Alphabet Inc.

Welcome, everyone, and thank you for standing by for Alphabet's third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. I would 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 third quarter 2022 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 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, as updated in our Form 10-Q for the quarter ended September 30, 2022, expected to be filed with the SEC later today. 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 forward slash investor. And now, I'll turn the call over to Sundar.

Thank you, Jim, and good afternoon, everyone. Our financial results for the third quarter reflect healthy fundamental growth in search and momentum in cloud. Our reported results reflect the effect of foreign exchange. The growth in our advertising revenues was also impacted by lapping last year's elevated growth levels and the challenging macroclimate. We are sharpening our focus on a clear set of product and business priorities. The product announcements we have made in just the past month alone have shown that very clearly, including significant improvements to Search powered by AI, new ways to monetize YouTube Shorts, which will support the creator ecosystem, a strong series of hardware launches, and a new partnership and product announcements at Cloud Next. These will all drive value for users, partners, and our business. We've also started our work to drive efficiency by realigning resources to invest in our biggest growth opportunities. Over the past quarter, we've made several shifts away from lower priority efforts to fuel higher growth priorities. Our Q4 headcount additions will be significantly lower than Q3. And as we plan for 2023, we'll continue to make important trade-offs where needed and are focused on moderating operating expense growth. Throughout Google's history, periods of dedicated focus have enabled us to emerge strongly and unleash new eras of computing innovation. For example, over a decade ago, focusing the company's efforts on mobile helped us to build and grow our business for the shift to mobile computing. We are at a similar point now with AI, another transformational technology. Our investments in AI and deep computer science mean that we can deliver a wide range of breakthroughs across our products and services to help people, businesses, and communities. Turning to the quarter, first, our core information products. At our Search On event, we shared how we are using AI advances to deliver a more natural and intuitive search experience. These advancements will soon help to surface things you might find helpful before you've even finished typing. We are also making visual search more natural than ever before. People now use Google Lens to answer more than 8 billion questions every month using just a photo or an image. Now we are supercharging our visual search capabilities to help people find what they are looking for at businesses nearby. Philip will also talk in more detail about our work to make it easier to shop on Google, a key focus. Google Lens also has an amazing translation feature. It can now blend translated text seamlessly into the background of images, like menus or street signs, in just 100 milliseconds, shorter than a blink of an eye. Through advanced language models, AI is unlocking new experiences that support more natural and conversational ways to interact with computing. Lambda is one of our most promising models for this. It's now available to demo in our AI Test Kitchen, which offers a way for people to experience and give feedback on emerging AI technology. DeepMind also debuted its most helpful and safest language model yet. Sparrow can talk to users, answer questions, and provide evidence-based answers using Google Search. Moving to YouTube, another big priority. We remain focused on long-term growth for our community of viewers, creators, and advertisers. To that end, we announced some exciting changes at our Made on YouTube event last month. First, improving the monetization of Shorts. This is a big deal for creators and for our business. We'll introduce revenue sharing on Shorts early next year. This update makes YouTube the only platform where creators can monetize their content across short, long, and live formats at scale. Shorts continues to show great user momentum. And we continue to invest in our mobile video tools for creators. We are seeing mobile-first creators investing more in the platform, creating content that helps the broader community grow. TV is a big area for us as well. Nielsen reported that YouTube was the leader in streaming TV viewership in the US in September for the first time. turning next to hardware. Hardware is an important area of investment for us. We are investing deeply from the silicon to the OS to powerful software experiences because it's a big opportunity to move computing forward and build deeper relationships with people who love using Google products. It also really helps to guide the Android ecosystem beyond just building the underlying platform. Earlier this month, we introduced the Pixel 7, the Pixel 7 Pro, and the very first Pixel Watch. We've also previewed more detail about the Pixel tablet, which is coming in 2023. Pixel combines our foundational technologies, AI, Android, and our Google Tensor G2 processor to bring state-of-the-art AI directly to the device. The Pixel 7 and Pixel 7 Pro offer industry-leading photography features that can unblur or sharpen photos and shoot cinema-quality videos. We recently had our highest selling week ever for Pixel, and I'm really proud of the positive reviews so far. Along with great devices, we introduced our latest release of Android. Android 13 offers new personalization features, improved privacy controls, and a more seamless experience with connected devices. Next, Google Cloud. We see continued momentum with Q3 revenue of $6.9 billion, with Google Cloud Platform's revenue growth rate above the aggregate. I've long shared that cloud is a key priority for the company. The long-term trends that are driving cloud adoption continue to play an even stronger role during uncertain macroeconomic times. Google Cloud helps customers solve today's business challenges, improve productivity, reduce costs, and unlock new growth engines. At Cloud Next, we unveiled more than 100 new products and announced new and expanding relationships with Toyota, Prudential PLC, Coinbase, and Apple event. The shift to hybrid work continues, with organizations evolving to support an increasingly distributed workforce. I'm proud to share that Google Workspace is now used by more than 8 million businesses and organizations worldwide. That includes Korean Air, as well as the U.S. Army, which is transitioning 250,000 personnel to our secure communication and collaboration platform. In the past year, we have announced nearly 300 new capabilities to support hybrid work. Empowering a distributed workforce brings an increased need for cybersecurity to keep workers, data, and critical business systems safe and secure. It's top of mind for nearly every CEO I speak with, and customers including the City of Los Angeles, Roche, and Bernalte put their trust in Google Cloud's industry-leading products. our new Chronicle Security Operations suite unifies security analytics, automation response, and threat intelligence. This has helped Vertiv analyze 22 times more security data while cutting investigation time in half. In September, we closed our acquisition of Mandiant and are proud to welcome more than 2,600 colleagues to Google. With Mandiant, we add industry-leading threat intelligence and incident response capabilities to help customers stay protected at every stage of the security lifecycle. Customers partner with Google Cloud because we offer a single platform that can analyze data across any cloud. Our leadership here is winning customers across industries, including the state of Hawaii and the Australia Securities Exchange. Our capabilities help solve difficult business challenges, like supply chain and logistics, while also creating new growth opportunities. And as companies globally are looking to drive efficiencies, Google Cloud's open infrastructure creates a valuable pathway to reduce IT costs and modernize. In addition, with our new media CDN product for large media streaming workloads, We are helping Major League Baseball and Paramount Plus deliver flawless experiences to their customers. And with Google Cloud Edge, Rite Aid is more efficiently helping patients in their pharmacies. Across all of these areas, I'm proud of the trust and enthusiasm our customers are placing in Google Cloud. Briefly on our other bets. Waymo announced that Los Angeles will be its third ride-hailing city, joining Phoenix and San Francisco. Waymo will begin by mapping several neighborhoods in LA as it prepares to serve people there. Wing just surpassed 300,000 commercial deliveries. It's servicing new areas in Australia and announced its first drone delivery trials in Ireland. To close, times like this are clarifying. As we head into 2023, we are going to focus on our most important priorities as a company. to support our growth, we'll continue to invest responsibly for the long term in a way that is responsive to the current economic environment. I want to thank our employees around the world for their contributions over the last quarter. We help people, our partners, and society when we focus on what we do best and execute on that really well. Over to you, Philip.