Alphabet (GOOG) 31 Jul 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Alphabet Second Quarter 2020 Earnings Conference Call. [Operator Instructions]. I'd now like to hand the conference over to your speaker today, Jim Friedland, Director of Investor Relations. Please go ahead.

Thank you. welcome second and conference XXXX everyone, call. afternoon, to quarter Alphabet's earnings Good are Ruth Pichai us Sundar With today and Porat.

Now I'll harbor. quickly cover the safe

of statements including could to we operations that areas, uncertainties may COVID-XX the that regarding forward-looking. those number Some business, And differ of considered our and such pandemic make on results and a effect materially. cause the today performance, actual be of involve the financial statements risks

in refer our with to XXXX recent the the For our more discussed the in most be the XX-K factors and quarter information, today. Form with filed filed please later expected to XX, Form risk for SEC ended SEC June XX-Q

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you, here. Jim, week, to thank glad in. joining is I'm and a for be certainly everyone, been hope safe It's and busy everyone staying well. Thank I you, and

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Thanks, Sundar.

by are of mindful results although quarter, environment. our global fragile We for cautiously the second encouraged economic the

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and primarily by second The million quarter, $XXX Fiber operating the was For loss generated revenues $X.X were billion. Verily.

Let me end outlook. with our

Search, improved earlier, across As quarter gradually the network. I said revenue and ads YouTube during

trends, gauge of However, uncertainty the recent environment. to of macro the durability we believe premature is obvious global given the it

on has discussed earnings is quarter's with tended to and we to key performance monitor. last ad macroeconomic call, signal correlated spend As global a be

the the business. term, about optimistic of strength Over remain we our underlying long

support of the around we reflect world new reflects significant results stayed expanding the locales in digital the as such in also adoption traction are customers who ended which are commitments performance is In of Cloud. terms organization. quarter we the the accelerated us. the as of Google result billion, Cloud, games successful home. at of backlog, local Google our availability QX have and of the apps of and which buyers all investments in Google Performance we're large developers cloud in the adoption reflected forms into made the making our people promotion the pleased and to with with ecosystem of with strength Play's to partners' is a go-to-market This making payments. $XX.X users, This multiyear and investments having growth are relates number we substantially with of new

put profitability, investments profitability. was long-term Moving which our on for pressure impacted further by Search ongoing on The growth. our to decline revenues significant in

of is with of OpEx and both in our directly last base, cost As quarter, revenues. not much expense revenues in changes I discussed correlated

in revenues, cost are For of activities remain revenues continue products. items expenses, less although on technical TAC headcount nature, continuing we're in graduates. other marketing to as tied higher new although and to focused customer to we well pace We that of experience, a prior on example, the as percentage our acquisition and content as seasonally operating years, still to We for the be support and will additions decelerate the of such that invest obviously half are cloud. more bring generally still as in expect holiday Consistent in aggressively costs of QX heavily growth expect weighted sales With headcount expect . back with there's respect the support areas support to and and and like product our XXXX, hire to in we'll costs like somewhat content review. priority we to to to expenses year, operations in the depreciation sizable be infrastructure season. user launches of customer we and part variable

Turning to CapEx.

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and Board authorized our take of our now in up indicated the to Thank we today, press I and As your our additional Sundar release C repurchase stock. questions. of will an has Class billion $XX you,

from from [Operator of the UBS. Eric line Sheridan first comes Instructions]. And our question

amplifying of for What pulled sort U.S. a YouTube the of to want how the both TV against, seeing a environment. sort obviously, volatile I remains advertising commission-free broadly if advertising brand landscape an the lot e-commerce go budgets of e-commerce the moving obviously, to understand under making given and can, and both second commerce of from moves fairly lot the strategically announcements advertising the two, that think the of are quarter, the globally And YouTube, in in some and penetration One, the I Maybe in forward and on Sundar. opportunities you after efforts. TV environment on company positions and initiatives, a ad that's current you're towards flux. you umbrella?

a for, and opportunity a little bit spoke The Overall, I they but well. in to really experience potential but find Shopping, the see the very been there. my products at On come Google better. to users executing has are excited remarks, to make invest team we the looking lot an

Sometimes because the for. journeys fail don't looking find they may they're what

want sure make we it's to So comprehensive.

Next when to to want people find what make they transact. like, them for simple it we

to making end-to-end investment sure both indications merchants, been on merchants terms for user The back that we engagement value responding focus. their so merchants, more experience for of obviously, there. open are in positively, focus. we has and for importantly, the are giving sure working them has users a giving And are value really and early to business And that to been big are making

We to So with Google ensure to return a is users. the for in some to connect first our want that it's best place merchants ways, principles.

area. I'm see this excited you'll to focus so And us by in it, and continue

Obviously, on terms time. brand. was been second has YouTube well in and doing engagement The YouTube watch of

main YouTube there. quarter. we product, opportunity as as on We've obviously well. on But in question, And investing TV which not was your this brand, just so see strength had through a we well direct YouTube are response long-term

where a YouTube together, advertisers especially advertisers bringing and well. a as is bundle, Select in so offer and areas are opportunity bundle can streaming, through upfronts interested to so we big And that

focused are we So that. on

And from our next Anmuth question comes JPMorgan. Doug from

two. have I

to term. you'll the bit invest growth can over more. you about cost just structure if know curious a to continue Ruth, long first, We little talk Just drive the

thinking the it over recover were about last trends know top Just as And by end you're quarters. hopefully said the search line June. to year starts you coming of more then secondly, curious I that how to flat

Just curious month last if in more what of anything over could as seen well. the there's recently terms you add you've

Thanks this, for Doug.

been of structure, on So the cost enhance on talked to last both Sundar And the is in taking said, as focused focused have in near efficiency about we what steps the I we terms that investing that quarter, you're for we fact noted, and remain do being term. as seeing long term.

So sort of of of and while correlated revenues, the overall breaking not and and opening cost to are are tied is cost sizable on very I ecosystem. are of comments, that as experience down revenue TAC noted growth, obviously the focused that there we in in a costs other revenues, directly acquisition user with content percentage revenues

investing to and are necessarily less our is reliable our supporting variable then of generally in in expense we So so much in sure term. they we're not products all to near correlating that remain revenues make operating And OpEx, the environments.

noted, of a in of the the I we terms expect to are decelerate, items, like in although hiring headcount growth So Cloud. to as couple areas year-on-year aggressively do priority we rate continue

And investing for enhance the so steps but still we're near-term long term. efficiency to taking

for headcount XXXX growth make upward year-on-year that And put XX% to do those I X trying be the headcount down the sure last to somewhat we're as from even growth. and year, rate year-on-year items that tradeoffs on noted, adjusting getting pressure rate in that's we're So we right. expect

vendors roles to OpEx third-party pending Google's in-house we're operation but is Fitbit. customer actually second, center. of spend. does support certain first, moving acquisition reported increase the from And then That neutral, The

we're So trying navigate to it appropriately.

that search question, in the terms the saw and we of a your and I not improved YouTube throughout quarter, end Network. of to rough in gradually would but quarter, quarter, first ads say terms In Search, revenue second what in trends following the only

and as Search, commercial quarter, by ended for more that revenues. spending in through then year-on-year increase progressed at to the search activity was second gradual so decline by return saw in then in percentage a advertisers. we a midteens March we followed topics, And user an And we

the in throughout you in quarter. last trends in and by second basically So year that although June resulted know that improvement carry the revenue gradual revenue ended gradually a to We Search quarter. the flat we're ads of pleased improved to year-on-year it forward, end

you're we nature environment. as were correlated does said, I aware, out ad be premature with say, do of As macro of given tend the fragile woods it's to macroeconomic believe to the spend performance. they the And

backdrop through continue And be has modest But question, of signal from on our macro quarter, been so June will July. a the in a to improvement to key end to estimates there based last monitor. your the

Sachs. question from next comes our Bellini And from Heather Goldman

you've you what growth the I puts have and utilization just has about and might those the you capacity? wanted could. to customers how us bit about puts kind but on with business, the lower in you seeing be takes do ask that would cloud, pace takes, that of I that share given could to migrating a if they if and cloud talked last seen cloud the Sundar, So Azure was questions kind impacted I or as week little Google the with offset of Microsoft of workloads to they're question also accelerated where Cloud, normally be talk for if than their great. with workload can well, One, wondering change us to this you the of that the serving companies how migration industries if much -- COVID? two related could a to And share I'm wondering

on. obviously we've point, and regions from investment scale and up, with obviously so Overall, investing Cloud, go-to-market my engineering, cloud our side on on Google especially with the to Thanks, Heather. data vantage been on then, people centers, side,

see many, deals telco come We customers we been and are big many for so last Deutsche executing Bank, And personally banking me, are in to we on been it's example. cloud, conversations many up, effectively. as involved to large as scaling deals, more good I've an quarter. had

long So transformation our through overall, deeply the interest Generally, felt term more and course. were I felt the thinking a like like continuing for momentum was companies digital secular Felt in us. planning things strong. well are

overall, Obviously, execution scaling almost as up I the we we are a felt at I moment, So our And are up. scaling there. felt lot.

-- well. working combination so And it's the is

and Your I are worth me point in the but know same, I right you anything it won't there for second highlight to nothing are significant terms takes. Obviously, that question Overall, of for out think here highlighting. whether significant me affect today. doesn't puts everyone -- to I there's -- don't

comes And question from Nowak Morgan our Stanley. next Brian from

have I two.

then sort things guess second changes potentially one, larger a we consumer the most in and know maybe what been us looking areas workforce, we really Sundar, without from ahead work home, Ruth, work And the investing changing of for the are percentage doing driving always as help out habits. I remote of look have I or just consumers create way talk as over quantification, where from larger potential to first to of been through focused a people efficiency could long we term. and see to remote us you about costs their to takes have changing either of about the workforce The percentage new or your figure in a the talk higher from some studying from areas puts perspective, consumer being and behavior. with one, products try on, teams to to you sort with you're shelter-in-place

Yes.

is see across the before. would interests I there We one, newer -- lot, On than things to have engaging profound. are online the when doing People's board. first they say, shift did the -- broadening, a is people

at for each deeper journeys types user And and I'm of are sure them making getting for and looking -- is of better. different so we example, me,

more about maybe do thinking focused evolving is started All that's So very our in investments as about And underneath that team's I'm teams obviously that, earlier, long-term bigger and people in we and need, businesses TPUs how think, G for us. they the is and well. Education a Google, example, really for through more spoke I we But to focus health-related when the undertaking, models in that, thinking I really think investing is that our things talk something next-generation working, would coming algorithms. interested Shopping are doing say been is, all collaboration, that cutting our for it. and Suites' medium the big while as on have me. focused better small, to about experience AI where and all in potential building investments for and I general. companies ability we through exciting better it, on didn't information, the

So I'm -- about that's excited term. the longer for something

then question G feeds so about lot obviously work cetera. And much Cloud doing in in work-from-home, that into a terms of of your point the think product a it through Suite, I great because we're et it's

we slowed in this in I own really CapEx our The looking where looking we we're but facilities actually of office that the I what can particular, are really asking like. sort you you're would cost see start, has to reimagine with that's called main it what And at last front. how change is we out quarter, CapEx, at been look is the pace to here And what quarter. the on appreciate workplace base. how So respect will and

and place in that collaboration. fact the is believe on focused Serendipity key important. much very We be innovation. space are to to continue We

So see does hope question we We've and CapEx, view offices, side as the and the very in that on we're what to we've in overall do it space of place mean over a that expect is our number countries do in structure, do to in it facility reopen opened the XXXX focused on our mean term. at it will actually you the and looking at what for important long be CapEx office now looking been But way indication as XX cost your that does our lower fact, result. more. many quite and are in we a with

And question comes Jefferies. from from our Thill next Brent

you've some trends you of changed anything of that's curious the near-term and through what versus in terms comment just just month was of business in if as June? could gone saw I you July the

commented more, already to on broaden I this the with Sure. based but from it to and last a again, through is of estimates June week. Search, respect on bit that end

brand consistently in year-on-year been growth high rate second moderated the end a of strong. has a So digits, further the headwind from we and and modestly for from then at in July. March saw substantial response single headwind reflecting that's Direct YouTube, ended a improvement brand. The with the quarter, we

estimates trend its when to has both move based Obviously, Cloud, of toward I maintained example, July. quarter, it's and but this more and For cloud. Network, further said, Sundar with X slight seen for June. it at, end we say that in And then you at the about the much of growing from look second And really I'd to is as improvement here strength the a consistently. business a end have secular on not that's that's the pace, improved revenues the a weeks a quarter,

So really comment to there. nothing on

comes America. our from from next Post Justin question Bank And of

I interesting know obviously And but do now. on the any environment? model. regulatory as yesterday. the Maybe TV secondly, regulatory then a pretty can how it on seeing you comment longer with see important the you the with term, can brand? you you think Google hearing that characterize strategically progress saw just we business don't profitable really for that? the top you YouTube increase, a Sundar, Great. much price Or do really are But have for of right environment, And business mind it's YouTube

from overall, on pace very We the all operating it's scale, almost And my across obviously scrutiny constructively innovation. our jurisdictions. realize, On focus of fast And take, and we And the while, lower and approach a there's we've confident regulatory at we've been in. we in in our operate engaged or standpoint, appropriate. in front, choice for we under overall evidence I'm the prices. -- areas that's a users expand

dynamic said So and rules. on it's will that, competitive. we operate Having based obviously, the

flexible areas being I a need be, around we extent think are where the those as important, is we will to And to company, we I any things so will. adapt, think, think. And there I

think I are so be going while, here committed through and we a for scrutiny it. is the working to to

On how in about YouTube good I mean, brand second streaming. they interested a about around it's spoke are there from is -- question a earlier people think I it, the and question. even yes, TV,

we more TV think YouTube as scale, gets I So will see more opportunities there.

in We too. TV And working we've advertising market the bunch the are building sure part the In big a new a out of just of is early it's and still market, U.S., the recently, well. the obviously channels making product. stages of added

we YouTube over with the time. here invest and scale synergies can meaningful if up, think overall, more So will I become

But is too so product excited the And traction early. still getting. the

from And our next Rippey comes from Evercore. question Kevin

or for This the since I a past one you across very there's earlier the you the evolution been that expand whether commercialization for the strategy able past X the about I'm wondering, comment or things really on business. to is began, months expansion an the able strategy of AI an Sundar. relates was thought strategy. monetization high hoping be be of pandemic to solve you might might if over particularly made to that anything or

really really, curious. Just

first -- across the is which progress area steep. An board, the of all,

R&D and both we very pace the company, I'm progressing. Google So with happy And to leading. and our at that AI is are DeepMind. on are important pace which me, working across for R&D me, engineering we our which excited as state-of-the-art at And and are a it's I'm at the teams

it. about excited I'm So

to But last language I took stuff Specifically, improvements understanding. Search. some us a And in But there. making like in BERT with things the few BERT we are more areas significant see that, years good improvements year, saw get progress like you and future.

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workloads actually there. feels we are solutions of companies potential, in, for think the for run of whatever you that have on. lot so a longer about industry business thinking truly AI very you still using are opportunity migrating are and and there's I like to But early

as solutions our dots And is, users. us, the so part internally connecting for to of it and bringing it

in but the in see opportunity future. bigger a there's areas, it done certain have product I We

And Ross from comes our question Sandler from Barclays. next

Great. I questions. two had just

First, on YouTube subscription.

talk billion? size that of profitability advertising at how XX% the the YouTube? growth on And area that $XX goals of impacting YouTube revenue. So area to the about second can the And about Search. relative it of long-term that had at then relative question faster business your is then to you in We total is

strip out pretty So like is flat we I'm the that. guessing above it If encouraging. run it's travel, sounds rate well exit year-on-year

just So how dynamics would growth levels those query the across in pre-COVID you we areas? of travel other ad Are back auction to the characterize categories? versus outside the

So out within in haven't the question, the we specifics YouTube of terms broken subscription first the revenues.

we a impetus. wanted wanted were view experience. found in not it, time. component songs what And this is revenues, the was it and And an we and YouTube to YouTube we really we users they the overall ability hearing we And music we important and that Other -- viewing -- from the key overall, think And product, experience premium users. wanted as were launching part talked the subscription is download it's at It's watch our subscriptions to of are YouTube of with revenues. videos. -- really a some that ad-free choice about the is was advertising in as opportunity what look when responsive about and

provides additional and Premium YouTube addition, streams In revenue for music labels publishers.

our industry countries in the paid meaningfully presence And of done announced more XX% had year. And XXXX X that music paid Premium we million XX countries is ramp beginning in this billion. the today. what year, for we've So earlier versus than subscribers, XXXX, up $X XX YouTube over geographic example, YouTube from the more to than prior

continued numbers to was give our driven So really and subscriber grow choice. there, to the have users goal it by

Baird. Colin next our Sebastian And comes from question from

earlier I guess maybe on question the a follow-up commerce. to

assistant the specifically some and thinking a Checkout and and to were play I'm play initiatives role a may Google platform. other of Maps you year are, those functionality focused transactions, on promotional wonder going the And role. things some marketplace in commerce how the of Beyond Google some changing free functionality, the how on before of I the are

Great Yes. question.

have of satisfaction experience, so have peace to which and terms the simple is mind of in able on. and to is being and bar and that it super the you return product think I that delightful getting

why through end-to-end the a And changes, of done. a the matters part So we the funnel have couple lot. of things reason

and that be can As take be it platform. that. shipping, be They in, the experience. you removed the we part of is by it we removing on invest saw, the and be changed delivery, for And it to it commission customer merchants

overall PayPal, with underlying that our And And possible to investments deeply experience users I experience the investing matters, as our matters something from big Google one-click Obviously, experience. close it's Buy it on of so the that as lot a investment are our the well. of a sure integrations in for part standpoint, is a as which make think to in. is

the of Mark from line from And our question RBC. final Mahaney comes

in pandemic -- commerce retail. not years. We there's see to Google's question central. last a obviously been also or real central We because but gone about results. ask it online it to Search this commerce, position, results. Shopify's I point. where Google Google's whatever, We've And has has been also place XX Google. this want central, been I YouTube I has sure the And a results. I'm broad see through it Amazon's inflection online for see in in in asked

needed year of what's accelerated really been about way demand. make things like services products you to positioned talk to make how just pull-forward positioned? -- up the and you you better are or be online need changes ramp now? X So positioned Google is retail to to a to broadly, the for there positioned you you in Are X the And want think, be

serve wide areas, Obviously, company, not I from users, think like it's as comes services, in we which a it's the And product, including just areas our strength it's travel. categories right? diverse

areas diversified. through well. -- it also areas are areas as pandemic, are a there where strength, it's but -- And get means there of So you but impacted of

we this which doing Google be improving the leadership in and are play are in shift as the are sure which are the essential we new in, are on it point. long-term right, continues, So direct with platform, big effort we us, shopping is important come those continues in providers focused and see. to built precisely a But you e-commerce I to make don't as is by which think groceries people that's On in. But journeys. what an what a directly participate e-commerce, categories place stuff, like inflection reason reflected to you're and team seeing

that what we on run, long retailers making, investing just with the see Search, are where in the related a helping interest in but opportunity I we a Shopping -- partner to investments we as So are but Google, Not to growth well. through lot well. It's Search opportunity see area YouTube, a in as a side. big to work also as of there's an so and naturally and cloud with there

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

look We know joining Thank a for and you, evening. call. XXXX everyone, today. to quarter all you forward have Thanks, We on a us have speaking good evening. our you busy with again third

Ladies for and gentlemen, this concludes Thank today's participating. you conference call.

may disconnect. now You