Alphabet Inc.

Welcome, everyone. Thank you for standing by for the Alphabet second quarter 2024 earnings conference 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 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 second quarter 2024 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. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our forms 10-K and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statement. 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. Our comments will be on year-over-year comparisons unless we state otherwise. And now, I'll turn the call over to Sundar.

Thank you, Jim, and hello, everyone. I'm really pleased with our results this quarter. They show tremendous ongoing momentum in search and great progress in cloud with our AI initiatives driving new growth. Search had another excellent quarter. And in terms of product innovation, we are seeing great progress with AI overviews. In Q2, cloud reached some major milestones. Quarterly revenues crossed the $10 billion mark for the first time, at the same time passed the $1 billion mark in quarterly operating profit. Year to date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. As I spoke about last quarter, we are uniquely well positioned for the AI opportunity ahead. Our research and infrastructure leadership means we can pursue an in-house strategy that enables our product teams to move quickly. Combined with our model building expertise, we are in a strong position to control our destiny as the technology continues to evolve. Importantly, we are innovating at every layer of the AI stack, from chips to agents and beyond, a huge strength. We are committed to this leadership long-term. This was underscored by the announcements we made at I.O., Cloud Next, and Google Marketing Live, and we'll touch on many of them here. Today, I'll start with Search, then move to our AI momentum more generally, followed by Cloud, YouTube, and some closing thoughts. Let's dive in. Over the past 25 years, we have continued to reimagine and expand Google Search across many technological shifts. With AI, we are delivering better responses on more types of search queries and introducing new ways to search. We are pleased to see the positive trends from our testing continue as we roll out AI overviews, including increases in search usage and increased user satisfaction with the results. People who are looking for help with complex topics are engaging more and keep coming back for AI overviews. And we see even higher engagement from younger users aged 18 to 24 when they use search with AI overviews. As we have said, we are continuing to prioritize approaches that send traffic to sites across the web. And we are seeing that ads appearing either above or below AI overviews continue to provide valuable options for people to take action and connect with businesses. Beyond AI overviews, AI expands the types of queries we are able to address and opens up powerful new ways to search. Visual search via lens is one. Soon you'll be able to ask questions by taking a video with lens. And already, we have seen that AI overviews in lens leads to an increase in overall visual search usage. Another example is Circle to Search, which is available today on more than 100 million Android devices. We are seeing tremendous momentum from our AI investments. More than 1.5 million developers are now using Gemini across our developer tools. And we recently unveiled new models that are more capable and efficient than ever. Gemini now comes in four sizes with each model designed for its own set of use cases. It's a versatile model family that runs efficiently on everything from data centers to devices. At 2 million tokens, we offer the longest context window of any large-scale foundation model to date, which powers developer use cases that no other model can handle. Gemini is making Google's own products better. All six of our products with more than 2 billion monthly users now use Gemini. This means that Google is the company that's truly bringing AI to everyone. Gemini is powering incredibly helpful features in Search, Workspace, Google Messages, and more. At I.O., we showed new features coming soon to Gmail and to Google Photos. Soon you'll be able to ask Photos questions like, what did I eat at that restaurant in Paris last year? For a glimpse of the future, I hope you saw Project Astra at IO. It shows multimodal understanding and natural conversational capabilities. We've always wanted to build a universal agent, and it's an early look at how they can be helpful in daily life. Our AI product advances come from our longstanding foundation of research leadership, as well as our global network of infrastructure. In Q2, we announced our first data center and cloud region in Malaysia and expansion projects in Iowa, Virginia, and Ohio. Our TPUs are a key bet here too. Trillium is the sixth generation of our custom AI accelerator, and it's our best performing and most energy efficient TPU to date. It achieves a near 5X increase in peak compute performance per chip and is 67% more energy efficient compared to TPU v5e. And the latest NVIDIA Blackwell platform will be coming to Google Cloud in early 2025. We continue to invest in designing and building robust and efficient infrastructure to support our efforts in AI given the many opportunities we see ahead. Of course, as we do this, we'll continue to create capacity by allocating resources towards our highest priorities. We are relentlessly driving efficiencies in our AI models. For example, over the past quarter, we have made quality improvements that include doubling the core model size for AI overviews, while at the same time improving latency and keeping cost per AI overview served flat. and we are focused on matching the right model size to the complexity of the query in order to minimize impact on costs and latency. Separately on our real estate investments, we are taking a measured approach to match the current and future needs of our hybrid workforce, as well as our local communities. Next, Google Cloud. We continue to see strong customer interest, winning leading brands like Hitachi, Motorola Mobility, and KPMG. Our deep partnership with Oracle significantly expanded our joint offerings to their large customer base. Our momentum begins with our AI infrastructure, which provides AI startups like Essential AI with leading cost performance for models and high-performance computing applications. We continue to drive fundamental differentiation with new advances since Cloud Next. This includes Trillium, which I mentioned earlier, and A3 Mega, powered by Nvidia H100 GPUs, which doubles the networking bandwidth of A3. Our enterprise AI platform, Vertex, helps customers such as Deutsche Bank, Kingfisher, and the US Air Force build powerful AI agents. Last month, we announced a number of new advances. Uber and WPP are using Gemini Pro 1.5 and Gemini Flash 1.5 in areas like customer experience and marketing. We broaden support for third-party models, including Anthropix Cloud 3.5 Sonnet and open-source models like Gemma 2, Lama, and Mistral. We are the only cloud provider to offer grounding with Google Search, and we are expanding grounding capabilities with Moody's, MSCI, ZoomInfo, and more. Our AI-powered applications portfolio is helping us win new customers and drive upsell. For example, our conversational AI platform is helping customers like Best Buy and Gordon Food Service. Gemini for Workspace helps click therapeutics analyze patient feedback as they build targeted digital treatments. Our AI-powered agents are also helping customers develop better quality software, find insights from their data, and protect their organization against cybersecurity threats using Gemini. Software engineers at Wipro are using Gemini Code Assist to develop, test, and document software faster. And data analysts at MercadoLibre are using BigQuery and Looker to optimize capacity planning and fulfill shipments faster. Cybersecurity risks continue to accelerate and the number of breaches continue to grow, something we all see in the news every day and that our Mandiant teams help manage. Our strong track record of uptime, quality control, and reliability make Google Cloud the trusted security choice for organizations like Fiserv and Marriott International. In Q2, we infused AI throughout our security portfolio, helping Telus strengthen its proactive security posture. Turning next to YouTube, YouTube is focused on a clear strategy, connecting creators with a massive audience and enabling them to build successful businesses through ads and subscriptions while helping advertisers reach their desired audience. We had a great brandcast this quarter, and Philip will say more. I'm pleased at the progress here. YouTube has remained number one in US streaming watch time, according to Nielsen. Views of YouTube Shorts and connected TVs more than doubled last year, and we are making it easier for creators to add captions and turn regular videos into Shorts. Next, on Android and Pixel. We joined Samsung for their Galaxy Unpacked event a few weeks ago, and we shared that Samsung's new devices will include the latest AI-powered Google updates on Android. It was a great event. I'm looking forward to our Made by Google event happening in August. We'll have lots to share around Android and the Pixel portfolio of devices. Our Pixel line is doing well. We recently introduced the new Pixel 8a, powered by our latest Google Tensor G3 chip. It provides beautiful AI experiences like Circle to Search, Best Take, and a Gemini-powered AI Assistant. In other bets, I'm really pleased with the progress Waymo's making, a real leader in the space and getting rave reviews from users. Waymo's served more than 2 million trips to date and driven more than 20 million fully autonomous miles on public roads. Waymo's now delivering well over 50,000 weekly paid public rides, primarily in San Francisco and Phoenix. And in June, we removed the wait list in San Francisco so anyone can take a ride. Fully autonomous testing is underway in other Bay Area locations without a human in the driver's seat. Before I close, I want to acknowledge that today is Ruth's final earnings call. Let me take a moment to thank her for all she has done for Google and Alphabet as our longest serving CFO. I'm excited to continue to work with her in her new role. And I look forward to welcoming our newly appointed CFO, Anath Ashkenazi. She starts next week and you'll hear from her on our call next quarter. Thanks, as always, to our employees and partners everywhere for a great Q2. With that, over to you, Philip.