Alphabet Inc.

Welcome, everyone. Thank you for standing by for the Alphabet fourth quarter 2025 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, head of investor relations. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Alphabet's fourth quarter 2025 earnings conference call. With us today are Sundar Pichai, Philipp Schindler, and Anat Ashkenazi. 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.com. Our comments will be on year-over-year comparisons unless we state otherwise. And now, I'll turn the call over to Sundar.

Thanks, Jim. Hi, everyone. Thanks for joining us. It was a tremendous quarter for Alphabet. The launch of Gemini 3 was a major milestone and we have great momentum. Alphabet annual revenues exceeded $400 billion for the first time. This quarter, search continued to accelerate with revenues growing 17%. YouTube's annual revenues surpassed $60 billion across ads and subscriptions. Cloud significantly accelerated with revenues growing 48%, now on an annual run rate of over $70 billion. Backlog grew by 55% quarter over quarter to $240 billion, representing a wide breadth of customers driven by demand for AI products. We have over 325 million paid subscriptions across consumer services with strong adoption for Google One and YouTube Premium. In addition, we have sold more than 8 million paid seats of Gemini Enterprise, which we launched just four months ago. And our Gemini app now has over 750 million monthly active users. We are also seeing significantly higher engagement per user, especially since the launch of Gemini 3 in December. Overall, we are seeing our AI investments and infrastructure drive revenue and growth across the board. To meet customer demand and capitalize on the growing opportunities ahead of us, our 2026 CapEx investments are anticipated to be in the range of $175 to $185 billion. Today, I'll provide an update on our AI progress and then share highlights from Search, Cloud, YouTube, and Waymo. First, AI progress across the full stack. Our unrivaled infrastructure serves as the bedrock of our AI stack. We have the industry's widest variety of compute options. That includes GPUs from our partner, NVIDIA, who announced at CES that we'll be among the first to offer their latest Vera Rubin GPU platform, plus our own TPUs that we have been developing for a decade. In December, we announced our intent to acquire Intersect, which provides data center and energy infrastructure solutions. As we scale, we are getting dramatically more efficient. We were able to lower Gemini serving unit costs by 78% over 2025 through model optimizations, efficiency, and utilization improvements. Next, world-class AI research, including models and tooling. We offer the most extensive model portfolio in the world and lead across text, vision, and image to video Ella Marina leaderboards. Gemini 3 Pro drives the state of the art in reasoning and multimodal understanding. It has seen the fastest adoption of any model in our history. Since launch, Gemini 3 Pro has consistently processed three times as many daily tokens on average as 2.5 Pro. Our latest model powers Google Anti-Gravity, our new development platform where agents can autonomously plan and execute complex software tasks. It already has more than 1.5 million weekly active users after launching just over two months ago. Our first-party models like Gemini now process over 10 billion tokens per minute via direct API used by our customers, up from 7 billion last quarter. Third, bringing AI to our products and platforms. We are shipping innovation at scale to bring helpful AI features to people everywhere. In January alone, we have launched Personal Intelligence in AI mode in Search and the Gemini app. Introduced new features to Gmail and updated VO. Reimagined Chrome as an AI-first agentic browser through features like Chrome Auto Browse. announced Project Genie, which lets users create and explore interactive worlds generated in real time using Genie 3, our general purpose world model. And we laid the groundwork for shopping in the AI era by introducing a new open standard for agentic commerce, the Universal Commerce Protocol, built alongside many retail industry leaders. Finally, from Android to Pixel, we are getting our best AI capabilities into people's hands. At CES, a range of partners, including Samsung, showcased how they are bringing Gemini to more devices, from XR to the living room and beyond. And to confirm the rumors, we'll be introducing our Pixel 10a to our best-ever rated Pixel 10 series very soon. Turning now to key highlights from the quarter, starting with Search. Search saw more usage in Q4 than ever before, as AI continues to drive an expansionary moment. We have executed with incredible speed. We shipped over 250 product launches within AI mode and AI overviews just last quarter. We have integrated Gemini 3 directly into AI mode in search. Now search can better understand your query, dive deeper on the web, and generate interactive UI experiences. and last week we upgraded AI overviews to Gemini 3, giving users a best-in-class AI response at the top of the search results page. We have also made the search experience more cohesive, ensuring the transition from an AI overview to a conversation in AI mode is completely seamless. These new experiences are proving to be more helpful and are driving greater usage. A few highlights. First, once people start using these new experiences, they use them more. In the US, we saw daily AI mode queries per user double since launch, and AI overviews continue to perform very well. Second, people are engaging in longer, more complex sessions. Queries in AI mode are three times longer than traditional searches. We are also seeing sessions become more conversational, with a significant portion of queries in AI mode now leading to a follow-up question. Third, people are searching in new ways beyond text. Nearly 1 in 6 AI mode queries are now non-text using voice or images. And Circle to Search is now available on over 580 million Android devices. Next, Google Cloud. Our growth in revenue, operating margin, and backlog highlights the strength of our entire portfolio. One, we are winning more new customers faster. We exited the year with double the new customer velocity compared to Q1. Two, we are also signing larger customer commitments. The number of deals in 2025, over a billion dollars, surpassed the previous three years combined. And three, we continue to deepen our relationships with existing customers who are outpacing their initial commitments by over 30%. Nearly 75% of Google Cloud customers have used our vertically optimized AI, from chips to models to AI platforms and enterprise AI agents, which offer superior performance, quality, security, and cost efficiency. These AI customers use 1.8 times as many products as those who do not, enabling us to diversify our product portfolio. Thank you for watching. We offer leading infrastructure for AI training and inference to our cloud customers with the industry's widest variety of compute options from our own 7th generation Ironwood TPU to the latest NVIDIA GPUs. Our 10-year track record in building our own accelerators with expertise in chips, systems, networking, and software translates to leading power and performance efficiency for large-scale inference and training. Our cloud AI accelerators serve the leading frontier AI labs, capital markets firms like Citadel Securities, enterprises like Mercedes-Benz, and governments for high-performance computing applications. We also offer our leading generative AI models, including Gemini, Imagine, Veo, Chirp, and Lyria to cloud customers. In December alone, nearly 350 customers each processed more than 100 billion tokens. In Q4, revenue from products built on our generative AI models grew nearly 400% year over year, significantly accelerating from the prior quarter. Today, more than 120,000 enterprises use Gemini, including AI unicorns like Lovable and Open Evidence, and global enterprises like Airbus and Honeywell. 95% of the top 20 and over 80% of the top 100 SaaS companies use Gemini including Salesforce and Shopify. Gemini is becoming the AI engine for the world's most successful software companies. Leading enterprises are also driving strong demand for our enterprise AI agents. We have sold more than 8 million paid seats of Gemini Enterprise, our enterprise AI platform, to more than 2,800 companies, including BNY and Virgin Voyages, to streamline knowledge management and automate processes. Gemini Enterprise managed over 5 billion customer interactions in Q4, growing 65% year-over-year for customers including Wendy's, Kroger, and Woolworths Group. Our integration of Gemini and Google Workspace is driving wins with global brands like Schwartz Group and public sector organizations like the U.S. Department of Transportation. We are also seeing momentum with independent software vendors. Revenue from AI solutions built by our partners increased nearly 300% year-over-year and commitments from our top 15 software partners grew more than 16x year-over-year. Before moving on, I'm pleased that we are collaborating with Apple as their preferred cloud provider and to develop the next generation of Apple Foundation models based on Gemini technology. Up next, YouTube. I want to highlight four points. First, streaming. In the living room, YouTube continues to be the number one streamer in the U.S. for nearly three years, according to Nielsen. From the NFL to Coachella, YouTube is where people watch today's biggest popular culture moments unfold. Second, subscriptions. We continue to see strong subscription revenue growth across YouTube, particularly YouTube Music Premium. We'll soon launch new YouTube TV plans, bringing more choice and flexibility to subscribers with over 10 genre-specific packages. And the NFL has seen strong NFL Sunday Ticket subscriber growth with YouTube, with the highest paid subscriber number ever in the history of the product. Third, podcasts. To illustrate YouTube's popularity, in October 2025, viewers watched over 700 million hours of podcasts on living room devices, up 75% from just a year prior. And fourth, AI is transforming the YouTube experience for both creators and viewers. On average, every day in December, over 1 million channels used our new AI creation tools to supercharge their creativity. During that same month, more than 20 million viewers used our new Ask tool, powered by Gemini, to learn more about the content they watched. And finally, Waymo. This week, Waymo raised its largest investment round to date and is well positioned to continue its momentum with safety at the core. In December, we surpassed 20 million fully autonomous trips and are now providing more than 400,000 rides every week. Thank you for watching. In closing, 2025 was a fantastic year for the company. A big thanks to our employees and partners worldwide. We are really well positioned going into 2026. Now, over to Philip.