Q3 2025 Alphabet Inc Earnings Call

October 29, 2025

Sorry for the alphabet third quarter 2025 earnings conference call.

At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone.

I would like to hand, the conference over to your Speaker today, Jim Friedland head of Investor Relations. Please go ahead.

Thank you good afternoon, everyone and welcome to alphabets third quarter 2025 earnings conference call with US today are Sundar Pichai Philipp Schindler Enernoc Ashkenazi now I'll quickly cover the safe Harbor.

Welcome everyone. Thank you for standing by for the alphabet third quarter 2025 earnings Conference call.

This time, all participants are in a listen only mode.

Some of the statements that we make today regarding our business operations and financial performance may be considered forward looking such.

After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone.

Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties actual results could differ materially. Please refer to our forms 10-K, and 10-Q, including the risk factors. We undertake no obligation to update any forward looking statement.

And I'd like to hand, the conference over to your Speaker today, Jim Friedman head of Investor Relations. Please go ahead.

Thank you good afternoon, everyone and welcome to alphabets third quarter 2025 earnings conference call with US today are Sundar Pichai Philipp Schindler Ashkenazi now I'll quickly cover the safe Harbor.

During this call we will present, both GAAP and non-GAAP financial measures a reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at a B C Dot xyz forward slash investor.

Some of the statements that we make today regarding our business operations and financial performance may be considered forward looking.

Our comments will be on year over year comparisons unless we state otherwise and now I will turn the call over to Sundar.

Thank you Jim Good afternoon, everyone and thanks for joining US this was a terrific quarter for alphabet, driven by double digit growth across every major part of our business.

We are seeing a I know driving real business results across the company.

We delivered our first ever $100 billion quarter.

Five years ago, our quarterly revenue was 50 billion.

Our comments will be on year over year comparisons unless we state otherwise and now I will turn the call over to Sundar.

Our revenue number has doubled since then and we are firmly in degenerative AI era.

In parallel we have built for the long term and diversified with successful businesses in cloud Youtube subscriptions.

Thank you Jim Good afternoon, everyone and thanks for joining US this was a terrific quarter for alphabet, driven by double digit growth across every major part of our business.

Our momentum is strong and we are shipping at speed.

Just a few examples.

First party models like Gemini now processed 7 billion tokens permanent where direct API used by our customers.

We are seeing a I know driving real business results across the company.

We delivered our first ever 100 billion dollar quarter.

The German App now has solar 650 million monthly active users and query is increased by three X from Q2.

Five years ago, our quarterly revenue was at 50 billion.

Our revenue number has doubled since then and we are firmly in the generative AI era.

Cloud had another great quarter of accelerating growth with the AI revenue was the key driver cloud.

In parallel we are built for the long term and diversified with successful businesses in cloud Youtube subscriptions.

Cloud backlog grew 46% quarter over quarter to $155 billion.

Our momentum is strong and we are shipping at speed.

And we crossed 300 million paid subscriptions led by growth in Google, One and Youtube premium.

Just a few examples.

First party models like Gemini now processed 7 billion tokens per minute via direct API used by our customers.

Today I'll discuss progress in our full stack approach to AI, and then share highlights from search cloud Youtube and BMO.

The Gemini App now has over 650 million monthly active users and query is increased by three X from Q2.

As a reminder, our full stack approach spans AI infrastructure World class research, including models and tooling and our products and platforms that bring AI to people everywhere.

Cloud had another great quarter of accelerating growth with the AI revenue is a key driver cloud.

Cloud backlog grew 46% quarter over quarter to $155 billion.

First up AI infrastructure.

Our extensive unreliable infrastructure, which powers all of Google's product is the foundation of our stack and a key differentiator.

And we crossed 300 million paid subscriptions led by growth in Google, One and Youtube premium.

We are scaling the most advanced chips in our data centers, including Gpus from our partner in media as well as our own purpose built tpu's.

Today I'll discuss progress in our full stack approach to AI, and then share highlights from search cloud Youtube and BMO.

And we are the only company, providing a wide range of both.

As a reminder, our full stack approach spans AI infrastructure World class research, including models and tooling and our products and platforms that bring AI to people everywhere.

As we announced yesterday at Nvidia GTC, we are now shipping the new Forex Max instances powered by Nvidia GBP 302, our cloud customers.

First up AI infrastructure.

Our highly sought after TPU portfolio is led by a seven generation TPU ironwood, which will be generally available soon.

Our extensive unreliable infrastructure, which powers all of Google's products is the foundation of our stack and a key differentiator.

We are scaling the most advanced chips in our data centers, including Gpus from our partner Nvidia as well as our own purpose built tpu's.

We are investing in TPU capacity to meet the tremendous demand, we're seeing from customers and partners and we are excited that anthropic recently shared plans to access up to 1 million Teus.

And we are the only company, providing a wide range of bolt.

Next World Class AI research, including models and tooling.

As we announced yesterday at Nvidia G. T. C. We are now shipping the new Forex Max instances powered by Nvidia G. B 302, our cloud customers.

Our models are world, leading Gemini two five pro V O G III on a viral sensation nano banana.

The very best in class over 230 million videos have been generated with via <unk> III and.

Our highly sought after TPU portfolio is led by our seventh generation TPU, Ironwood, which will be generally available soon.

And more than 13 million developers have built with our generative models.

We are investing in TPU capacity to meet the tremendous demand, we're seeing from customers and partners and we are excited that anthropic recently shared plans to access up to 1 million Teus.

We're looking forward to the release of Gemini three later this year.

Our research leadership is advancing next frontier technologies last week, we announced that are below quantum chip achieved a major breakthrough running an algorithm 13000 times faster than one of the world's best supercomputers.

Next World Class AI research, including models and tooling.

Our models are world, leading Gemini 2.5 Pro V O G. III on a viral sensation nano banana are among the very best in class over 230 million videos have been generated with poultry and.

And the result is verifiable paving debate the future practical applications.

Speaking of point, and let me congratulate Michelle debris, our chief scientist for quantum hardware. He received a Nobel in physics for early research. He did in the 19 eighties three noble's awarded to current Googlers in two years incredible.

And more than 13 million developers have built with our generator models.

We're looking forward to the release of Gemini three later this year.

And third our products and platforms, we are bringing AI to more people and developers than anyone else.

In July we announced that we processed 980, Chilean monthly tokens across all of our services. We are now processing over 1.3 quarterly and monthly tokens more than 20 X growth in a year phenomenon. This.

And the result is very firewall paving the way to future practical applications.

Speaking of quantum let me congratulate Michelle debris, our chief scientist for quantum hardware. He received a Nobel in physics for early research. He did in the 19 eighties three noble's awarded to current Googlers in two years incredible.

This quarter, we took big steps to re imagine chrome is a browser powered by AI through deep integrations with Gemini and AI mode, and search with more agent capabilities coming soon.

And third our products and platforms, we are bringing AI to more people and developers than anyone else.

In August it made by Google, We unveiled our pixel 10 series of devices.

In July we announced that we processed 980, Chilean monthly tokens across all our services. We are now processing over 1.3 quarterly and monthly tokens more than 20 X growth in a year phenomenal. This.

They are the first with our most powerful chip designed to run on Gemini tensor G. Five there are best reviewed devices ever.

And last week, we launched Android XR, our new operating system at Samsung's Galaxy XR device.

This quarter, we took big steps to re imagine chrome is a browser powered by AI through deep integrations with Gemini and AI modern search with more agent capabilities coming soon.

It brings new ways to use headsets and classes with Gemini at the core.

Now turning to highlights from search AI is driving an expansionary moment for search as people learn what they can do with our new AI experiences. They are increasingly coming back to search more search and its AI experiences are built to highlight the web sending billions of clicks to sites every day.

In August it made by Google, We unveiled our pixel 10 series of devices.

They are the first with our most powerful chip designed to run on Gemini tensor G. Five there are best reviewed devices ever and.

And last week, we launched Android XR, our new operating system at Samsung's Galaxy XR device.

During the Q2 call we shared that overall queries and commercial Corey has continued to grow year over year.

This growth rate increase in Q3, largely driven by our AI investments in search most notably AI all of us and AIG mode. Let.

It brings new ways to use headsets and classes with Gemini at the core.

Now turning to highlights from search AI is driving an expansionary moment for search as people learn what they can do with our new AI experiences. They are increasingly coming back to search more search and it's a I experiences are built to highlight the web sending billions of clicks to sites every day.

Let me dive into the momentum we are seeing.

As we have shared before AI all of us drive meaningful query growth.

It was evenly spread.

Q3 as users continue to learn that Google can answer more of their questions.

And it's particularly encouraging to see the effect was more pronounced with younger people.

During the Q2 call, we shared that overall Aquarius and commercial queries continued to grow year over year.

We're also seeing that AI model is resonating well with users in the U S. We have seen strong and consistent week over week growth in usage since launch and Aquarius doubled over the quarter.

This growth rate increase in Q3, largely driven by our AI investments in search most notably AI all of us and AI mode.

Let me dive into the momentum we are seeing.

Over the last quarter, we rolled out AI more globally across 40 languages in record time. It now has over 75 million daily active users and we shipped over 100 improvements to the product in Q3, an incredibly fast space most.

As we have shared before AI all of Us drive meaningful query growth. This effect was even stronger in Q3 as users continue to learn that Google can answer more of their questions.

And it's particularly encouraging to see the effect was more pronounced with younger people.

Most importantly, AI motors already driving incremental total credit growth for search.

We're also seeing that AI motives resonating well with users in the U S. We have seen strong and consistent week over week growth in usage since launch and quarry has doubled over the quarter.

Philip will talk more about monetization and share how AI is helping people connect with businesses and shop on search.

Next Google cloud.

Our complete enterprise AI product portfolio is accelerating growth in revenue operating margins and backlog.

In Q3 customer demand strengthened in three ways. One we are signing new customers faster the number of new GCB customers increased by nearly 34% year over year.

Most importantly, AI mode is already driving incremental total query growth for search.

Two we are signing larger deals we've signed more deals over $1 billion through Q3. This year than we did in the previous two years combined.

Philip will talk more about monetization and share how AI is helping people connect with businesses and shop on search.

Third we are deepening our relationships.

Next Google cloud.

A complete enterprise AI product portfolio is accelerating growth in revenue operating margins and backlog.

We're 70% of existing Google cloud customers use our AI product, including Banco BV Bestbuy and fair price group.

In Q3 customer demand strengthened in three ways. One we are signing new customers faster the number of new G. C. P customers increased by nearly 34% year over year.

As we scale, we are diversifying revenue to date 13 product lines are each at an annual run rate or $1 billion.

And we are improving operating margin with highly differentiated products built with their own technology.

Two we are signing larger deals we've signed more deals over $1 billion through Q3. This year than we did in the previous two years combined.

This deep product differentiation starts with our AI infrastructure.

We have a decade of experience building AI accelerators and today offer the widest array of chips. This leadership is winning customers like HCA healthcare LG AI research and Macquarie Bank and its why nine of the top 10, AI labs to school class.

Third we are deepening our relationships.

We're 70% of the existing Google cloud customers use our AI products, including Banco Bebe Bestbuy and fair price group.

As we scale, we are diversifying revenue today 13 product lines are each at an annual run rate or $1 billion.

We are also the only cloud provider offering our own leading generative AI models, including Gemini imagine veal chirp and Lydia adopt.

And we are improving operating margin with highly differentiated products built with their own technology.

Adoption is rapidly accelerating in Q3 revenue from products built on our generative AI models grew more than 200% year over year.

This deep product differentiation starts with our AI infrastructure.

Over the past 12 months nearly 150, Google cloud customers each processed approximately one trillion tokens with our models for a wide range of applications.

For example, W. P. P is creating campaigns with up to 78% efficiency gains.

We are also the only cloud provider offering our own leading generative AI models, including Gemini imagine V O chirp and Lydia.

For our ski as increased email open rates by 17% and accelerated campaign localization by 10 times.

Adoption is rapidly accelerating in Q3 revenue from products built on our generative AI models grew more than 200% year over year.

Earlier this month, we launched Gemini enterprise, the new front door for AI in the workplace.

And we are seeing strong adoption for agents built on this platform our package enterprise agents in Gemini enterprise are optimized for a variety of domains are highly differentiated and offer significant out of box value to customers. We.

Over the past 12 months nearly 150, Google cloud customers each processed approximately one trillion tokens with our models for a wide range of applications. For example, W. P. P is creating campaigns with up to 78% efficiency gains.

We have already crossed 2 million subscribers across 700 companies.

Swarovski is increased email open rates by 17% and accelerated campaign localization by 10 times.

Next Youtube.

In the living room Youtube has remained number one in streaming watch time in the U S for more than two years, adding to Nielsen.

Earlier this month, we launched Gemini enterprise, the new front door for AI in the workplace and we are seeing strong adoption for agents built on this platform our package enterprise agents in Gemini enterprise are optimized for a variety of domains are highly differentiated and offer significant out of box.

Last month marked youtube's first time saliva NFL broadcaster.

Exclusive global broadcast live from Brazil drew more than 19 million fans and set a new record for most concurrent viewers of a livestream on Youtube.

Youtube shorts also continues to perform well.

Value to customers we.

We have already crossed 2 million subscribers across 700 companies.

In the U S shots now earn more revenue per watch our than traditional in stream on Youtube.

Next Youtube.

In the living room Youtube has remained number one in streaming watch time in the U S for more than two years according to Nielsen.

Are made on Youtube event, we rolled out a number of AI powered features that are helping creators supercharged creation and build their businesses.

Last month marked youtube's first time is alive NFL broadcaster. This exclusive global broadcast live from Brazil drew more than 19 million fans and set a new record for most concurrent viewers of a livestream on Youtube.

AI is now streamlining the entire content creation workflow from generated video tools and more efficient editing to AI powered insights that help creators optimize their channels.

We're also using AI to expand monetization automatically identifying products to make their videos more shopper ball.

Youtube shorts also continues to perform well.

In the U S shots now earn more revenue per watch our than traditional in stream on Youtube.

Philip will discuss in more detail.

And finally Raimo next year Raimo aims to open service in London, and they are working to bring service to Tokyo.

But are made on Youtube event, we rolled out a number of AI powered features that are helping creators supercharged creation and build their businesses.

They have also announced expansions to Dallas, Nashville, Denver, and Seattle and secured permission to operate fully autonomous Lee at San Jose and San Francisco airport's.

AI is now streamlining the entire content creation workflow from generated video tools and more efficient editing to AI powered insights that help creators optimize their channels.

Eponymous testing continues to scale in New York City.

The new way more for business allows enterprises to offer <unk> as a work travel option.

We're also using AI to expand monetization automatically identifying products to make their videos more shopper bull.

We launched BMO teens accounts in Phoenix. This summer we are pleased to see usage surely increase with positive feedback from teens and their parents alike.

Philip will discuss in more detail.

And finally Raimo next year Raimo aims to open service in London, and they are working to bring service to Tokyo.

But he must growth and momentum our strong and 2026 is shaping up to be an exciting year.

They've also announced expansions to Dallas, Nashville, Denver, and Seattle and secured permission to operate fully autonomous Lee at San Jose and San Francisco airport's.

Overall, a milestone quarter the incredible work of our teams is driving momentum across the board and our leadership in AI positions us so well for the opportunity ahead.

Anonymous testing continues to scale in New York City.

The new way more for business allows enterprises to offer venmo as a work travel option.

I want to thank all of our partners and our employees for their hard work and an excellent Q3 with that I'll turn it over to Philip.

And we launched BMO teens accounts in Phoenix. This summer we are pleased to see usage surely increase with positive feedback from teens and their parents alike.

Thanks, <unk> and Hello, everyone I'll quickly cover performance for Google services for the quarter, then structure of the rest of my remarks are on the great progress, we're delivering across search ads Youtube and partnerships.

Most growth and momentum our strong and 2026 is shaping up to be an exciting year.

Overall, a milestone quarter the incredible work of our teams is driving momentum across the board and our leadership in AI positions us so well for the opportunity ahead.

Google Services revenues were 87 billion for the quarter up 14% year on year, driven by accelerated growth in search and Youtube, partially offset by year on year decline in network revenues, adding some further color to our results the 15% increase in search and other was led by growth across all major verticals with the largest contributions from retail and financial services.

Want to thank all of our partners and our employees for their hard work and an excellent Q3 with that I'll turn it over to Philip.

Thanks, Sundar and Hello, everyone.

<unk>.

Youtube saw similar performance across verticals, it's 15% growth in advertising revenues was driven by direct response, followed by brand.

Quickly cover performance for Google services for the quarter, then structure. The rest of my remarks around the great progress, we are delivering across search ads Youtube and partnerships Google.

Starting with search and other revenues, which delivered over $56 billion in revenue for the quarter.

<unk> services revenues were 87 billion for the quarter up 14% year on year, driven by accelerated growth in search and Youtube, partially offset by year on year decline in network revenues.

And Sundar mentioned AI is driving an expansionary moment in transforming how people use Google search our investments in UAE experiences such as AI overviews and AI mode continued to drive growth in overall quarries, including commercial cores, creating more opportunities for monetization.

Adding some further color to our results the 15% increase in search and other was led by growth across all major verticals with the largest contributions from retail and financial services.

These are experiences or enhancing how people connect with businesses and shop on search we recently added shopping capabilities in AI mode, which no help people shop conversation in search and we expand the try on capabilities to more clothing items now available to anyone in the U S. Lastly, we're making it easier for consumers to benefit from <unk>.

Youtube saw similar performance across verticals, it's 15% growth in advertising revenues was driven by direct response, followed by brand.

Starting with search and other revenues, which delivered over 56 billion in revenue for the quarter.

And Sundar mentioned AI is driving an expansionary moment entrants, forming how people use Google search and our investments in UA experiences such as AI overviews and AI mode continue to drive growth in overall quarries, including commercial cores, creating more opportunities for monetization.

Deals through new loyalty offerings like personalized notations on organic results and ads.

Looking at monetization businesses can now tap into our most powerful AI search experiences using.

Using our most advanced AI models, we can understand and predict intend like never before unlocking entirely new commercial pathways to provide valuable new consumer connections and helping us monetize even more efficiently.

<unk> rolled out globally in September IMAX and search is already used by hundreds of thousands of advertisers currently making it the fastest growing airport search ads product in Q3 alone IMAX unlock billions of net new inquiries.

Deals through new loyalty offerings like personalized notations on organic results and ads.

Looking at monetization businesses can now tap into our most powerful AI search experiences using.

By delivering the most relevant that across surfaces and matching advertisers it against additional coors they weren't reaching before.

Imacs helps advertisers discover new customers at the exact moment, they need their product or service.

Cardiac for example looked to grow conversions, while staying within their role West Scott's after turning on Amex and search they grew the conversion value by 12% in early tests.

<unk> rolled out globally in September IMAX and search is already used by hundreds of thousands of advertisers currently making it the fastest growing airports search ads product.

We continue to infuse generative AI capabilities at every step of the marketing process, we rolled out imaging for an asset studio in product studio, helping businesses produce more and better creators.

In Q3 alone IMAX unlock billions of net new quarries by delivering the most relevant to add across surfaces and matching advertisers against additional core as they weren't reaching before.

On the measurement front, we enriched the model supporting Meridian, our marketing mix model with additional variables.

Imacs helps advertisers discover new customers at the exact moment, they need their product or service.

And more granular reporting and P. Max is making bidding more effective.

Kayak for example look to grow conversions, while staying within their role West Scott's after turning on Amex and search they grew the conversion value by 12% in early tests we.

Financial services companies. So far has been using <unk> to meet its ambitious growth targets and helped drive a 39% improvement in its conversion volume year over year.

Moving to Youtube, where we saw accelerated revenue growth a recommendation systems are driving robust watch time growth in our key monetization areas like shorts and living room.

As we leverage them in my models, we're seeing further discovery improvement on direct response, we're excited about the growth in revenue, we're seeing especially from small and medium advertisers adopting demand gen.

On the measurement front, we enriched our model supporting Meridian, our marketing mix model with additional variables.

And more granular reporting and P. Max is making bidding more effective.

Financial services companies. So far has been using P. Max to meet its ambitious growth targets and helped drive a 39% improvement in its conversion volume year over year.

We also improved performance on dimension with over 100 launches, helping to increase conversion and value by more than 40% for advertisers using target based bidding on Youtube. The retail vertical continues to lead our growth on Youtube with demand in helping us further monetize shopping related categories.

Moving to Youtube, where we saw accelerated revenue growth a recommendation systems are driving robust watch time growth in our key monetization areas like shorts and living room.

Looking at the living room, a long term bet more advertisers are adopting interact with direct response ads leading to an annual revenue run rate exceeding 1 billion globally for this format.

As we leverage M&A models, we're seeing further discovery improvement on direct response, we're excited about the growth in revenue, we're seeing especially from small and medium advertisers adopting demand gen.

For our viewers, we continue to be a fence greater access across sports, while tapping into the best of Youtube product innovation and creator of that content.

We also improved performance on dimension with over 100 launches, helping to increase conversion value by more than 40% for advertisers using target based bidding on Youtube. The retail vertical continues to lead our growth on Youtube with demand in helping us further monetize shopping related categories.

So and I mentioned that we expanded our NFL partnership without first ever exclusive global broadcast of an NFL game brands love the opportunity and be sold all our AD inventory within a couple of weeks.

Looking at the living room, a long term bet more advertisers are adopting interactive direct response ads, leading to an annual revenue run rate exceeding 1 billion globally for this format.

Looking at greater as a significant force behind the thriving Youtube creator economy, it's the collaboration between creators and brands.

We will select direct linking two deals websites and shorten Swapo with brand segments in long form will soon help create a show or they deliver great value for brands.

For our viewers, we continue to give fence greater access across sports, while tapping into the best of Youtube product innovation and creator that content Sundar.

<unk> through a collaboration with Duke perfect Comcast Xfinity drove an 8% search lift beating other Xfinity adds recall lift on shorts by 34% at the same time it decreased the cost per lifted user by 50% when compared to the next most efficient bad.

Sundar mentioned that we expanded our NFL partnership with our first ever exclusive global broadcast of the NFL game brands loved the opportunity and be sold all our AD inventory within a couple of weeks.

Looking at graders, a significant force behind a thriving Ugo creator economy is the collaboration between creators and brands.

We continue to invest in AI part features that are helping greater supercharged creation and build their businesses with views for integration and speech to song Greater school from idea to iteration quicker and new channel insides helped them better understand performance.

Truth like direct linking two deals websites and shorts and swap over brand segments in long form will soon help creators show how they deliver great value for brands.

Ending on Youtube with our subscriptions product. We're also seeing momentum with strong growth in offerings, such as Youtube music and premium and Youtube TV.

<unk> through a collaboration with Duke perfect Comcast's Xfinity drove an 8% search lift beating other Xfinity adds recalled lift on shorts by 34% at the same time it decreased the cost per lifted user by 50% when compared to the next most efficient bad.

We're also playing Gemini internally to help us serve customers with increased speed intelligence and efficiency our.

Our sales teams use Gemini enriched with ads knowledge to streamline customer interactions that is increased productivity of over 10% led to hundreds of millions in incremental revenue and frees up soldiers to engage with more customers at a deeper more strategic level.

We continue to invest in AI powered features that are helping creators supercharge creation and build their businesses with view three integration and speech to song Greater school from idea to iteration quicker and new channel insights helped them better understand performance.

And our customer support Division Gemini powered solutions have managed over 40 million customer session. So far this year and result, hundreds of thousands of customer inquiries and we're just getting started.

Ending on Youtube with our subscriptions product. We're also seeing momentum with strong growth in offerings, such as Youtube music and premium and Youtube TV.

We're also playing Gemini internally to help us serve customers with increased speed intelligence and efficiency our.

As always at a rep with the progress we're seeing across partnerships, where our customers tap into the strength and breadth of google's products to accelerate that transformation.

Our sales teams use Gemini enriched with ads knowledge to streamline customer interactions. This increased productivity by over 10% led to hundreds of millions in incremental revenue and frees up dollars to engage with more customers at a deeper more strategic level.

Revolute, the global financial services Company, Leverages, Google clouds vertex AI platform in Gemini models to help power its advanced customer service chatbot develop new hyper personalized financial product and offer predictive insights.

In our customer support Division Gemini powered solutions have managed over 40 million customer sessions. So far this year and resolved hundreds of thousands of customer inquiries and we're just getting started.

Resolute is also increasing its presence on Youtube adopting video through you for personalized creative making Google the key adds partner for delivering growth and launching new markets.

As always our rep with the progress we're seeing across partnerships, where our customers tap into the strength and breadth of google's products to accelerate the transformation.

In closing I'd like to thank Googlers everywhere for their contributions to our success and as always to our customers and partners for their continued trust and of course, a huge thanks to all of you as we celebrate 25 years of Google ads are not over to you.

We're resolute the global financial services company Leverages, Google clouds vertex AI platform in Gemini models to help power its advanced customer service chatbot develop new hyper personalized financial product and offer predictive insights.

Thank you Phil My comments will focus on year over year comparisons for the third quarter, unless I state otherwise I will start with the results at the alphabet level and will then cover our segment results.

Revolute is also increasing its presence on Youtube adopting video three for personalized creatives, making Google of key adds partner for delivering growth and launching new markets.

And with some commentary on our outlook for the fourth quarter of 2025.

We had an outstanding quarter in Q3, continuing the strong momentum we've had throughout the year.

Delivering double digit revenue growth across search and Youtube advertising subscriptions platforms and devices and Google cloud.

<unk> revenue reached $102 3 billion hours, a 16% year over year increase or 15% in constant currency.

Total cost of revenue was $41 $4 billion.

And with some commentary on our outlook for the fourth quarter of 2020 five.

13%.

<unk> was $14 9 billion up 8%.

We had an outstanding quarter in Q3, continuing the strong momentum we've had throughout the year delivering double digit revenue growth across search and Youtube advertising subscriptions platforms and devices and Google cloud.

Other cost of revenues was $26 5 billion.

16% with the increase primarily driven by content acquisition costs largely for Youtube, followed by depreciation and other technical infrastructure operations cost.

Consolidated revenue reached $102 $3 billion.

Total operating expenses increased 28% to $29 7 billion.

16% year over year increase or 15% in constant currency.

Total cost of revenue was $41 $4 billion up 13%.

R&D expenses increased by 22% driven by compensation and depreciation expenses related to our AI efforts.

<unk> was $14 9 billion up 8%.

Sales and marketing expenses were flat and G&A expenses increased meaningfully primarily due to the $3 5 billion charge related to the European Commission Fine mentioned in the earnings press release.

Other cost of revenues was $26 5 billion up 16% with the increase primarily driven by content acquisition costs largely for Youtube, followed by depreciation and other technical infrastructure operations cost.

Operating income increased 9% this quarter, just $31.2 billion and operating margin was 35%.

Total operating expenses increased 28% to $29 7 billion R&D.

Excluding the EC fine operating income increased 22% and operating margin was 33, 9%.

Fences increased by 22% driven by compensation and depreciation expenses related to our AI efforts.

Operating margin benefited from strong revenue growth and continued efficiencies in our expense base offset by the legal charge and a significant increase in depreciation expense.

Other income and expenses was $12 $8 million, primarily due to unrealized gains in our non marketable equity securities portfolio.

Operating income increased 9% this quarter, just $31.2 billion and operating margin was 3.5% ish.

Net income increased 33% to $35 billion and earnings per share increased 35% to $2.87.

Excluding the EC fine operating income increased 22% and operating margin was 33, 9%.

We generate free cash flow of $24 $5 billion necessary corner and $73 $6 billion for the trailing 12 months.

Operating margin benefited from strong revenue growth and continued efficiencies in our expense base offset by the legal charge and a significant increase in depreciation expense.

Free cash flow in Q3 benefited from strong operating cash flow and recent tax changes regarding the timing of when research and development costs are expensed and assets are depreciated.

Other income and expenses was $12 $8 billion, primarily due to unrealized gains in our non marketable equity securities portfolio.

This was partially offset by higher capex.

Net income increased 33% to $35 billion and earnings per share increased 35% to $2.87.

We ended the quarter with $98 $5 billion in cash and marketable securities.

Turning to segment results, Google services revenues increased 14% to $87.1 billion, reflecting strength in Google search Youtube advertising and subscriptions.

We generate free cash flow of $24 $5 billion necessary corner and $73 $6 billion for the trailing 12 months.

Free cash flow in Q3 benefited from strong operating cash flow and recent tax changes regarding the timing of when research and development costs are expensed and assets are depreciated.

Google search and other advertising revenues increased by 15% to $56 $6 billion.

Representing another robust quarter with continued growth across all major verticals with the largest contributions from retail and financial services.

This was partially offset by higher capex.

We ended the quarter with $98.5 billion in cash and marketable securities.

Youtube advertising revenues increased 15% to $10 $3 billion driven by direct response advertising followed by brand.

Turning to segment results, Google services revenues increased 14% to $87.1 billion, reflecting strength in Google search Youtube advertising and subscriptions.

Network advertising revenues of $7.4 billion were down 3%.

Google search and other advertising revenues increased by 15% to $56 $6 billion.

Subscriptions platforms and devices revenues increased 21% this quarter to 12 $29 billion driven by very strong growth in both Youtube and Google lens subscriptions.

Representing another robust quarter with continued growth across all major verticals with the largest contributions from retail and financial services.

Services operating income increased 9% to $33 $5 billion.

Youtube advertising revenues increased 15% to $10.3 billion driven by direct response advertising followed by brand.

Operating margin declined year over year to 38, 5% is healthy revenue growth and continued efficiencies in our expense base were offset by the impact of the EC fine, which was fully reflected in the Google services segment.

Network advertising revenues of $7.4 billion were down 3%.

Subscription platforms and devices revenues increased 21% this quarter to $12 $9 billion, driven by very strong growth in both Youtube and Google ones subscriptions.

Turning to the Google Cloud segment, which again delivered very strong results. This quarter as cloud continued to benefit from our enterprise AI optimized stack, including our own custom T to us and our industry, leading AI models.

Services operating income increased 9% to $33 $5 billion.

Cloud revenue increased by 34% to $15 $2 billion into third quarter, driven by strong performance in G. C. P, which continued to grow at a rate that was much higher than clouds overall revenue growth rate.

G C piece growth was driven by enterprise and products, which are generating billions in quarterly revenue.

Turning to the Google Cloud segment, which again delivered very strong results. This quarter as cloud continues to benefit from our enterprise AI optimized stack, including our own custom T P us and our industry, leading AI models.

We had strong growth in enterprise infrastructure, and enterprise AI solutions, which benefited from demand for our industry, leading models, including Gemini 2.5.

Cloud revenue increased by 34% to $15.2 billion into third quarter, driven by strong performance in G. C. P, which continued to grow at a rate that was much higher than clouds overall revenue growth rate.

Core T. C. P was also a meaningful contributor to growth.

And we had double digit growth in workspace, which was driven by an increase in average revenues per seat and the number of seats.

Cloud operating income increased by 85% to $3 6 billion and operating margin increased from 17, 1% in the third quarter last year to 23, 7% this quarter.

G C piece growth was driven by enterprise AI products, which are generating billions in quarterly revenue.

We had strong growth in enterprise, the infrastructure and enterprise AI solutions, which benefited from demand for our industry, leading models, including Gemini 2.5.

The expansion in cloud operating margin was driven by strong revenue performance and continued efficiencies in our expense base.

Core G. C. P was also a meaningful contributor to growth.

Partially offset by higher technical infrastructure usage cost, which includes depreciation expense and other operations costs such as energy.

And we had double digit growth in workspace, which was driven by an increase in average revenues per seat and the number of seats.

Google clouds backlog increased 46% sequentially and 82% year over year, reaching $155 billion at the end of the third quarter.

Cloud operating income increased by 85% to $3 $6 billion and operating margin increased from 17, 1% in the third quarter of last year to 23, 7% this quarter.

The increase was driven primarily by strong demand for enterprise AI.

The expansion in cloud operating margin was driven by strong revenue performance and continued efficiencies in our expense base.

As Sundar mentioned earlier.

<unk> has signed more billion dollar deals in the first nine months of 2025 than in the past two years combined.

Partially offset by higher technical infrastructure usage costs, which includes depreciation expense and other operations costs such as energy.

In other bets revenues were $344 million in operating loss was the 1 billion four in the third quarter.

Google clouds backlog increased 46% sequentially and 82% year over year, reaching $155 billion at the end of the third quarter.

Within other bets, we continue to allocate more resources to businesses like Weymer, where we see opportunities to create substantial value.

With respect to Capex in the third quarter, our Capex was $24 billion. The vast majority of our Capex was invested in technical infrastructure with approximately 60% of that investment in servers, and four 8% and data centers and networking equipment.

The increase was driven primarily by strong demand for enterprise AI.

And I mentioned earlier cloud has signed more billion dollar deals in the first nine months of 2025 than in the past two years combined.

In other bets revenues were $344 million in operating loss was 1 billion four in the third quarter.

In Q3, we returned capital to shareholders through repurchases of stock of $11.5 billion and dividend payments of $2 5 billion.

Within other bets, we continue to allocate more resources to businesses like Weymer, where we see opportunities to create substantial value.

Turning to our outlook I would like to provide some commentary on factors that will impact our business performance in the fourth quarter of 2025 as well as an updated outlook for Capex for the year first in terms of revenues. We're pleased with the overall momentum of our business at the current spot rates, we could see an FX tailwind to revenue and <unk>.

Q4.

In Q3, we returned capital to shareholders through repurchases of stock of $11.5 billion and dividend payments of $2 5 billion.

However, the volatility in exchange rates could affect the impact of FX on Q4 revenues.

As far as segments in Google services year over year comparisons and advertising will be negatively impacted by the strong spend on U S elections in the fourth quarter of 2024, particularly on Youtube.

In cloud demand for our products remains high as evidenced by the accelerating revenue growth and then $49 billion sequential increase in cloud backlog in Q3.

Sure.

And G. C. P. We see strong demand for enterprise infrastructure, including Tpu's N. G. P is enterprise.

However, the volatility in exchange rates could affect the impact of FX on Q4 revenues.

As far as segments in Google services year over year comparisons and advertising will be negatively impacted by the strong spent on U S elections in the fourth quarter of 2024, particularly on Youtube.

Enterprise AI solution is driven by demand for Gemini 2.5.

In our other AI models and core DCP infrastructure and other services, such as cyber security and data analytics.

As I've mentioned on previous earnings calls, we have been working hard to increase capacity and have improved the pace of server deployments and data center construction.

In cloud demand for our products remains high as evidenced by the accelerating revenue growth and then $49 billion sequential increase in cloud backlog in Q3.

We still expect to remain in a tight demand supply environment in Q4 and 2026.

And G. C. P. We see strong demand for enterprise via infrastructure, including Tpu's N. G. P is.

Moving to investments, we're continuing to invest aggressively due to the demand we're experiencing from cloud customers as well as the growth opportunities we see across the company.

Enterprise AI solutions, driven by demand for Gemini 2.5, and our other AI models and core G. C P infrastructure and other services, such as cyber security and data analytics.

We now expect capex to be in the range of $91 billion to 93 billion in 2025 up from our previous estimate of $85 billion.

As I've mentioned on previous earnings calls, we have been working hard to increase capacity and have improved the pace of server deployments and data center construction.

Keeping in mind that the timing of cash payments can cause variability in the reported capex number.

We still expect to remain in a tight demand supply environment in Q4 and 2026.

Looking out to 2020 six we expect a significant increase in Capex and we will provide more detail on our fourth quarter earnings call.

Moving to investments, we're continuing to invest aggressively due to the demand we're experiencing from cloud customers as well as the growth opportunities we see across the company.

In terms of expenses first as I've mentioned on previous earnings calls the significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expenses and related data center operations costs, such as energy and.

We now expect capex to be in the range of $91 billion to 93 billion in 2025 up from our previous estimate of $85 billion.

Keeping in mind that the timing of cash payments can cause variability in the reported capex number.

In the third quarter of depreciation increased $1 6 billion year over year to $5 $6 billion, reflecting a growth rate of 41%.

Looking out to 2020 six we expect a significant increase in Capex and we will provide more detail on our fourth quarter earnings call.

The overall increase in Capex investments, we expect the growth rate in depreciation to accelerate slightly in Q4.

Yeah.

Second we expect sales and marketing expenses to be more heavily weighted to the end of the year in part to support product launches and holiday season.

Q3 was a strong quarter and we're excited with the adoption of our AI products held by our rapid pace of innovation and great execution by our teams. This.

In the third quarter of depreciation increased $1 6 billion year over year to $5 $6 billion, reflecting a growth rate of 41%.

This translated into strong momentum in search Youtube ads subscription platforms and devices and cloud, resulting in our first 100 billion dollar plus quarter.

Given the overall increase in Capex investments, we expect the growth rate in depreciation to accelerate slightly in Q4.

Now Sundar, Philip and I will now take your questions.

Second we expect sales and marketing expenses to be more heavily weighted to the end of the year in part to support product launches and the holiday season.

Thank you as a reminder to ask a question you will need to press star one on your telephone to prevent any background noise. We ask that you. Please mute your line once your question stated.

Q3 was a strong quarter and we're excited with the adoption of our AI products helped by our rapid pace of innovation and great execution by our teams. This.

Our first question comes from Brian Nowak with Morgan Stanley. Your line is now open.

This translated into strong momentum in search Youtube AD subscription platforms and devices and cloud, resulting in our first 100 billion dollar plus quarter.

Great. Thanks for taking my questions everyone. The first one maybe for fulfill up or or sort of thoughts on E. Commerce agenda travel. There is a lot of external wall Street discussion about a gentle e-commerce potentially monetizing at a lower rate than search.

Now as Sundar, Philip and I will now take your questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to prevent any background noise. We ask that you. Please mute your line once your question's been stated.

The question is what what factors are you most focused on sort of ensure a smooth transition for your search business or for your advertisers as you move over to a more agenda world.

Our first question comes from Brian Nowak with Morgan Stanley. Your line is now open.

And the second one sundar on Weibo how.

Far are we from an integration of weibo into more of the core Gemini capabilities and the users on the platform you are taking your your user data of where I'm going with hotel I'm staying at what airport I'm, saying that and integrate that in a way Mo you can I guess you have users use their profile to pre schedule weibo's, how far off is that.

Great. Thanks for taking my questions everyone. The first one maybe for fulfill up or Sun darts on agenda E. Commerce agenda travel there is a lot of external wall Street discussion about a gentle e-commerce potentially monetizing at a lower rate than search.

The question is what factors are you most focused on the sort of ensure a smooth transition for your search business or for your advertisers as you move up to a more agenda world.

What do we have to do.

Hello, Brian Great question. This is all early but we see identical experiences really is additive to the way people seek information. It helps us answers peoples tough questions that helps us.

And the second one's on doors on Weibo how.

How far are we from an integration of weibo into more of the core Gemini capabilities and the users of the platform you're taking your your user data of where I'm going what hotel I'm staying at what airport I'm, saying that and integrate that into way Mo you could I guess you have users use their profiles to pre scheduled weibo's how far off.

It helps people get stuff done and it helps businesses in the process and we're working on multiple agenda experiences across key verticals, such as travel commerce shopping and so on.

And we're paying a lot of attention to creating a seamless user experience, but also to the fact that we need to integrate different partner ecosystems in a way that creates value for them and by the way. We're also working closely with a lot of our partners on the other side throw a cloud services to improve their own gen take our experiences and so maybe we'll go a little deeper on.

Is that what do we have to do.

Hello, Brian Great question. This is all early but we see agenda experiences really is additive to the way people seek information. It helps us answers people, it's tough questions that helps us.

Shopping side.

It helps people get stuff done and it helps businesses in the process and we're working on multiple agenda experiences across key verticals, such as travel commerce shopping and so on and we're playing a lot of attention to creating a seamless user experience, but also to the fact that we need to integrate different partner ecosystems in a way that creates value for.

Well, we actually use AI already very actively to improve the shopping experience as you know we launched a more visual experience on AI mode and it gives people a much more intuitive conversational way to shop.

You can simply describe what youre looking for no like the way you would talk to a friend and we'll show you. The visual of shopping results and then we think about building in Egypt agenda shopping future and it has to be one again that benefits all of us us and.

Them and by the way. We're also working closely with a lot of our partners on the other side throw a cloud services to improve their own gen take our experiences and so maybe we go a little deeper on the shopping side, where.

Merchants here and say Oh, we also introduced new agenda, checkout, which will let shoppers use our luggage I think AI to buy products for merchant sides and so on we.

We have a partnership with Paypal to help merchants build agenda commerce experiences, we have and you open protocols for agent agent transactions and so on and so on.

You can simply describe what youre looking for no like the way you would talk to a friend and we'll show you the visual of shopping results.

And Brian on Rainbow.

Great question I was reflecting I think on the exact same topic.

And then we think about building in Egypt, a gentex shopping future and it has to be one again that benefits both users and merchants here and you know that a O. We also introduced new Gentex checkout, which will let shoppers use like agenda gay I'd buy products from merchant sites and so on.

I'm scheduled to meet with the team to do a revenue on it in a few weeks out.

Okay. There's some exciting I'm way more clearly you know scaling up particularly in 2026.

And I think the possibility is he said of.

Jim and I, particularly with the multimodal experience Hasler services like Youtube I think there's a real opportunity to make the in car experience dramatically better definitely something we are excited about and you'll see newer experiences in in 2026 for sure.

We have a partnership with Paypal to help merchants build agenda commerce experiences, we have a new open protocols for agent agent transactions and so on and so on.

And Brian on Weibo.

Great question I was reflecting I think on the exact same topic.

I'm scheduled to meet with the team to do a review on it in a few weeks out.

Great. Thank you both.

Look it is an exciting time way more clearly you know as scaling up.

Our next question comes from Doug Anmuth with Jpmorgan. Your line is now open.

Thanks for taking the questions.

Maybe you can just talk more about some of the drivers of our core search strength in I guess in particular, when you think about AI overviews and AI mode. We know the query growth is accelerating but can you help us understand from there kind of what happens in terms of clicks per query and conversion rates and pricing in these AI driven.

Search formats and then.

And that.

Can you talk about where you see opportunities in the core cost base as you look to make room to absorb the rapid growth and infrastructure and depreciation going forward.

So.

Let me give you a bit of vertical color first in Q3.

I know we know the query growth is accelerating but can you help us understand from there kind of what happens in terms of clicks per query and conversion rates and pricing in these AI driven search formats, and then or not.

Three search and other revenues again delivered growth across all market major vertical as we said.

It was from retail and financial services and health care was also a contributor to the growth here.

Our new AI experiences you mentioned overviews air mode continued to drive growth in overall core areas, including commercial quarries are really creating more opportunities for monetization.

Can you talk about where you see opportunities in the core cost base as you look to make room to absorb the rapid growth in infrastructure and depreciation going forward.

So scaling up and are working for our entire user base Reno Scioto over 2 billion users here and we're continuing to expand ads in a overviews in English to more countries across desktop mobile and so on and as I've shared before for a overviews even at our current baseline of ads.

So.

Let me give you a bit of vertical color first in Q.

Search and other revenues again delivered growth across all major vertical as we said.

It was from retail and financial services and health care was also a contributor to the growth here.

The low end with India's response overall, we see the monetization at approximately the same rate. So over time, we're excited about the opportunity of a richer experiences in AI mode NAA overviews to basically open up and the opportunity for also a much richer placement.

Our new AI experiences you mentioned overviews mode continued to drive growth in overall core areas, including commercial quarries are really creating more opportunities for monetization.

Overviews of scaling up and are working for our entire user base. We're now scaled to over 2 billion use us here and we're continuing to expand ads in a overviews in English to more countries across desktop mobile and so on and as I've said before for a overviews even at our current baseline of ads.

Placements and.

I think as I've said on a prior call we manage the business to drive great outcomes for our users and an attractive ROI for our advertisers.

We don't really manage to paid clicks and CPC targets.

But as you will see in the 10-Q paid clicks were up 7% year on year in CPE CS were up 7% year on year.

The low end with India's response overall, we see the monetization at approximately the same rate. So over time, we're excited about the opportunity of a richer experience is an AI mode N. A overviews to basically open up then the opportunity for also a much richer placemen.

Now going to your question around where else can we see more opportunity for efficiency and productivity and I think you've heard me say before this is not a one time type of effort, but rather an ongoing way in which we manage the business.

Placements and.

I think as I've said on a prior call. We managed the business to drive great outcomes for our use us in an attractive ROI for advertisers we do.

And the key here is that the more we drive productivity across our business. The more we can invest in the business for growth and obviously continue to.

Don't really manage to a paid clicks and CPC targets.

Drive improvement in the P&L some of the areas or things that you've heard us talk about in the past such as moderating the pace of headcount growth optimizing our real estate footprint, but also as we invest more and more in our technical infrastructure, ensuring that we are optimizing that build out and the overall technical.

But as you will see in the 10-Q paid clicks were up 7% year on year, and <unk> were up 7% year on year.

Doug to your question around where else can we see more opportunity for efficiency and productivity and I think you've heard me say before this is not a one time type of effort, but rather an ongoing way in which we manage the business and the key here is that the more we drive productivity across our business. The more we can invest.

Infrastructure, we have you know that a lot of the data centers for example that we build ourselves. So there are optimized and we make sure we do them in the most efficient way Sundar.

And the business for growth and obviously continue to.

Sundar mentioned.

Drive improvement in the P&L some of the areas or things that you've heard us talk about in the past such as are moderating the pace of headcount growth optimizing our real estate footprint, but also as we invest more and more in our technical infrastructure, ensuring that we are optimizing that build out and the overall tech.

And one of the previous calls the productivity associated with leveraging AI for Google. So it is the example, the the percent of code now nearly half of all code generated by AI, that's a way for us to leverage AI to drive further productivity.

Across the business.

And obviously, we always look at making sure that when we provide services or products that we get the right economics and the right value for what we provide so the one. Good example is shorts, which has a lower revenue share then in stream.

Nickel infrastructure, we have you know that a lot of the data centers for example that we built ourselves. So there are optimized and we make sure we do them in the most efficient way Sundar mentioned.

That helps to improve some of our gross margin. So this is an effort we have ongoing I've mentioned in the past that we have a headwind with depreciation obviously, increasing alongside our capex increase the wear.

And one of the previous calls the productivity associated with leveraging AI for Google. So it is the example, the the percent of code now nearly half of all cold generated by AI, that's a way for us to leverage AI to drive further productivity across the business.

We have efforts across the organization to ensure we run the business in the most disciplined a productive way, while continuing to invest for future growth.

Thank you Bob.

Our next question comes from Eric Sheridan with Goldman Sachs. Your line is now open.

That helps to improve our some of our gross margin. So this is an effort we have ongoing I've mentioned in the past that we have a headwind with depreciation obviously, increasing alongside our capex increase so we're.

Thank you so much for taking the questions maybe two if I could so now when you think about your custom silicon efforts across the organization can you reflect a little bit about the opportunity set you see with each passing generation of custom silicon both in terms of driving operating efficiencies inside of the organization and potentially.

We have efforts across the organization to ensure we we run the business in the most disciplined and productive way, while continuing to invest for future growth.

Increased monetization efforts around those outside of the organization.

Thank you both.

Second question would be for fill up.

Our next question comes from Eric Sheridan with Goldman Sachs. Your line is now open.

We can see the Youtube advertising revenue number in our reported results can you reflect a little bit about the scaling of the subscription side of it.

Thank you so much for taking the questions maybe two if I could so now when you think about your custom silicon efforts across the organization can you reflect a little bit about the opportunities that you see with each passing generation of custom silicon both in terms of driving operating efficiencies inside the organization and potentially.

<unk> offerings and how the two parts together represent an interesting framework and thinking about the monetization side of Youtube.

Secondly, being a mix of both ads and subscription thank you.

Eric.

Core all I would say we are seeing substantial demand for our AI infrastructure products, including TPU based in GPU base solutions it.

Increased monetization efforts around those outside of the organization second question would be for fill up.

Obviously, we can see the Youtube advertising revenue number in our reported results can you reflect a little bit about the scaling of the subscription side of Youtube offerings and how the two parts in it together maybe represent an interesting framework and thinking about the monetization side of Youtube are increasingly being a mix of both ads and.

Is one of the key drivers of our growth over the past year and I think on a going forward basis.

I think we continue to see very strong demand and we are investing to meet that.

I do think a big part of Florida differentiate school cloud effectively we are you know we've taken a full the full stack approach to AI.

Description. Thank you.

Eric.

Overall, I would say we are seeing substantial demand for.

So we are in and that really plays out right. We had only hyper scaler who's really building offerings on our own models.

Alright.

Excluding TPU based <unk> solutions.

It is one of the key drivers.

Either one.

You know and we'd be able to highly differentiate it on our own technology. So to your question I think that does.

Either way.

Yes.

Very strong.

Domestically.

You know give us the opportunity to continue.

Yes.

Continue.

I don't think so.

Driving growth and operating margins in cloud as we've done in the past.

Sean.

Sure Sean.

And also I think from a revenue.

Thanks Robby.

Thank you <unk>.

Sets the infrastructure portion of our business.

To be to be a growth driver looking ahead as well.

Alright.

Yeah.

And to the second part of your question just taking a quick step back you know, we often describe youtube's business as a flywheel. Obviously at first of all starts with the creators and we have significantly invested here to be the place that you do to creators really call their home that's a big piece of it number one piece.

<unk>.

Sure.

<unk>.

Yourself course, Youtube as billions of monthly logged in users and everyday people watch billions of hours of video and we talked about how our recommendation systems are driving a robust watch time growth and so on and so on so on the monetization side Youtube's business is really powered with Senate that called it a twin engine monetization strategy called <unk>.

<unk>.

Okay.

They're going to be demand.

Okay.

Is that part of enforcement that al just to your product.

Okay.

<unk> advertising business and it's growing subscript subscription services, both Youtube ads and subscription saw strong growth this quarter and so looking at Youtube music and premium.

Hi.

Operator.

Mr Territories.

The range of 400.

Okay.

Those are on average delivering more value to creators to music media partners and Youtube itself and even AD supported use us to so in other words on average at Youtube music and premium subscribers generates a meaningful higher gross profit.

<unk>.

Please go ahead.

Okay.

And many others.

And finally, our specialty store approach.

Okay.

So that's number one.

Essentially neutral.

And then we're simply in an AD supported users and fans come from all over the World you know the ascend this engagement through ads and subscription generates youtube's revenues and funds what I started with Eddie's creators here and the sudden drives more viewership and engagement and so on and that's the flywheel and so our priority in use like this growth cycle, we're happy with it.

Patrick specialist lawyers.

And the only way to win that deal.

The strength of lodging demand.

It's funny because ships are declaring.

Victory.

And this quarter.

<unk>.

Like average.

Operator.

Twin engine monetization strategy.

Operator.

Hello, everyone.

So in other words, the Gardner Denver in July in terms of are there.

Our next question comes from Mark Shmulik with Bernstein. Your line is now open.

It anymore.

Yes.

Yes, thanks for taking the questions Sundar strong adoption of Gemini mode, and overviews across the user base are there any meaningful differences to call out kind of around the behavior and depth of engagement for those users across the entire Google ecosystem.

Thanks.

It is a major internet and subscription based on regenerate.

<unk> for example.

Viewership and engagement largely wrangler.

And I would.

I encourage you to continue to learn with recycled scrap in the first quarter.

Philip I know you kind of asked this.

Sure.

This quarters, but I'm curious kind of what some of the adoption you've seen around annual reviews and mode.

Okay.

Certainly.

Our next question comes from Macquarie.

Do you see the economics of search evolving with the higher commercial in total query volume and how it kind of compares against the incremental cost to deliver these results. Thank you.

But you're right now at prior year, where they are right now.

Okay.

Yes.

Mark.

Look I think obviously AI all of US are a natural part of our global experience and so you know engagement is very very high I would say AI them. All you you'll have a varied cohorts that are people who are casual users who are checking it out and then but there's a core group, which which really like C. I am orders.

Kathy.

Okay.

We can't hear it.

<unk>.

Yes.

Yeah.

Okay.

Yes.

The higher <unk>.

Passionate about it and so you see the early adopters are.

Okay.

The product is resonating very strongly and they're seeking it out so I think I think that's how I would highlight the difference with Gemini again, a set of engaged user base, who who are seeking out the product and so on.

Yeah.

Thank you.

Okay.

Great Thanks for being here.

<unk>.

Okay anxiety.

But across the board I think.

Hey, Ryan.

Okay.

The trajectory has been we are we are definitely seeing each of those use cases, a set of early adopters and then more people coming in and the people who are using it continue to use it more or time and report high user satisfaction. So I would say the underlying product metrics now are pretty encouraging to see.

<unk>.

So we're checking.

I'm, just checking that shareholders should be an issue.

So you can see plenty of opportunities as well.

Question <unk>.

<unk> Gemini engaged.

As well.

Looking to the second part of your question I think we covered before sooner cover the core development and as I've, just said before for the Ada overviews, even at our current baseline of ads right whether above below and within the response overall, we see the monetization at approximately the same rate and this is a great baseline for our firm.

<unk> you can see.

Awesome.

Thank you.

Pretty much everybody else.

<unk>.

And again using <unk>.

Other innovation.

Okay.

We've talked about this we're excited about where this can go and on the ammo side, we're testing as an error mode and we will continue to test and learn before we expand this any further.

And what will change with any type of your product.

Yes.

Alrighty.

<unk> to the second part of your ownership.

So this in combination with what we mentioned about the commercial Corey.

Sure.

They're all development.

Okay.

I think we're in a we're in a good place here.

Interesting.

<unk>.

You could also argue that inquiries that historically have not been well monetized. We think there is a potential opportunity here.

Okay.

International Medical cannabis remains a breakdown.

Or you can obviously imagine that we can build this out with smart AI integration.

<unk> generation of free cash generation.

Our next question comes from Michael Nathanson with Moffett Nathanson. Your line is now open.

Alright.

Yeah.

Yes.

Got it.

10%.

Thanks, I have two one for Phil.

Is there any further.

One for Scott.

Large producer of international and domestic.

It's clear that when people use.

The British pound and euro.

Great. Thank you.

The query ramped as much longer you can talk about how about longer lengths.

And part of last year.

So right. There you can also bring in a hurry.

The impact on your ability to drive ROE ads and what Youre seeing in the early benefits of Omega longer crew rather than not.

At this time.

Thank you.

Yeah.

Good morning, everyone.

Well as far as the trough.

In late March.

<unk>.

Okay.

The alphabet from a pharmaceutical company you've been there more than a year.

Thanks Rich.

Our next question Michael <unk>.

About how you're working to look at ROIC internally on what early signs are you, saying that.

<unk> com.

Okay.

Hi, Ross.

It gives you confidence that the spending is driving.

On top of that.

Driving better returns longer term thanks.

Okay.

As Sundar shared.

Like 75 million daily active users.

All right.

Uh huh.

Perfect.

Okay.

Got it.

Some of that.

On top of that.

Right.

Okay.

Great.

Okay.

Sure Kash.

Yeah.

Strong.

Sure.

<unk>.

The number of patients on that.

To address that as well.

Yes.

Two music media partners and Youtube itself, then even AD supported users too. So in other words on average of Youtube music and premium subscriber generates a meaningful higher gross profit and then they were simply an AD supported users and fans come from all over the world.

These are tests.

Yes.

Okay.

<unk>.

Nine months.

This engagement through ads and subscription generate youtube's revenues and funds what I started with Eddie's creators here understanding drives more viewership and engagement and so on and that's the flywheel and so our priority continues like this growth cycle. We are happy with this twin engine monetization strategy.

Right.

Our European <unk> hardware.

And along with the R&D.

With regard to <unk>.

Our next.

Yeah.

Comes from Mark Shmulik with Bernstein. Your line is now open.

<unk>.

The market demand.

Yes, thanks for taking the questions Sundar, the strong adoption of Gemini AMOLED and overviews across the user base are there any meaningful differences to call out kind of around the behavior and depth of engagement for those users across the entire Google ecosystem.

They're out there.

Please go ahead.

Got it.

Finally.

Cash returned three.

And whether any of it.

Whether it.

<unk>.

And then Phil but I know you kind of asked this.

Most quarters, but I'm curious kind of what somebody adoption, you've seen around AI overviews and mode. How you see the economics of search evolving with the higher commercial in total query volume and how it kind of compares against the incremental cost to deliver these results. Thank you.

Got it.

Okay.

At this point.

Okay.

Yes.

The other part of it.

Alright.

Mark look I think obviously AI all of US are a natural part of a Google experience and so you know engagement is very very high I would say AI them or you have a varied cohorts that are people who are casual users who are checking it out and then but there's a core group, which.

Right.

Thank you.

Yes.

Alright.

No.

Operations are.

<unk>.

Any other theories.

Okay.

And <unk> given at that.

Which really likes eight I am ordering dispassionate about it and so you see the early adopters are you know the product is resonating very strongly and they're seeking it out. So I think I think that's how I would highlight the difference with Gemini again set of engaged user base, who are seeking out the product and and so on.

Anybody betting on market.

Terrific.

Operator.

Our next question kind of a rough idea right.

Okay.

Right.

Okay.

[music].

Okay.

But across the board I think.

Okay.

The trajectory has been we are we are definitely seeing in each of those use cases, a set of early adopters and then more people coming in and the people who are using it continue to use it more or time and report high user satisfaction. So I won't say the underlying product metrics now are pretty encouraging to see.

Okay.

Anat Ashkenazi: Welcome, everyone. Thank you for standing by for the Alphabet Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press *1 on your telephone. I would now like to hand the conference over to your speaker today, James Friedland, Head of Investor Relations. Please go ahead.

A swap.

Look into the second part of your question I think we covered before it's under cover the core development and as I've, just said before for the air Overviews, even at our current baseline of ads right, whether above below and with India response overall, we see the monetization at approximately the same rate and this is a great basket basis.

So.

Look a IMAX and I mentioned this in my call before improves and the ability for advertisers to target a wider range of Coreys separately. There is the question of whether worries are actually increase with AI mode, and I think sundar actually talked about it and I mentioned the opportunity that he sees here. So I think it's important to separate those two.

For further innovation.

We've talked about this we're excited about where this can go and on the AMOLED side, we're testing out in air mode, and we will continue to test and learn before we expand this any further.

James Friedland: Thank you. Good afternoon, everyone, and welcome to Alphabet Inc.'s Third Quarter 2025 Earnings Conference call. With us today are Sundar Pichai, Philipp Schindler, and Anat Ashkenazi. Now, I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Forms 10-K and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statement. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at abc.xyz/investor.

Things and I personally you also see this is what I just said in my last remark that I think over time, there's an opportunity to actually take a let's say cores that are not fully commercial but could have an adjacent commercial relationship to basically expand us into more attractive ads offerings without a lot of really creating a real inter.

So this in combination with what we mentioned about the commercial Corey.

They're all development.

I think we're in a we're in a good place here.

You could also argue that inquiries that historically have not been well monetized. We think there is a potential opportunity here.

And the user experience at the same time.

Yeah.

Where you can obviously imagine that we can build this out with smart AI integration.

The thing I would add is just stepping back broadly I think.

AI all of Us in AI mode are you now.

Our next question comes from Michael Nathanson with Moffett Nathanson. Your line is now open.

Dramatically improving search we can see it in our user satisfaction user quality, all our metrics and they are universal and the nature they apply across.

Thanks, <unk> one for <unk> one for <unk>.

It's clear that when people use AI.

The universality of human need so I think we're seeing it in breadth and so naturally over time that'll apply to commercial categories as well.

Query amount is much longer we can talk about how that longer when maybe impacting your ability to drive ROE as in what youre seeing in person.

James Friedland: Our comments will be on year-over-year comparisons unless we state otherwise. I'll turn the call over to Sundar.

Our next question comes from Ken Goralski with Wells Fargo. Your line is now open.

The benefits of Omega longer query ramping then.

Okay.

The alphabet from a pharmaceutical company they never more than a year.

Thank you very much two questions. Please first.

[Analyst]: Thank you, James. Good afternoon, everyone, and thanks for joining us. This was a terrific quarter for Alphabet Inc., driven by double-digit growth across every major part of our business. We are seeing AI now driving real business results across the company. We delivered our first-ever $100 billion quarter. Five years ago, our quarterly revenue was $50 billion. Our revenue number has doubled since then, and we are firmly in the generative AI era. In parallel, we have built for the long term and diversified with successful businesses in Google Cloud, YouTube, and subscriptions. Our momentum is strong, and we are shipping at speed. As just a few examples, our first-party models like Gemini now process 7 billion tokens per minute via direct API use by our customers.

Ed about how you're working to look at our ROIC internally on what early signs are you seeing that gives you confidence that the spending is.

It appears more and more clear that.

All the new modes.

At Google too.

I mean, I overview aio reuse AI mode, even Kashi P. T is growing the addressable market for engagement and search like behavior could you talk about what gives you confidence that it will also grow the addressable market for market activity and overall revenue associated with that behavior.

Driving better returns longer term thanks.

As Sundar shared air mode now has over like 75 million daily active users in the U S and we see strong and consistent week over week growth in usage since.

Since launching the quarries doubled over the quarter.

And as I also mentioned, we're testing ads in AI mode, and we will continue to list our test before we expand any further it's really too early to tell and go into any of the details of that testing.

That's question one and question two is just more about as you think about.

AI mode, AI or views and traditional Google search.

Okay, Yes, and the question related to our Oh I see in how we look at.

How do you think do you see a world in 12 to 24 months those all will exist and does the user.

Just overall, our business and where do we see early signs are encouraging so firstly with it it's not just early signs because we're seeing returns obviously in the cloud business you've heard US talk about the fact that we already are generating billions of dollars from AI in the quarter.

Does the user eventually.

[Analyst]: The Gemini app now has over 650 million monthly active users, and queries increased by 3x from Q2. Google Cloud had another great quarter of accelerating growth with AI revenue as a key driver. Cloud backlog grew 46% quarter over quarter to $155 billion. We crossed 300 million paid subscriptions led by growth in Google One and YouTube Premium. Today, I'll discuss progress in our full-stack approach to AI and then share highlights from Google Search, Google Cloud, YouTube, and Waymo. As a reminder, our full-stack approach spans AI infrastructure, world-class research, including models and tooling, and our products and platforms that bring AI to people everywhere. First up, AI infrastructure. Our extensive and reliable infrastructure, which powers all of Google's products, is the foundation of our stack and a key differentiator.

What what they want.

The algorithm.

Could you talk a little bit about how you think that will progress over the next 12 months to 24 months. Thank you very much.

But then across the board, we have a rigorous framework and approach by which we evaluate.

Ken Thanks look I think it's.

These long term investments that are meant to do two things one is to ensure we have we built a resilient growth profile for the company, but also that we meet the demand of the customers that we have here in the in the more near and midterm.

It's a dynamic moment and you know I think we are meeting people.

In the moment.

What they're trying to do obviously searches evolving and.

So we look at it across the business, we evaluate the potential return for each one of them, whether it's in cloud and I think that's more visible obviously externally given.

Between AI all views and AI mode. I think we are we are able to kind of give that range of experience for people. In this moment over time, you will expect us to you can expect us.

That you see the revenue generated in the fact that we are unable to meet at this point of customer demand, we have more demand than we have supplied them.

To make the experience a simpler.

In a way that just likely to universal search. Many many years ago. We may have done text search he made search media search et cetera, and then we kind of brought it together in a seamless search. So you will see evolutions like that but I think I think we want to be sensitive to making sure that we are meeting the uses are.

In our ads business you see the fact that we're investing to transform searches you heard from Phil concerned out with the I O N E.

So we're excited to see what where our investments are at health, how they're invested in are helping.

[Analyst]: We are scaling the most advanced chips in our data centers, including GPUs from our partner NVIDIA, as well as our own purpose-built TPUs. We are the only company providing a wide range of both. As we announced yesterday at NVIDIA GTC, we are now shipping the new A4x Max instances powered by NVIDIA GD300 to our cloud customers. Our highly sought-after TPU portfolio is led by our seventh-generation TPU, Ironwood, which will be generally available soon. We are investing in TPU capacity to meet the tremendous demand we are seeing from customers and partners, and we are excited that Anthropic recently shared plans to access up to 1 million TPUs. Next, world-class AI research, including models and tooling. Our models are world-leading. Gemini 2.5 Pro, VO Genie 3, and our viral sensation Nano Banana are among the very best in class.

Advertisers as well.

Youtube, where its helping power recommendations to where we were when we make a decision on investment in the long term. We go through a very rigorous process of assessing what the return could be and over what timeframe you will see that return to give us the high level of confidence to then invest and make those investments for the long term.

In terms of what they're looking for I think Gemini allows us to build a more personal proactive powerful AI assistant for that moment in and I think I think having the two surfaces search and Gemini allows us to really serve users across the breadth of their needs and but over time, we will totally look for.

So it's a it's a very rigorous approach.

Opportunities to make the experience better for users and to the first part I would broadly say U S.

Thanks.

Our next question comes from Ross Sandler with Barclays. Your line is now open.

Yes.

I do think we've been consistently saying for a while now does is an expansionary moment and and <unk>.

Great.

About 20%.

And we are seeing people engage more in and I think when they do that naturally a portion of that information for users. Those journeys are commercial in nature. So we would expect that to play out over time as well.

Search queries or our commercial historically.

You've talked a bunch on this call about how.

And my overview for kind of expanding the breadth of inquiry.

Could you talk about how new product from the monetization side like AI Max or potentially.

[Analyst]: Over 230 million videos have been generated with VO3, and more than 13 million developers have built with our generative models. We are looking forward to the release of Gemini 3 later this year. Our research leadership is advancing next frontier technologies. Last week, we announced that our Willow quantum chip achieved a major breakthrough, running an algorithm 13,000 times faster than one of the world's best supercomputers. The result is verifiable, paving the way to future practical applications. Speaking of quantum, let me congratulate Michel Debray, our Chief Scientist for Quantum Hardware. He received a Nobel in Physics for early research he did in the 1980s. Three Nobels awarded to current Googlers in two years. Incredible. Our products and platforms are bringing AI to more people and developers than anyone else. In July, we announced that we processed 980 trillion monthly tokens across all our services.

Thank you our last question comes from Justin Post with B a N out your line is now open.

Increasing the percent of commercial queries.

So look a IMAX and I mentioned this in my call before improves the ability for advertisers to target a wider range of quarries separately. There is the question of whether worries.

Great just a couple Sundar I think he mentioned Gemini three is coming maybe you can comment on the pace of innovation frontier models is there still just a tremendous amount of innovation or is it slowing at all and then you mentioned a number of large deals signed in the last nine months for cloud, which is great any any changes in.

Actually increase with AI mode, and I think sundar actually talked about it I.

I mentioned the opportunity that he sees here. So I think it's important to separate those two things and I personally you also see it as what I just said in my last remark that I think over time, there is an opportunity to actually take a let's say or is it or not fully commercial but could have.

The economics of these deals as far as long term profitability anything we should be aware of thank you.

Thanks, Justin first on the on the on the pace of Frontier model Research and development look I think the.

Jason commercial relationship to basically expand us into more attractive as offerings without a lot of really creating a really interesting user experience at the same time.

Two things about simultaneously true.

Credibly impressed by the pace at which the teams that are executing and the pace at which we are improving these models.

Yes and no.

Only thing I would add is just stepping back broadly I think AI.

<unk> views and AI mode or you know.

But it also is true at the same time that each of the prior model, you're trying to get better or it's now getting more and more capable. So I think both the paces, increasing but sometimes we are taking the time to put out a.

[Analyst]: We are now processing over 1.3 quadrillion monthly tokens, more than 20x growth in a year. Phenomenal. This quarter, we took big steps to reimagine Chrome as a browser powered by AI through deep integrations with Gemini and AI mode in Search, with more agentic capabilities coming soon. In August, as made by Google, we unveiled our Pixel 10 series of devices. They are the first with our most powerful chip designed to run on Gemini Tensor G5. They are our best-reviewed devices ever. Last week, we launched Android XR, our new operating system, with Samsung's Galaxy XR device. It brings new ways to use headsets and glasses with Gemini at the core. Now turning to highlights from Search. AI is driving an expansionary moment for Search. As people learn what they can do with our new AI experiences, they are increasingly coming back to Search more.

<unk> dramatically improving search we can see it in user satisfaction user quality, all our metrics and a universal in nature they apply across the.

The universality of human need so I think we're seeing it in breadth and so naturally over time that'll apply to commercial categories as well.

Notably.

Improved improved model, so I think that may take slightly longer.

I do think the underlying piece.

Is a phenomenon to see and I'm excited about our Gemini two point of release later this year.

Our next question comes from Ken Garosci with Wells Fargo. Your line is now open.

On cloud <unk>.

Thank you very much two questions. Please first.

I would I would point out that's the sign of the momentum.

It appears more and more clear that.

The number of deals greater than $1 billion that we signed in.

All the new modes.

In the first three quarters of this year are greater than the two years. Prior. So we are definitely seeing strong momentum and we are executing at pace.

Google Jim with Gemini overview, Aio reuse AI mode.

GPP is growing the addressable market.

For engagement and search like behavior.

And in terms of long term economics.

Talk about what gives you confidence that it will also grow the addressable market for market activity and overall revenue associated with that behavior.

Say that again us being a full stack.

AI player and the fact that we are developing highly differentiated products on our own technology I think will help us.

[Analyst]: Search and its AI experiences are built to highlight the web, sending billions of clicks to sites every day. During the Q2 call, we shared that overall queries and commercial queries continue to grow year over year. This growth rate increased in Q3, largely driven by our AI investments in Search, most notably AI Overviews and AI mode. Let me dive into the momentum we are seeing. As we have shared before, AI Overviews drive meaningful query growth. This effect was even stronger in Q3 as users continue to learn that Google can answer more of their questions. It is particularly encouraging to see the effect was more pronounced with younger people. We are also seeing that AI mode is resonating well with users. In the U.S., we have seen strong and consistent week-over-week growth in usage since launch, and queries doubled over the quarter.

That's question one and question two is just more about as you think about.

AI mode, AI or views and peripheral Google search.

Drive a good trajectory here as you have seen over the past.

How do you think.

A few years.

Do you see a world in 12 to 24 months those all will exist and does the user.

Great. Thank you.

Thank you and that concludes our question and answer session for today I'd like to turn the conference back over to Jim Friedland for any further remarks.

Does the user eventually.

What what more they want it.

Thanks, everyone for joining us today, we look forward to speaking with you again on our fourth quarter 2025 call. Thank you and have a good evening.

The algorithm.

Can you talk a little bit about how you think that will progress over the next 12 months to 24 months. Thank you very much.

Ken Thanks look I think it's.

Thank you everyone. This concludes today's conference call. Thank you for participating you may now disconnect.

You know, it's a dynamic moment and you know I think we are meeting people.

[music].

In the moment with what they are trying to do obviously searches evolving and.

Hey.

Between AI, all views and AI mode, I think B R. V are able to kind of give it at range of experience for people in this moment over time, you will expect us to you can expect us.

[Analyst]: Over the last quarter, we rolled out AI mode globally across 40 languages in record time. It now has over 75 million daily active users. We shipped over 100 improvements to the product in Q3, an incredibly fast pace. Most importantly, AI mode is already driving incremental total query growth for Search. Philipp will talk more about monetization and share how AI is helping people connect with businesses and shop on Search. Next, Google Cloud. Our complete enterprise AI product portfolio is accelerating growth in revenue, operating margins, and backlog. In Q3, customer demand strengthened in three ways. One, we are signing new customers faster. The number of new GCP customers increased by nearly 34% year over year. Two, we are signing larger deals. We have signed more deals over $1 billion through Q3 this year than we did in the previous two years combined.

Okay.

To make the experience a simpler.

[music].

In a way that just like we did universal search many many years ago. We may have done text search he made search video search et cetera, and we kind of brought it together. It is universal search. So you will see evolutions like that but I think I think b, we want to be sensitive to making sure that we are meeting the uses are.

Okay.

Yes.

Okay.

Yes.

Okay.

In terms of what they're looking for I think Gemini allows us to build a more personal proactive powerful AI assistant for that moment in and I think getting having the two surface search and Gemini allows us to really set of users across the breadth of their needs and but over time, we will you know thoughtfully look for.

Sure.

Opportunities to make the experience better for users and.

And to the first part I would I would broadly say.

Yes.

As you know.

[Analyst]: Third, we are deepening our relationships. Over 70% of existing Google Cloud customers use our AI products, including Banco BV, Best Buy, and Fairprice Group. As we scale, we are diversifying revenue. Today, 13 product lines are each at an annual run rate over $1 billion. We are improving operating margin with highly differentiated products built with our own technology. This deep product differentiation starts with our AI infrastructure. We have a decade of experience building AI accelerators and today offer the widest array of chips. This leadership is winning customers like HCA Healthcare, LG AI Research, and Macquarie Bank. It is why nine of the top 10 AI labs choose Google Cloud. We are also the only cloud provider offering our own leading generative AI models, including Gemini, Imagen, VO, Chirp, and Lyria. Adoption is rapidly accelerating.

Sure.

I do think we've been consistently saying for a while now does an expansionary moment and and and we are seeing people engage more in and I think when they do that.

Naturally a portion of that information for users those journeys are commercial in nature. So I would expect that to play out over time as well.

Sue.

Thank you our last question comes from Justin Post with B a M. L. Your line is now open.

Great and just a couple of cents.

I think you mentioned Gemini three is coming maybe you can comment on the pace of innovation and frontier models is there still just a tremendous amount of innovation or is it flowing at all and then you mentioned a number of large deals signed in the last nine months for cloud which is great.

Any changes in the economics of these deals as far as long term profitability anything we should be aware of thank you.

Thanks, Justin the first on <unk> on the on the pace of Frontier model, Our research and development look I think the two things about simultaneously true I'm incredibly impressed by the pace at which the teams are executing and the pace at which we are improving these models.

[Analyst]: In Q3, revenue from products built on our generative AI models grew more than 200% year over year. Over the past 12 months, nearly 150 Google Cloud customers each processed approximately 1 trillion tokens with our models for a wide range of applications. For example, WPP is creating campaigns with up to 70% efficiency gains. Swarovski has increased email open rates by 17% and accelerated campaign localization by 10 times. Earlier this month, we launched Gemini Enterprise, the new front door for AI in the workplace, and we are seeing strong adoption for agents built on this platform. Our packaged enterprise agents in Gemini Enterprise are optimized for a variety of domains, are highly differentiated, and offer significant out-of-box value to customers. We have already crossed 2 million subscribers across 700 companies. Next, YouTube. In the living room, YouTube has remained number one in streaming watch time in the U.S.

But it also is true at the same time that each of the prior model you're trying to get better or is now getting more and more capable. So I think both the paces, increasing but sometimes we are taking the time to put out a.

Notably improved improved model. So I think that may take slightly longer, but I do think the underlying pace.

<unk> is a phenomenal to see and I'm excited about our Gemini two point of release later this year.

On on cloud.

You know I.

I would I would point out is a sign of the momentum.

I think the number of deals greater than $1 billion that we sign in.

In the first three quarters of this year are greater than the two years. Prior so we're definitely seeing strong momentum and we are executing at pace and in terms of long term economics.

[Analyst]: for more than two years, according to Nielsen. Last month marked YouTube's first time as a live NFL broadcaster. This exclusive global broadcast, live from Brazil, drew more than 19 million fans and set a new record for most concurrent viewers of a live stream on YouTube. YouTube Shorts also continues to perform well. In the U.S., Shorts now earn more revenue per watch hour than traditional in-stream on YouTube. At our Made on YouTube event, we rolled out a number of AI-powered features that are helping creators supercharge creation and build their businesses. AI is now streamlining the entire content creation workflow from generative video tools and more efficient editing to AI-powered insights that help creators optimize their channels. We are also using AI to expand monetization, automatically identifying products to make their videos more shoppable. Philipp will discuss in more detail. Finally, Waymo.

Say that again us being a full stack.

AI player and the fact that we are develop being highly differentiated products on our own technology I think will help us.

Drive a good trajectory here as you've seen over the past.

A few years.

Great. Thank you.

Thank you and that concludes our question and answer session for today I'd like to turn the conference back over to Jeffrey Lin for any further remarks.

Thanks, everyone for joining us today, we look forward to speaking with you again on our fourth quarter 2025 call. Thank you and have a good evening.

Thank you everyone. This concludes today's conference call. Thank you for participating you may now disconnect.

[Analyst]: Next year, Waymo aims to open service in London, and they are working to bring service to Tokyo. They've also announced expansions to Dallas, Nashville, Denver, and Seattle, and secured permission to operate fully autonomously at San Jose and San Francisco airports. Autonomous testing continues to scale in New York City. The new Waymo for Business allows enterprises to offer Waymo as a work travel option. We launched Waymo Teens accounts in Phoenix this summer. We are pleased to see usage steadily increase with positive feedback from teens and their parents alike. Waymo's growth and momentum are strong, and 2026 is shaping up to be an exciting year. Overall, a milestone quarter. The incredible work of our teams is driving momentum across the board, and our leadership in AI positions us so well for the opportunity ahead.

[Analyst]: I want to thank all of our partners and our employees for their hard work and an excellent Q3. With that, I'll turn it over to Philipp.

James Friedland: Thanks, Sundar, and hello, everyone. I'll quickly cover performance for Google's services for the quarter, then structure the rest of my remarks around the great progress we're delivering across Search, Ads, YouTube, and partnerships. Google Services revenues were $87 billion for the quarter, up 14% year-on-year, driven by accelerated growth in Search and YouTube, partially offset by year-on-year decline in network revenues, adding some further color to our results. The 15% increase in Search and Other was led by growth across all major verticals, with the largest contributions from retail and financial services. YouTube saw similar performance across verticals. Its 15% growth in advertising revenues was driven by direct response, followed by brand. Starting with Search and Other revenues, which delivered over $56 billion in revenue for the quarter. As Sundar mentioned, AI is driving an expansionary moment and transforming how people use Google Search.

James Friedland: Our investments in new AI experiences, such as AI Overviews and AI mode, continue to drive growth in overall queries, including commercial queries, creating more opportunities for monetization. These AI experiences are enhancing how people connect with businesses and shop on Search. We recently added shopping capabilities in AI mode, which now help people shop conversationally in Search. We expanded try-on capabilities to more clothing items, now available to anyone in the U.S. Lastly, we're making it easier for consumers to benefit from deals through new loyalty offerings, like personalized annotations on organic results and ads. Looking at monetization, businesses can now tap into our most powerful AI search experiences. Using our most advanced AI models, we can understand and predict intent like never before, unlocking entirely new commercial pathways to provide valuable new consumer connections and helping us monetize even more efficiently.

James Friedland: Rolled out globally in September, AI Max in Search is already used by hundreds of thousands of advertisers, currently making it the fastest-growing AI-powered Search Ads product. In Q3 alone, AI Max unlocked billions of net new queries. By delivering the most relevant ad across surfaces and matching advertisers against additional queries they weren't reaching before, AI Max helps advertisers discover new customers at the exact moment they need their product or service. Kayak, for example, looked to grow conversions while staying within their ROAS goals. After turning on AI Max in Search, they grew the conversion value by 12% in early tests. We continue to infuse generative AI capabilities at every step of the marketing process. We rolled out Imagen 4 in Asset Studio and Product Studio, helping businesses produce more and better creatives.

James Friedland: On the measurement front, we enriched the model supporting Meridian, our marketing mix model, with additional variables. More granular reporting in PMax is making bidding more effective. A financial services company, SoFi, has been using PMax to meet its ambitious growth targets and helped drive a 39% improvement in its conversion volume year over year. Moving to YouTube, where we saw accelerated revenue growth, our recommendation systems are driving robust watch time growth in our key monetization areas, like Shorts and Living Room. As we leverage Gemini models, we're seeing further discovery improvement. On direct response, we're excited about the growth in revenue we're seeing, especially from small and medium advertisers adopting Demand Gen. We also improved performance on Demand Gen, with over 100 launches helping to increase conversion value by more than 40% for advertisers using target-based bidding on YouTube.

James Friedland: The retail vertical continues to lead our growth on YouTube, with Demand Gen helping us further monetize shopping-related categories. Looking at the Living Room, our long-term bet, more advertisers are adopting interactive direct response ads, leading to an annual revenue run rate exceeding $1 billion globally for this format. For our viewers, we continue to give fans greater access across sports while tapping into the best of YouTube's product innovation and creator-led content. Sundar mentioned that we expanded our NFL partnership with our first-ever exclusive global broadcast of an NFL game. Brands loved the opportunity, and we sold all our ad inventory within a couple of weeks. Looking at creators, a significant force behind a thriving YouTube creator economy is the collaboration between creators and brands.

James Friedland: Tools like direct linking to deals websites and Shorts and swappable brand segments in long form will soon help creators show how they deliver great value for brands. Thanks to a collaboration with Do It Perfect, Comcast Xfinity drove an 8% search lift, beating other Xfinity ads' recall lift on Shorts by 34%. At the same time, it decreased the cost per lifted user by 50% when compared to the next most efficient ad. We continue to invest in AI-powered features that are helping creators supercharge creation and build their businesses. With VO3 integration and speech-to-song, creators go from idea to iteration quicker, and new channel insights help them better understand performance. Ending on YouTube with our subscriptions product, we're also seeing momentum with strong growth in offerings such as YouTube Music and YouTube Premium and YouTube TV.

James Friedland: We're also playing Gemini internally to help us serve customers with increased speed, intelligence, and efficiency. Our sales teams use Gemini enriched with ads knowledge to streamline customer interactions. This increased productivity by over 10%, led to hundreds of millions in incremental revenue, and frees up sellers to engage with more customers at a deeper, more strategic level. In our Customer Support division, Gemini-powered solutions have managed over 40 million customer sessions so far this year and resolved hundreds of thousands of customer inquiries. We're just getting started. As always, I'll wrap with the progress we're seeing across partnerships, where customers tap into the strength and breadth of Google's products to accelerate their transformation. Revolut, the global financial services company, leverages Google Cloud's Vertex AI platform and Gemini models to help power its advanced customer service chatbot, develop new hyper-personalized financial products, and offer predictive insights.

James Friedland: Revolut is also increasing its presence on YouTube, adopting VO3 for personalized creatives, making Google a key ads partner for delivering growth and launching new markets. In closing, I'd like to thank Googlers everywhere for their contributions to our success, and as always, to our customers and partners for their continued trust. Of course, a huge thanks to all of you as we celebrate 25 years of Google Ads. Anat, over to you.

Anat Ashkenazi: Thank you, Philipp. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet Inc. level and will then cover our segment results. I'll end with some commentary on our outlook for the fourth quarter of 2025. We had an outstanding quarter in Q3, continuing the strong momentum we've had throughout the year, delivering double-digit revenue growth across Search and YouTube advertising, subscriptions, platforms and devices, and Google Cloud. Consolidated revenue reached $102.3 billion, a 16% year-over-year increase, or 15% in constant currency. Total cost of revenue was $41.4 billion, up 13%. Tech was $14.9 billion, up 8%. Other cost of revenues was $26.5 billion, up 16%, with the increase primarily driven by content acquisition costs, largely for YouTube, followed by depreciation and other technical infrastructure operations costs. Total operating expenses increased 28% to $29.7 billion.

Anat Ashkenazi: R&D expenses increased by 22%, driven by compensation and depreciation expenses related to our AI efforts. Sales and marketing expenses were flat. G&A expenses increased meaningfully, primarily due to the $3.5 billion charge related to the European Commission fine mentioned in the earnings press release. Operating income increased 9% this quarter to $31.2 billion, and operating margin was 30.5%. Excluding the EC fine, operating income increased 22%, and operating margin was 33.9%. Operating margin benefited from strong revenue growth and continued efficiencies in our expense base, offset by the legal charge and a significant increase in depreciation expense. Other income and expenses were $12.8 billion, primarily due to unrealized gains in our non-marketable equity securities portfolio. Net income increased 33% to $35 billion, and earnings per share increased 35% to $2.87.

Anat Ashkenazi: We generated free cash flow of $24.5 billion in the third quarter and $73.6 billion for the trailing 12 months. Free cash flow in Q3 benefited from strong operating cash flow and recent tax changes regarding the timing of when research and development costs are expensed and assets are depreciated. This was partially offset by higher CapEx. We ended the quarter with $98.5 billion in cash and marketable securities. Turning to segment results, Google Services revenues increased 14% to $87.1 billion, reflecting strengths in Google Search, YouTube advertising, and subscriptions. Google Search and other advertising revenues increased by 15% to $56.6 billion, representing another robust quarter with continued growth across all major verticals, with the largest contributions from retail and financial services. YouTube advertising revenues increased 15% to $10.3 billion, driven by direct response advertising, followed by brand. Network advertising revenues of $7.4 billion were down 3%.

Anat Ashkenazi: Subscriptions, platforms, and devices revenues increased 21% this quarter to $12.9 billion, driven by very strong growth in both YouTube and Google One subscriptions. Google Services operating income increased 9% to $33.5 billion. Operating margin declined year over year to 38.5%, as healthy revenue growth and continued efficiencies in our expense base were offset by the impact of the European Commission fine, which was fully reflected in the Google Services segment. Turning to the Google Cloud segment, which again delivered very strong results this quarter, as Cloud continued to benefit from our enterprise AI-optimized stack, including our own custom TPUs and our industry-leading AI models. Cloud revenue increased by 34% to $15.2 billion in the third quarter, driven by strong performance in Google Cloud Platform, which continued to grow at a rate that was much higher than Cloud's overall revenue growth rate.

Anat Ashkenazi: Google Cloud Platform's growth was driven by enterprise AI products, which are generating billions in quarterly revenue. We had strong growth in enterprise AI infrastructure and enterprise AI solutions, which benefited from demand for our industry-leading models, including Gemini 2.5. Core Google Cloud Platform was also a meaningful contributor to growth. We had double-digit growth in Google Workspace, which was driven by an increase in average revenues per seat and the number of seats. Cloud operating income increased by 85% to $3.6 billion, and operating margin increased from 17.1% in the third quarter last year to 23.7% this quarter. The expansion in Cloud operating margin was driven by strong revenue performance and continued efficiencies in our expense base, partially offset by higher technical infrastructure usage costs, which includes depreciation expense and other operations costs, such as energy.

Anat Ashkenazi: Google Cloud's backlog increased 46% sequentially and 82% year over year, reaching $155 billion at the end of the third quarter. The increase was driven primarily by strong demand for enterprise AI. As Sundar mentioned earlier, Cloud has signed more billion-dollar deals in the first nine months of 2025 than in the past two years combined. In Other Bets, revenues were $344 million, and operating loss was $1.4 billion in the third quarter. Within Other Bets, we continue to allocate more resources to businesses like Waymo, where we see opportunities to create substantial value. With respect to CapEx, in the third quarter, our CapEx was $24 billion. The vast majority of our CapEx was invested in technical infrastructure, with approximately 60% of that investment in servers and 40% in data centers and networking equipment.

Anat Ashkenazi: In Q3, we returned capital to shareholders through repurchases of stock of $11.5 billion and dividend payments of $2.5 billion. Turning to our outlook, I would like to provide some commentary on factors that will impact our business performance in the fourth quarter of 2025, as well as an updated outlook for CapEx for the year. First, in terms of revenues, we're pleased with the overall momentum of our business. At the current spot rates, we could see an FX tailwind to our revenues in Q4. However, the volatility in exchange rates could affect the impact of FX on Q4 revenues. As for our segments, in Google Services, year-over-year comparisons in advertising will be negatively impacted by the strong spend on U.S. elections in the fourth quarter of 2024, particularly on YouTube.

Anat Ashkenazi: In Cloud, demand for our products remains high, as evidenced by the accelerating revenue growth and the $49 billion sequential increase in Cloud backlog in Q3. In GCP, we see strong demand for enterprise AI infrastructure, including TPUs and GPUs, enterprise AI solutions driven by demand for Gemini 2.5 and our other AI models, and core GCP infrastructure and other services, such as cybersecurity and data analytics. As I've mentioned on previous earnings calls, while we have been working hard to increase capacity and have improved the pace of server deployments and data center construction, we still expect to remain in a tight demand-supply environment in Q4 and 2026. Moving to investments, we're continuing to invest aggressively due to the demand we're experiencing from Cloud customers, as well as the growth opportunities we see across the company.

Anat Ashkenazi: We now expect CapEx to be in the range of $91 billion to $93 billion in 2025, up from our previous estimate of $85 billion, keeping in mind that the timing of cash payments can cause variability in the reported CapEx number. Looking out to 2026, we expect a significant increase in CapEx and will provide more detail on our fourth quarter earnings call. In terms of expenses, first, as I mentioned on previous earnings calls, the significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expenses and related data center operations costs, such as energy. In the third quarter, depreciation increased $1.6 billion year over year to $5.6 billion, reflecting a growth rate of 41%. Given the overall increase in CapEx investments, we expect the growth rate in depreciation to accelerate slightly in Q4.

Anat Ashkenazi: Second, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches and the holiday season. Q3 was a strong quarter, and we're excited with the adoption of our AI products, helped by a rapid pace of innovation and great execution by our teams. This translated into strong momentum in Search, YouTube Ads, subscription platforms and devices, and Cloud, resulting in our first $100 billion plus quarter. Now, Sundar, Philipp, and I will take your questions. Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To prevent any background noise, we ask that you please mute your line once your question has been stated. Our first question comes from Brian Nowak with Morgan Stanley. Your line is now open.

[Analyst]: Great. Thanks for taking my questions, everyone. The first one, maybe for Philipp or Sundar, it's on agentic e-commerce and agentic travel. There's a lot of external Wall Street discussion about agentic e-commerce potentially monetizing at a lower rate than Search. The question is, what factors are you most focused on to sort of ensure a smooth transition for your Search business and for your advertisers as you move over to a more agentic world? The second one, Sundar, is on Waymo. How far are we from an integration of Waymo into more of the core Gemini capabilities and the users in the platform, taking your user data of where I'm going, what hotel I'm staying at, what airport I'm staying at, and having me integrate that into Waymo? You can actually have users use their profiles to pre-schedule Waymos. How far off is that?

[Analyst]: What do we have to do?

James Friedland: Brian, great question. This is all early, but we see agentic experiences really as additive to the way people seek information. It helps us answer people's tough questions, helps people get stuff done, and helps businesses in the process. We're working on multiple agentic experiences across key verticals, such as travel, commerce, shopping, and so on. We're paying a lot of attention to creating a seamless user experience, but also to the fact that we need to integrate different partner ecosystems in a way that creates value for them. By the way, we're also working closely with a lot of our partners on the other side through our Cloud services to improve their own agentic experiences. Maybe we go a little deeper on the shopping side, where we actually use AI already very actively to improve the shopping experience.

James Friedland: As you know, we launched a more visual experience on AI mode, and that gives people a much more intuitive conversational way to shop. You can simply describe what you're looking for now, like the way you would talk to a friend, and we'll show you the visual shopping results. When we think about building an agentic shopping future, it has to be one, again, that benefits both users and merchants here. You know that at Google I/O, we also introduced new agentic checkout, which will let shoppers use agentic AI to buy products from merchant sites and so on. We have a partnership with PayPal to help merchants build agentic commerce experiences. We have a new open protocol for agent-to-agent transactions, and so on and so on.

[Analyst]: Brian, on Waymo, a great question. I was reflecting, I think, on the exact same topic. I'm scheduled to meet with the team to do a review on it in a few weeks out. It is an exciting time. Waymo clearly is scaling up, particularly in 2026. I think the possibility, as you said, of Gemini, particularly with the multimodal experience, as well as services like YouTube, I think there's a real opportunity to make the in-car experience dramatically better. Definitely something we are excited about, and you'll see newer experiences in 2026, for sure.

James Friedland: Great. Thank you both.

Anat Ashkenazi: Our next question comes from Doug Anmuth with JPMorgan. Your line is now open.

[Analyst]: Thanks for taking the questions. Philipp, maybe you can just talk more about some of the drivers of the core search strength. In particular, when you think about AI Overviews and AI mode, we know that query growth is accelerating, but can you help us understand from there kind of what happens in terms of clicks per query and conversion rates and pricing in these AI-driven search formats? Anat, can you talk about where you see opportunities in the core cost space as you look to make room to absorb the rapid growth in infrastructure and depreciation going forward? Thanks.

James Friedland: Let me give you a bit of vertical color first. In Q3, Search and other revenues, again, delivered growth across all major verticals, as we said. It was from retail and financial services. Healthcare was also a contributor to the growth here. Our new AI experiences, you mentioned them, AI Overviews, AI mode, continue to drive growth in overall queries, including commercial queries, really creating more opportunities for monetization. AI Overviews are scaling up and are working for our entire user base. We're now scaled to over 2 billion users here, and we're continuing to expand ads in AI Overviews in English to more countries across desktop, mobile, and so on. As I've shared before, for AI Overviews, even at our current baseline of ads, below and within the AI's response, overall, we see the monetization at approximately the same rate.

James Friedland: Over time, we're excited about the opportunity of richer experiences in AI mode and AI Overviews to basically open up the opportunity for also much richer placements. I think, as I've said on a prior call, we manage the business to drive great outcomes for our users and an attractive ROI for our advertisers. We don't really manage to paid clicks and CPC targets. As you will see in the 10-Q, paid clicks were up 7% year on year, and CPCs were up 7% year on year.

Anat Ashkenazi: Doug, to your question around where else can we see more opportunity for efficiency and productivity, I think you heard me say before, this is not a one-time type of effort, but rather an ongoing way in which we manage the business. The key here is that the more we drive productivity across our business, the more we can invest in the business for growth and obviously continue to drive improvement in the P&L. Some of the areas are things that you've heard us talk about in the past, such as monitoring the pace of headcount growth, optimizing our real estate footprint, but also, as we invest more and more in our technical infrastructure, ensuring that we are optimizing that build-out and the overall technical infrastructure we have.

Anat Ashkenazi: You know that a lot of the data centers, for example, that we build ourselves, so they're optimized, and we make sure we do them in the most efficient way. Sundar mentioned on one of the previous calls the productivity associated with leveraging AI for Google. As the example, the % of code, now nearly half of all code generated by AI, that's a way for us to leverage AI to drive further productivity across the business. Obviously, we always look at making sure that when we provide services or products, we get the right economics and the right value for what we provide. One good example is Shorts, which has a lower revenue share than InStream, that helps to improve some of our gross margins. This is an effort we have ongoing.

Anat Ashkenazi: I've mentioned in the past that we have a headwind with depreciation, obviously increasing alongside our CapEx increase. We have efforts across the organization to ensure we run the business in the most disciplined and productive way while continuing to invest for future growth.

James Friedland: Thank you both.

Anat Ashkenazi: Our next question comes from Eric Sheridan with Goldman Sachs. Your line is now open.

[Analyst]: Thank you so much for taking the questions. Maybe two, if I could. Sundar, when you think about your custom silicon efforts across the organization, can you reflect a little bit about the opportunity set you see with each passing generation of custom silicon, both in terms of driving operating efficiencies inside the organization and potentially increased monetization efforts around those outside of the organization? Second question would be for Philipp. Obviously, we can see the YouTube advertising revenue number in the reported results. Can you reflect a little bit about the scaling of the subscription side of YouTube offerings and how the two parts in together maybe represent an interesting framework in thinking about the monetization side of YouTube increasingly being a mix of both ads and subscription? Thank you.

Sundar Pichai: Eric, overall, I would say we are seeing substantial demand for our AI infrastructure products, including TPU-based and GPU-based solutions. It is one of the key drivers of our growth over the past year. I think on a going-forward basis, we continue to see very strong demand, and we are investing to meet that. I do think a big part of what differentiates Google Cloud is that we have taken a full, deep, full-stack approach to AI. That really plays out, right? We are the only hyperscaler who is really building offerings on our own models. We are also highly differentiated on our own technology. To your question, I think that does give us the opportunity to continue driving growth in operating margins in Cloud, as we have done in the past.

Sundar Pichai: I think from a revenue set, the infrastructure portion of our business will be a growth driver looking ahead as well.

James Friedland: To the second part of your question, just taking a quick step back, we often describe YouTube's business as a flywheel. First of all, it starts with the creators, and we have significantly invested here to be the place that YouTube creators really call their home. That's a big piece of it, the number one piece. Viewers, of course, YouTube has billions of monthly logged-in users, and every day people watch billions of hours of video. We talked about how our recommendation systems are driving robust watch time growth and so on. On the monetization side, YouTube's business is really powered, I would say, on it. Let's call it a twin-engine monetization strategy, combining its advertising business and its growing subscription services. Both YouTube ads and subscriptions saw strong growth this quarter.

James Friedland: Looking at YouTube Music and Premium, users are on average delivering more value to creators, to music media partners, and YouTube itself than even ad-supported users do. In other words, on average, a YouTube Music and Premium subscriber generates a meaningful high gross profit, and they were simply ad-supported users. Fans come from all over the world. You know this, and this engagement through ads and subscription generates YouTube's revenues and funds what I started with, these creators here. This then drives more viewership and engagement and so on. That's the flywheel. Our priority continues like this growth cycle. We're happy with this twin-engine monetization strategy.

Anat Ashkenazi: Our next question comes from Mark Schmulik with Bernstein. Your line is now open.

[Analyst]: Yes, thanks for taking the questions. Sundar, with the strong adoption of Gemini AI mode and AI Overviews across the user base, are there any meaningful differences to call out around the behavior and depth of engagement for those users across the entire Google ecosystem? Philipp, I know we ask this most quarters, but I'm curious with some of the adoption you've seen around AI Overviews and mode, how you see the economics of search evolving with the higher commercial and total query volume and how it compares against the incremental cost to deliver these results. Thank you.

Sundar Pichai: Across the board, I think the trajectory has been we are definitely seeing in each of those use cases a set of early adopters, then more people coming in, and the people who are using it continue to use it more over time and report high user satisfaction. I would say the underlying product metrics are pretty encouraging to see as well.

James Friedland: Looking to the second part of your question, I think we covered before, Sundar covered the query development. As I've just said before, for the AI Overviews, even at our current baseline of ads, whether above, below, and within the AI response, overall we see the monetization at approximately the same rate. This is a great baseline for further innovation. We've talked about this. We're excited about where this can go. On the AI mode side, we're testing ads in AI mode, and we will continue to test and learn before we expand this any further. This in combination with what we mentioned about the commercial query overall development, I think we're in a good place here.

James Friedland: You could also argue that on queries that historically have not been well monetized, we think there is a potential opportunity here where you can obviously imagine that we can build this out with smart AI integration.

Anat Ashkenazi: Our next question comes from Michael Nathanson with MoffettNathanson. Your line is now open.

[Analyst]: Thanks. I have two, one for Philipp, one for Anat. Philipp, it's clear that when people use AI mode, the query length is much longer. Could you talk about how that longer length may be impacting your ability to drive ROAS and what you're seeing in terms of the early benefits of maybe the longer query length? Anat, you came to Alphabet Inc. from a pharmaceutical company. You've been there more than a year. Could you talk a bit about how you're working to look at ROIC internally and what early signs are you seeing that give you confidence that this spending is really driving better returns longer term? Thanks.

James Friedland: OK. As Sundar shared, AI mode now has over 75 million daily active users.

Sundar Pichai: To music media partners and YouTube itself, then even ad-supported users too. In other words, on average, a YouTube Music and YouTube Premium subscriber generates a meaningful high gross profit, and then they were simply ad-supported users. Fans come from all over the world. You know this, and this engagement through ads and subscription generates YouTube's revenues and funds what I started with, these creators here. This then drives more viewership and engagement and so on. That's the flywheel. Our priority continues like this growth cycle. We're happy with this twin-engine monetization strategy.

Anat Ashkenazi: Our next question comes from Mark Schmulik with Bernstein. Your line is now open.

Sundar Pichai: Mark, look, I think obviously AI Overviews are a natural part of the Google experience, and engagement is very, very high. I would say AI mode, you have varied cohorts. There are people who are casual users who are checking it out, but there is a core group which really likes AI mode and is passionate about it. You see the early adopters. The product is resonating very strongly, and they are seeking it out. I think that's how I would highlight the difference. With Gemini, again, a set of engaged user base who are seeking out the product and so on. Across the board, I think the trajectory has been we are definitely seeing in each of those use cases a set of early adopters, then more people coming in, and the people who are using it continue to use it more over time and report high user satisfaction.

Sundar Pichai: I would say the underlying product metrics are pretty encouraging to see as well.

James Friedland: Looking to the second part of your question, I think we covered before, Sundar covered the query development. As I've just said before, for the AI Overviews, even at our current baseline of ads, whether above, below, and within the AI response, overall we see the monetization at approximately the same rate. This is a great baseline for further innovation. We've talked about this. We're excited about where this can go. On the AI mode side, we're testing ads in AI mode, and we'll continue to test and learn before we expand this any further. This in combination with what we mentioned about the commercial query overall development, I think we're in a good place here.

Anat Ashkenazi: Our next question comes from Michael Nathanson with MoffettNathanson. Your line is now open.

[Analyst]: Thanks. I have two, one for Anat. Philipp, it's clear that when people use AI mode, the query length is much longer. Could you talk about how that longer length may be impacting your ability to drive ROAS and what you're seeing in terms of the early benefits of maybe longer query length? Anat, you came to Alphabet Inc. from a pharmaceutical company. You've been there more than a year. Could you talk a bit about how you're working to look at ROIC internally and what early signs are you seeing that give you confidence that this spending is really driving better returns longer term? Thanks.

James Friedland: OK. As Sundar shared, AI mode now has over 75 million daily active users in the U.S., and we see strong and consistent week-over-week growth in usage since launch. The queries doubled over the quarter. As I also mentioned, we're testing ads in AI mode. We'll continue to test before we expand any further. It's really too early to tell and go into any of the details of that testing.

[Analyst]: OK.

Anat Ashkenazi: Yes, and the question related to ROIC and how we look at just overall our business and where do we see early signs that are encouraging. First, I would say it's not just early signs because we're seeing returns, obviously, in the Cloud business. You've heard us talk about the fact that we already are generating billions of dollars from AI in the quarter. Across the board, we have a rigorous framework and approach by which we evaluate these long-term investments that are meant to do two things. One is to ensure we build a resilient growth profile for the company, but also that we meet the demand of the customers that we have here in the more near and midterm. We look at it across the business.

Anat Ashkenazi: We evaluate the potential return for each one of them, whether it's in Cloud, and I think that's more visible, obviously, externally, given that you see the revenue generated and the fact that we're unable to meet at this point customer demand. We have more demand than we have supplied. In our ads business, you see the fact that we're investing to transform search, as you heard from Philipp and Sundar with AI Overviews and AI mode. We're excited to see what our investments are, how the investments are helping advertisers as well. YouTube, where it's helping power recommendations.

Anat Ashkenazi: When we make a decision on investment in the long term, we go through a very rigorous process of assessing what the return could be and over what time frame we'll see that return to give us the high level of confidence to then invest and make those investments for the long term. It's a very rigorous approach.

[Analyst]: Thanks.

Anat Ashkenazi: Our next question comes from Ross Sandler with Barclays. Your line is now open.

[Analyst]: Great. About 20% of Google's search queries are commercial historically. You've talked a bunch on this call about how AI Overviews are kind of expanding the breadth of queries. Could you talk about how new products on the monetization side, like AI Max, are potentially increasing the % of commercial queries?

James Friedland: AI Max, and I mentioned this in my call before, improves the ability for advertisers to target a wider range of queries. Separately, there is the question of whether queries actually increase with AI mode. Sundar actually talked about it and mentioned the opportunity that he sees here. I think it's important to separate those two things. I personally also see this, what I just said in my last remark, that I think over time there's an opportunity to actually take, let's say, queries that are not fully commercial but could have an adjacent commercial relationship to basically expand this into more attractive ads offerings while really creating a really interesting user experience at the same time.

Sundar Pichai: Yeah, the only thing I would add is just stepping back broadly, I think AI Overviews and AI mode are dramatically improving Search. We can see it in user satisfaction, user quality, all our metrics. They are universal in their nature. They apply across the universality of human needs. I think we are seeing it in breadth. Naturally, over time, that will apply to commercial categories as well.

Anat Ashkenazi: Our next question comes from Ken Gurovsky with Wells Fargo. Your line is now open.

[Analyst]: Thank you very much. Two questions, please. First, it appears more and more clear that all the new modes at Google with Gemini overview, AI Overviews, AI mode, even ChatGPT, is growing the addressable market for engagement in search-like behavior. Could you talk about what gives you confidence that it will also grow the addressable market for marketing activity and overall revenue associated with that behavior? That's question one. The second question is just more about as you think about AI mode, AI Overviews, and traditional Google Search, how do you think do you see a world in 12 to 24 months those all coexist? Does the user eventually pick what mode they want? Does the algorithm pick the mode? Could you talk a little bit about how you think that will progress over the next 12 to 24 months? Thank you very much.

Sundar Pichai: Ken, thanks. I think it's a dynamic moment, and I think we are meeting people in the moment with what they are trying to do. Obviously, search is evolving. Between AI Overviews and AI mode, I think we are able to kind of give that range of experience for people in this moment. Over time, you can expect us to make the experiences simpler in a way that, just like we did universal search many, many years ago, we may have done text search, image search, video search, etc., and then we kind of brought it together as universal search. You will see evolutions like that. I think we want to be sensitive to making sure we are meeting the users in terms of what they are looking for. I think Gemini allows us to build a more personal, proactive, powerful AI assistant for that moment.

Sundar Pichai: I think having the two surfaces, search and Gemini, allows us to really serve users across the breadth of their needs. Over time, we will thoughtfully look for opportunities to make the experience better for users. To the first part, I would broadly say, as I do think we've been consistently saying for a while now, this is an expansionary moment, and we are seeing people engage more. I think when they do that, naturally, a portion of that information for users, those journeys are commercial in nature. I would expect that to play out over time as well.

[Analyst]: Thank you.

Anat Ashkenazi: Our last question comes from Justin Post with BAML. Your line is now open.

[Analyst]: Great. Just a couple. Sundar, I think you mentioned Gemini 3 is coming. Maybe a comment on the pace of innovation in frontier models. Is there still just a tremendous amount of innovation, or is it slowing at all? You mentioned a number of large deals signed in the last nine months for Cloud, which is great. Any changes in the economics of these deals as far as long-term profitability? Anything we should be aware of? Thank you.

Sundar Pichai: Thanks, Justin. The first on the pace of frontier model research and development. Look, I think two things are both simultaneously true. I'm incredibly impressed by the pace at which the teams are executing and the pace at which we are improving these models. It also is true at the same time that each of the prior models you're trying to get better over is now getting more and more capable. I think both the pace is increasing, but sometimes we are taking the time to put out a notably improved model. I think that may take slightly longer. I do think the underlying pace is phenomenal to see. I'm excited about our Gemini 3.0 release later this year.

Sundar Pichai: On Cloud, I would point out as a sign of the momentum, I think the number of deals greater than $1 billion that we signed in the first three quarters of this year are greater than the two years prior. We are definitely seeing strong momentum, and we are executing at pace. In terms of long-term economics, I would say that, again, us being a full-stack AI player and the fact that we are developing highly differentiated products on our own technology, I think will help us drive a good trajectory here, as you have seen over the past few years.

[Analyst]: Great. Thank you.

Anat Ashkenazi: Thank you. That concludes our question and answer session for today. I'd like to turn the conference back over to James Friedland for any further remarks.

James Friedland: Thanks, everyone, for joining us today. We look forward to speaking with you again on our fourth quarter 2025 call. Thank you and have a good evening.

Anat Ashkenazi: Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect.

Q3 2025 Alphabet Inc Earnings Call

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