Alphabet (GOOG) 25 Oct 222022 Q3 Earnings call transcript

Thank you. Good afternoon, everyone, and welcome to Alphabet’s third quarter 2022 earnings conference call. With us today are Sundar Pichai, Philipp Schindler and Ruth Porat.

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, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially.

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

available to through both, release, included is in Investor earnings press During present non-GAAP located And measures. measures GAAP this at call, public A the now, GAAP financial is to distributed Relations website I’ll and which and Sundar. our call we’ll reconciliation the of non-GAAP abc.xyz/investor. to over today’s turn

and Jim, you, good Thank afternoon, everyone.

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Thank you, Philipp.

quarter third the momentum for Cloud. reflect results and in financial in fundamental Search healthy growth Our

conclude the the start with of third Our will exchange. on reflect quarter, comments foreign My the reported year-over-year clearly I outlook. state be results with otherwise. and segment effect by unless level, followed our comparisons results I Alphabet for at will results

X% constant were consolidated our third in or the up For $XX.X billion, revenues currency. quarter, up XX%

and was driven promotions, here XX%. by costs $XX.X ads followed first, which primarily down the billion, were We delivered billion XX%, income and billion billion securities. the $XX.X of and $XXX last revenues and cost cash XX%, headcount followed expense operations, flow operating total headcount other by which biggest by billion. $XXX XX%. reflecting other of up marketable billion, loss centers with XX was following: $XX.X revenues, quarter of was primarily Net growth; increased a second, and our and data associated billion, G&A the R&D and driven driven was $XX.X by margin factor increases year sales was XX% up expenses, We versus in trailing cost income Operating expenses, costs. primarily growth. in Other of $XX growth was The quarter were Our the hardware up with $XX.X marketing which $XX.X billion, months. on spending cash in by and for Operating income was and ended in the was the million. free expenses

Let financial results. me to now turn our segment

at of basis. a reminder, billion, by level our last only Starting geographic Services X%. GAAP $XX.X we revenues the exchange third the performance, rates Google were Google was Services Across very Total in provide our revenues notably by in most revenues. revenues largely year up and on growth All deceleration reported segment segment. As strong quarter a revenues, and Search the fixed foreign advertising year-over-year versus consolidated driven are region. lapping with other

Network Additionally, and a the advertisers some in as noted YouTube by spend reflects last deceleration pullback on year-on-year quarter. first we

the up of the terms in $XX.X quarter revenue advertising X%. were In other of revenues and Search Google lines, billion

these Music lower delivered revenues, of a billion second, TV growth spend solid ongoing pandemic. Other we slowdown a in growth subscriber were X%. of to Xa; levels of strong in $X.X revenues continued first, Play by to Network earlier with buyer in the non-advertising $X.X several stages offset of YouTube in billion revenues, billion, revenues in compared advertising X%. up the growth including YouTube in reflecting decline Premium of engagement reflecting were $X.X sales YouTube due in year-on-year revenues; revenues YouTube growth and drive X%, primarily factors, a finally, down from Pixel number were areas down advertising hardware was two gaming the factors:

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and GCP’s Google growth Workspace platform per services. the loss growth $X.X both, operating growth were in Strong revenue growth than reflecting was and driven million. infrastructure Turning revenue greater XX%. $XXX both average segment. quarter, Revenues Cloud Google in Cloud’s, Cloud of was the by second Google billion revenue up seat. in to for had again seats significant an

$X.X third our the and Other As the was Bets loss quarter, were to for million billion. operating $XXX revenues

Let with me outlook. close our comments on some

from in U.S. versus an the foreign third given strengthening of results ongoing Our the quarter the reflect last exchange, year. headwind dollar increased

a of there the quarter was the hedge Excluding X-point X slight in with hedging, with from revenue headwind or points a benefit the year-on-year benefit XXXX. tailwind compared third

to quarter, foreign we exchange. based strengthening headwind of the from quarter-to-date, larger dollar on an even Looking U.S. expect the fourth

is our addition, it as on impact the have with R&D In given expense base is toward operating the said, here. revenues, of U.S. than foreign is our that we located previously most income exchange on more efforts greater of weighted

our segment Turning results. to

and the Within the had quarter, movements. currency other growth which Search the segment, revenues of third impact in by fundamental Google was healthy Services affected

user an buyer on expect of of spend year-on-year in versus including to As by lapping in levels quarter that from number fourth and of primarily results very lapping revenue impacted advertising the rates a gaming In the sequential quarter I YouTube was reflects also the quarter spend the in revenues. performance in quarter factors, with Search we slowdown in the headwind growth in was will of the year-on-year additional strong due driven engagement deceleration second the some already areas. weigh advertiser third versus other quarter, the pullback that noted, ‘XX in ongoing in create deceleration the year-on-year largest driver XXXX. continue comps pullbacks XQ compared Network, on year-on-year of the Search spend. an third second tough year to the further growth third and The revenues, growth from in deceleration headwind Play with In in second Within of sequential last of quarters. in advertiser the the growth lower Google growth the outsized will

app advertising Search and ads revenues shift and YouTube, from Network this other. in behavior revenues, spend factors, also a with in other promo among headwind Play mentioned, to Philipp user on As lower was

Turning Cloud. to Google

Customers their Our adopting globally Workspace. GCP momentum services and to and across results products transform are our businesses. digitally reflect

excited early that given path longer-term We we profitability. opportunity, of cloud to remain invest to the focused days accordingly. and the governments about still in continue are are We the businesses adoption on public and

against profitability, have most In we underway ensure terms compelling an our investments to redeploy opportunities. effort of we

our we respect than our call, XXXX. on pace those slow apparent third part in we joining quarter XX,XXX become in our of of acquisition more people headcount, noted hiring actions to second As will the quarter, to Alphabet With Mandiant. including X,XXX of added more the of Google Cloud as

As headcount focused hires the the particularly number QX. quarters, expect majority in on quarter, top additions of less were this hiring will next for we half roles. slow roles, added In and Within talent. headcount continue for we fourth prior slower than engineering will year, to growth, technical critical in technical the

your CapEx, significant questions. infrastructure to now to continue I take with Philipp Turning the will Sundar, in we technical Thank you. and investments make largest servers as component.

line first Instructions] Eric the comes question Sachs. from Our Sheridan [Operator of Goldman of

of if a and Would X broader both macro the the the with to Maybe seeing priorities investors opportunity set go terms of much. and long happen two deeper a Sundar, XX investment first, Can expect curious in lot bit much to a of respect efficiency. going headwind is a are term. longer Connected the about Philipp, forward. your perspective against about growth in you I for term in turn to drive medium love potential change a maximizing to terms of Thank to revenue little and there And tailwind next this you to productivity can. what YouTube reflection versus your very aligning then, months on you get a how TV of is the you’re and for what Shorts questions, comments in on that. over over very think possible to environment what philosophy maybe I

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video seeing over fact, campaigns already We’re on feeds action results. Shorts on in those XX% saw And with product without. an versus increase conversions average, in

screens well helping side, as you to strategy. said to way achieve advertisers connected this moving awareness are to formats important an I the and of away CTV. for best move we’re think And really multiple their and place as from brands linear across obviously, the shorts earlier, really long-form, from is beyond YouTube part you On podcast, to brand mentioned goals. lets reach is it, about music TV tradition, consumers When and reach all new that the TV, efficiently eyeballs as --

you. Thank

from Nowak Our Stanley. Morgan next question comes of Brian

taking I for have Thanks questions. two. my

one, Sundar, or earlier added the have of about look the XX,XXX term in examples tonight, the us Can just Ruth. or from efficient. of hiring analysis you’re other to you over If users, go are the through seeing to helpful. more for since YouTube the running more becoming it quantifiable all quarter, first the to for one. Shorts about on over sort ensure long you’re Then Shorts, sheet, the company KPIs comment to second XX% to responsive internal incremental is as investing the to Excel That’s give of these just run year. seeing of environment at spent The thought just analyses? investors Sundar I first of shift one comment the to last back your Shorts? responsibly lead I so is time of sort you’ll Philipp, think some time you from or forms on the generating start those people from being new I you you’re your ROI

Brian, as I I are we clear some we’ve to our of -- been we pace going -- hiring going into gave well XXXX. that QX moderate think think look, as

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continue going and granularly to right will at It resourcing projects be reviewing thing. all plans something corrections. on that, ongoing we’ll the are have as the we pretty right ‘XX course doing into is this and make there, We scales an well. based sure making And

time. the by as question, and before, user followed first, increasing to always building we over discussed focused a second great part And of experience creator we’ve the on Yes. monetization

as increasingly YouTube to to as logged-in continued more the content between earlier, has and gap And alluded the across are slight on viewership encouraging. over watch long-form every closing specifically, this time. And And earlier, I being YouTube. as we’re And by said X. Shorts experience been monetization progress on short-form we’re on watched platforms, users and YouTube Shorts a We video, billion-plus focused Shorts grew of to Shorts initial I a percentage total revenues month. X consumers headwind monetization time. are seeing consuming including as multiple

Thank you.

the line JP Anmuth Doug comes question from next of Morgan. Our of

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you. Thank

from Our next of Michael question the Nathanson of MoffettNathanson. comes line

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we other anything a like versus percentage the going It all-time kind outlook on forward is expect bit on what’s a and out fixed what of driving on talk how And of up base nearly XX%. revenues? maybe this cost of looks it’s cost being much Thanks. spike of quarter Can high. called the there of that about You revenues variable? cost you an as revenues,

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of way it’s our products innovating for to So, I iterating think best the build a and healthy and users. services

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question line comes from Our of the next Ross Sandler of Barclays.

dead the guys. you just margin, to mentioned on Hate Hey the Google horse but Ruth, mix Services shift. beat

pandemic, And you that’s in estimate that and the that frame we think coming of you’re trajectory Maybe a on which where in items, are subscription, here. profit’s in I versus those Play, most are Search the next where framing help is lower-margin like for at would going XX%? Services pre land below XX% Thank we of around low just was might XQ see helpful. Google this the that which we Could think Any of to could what’s the going some YouTube et seeing segment of lot land help couple be you. where margin? cetera. given years, from I hardware, here of ‘XX

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lag response performance management we’re as So, taking, the which issues. to being to and and we top do we tried And we’re seeing that you. it of last doing in you said do to performance. we in to are timing very taking growth we’re a looking said we’ve are questions. well investment is was a due line in but drive both, around expense noted I the so, timing here. the pace both surge to strong can this some that what I’ll upside investment. year, building that efforts the efforts last some in modeling of durable difference, for was and point, as in but and it a revenues, the And at contextualize But also revenues while investments margin the support line main to Michael’s would that of we growth, revenue I to mindful long-term we of the continue leave year say had

you. Thank

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are talk by draw forward? a can that about that is the on and pullback common dynamic back on what continuing you versus are that you to seeing? advertisers, Ruth, that lean underlying those pulling Can thread characteristics some you’re there common

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from Our of next question Post Bank of comes Justin America.

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turn to Thank I’d Friedland for session. concludes back Jim the Q&A you. remarks. conference That closing our to like

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

for This you concludes today’s participating. conference call. Thank

You disconnect. may now