Alphabet (GOOG) 23 Jul 242024 Q2 Earnings call transcript

Welcome, everyone. Thank you for standing by for the Alphabet Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I would 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 Schindler Pichai, us Sundar With today Philipp and Porat. Ruth

quickly I'll cover safe harbor. Now the

update Some subject statements are our on today current performance of assumptions we based be operations that and are may including materially. any no our Forms to a risks Such uncertainties. and and financial the refer undertake number regarding statement. forward-looking. considered We Actual and forward-looking Please the XX-Q, of expectations obligation factors. that to to statements results could business, make differ risk XX-K

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

will comments Our we unless on comparisons be state otherwise. year-over-year

over the And call I'll to now Sundar. turn

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Turning next to YouTube.

successful with a on the I'm businesses audience reach Philipp audience. massive connecting quarter, and is We YouTube build here. enabling clear a a to their advertisers them and brand focused will helping subscriptions say pleased creators progress cast had desired more. while great through with ads and this strategy,

into time and streaming videos to in Views Connected and Nielsen. YouTube regular than and year, captions turn easier doubled the has YouTube U.S. TVs creators remained to are making Shorts #X watch add Shorts. it according more of last we for

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Ruth's I close, final acknowledge I call. today that want earnings is Before to

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our Philipp. Thanks, you, over to partners everywhere and With as a that, to always, for QX. great employees

by vertical with billion year-on-year. for growth revenues retail up and led the followed delivered $XX.X Sundar, XX% grew Starting the hello, in year-on-year, everyone. of Thanks, Services financial Google performance, quarter, services. by XX% Search revenues other and

driven revenues XX% well devices, strong direct platforms In YouTube as year-on-year. in declined growth driven X% subscriptions. Network ads by were year-on-year, by year-on-year brand up response. revenues subscriptions, revenues in as and YouTube growth XX%, again increased

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Ruth, leadership by that, customers trust. to With commitment all and to for continued partnership years. and I'll and partners for over And Googlers thanks thank collaboration saying finish everywhere these our their for their amazing you and extraordinary a huge your

for Now over time, you. to last one it's

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in $X.XX. the $XX.X billion, EPS operating trailing quarter the $XX.X was second billion was for was $XX.X was flow margin XX%, free of $XX.X and delivered We income our billion cash XX billion and and months. Operating up Net income XX%.

made year, quarter again had in last We next billion a cash quarter reminder, growth marketable cash billion a quarter, the a from in in and As timing $XXX we quarter. cash payment reported the and the depressed do so deferred which will benefit second free this securities. fourth $XX.X ended quarters flow and with third tax

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reflects expansion as in year margin to cost our efforts our The as Turning strength. revenue to reengineer QX base well versus last margins. durably ongoing

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headcount both have half taken the declined which and hiring. we Once much quarter-on-quarter, again, slower of actions the reflects year a first in of pace

Looking a headcount we third quarter bring expect ahead, in increase slight we in graduates. new the as on

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relative Looking full forward, expect Alphabet deliver year XXXX. continue operating to to we XXXX to margin expansion

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will take Philipp now your Sundar, and questions. I

[Operator Stanley. Instructions] Morgan Nowak Your question comes Brian from with first

First, Ruth, past all the thank for the over you, significant decade. and impact help

can to about bit this us any for where sort you've further us from ways little I the or of testing slower-than-expected it's of traction across about gen faster-than-expected you from adoption structurally fever world. your still more I AI, efficiency the see appreciate where any about jump, Maybe to guess of first areas comments we're a of drive versus or the some a a just pitch perspective, And traction around to focus company? Are of testing The a tangible perspective? then, the Ruth. there Google more of base. you can the generative Philipp capabilities all areas in one, seen reengineering talk Ruth, sort of months, Sundar, I AI AI you guess, examples and talk OpEx XX

Brian, thanks. first the I'll take part.

I think it consumer good Definitely, underlying time taking enterprise the solutions into we've both on the the of that earlier, of on my side. a and I'm over the Obviously, this which positively and think in meaningful it's at like in that been said how is and is contributing additive to introduce I many consumer terms curve in how able and decades, comments across pleased, technology product for board, I scale there a Search, question. used it experience way a terms translating overall it's in enhances side, as the there. a

-- we are think lot something models. earn that our think able where would of it. products, is progress there seeing organic I on stage I we of been side. top have I definitely The a Obviously, consumer are think enterprise the side, across we've at are to monetization on a we

But And customer it those those. think of use be seeing the think there think traction, work cases cetera, unlock still some there towards to we kind there are solutions completely the models are is top I to seeing build next pockets, but I base service, all it. working be coding, is capabilities. hard et are of of it in roughly, are where a I I think where converging of set on wave

focused cost They're we durably these reason the the because our and fixes, And on your used that them. term, your consistently continue tactical not we're is base phrase reengineering deep the -- thank we've build are on second Look, work question on comments. streams. for to first, you

and Both those headcount that the focused main so said, all we've around of headcount the leadership across as entire And down and team, is And fact the we prioritization, across on efficiency reflected remain our areas -- structure. to are continuing in organizational talked them. that execute product of are year-on-year. against and process about around I those

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keeps So giving. gift kind of that the

very infrastructure improving real estate And then technical A and of also build one, to efforts, all talked continue our important continuing there. one, before, efficiency more the all remain We're to you on. to about broadly, of that work what organization. around of optimize the to work We're we've the on focused is streams our with streams working we efficiency working procurement on Alphabet. AI centralized the done use we've continuing across We're on portfolio. big

again, durably are across is our phrase, so And that cost this build this all team. These reengineering base. to our leadership efforts

And our next question comes from Doug Anmuth with JPMorgan.

quarters. roughly Services Ruth the One for Google operating now and XX% X one for for you've had past Sundar. Ruth, margins

in about Just it any Can capacity you levels could help it reasonable help think relates you relative to levels future that create along at as sustain forward? those kind then to just rolling you and the investments, more Sundar, going to of and And just Overviews then, Overviews, click-through where of how the offset are, as more you is out far understand AI your us talked around you rates positive AI to monetization color traditional trends searches? there. kind

all did operating we're of revenue reflect Google cost Search. in work durably that in the strong of it So reflected reengineering terms benefit margin, performance the It also the on base. the Services doing

reflect in due with of will as reflect higher our also to look higher third levels to margins operating forward pull to I the investment launch the in what Pixel technical so comments It expenses with the infrastructure. lay is will associated the forward. out quarter the we depreciation And tried increases expenses and associated in

say to those company-wide, continue important are look QX. forward operating margin important XXXX, want overall, to that to deliver relative factors. Alphabet we to I expansion those we as So important full I but do it's 'XX to expect points year highlight would did note to

thanks. Doug, And

-- on. are we a rolled on the are to so and quality, -- in AI we Maybe, more are both around has But Philipp be, the we'll see think the will we up, us more we it. it Overviews, queries. focused you anything touched healthy upon All use And you the And sure definitely also, positive. course will have to making of taken the metrics have On monetization side, have start, year, are the more definitely I And it, countries. expand on out and want touch it the there? add Philipp, we through feedbacks seen cases the scaling U.S. conservative

gen Yes. innovation Look, advertisers. before. We navigated mobile, we can above user mentioned. about helpful. from And for and to before, finding have opened the this we Sundar with, when types we on are as said up ads, Yes. AI or the either for of can help We Search And people this people as example. expand saw Overviews, experience we desktop see obviously opportunities improvements talked below questions to new historically AI

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Thank of new in you. Ruth, Best your role. luck,

from next Moffett. question Michael Nathanson with comes Our

Chrome to talk Philipp. and X, deprecate Philipp, Search? these I happen between X there of It's know what talk rates Search see path you terms growing for than what on reaccelerating are a that is have a of you've markets? front it's this surprised your for maybe in week company in a But go down Can about differences can with then on experience Sundar deprecating anything growth cookies. think could factors and long which the quarter. AI as you we faster one some makes us. to seen you Sundar, should you not it's know YouTube, YouTube behind growth only that expect journey. about why one is been the interesting the bit And decision And I not I in cookies. decision on

I is improving privacy third-party on users forward the the in look, obviously whole implications to our the in remain and be But area privacy-enhancing are users path investments best continue across Chrome. there. both to we'll committed feedback the was ecosystems and first the cookies, ecosystem, cookies, many we will there it's considerations committed we focus obviously, from believe the given And journey. across we improve Privacy Philipp? we for privacy in on feedback as choice, around super on technologies. an Michael, are players giving now choice And think, committed taking privacy the stakeholders, and Sandbox, we'll and and But being by we user so well.

Ruth, needed. second the part rest, then of And if in question, on you jump your maybe, want And first? I the to take

Absolutely.

followed was So we Search both by revenues financial services. by verticals. growth That Look, really noted, broad-based as retail led reflected across

the both done. comment of driven which brand have was will heart was Philipp they the YouTube It that by I followed by to strong And really goes all really team, ongoing YouTube, with on. and Philipp noted, question operating year-on-year your as comparison. think metrics, pleased direct And the growth response. we're I very

I tease because think And primarily and year. comparison versus YouTube leap probably extra growth the for lapping was last the in growth negative quarter note, quarter also the in the year-on-year second quarter, QX that tougher the you from important versus point, out benefited point year-on-year first at I then QX as revenue was in tried deceleration recall, the year. the to from that opening first comments, reflected to this

were exchange that in And so and we ramp began last quarter APAC-based that the seeing in the with year retailers also anniversary-ing here noted. second foreign headwinds YouTube, you're what is well as we

And -- are timing what so you, it's we're Philipp. strength. issues highlight Back to going the operating underlying there to And on. is some trying

really that very to from side comprehensive. my Yes, here. was Nothing add

maybe thing question taking only The Brian's I longer. things to are first say, where on would adding areas

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video terms well. in audio, real is of getting generative working experience So

is obviously, will to some be it's over take time, I think But going time. it to -- there relevant YouTube. deeply still

the about future. so in it's I'm an excited area And

Your Sheridan question Eric Goldman with next comes from Sachs.

over on I'll the calls. echo years and earnings for insights for maybe for the all these the partnership you. Sundar, Ruth first thanks

of for you bringing to of the potential know business side of first. about positioning be continue wanted macro last terms if I a with adopted of the learn engage really YouTube to following actually it the AI Cloud the and growth and Cloud and terms on at YouTube enterprise, consumers to the revenue Cloud deeper array a for ad What up the for layer? do or set in In about AI potentially products strategic you what a subscription seeing the of to subscription little implemented, bit to the guys, the for go to appetite workloads AI could a the how team, as or environment. of stimulant broader mean then you're And questions media get

cases. models the Vertex we have the now are playing Gemini products Gemini across it's Cloud Thanks, definitely developers seeing a early side, for be People around driver my at remarks, our AI cloud with obviously, time. and generative with everything seeing X deeply in Gemini look over are AI, something it which Google definitely cetera, solutions a being for think have engaging use the big studio. for Workspace Vertex we are Eric. things, We will the and already, AI through and over infrastructure mentioned AI these take stuff, Cloud, and I AI Look, if compute do, et million up you AI you and end on I we across opening on traction.

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pretty ahead. about And opportunity so the I'm space excited

subscriptions, how respect your then And question question, strong in with is to implicit your on second it.

we've be YouTube that platforms revenue growth strong strong. growth. devices said led and and to growth YouTube quite TV delivered by subscriptions delivered And within a line in It the also was I then subscription many Google row, driven Premium. was as line One subscriber in here Music component comments, that in As that and growth, revenue healthy overall opening subscriptions. on other by continued and is that subscriber calls the noted both And

that But around is of and I heart of YouTube, the revenues your think in the that really question is line. the heart

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Our next Barclays. Sandler question from with Ross comes

Just AI the CapEx. on X questions

overbuilt demand an being keep capacity going year industry least, growth these potentially the So year if right of to from next at it looks to outside hyperscaler underbuilt this now meeting is time CapEx up. the with kind last rates like from the better situation

we in the return this CapEx So about you close train new AI industry of characterization? do thinking that that, away a think on wall great. fair think do cycle? related is on far AI you would hitting be invested Just to data training then with And AI like to from to the on are lack how And of capital that's your thoughts kind on? of on model or that some based foundation availability improvement

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obsess that, in. put around we every said we Having dollar

model efficiency Our are across our -- hard. fleet. proud I'm optimization super teams of hardware, work, work be the of software, it deployment

of that of All something we is lot on, think how about we a that's spend and time it.

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on that And so we well. as focused are pretty

Ju Stephen next with question UBS. from comes Our

Okay.

help is use an consideration, can when one the shopping side. revenue probably as efficiency direct about we larger being products your you be, I help important And prior notice when ask to were XXX, greater that Fortune So And time -- can YouTube's something do cutting you, of think by what final the the the companies, help. Fortune do but model response. we'll on think Philipp, I to you by we we'll bring public Sundar, XXXX thinking will is on create brand? hopefully bigger costs? versus way, talk listening over that to up just all you value start comments which about generation start that the for about initial think factors the cases we out thank growth the first But cost a -- I much YouTube to when more these are guess bigger this question a and tying builders talking it AI contributor the do different or guess, like to Ruth's and savings versus being brand calls commentary looks continue Ruth, way, there, on for some factor if couldn't direct the that followed into the response

On horizontal the the first part of both can the question, technology's look, sides. it I think apply enough, on

the improving use is the retail you at experience, the case you take size could better, part of can driving like increasing efficiencies. improving player, customer improving a experience, you're and is cetera. And but et you conversion, look which a a overall it, e-commerce driving standpoint, service also If be basket so it it if cost from funnel

both experiment are across sides. So seeing we people

the play both Philipp, on one? out across I sides. you second will think so And it see

Yes.

It discovery. your the this about direct example with obviously video automated performance On of just response run AI-powered intent On And boost and ads we're Gen optimistic can ads enhance this you know, this those campaigns. driving one, to conversions and video dollar could who using very create how is And both X% commercial image-only than and see little creatives. it's as very, and tools running Gen about path. on Demand converting obviously could and and It one obviously average, business. are advertisers campaigns per video image Demand more be second their benefiting including side, customers be the PMax. look, from our in

that's a So big part.

brands into about to direct a to it, viewers where content you the brand YouTube also from The up make show continues know, most quite side, consideration. put you that and easier to we're for the on if And AI want launches And some way awareness next of recent you obviously engaged. as response the numbers, finding excited side, the to as drive are Google Shopping see they're it very can to the effective bucket.

Post last our with Justin comes of question And from Bank America.

I'll ask couple a of Great. areas.

cloud better on ask as AI how How moving that internal AI help just savings, a to other to And cut been your has AI in which to cost hear would characterize AI cut helping rebound acceleration? your and wanted own you drive really this acceleration, costs? general And I the of about efficiencies year-to-date? you're then really to new using demand would is Or internally helping more compute is seeing that applying strong. Are you demand? just about your that Or you forward First, and are with engineers? love costs. drive

Great. Thank you for that.

we're in the with team overall, the engaging generative with So as around customers clearly Cloud. And is and AI AI infrastructure benefit Sundar solutions, -- solutions. results there pleased the broadly very with as a both globe solutions is Cloud I we're said, AI-related and

think that encouraged customers using the of top particularly XXX that already generative we're our AI are solution. noted our I we majority

GCP, business for of to the So Cloud it on of growth the above the top GCP to is clear, results rate for the really clearly doing. be just strength growth all adding And they're that is the for overall.

reflects in to that we just really part, in to you And spoken to efforts it and continuing on and saw We're QX, the improved then with do the we pleased invest But point, business. last looking cost strength respect seasonal delivered I'll it well And efficiency revenue the they one I've as in are ahead turn point. margin, the Sundar the already as expect about. but of did. pattern year saving same that margin all Cloud's that that that

the specifically, think the on cutting engineers cetera, I coding, Look, if there. be is want definitely to about we et question and edge

gaining think code. which and are it what by. I'm there, into in I our these productive making still writing are the learnings, high-quality when kicking it's the the they particularly out to and cycle comes products, tools models early hard. think, we would of that's I I think I most we some demanding all But virtuous the definitely engineers But tires stages, all and to excited secure are very translate here say engineers will and available

more So come. there's a to lot

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

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

everyone. call. This for Thank Thank concludes today's you, participating. conference you

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