Alphabet Inc.

Welcome, everyone, and thank you for standing by for the Alphabet fourth quarter 2021 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 the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I'd now like to hand the conference over to your speaker today, Jim Friedland, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Alphabet's fourth quarter 2021 earnings conference call. With us today are Sundar Pichai, Philip Schindler, and Ruth Peratt. Now, I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business, operations, and financial performance, including the effect of the COVID-19 pandemic on those areas, 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 Forms 10-K and 10-Q filed with the SEC, including our upcoming Form 10-K filing for the year ended December 31, 2021. 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 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, Jim, and Happy New Year, everyone. The last few months have been challenging for communities everywhere because of Omicron. I'm grateful for the frontline healthcare workers who are helping us through it and glad to see signs that this wave is receding in many parts of the world. Whether it's helping people find a COVID testing center, learn a new skill, or launch a new business, our mission to organize the world's information and make it universally accessible and useful is as relevant today as it's ever been. In 2022, we'll stay focused on evolving our knowledge and information products, including Search, Maps, and YouTube, to be even more helpful. Investments in AI will be key and will continue to make improvements to conversational interfaces like the Assistant. I'll begin by touching on a few highlights from Q4. Our new AI models are helping to create information experiences that are truly conversational, multimodal, and personal. For example, Multitask Unified Model, or MUMP for short, has improved searches for vaccine information, and soon will introduce new ways to search with images and words simultaneously. In October, we introduced a new AI architecture called Pathways. AI models are typically trained to do only one thing. With Pathways, a single model can be trained to do thousands, even millions of things. From MUM to Pathways to BERT and more, these deep AI investments are helping us lead in search quality. They're also powering innovations beyond search. For example, DeepMind's protein folding system, AlphaFold, was recently recognized by Nature and Science magazine as a defining breakthrough. To illustrate the scale of the team's achievement, it took scientists more than 50 years to figure out the structure of 150,000 proteins. The DeepMind team has now expanded that number to 1 million, and they think they will get to more than 100 million this year. Philip will talk in great detail about our advertising business, which also benefits from our investments in AI. It's been a very strong quarter for ads. Our teams have helped millions of businesses of all sizes and launched dozens of important features to help them get the most out of their online marketing spend. These businesses are the backbone of our global economy and the heart of our community, so helping them thrive is more important than ever. We are also seeing exciting momentum at YouTube. YouTube Shots continues to drive significant engagement. We just hit 5 trillion all-time views and have over 15 billion views each day globally. This is helping our creator community reach newer and bigger audiences. In fact, more people are creating content on YouTube than ever before. Last year, the number of YouTube channels that made at least $10,000 in revenue was up more than 40% year over year. And we are continuing to improve support for artists and creators. More creators than ever are earning money from our non-ads products like Super Chat and channel memberships. And the Shots Fund is now available in more than 100 countries. Another big area for investment is combining the best of AI software and hardware to deliver helpful experiences across our family of devices. In Q4, we set an all-time quarterly sales record for Pixel. This came in spite of an extremely challenging supply chain environment. The response to Pixel 6 from our customers and carrier partners was incredibly positive. and AI is making Pixel even more helpful. As one example, Live Translate detects whether a chat message is in a different language and automatically translates it in up to 48 languages. We are also focused on ensuring devices across the Android and Chrome ecosystems work well together. For example, at CES last month, we announced that we are working with Acer, HP, and Intel to bring great experiences to their devices. Also announced at CES, the new Ripple open standard will broaden the capabilities of radar technology, opening the door for new products and services. Another priority is ensuring our products and services are private, secure, and safe. To that end, I'll note our new privacy sandbox proposal called Topics API. We think it'll be a big improvement for protecting user privacy while also ensuring businesses are able to thrive online. We'll begin testing this year and look forward to feedback from the industry. Next on to cloud. It's been a big year, so let me go a bit deeper this quarter. In Q4, cloud revenue grew 45% year over year to $5.5 billion. Alphabet's backlog increased more than 70% to $51 billion, most of which is attributed to Google Cloud. This growth comes from many leading businesses, including Albertsons and LVMH, digital natives, including Box and Spotify, and public sector agencies, including the Commonwealth of Massachusetts, the Defense Innovation Unit, and the USDA. Our sales force, which we have more than tripled since 2019, delivered strong results across geographies, products, and industries. And we continue to invest. For the full year 2021, compared with the full year 2020, we saw over 80% growth in total deal volume for Google Cloud Platform and over 65% growth in the number of deals over a billion dollars. Our partner ecosystem is helping accelerate our growth. For the full year 2021, compared with the full year 2020, the number of customers spending more than $1 million through the marketplace increased by 6x. Customer spend through channel partners on GCP more than doubled, and the number of active certifications within our top global systems integrators more than doubled as well. Our product leadership continues with more than 2000 new cloud products and feature releases in the last year. These were in four categories. First, our data cloud and our AI ML platform is helping organizations like Cartier, Groupe Rocher, and Mitsubishi Heavy Industries understand and use their data intelligently across multiple clouds. Our fast, secure data sharing capability helps the National Cancer Institute advance breast cancer research. Our unified data lake and data warehouse, which brings together unstructured and structured data, helps Telus and Tyson Foods improve their understanding of customers. And our AI ML platform helps CN deliver better customer experiences. Second, our open multi-cloud infrastructure enables customers like BBVA and Wells Fargo to run machine-critical systems on our cloud. We believe new auto-scaling in our Kubernetes engine, which allows customers to run 15,000 node clusters, outscales the competition by up to 10 times. Our Edge Cloud helps us grow in telecommunications, driving partnerships in Q4 with Indosat, Oridoo, Hutchison, Telenor, and Verizon. They join existing customers and partners, including Ericsson, Reliance Jio, and Nokia. Third, our cybersecurity products are helping protect organizations like ANZ Bank, Meditech, and Wayfair as a trusted cloud provider. VirusTotal helps protect organizations from software supply chain vulnerabilities. Chronicle and Security Command Center help organizations detect and protect themselves from cyber threats. And our fraud prevention and identity verification solutions are protecting over 5 million websites. Finally, our secure communication and collaboration platform, Google Workspace, is helping public sector organizations like USAID and the U.S. Air Force Research Laboratory, as well as global brands including Colgate and Roche, adopt secure hybrid work. Our new Work Safer program, launched in Q4, provides the highest security for email meetings and documents by bringing together Google Workspace, Titan Security Keys, Zero Trust, and other security advances. Customers come to Google Cloud because of our expertise in bringing enterprises and consumer ecosystems closer together. One example is Shopify. And from Black Friday through Cyber Monday, Shopify reported $6.3 billion in global sales by 47 million customers, all safely transacted on Google Cloud. Importantly, we have made progress operating 24-7 on carbon-free energy and continue to provide customers the cleanest cloud in the industry. On to our other bets. October marked the one-year anniversary of our Waymo One fully autonomous commercial ride-hailing service in Arizona. In San Francisco, hundreds of riders are using Waymo One as part of our Trusted Tester program, with many more on the waiting list. And Waymo Via continues delivering freight in the southwest U.S. and developing partnerships with key industry players. Before I close, I want to say how proud I am of Google's work to help with economic recovery around the world. Nearly a third of small business owners say that without digital tools, they would have had to close their business during the pandemic. Digital skills have also been a lifeline to help people find jobs and grow their careers. Since 2014, we have provided digital skills training to over 90 million people around the world. In the months and years ahead, technology will help unleash new opportunities globally, especially as hundreds of millions more people come online in places including Southeast Asia and Africa. With that, let me thank Googlers everywhere for their contributions this quarter and throughout 2021. Over to you, Philip.