Alphabet Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Alphabet Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star and then one on your telephone. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker today, Ellen West, Head of Investor Relations. Please go ahead.

Thank you, Candice. Good afternoon, everyone, and welcome to Alphabet's fourth quarter 2019 earnings conference call. With us today are Sundar Pichai and Ruth Peratt. Now I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business performance and operations and our expected level of capital expenditures may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the risk factors discussed in our most recent form 10-K filed with the SEC. 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 slash investor. And now I'll turn the call over to Sundar.

Thank you, Ellen, and good afternoon, everyone. It's a privilege to join the call as the CEO of both Alphabet and Google after four years as CEO of Google. I'd like to start by thanking Larry and Sergey for giving all of us at Google a timeless mission, endearing values, and an opportunity to have an impact on the world. There's a lot I want to cover today, and I also want to leave plenty of time for any questions you may have for me and Ruth. As you've seen in our press release, we've added new revenue disclosures to give greater insight into our business. Search and other Google properties continue to drive great results with total revenues in 2019 of $98 billion and strong growth. I'm also really pleased with two of our newer growth areas. YouTube reached $15 billion in ads revenues in 2019, growing at 36% compared with 2018. and it now has over 20 million music and premium paid subscribers and over 2 million YouTube TV paid subscribers, ending 2019 at a $3 billion annual run rate in YouTube subscriptions and other non-advertising revenues. Google Cloud ended 2019 at a more than $10 billion run rate, up 53% year-on-year, driven by significant growth in GCP. The growth rate of GCP was meaningfully higher than that of cloud overall, and GCP's growth rate accelerated from 2018 to 2019. Before I talk about the highlights of the quarter, I want to take a step back and give some early thoughts about my approach to managing Alphabet and other bets. We have always taken a long-term view, investing in deep computer science and technology. Important trends like the wider adoption and application of artificial intelligence, ambient computing, and the move to the cloud underline our investments across Google and our other alphabet companies. Our work in healthcare is a great example of how our investments in these areas allows us to deliver solutions across an entire sector. Google Cloud works with hospitals and healthcare providers to securely manage their patients' data, data that is much more secure in the cloud than in paper records or on-premises. Our AI teams at Google also work with partners to apply AI to help them and their patients, whether it's developing better health systems or helping with the diagnosis and detection of disease. Among their broader efforts are other bets. Verily and Calico are also partnering with industry leaders to use AI and cloud technologies to improve clinical trials, research, and drug development. Our thesis has always been to apply these deep computer science capabilities across Google and our other beds to grow and develop into new areas. The alphabet structure allows us to have a portfolio of different businesses with different time horizons without trying to stretch a single management team across different areas. We'll continue to take a long-term view, managing the portfolio with the discipline and rigor needed to deliver long-term returns. Many of our other bets are getting to the stage where it now makes sense for them to partner closely with other players and investors in the industry. Waymo's technological leadership is widely reported. Its cars have driven 20 million miles across more than 25 U.S. cities. Waymo is now serving over 1,500 monthly active riders in Metro Phoenix and continues scaling fully driverless vehicles. by matching early riders with driverless vehicles and charging for these rides. As Waymo looks to its evolution as a business, it's focusing on strategic partnerships. For example, it's working closely with OEMs and other businesses to build out ride hailing and delivery business lines. And Verily is an example of a company in the portfolio that has outside investors, Silver Lake and Temasek, as well as its own board. we'll consider opportunities for some of our other bets to take similar steps over time. Now on to highlights from the quarter. First, search and related Google properties. As I mentioned on our last call, our neural network-based technique for natural language processing, called BERT, is the biggest advancement in search in the last five years. It now impacts 10% of searches, and in Q4, we rolled it out in over 70 languages. In MAPS, We are celebrating our 15th anniversary very soon, and in the past year, we brought reliable directions to 630 million additional people in locations that previously weren't well mapped. We added as many buildings to Maps using ML in 2019 as we have added using old techniques in the previous decade. With all these improvements, user growth is strong, and the range of things people are doing with Google Maps continues to expand as well. The Google Assistant now helps more than 500 million monthly users across 90 countries get things done, across smart speakers and smart displays, phones, TVs, cars, and more. Shopping and commerce is another exciting area. We are making strong leadership hires in this area to help build a thriving business for partners of all sizes. Over the Black Friday and Cyber Monday holiday weekend, we had the largest number of daily shoppers on Google.com ever in our history. Throughout the entire holiday shopping season, we also expanded the selection of products on Google due to a 4x uptick in the number of U.S. merchants participating in our Shopping Actions program. Second, YouTube. Speaking of shopping, people can now easily buy products in YouTube's home feed and in search results. making it possible for advertisers to reach even more audiences. Try searching for Pumas Shoes Review on YouTube to see an example. With all the related content on YouTube, like unboxing and beauty videos, this is a format people love, and it delivers a simple in-video buying experience. A huge focus is continuing our work to keep YouTube safe for users, creators, and advertisers. You may have seen a blog post today about our work to promote authoritative content and remove misleading information about the upcoming 2020 elections. For example, we are applying our deceptive content policies to reduce misleading information about voting locations or the census process. As I mentioned earlier, we are pleased with YouTube's growth in advertising and subscriptions, and we are also pleased with the early results from other revenue options we offer creators, including memberships brand integrations, merchandise, and ticket sales. Continuing on now to cloud. We are really pleased with the momentum we are seeing in cloud. Year on year, the number of deals over $50 million more than doubled. The investments in cloud's go-to-market expansion are resulting in customer momentum. Wayfair is one of the many retailers who successfully ran holiday operations on Google Cloud. In addition, Lowe's, which began transitioning off its legacy e-commerce system in late 2018 to Google Cloud, worked with us during this year's peak holiday buying season to improve the stability of their e-commerce site. Worth noting, at peak time, customers in our Black Friday slash Cyber Monday program used 4x the compute resources compared to previous year, and our platform experienced 100% uptime. Lufthansa Group is using our AI solutions to develop new tools that will improve air travel operations. The U.S. Postal Service also chose Google Cloud AI to improve business processes and customer experience. We have recently signed a 10-year agreement with Sabre to help them improve operations and develop new airline and hospitality services. Finally, Google Other Revenue. Android continues to thrive. I'm proud to announce that over $80 billion has been earned by developers around the world from Google Play, showing the popularity of our platform. There are now over 2 billion active monthly users of Google Play. Hardware is still in the early stages of delivering on our vision for ambient computing. Our home devices demonstrate how this vision can come to life in creating the home of the future, with our new Nest Mini and Nest Hub Max selling well over the holidays, following on from the Pixel 3a, which sold well last year. With Pixel 4, we continue to build out our capabilities and are keenly focused on execution, delivering great user experiences and broadening our distribution. And our pending acquisition of Fitbit will give us a foundation in wearables. I'm excited about our roadmap ahead across our products. Overall, In 2020, our teams at Google are focusing on four key things. First, creating the most helpful products for everyone. We are really focused on ensuring that our products like Search, Maps, and Assistant are helping people in their daily lives. Second, providing the most trusted experiences for our users. We are doing lots of work to keep improving users' privacy and security while also keeping harmful content off our systems. Third, executing at scale. This will show up as more seamless products across various surfaces and platforms like the Google Assistant, deeper partnerships, and better use of our shared infrastructure. For example, Activision Blizzard recently chose Google as a strategic partner using Google Cloud's computing infrastructure, YouTube for live streaming, and our AI tools. Putting together these multi-product partnerships helps us unlock great opportunities for our partners. And fourth, creating sustainable value. This means optimizing our usage of computing resources and also growing business opportunities in areas like YouTube, cloud, play, hardware, and beyond. So as you can see, there's a lot happening at the company and a real sense of excitement and focus. I want to thank our employees for all the great work in 2019. With that, I'll turn it over to Ruth, and I look forward to your questions.