Alphabet Inc.

Welcome, everyone. Thank you for standing by for the Alphabet First Quarter 2026 Earnings Conference Call. At this time, all participants are in the 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 first quarter 2026 earnings conference call. With us today are Sundar Pichai, Philip 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 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.

Thanks, Jim. Hi, everyone, and thanks for joining us today. It was a terrific quarter for Alphabet. Our momentum was on full display at Cloud Next last week, and the month of May brings even more with I.O., Brandcast, and GML. I hope you'll tune in to see our progress. It's clear that our AI investments and full stack approach are driving performance across our business. In search and other, revenue grew 19%. People love our AI experiences like AI mode and AI overviews, and they're coming back to search more. Cloud accelerated again this quarter due to strong demand for our AI products and infrastructure. Revenue grew 63%, exceeding $20 billion for the first time, and our backlog nearly doubled quarter-on-quarter to over $460 billion. Gemini Enterprise is seeing tremendous momentum with 40% growth quarter-over-quarter in paid monthly active uses. In subscriptions, this was the strongest quarter ever for our consumer AI plans, primarily driven by adoption of the Gemini app. Overall, the number of paid subscriptions has now reached 350 million, with YouTube and Google One being the key drivers. And our AI models have great momentum. Our first-party models now process more than 16 billion tokens per minute via direct API use by our customers, up from 10 billion last quarter. Today, I'll share our progress across the AI full stack, then search in cloud, followed by YouTube and other bets. Starting with our AI infrastructure, it's the foundation of our full-stack approach to AI driving customer growth and product adoption. Our custom TPUs, Axion CPUs, and the latest NVIDIA GPUs continue to form the industry's widest variety of compute options. NVIDIA GPUs are a core part of our AI accelerator portfolio and will be among the first to offer NVIDIA Verarubin NVL72 in addition to the Blackwell and Hopper-based instances already available. At Cloud Next, we introduced our eight-generation TPUs, individually specialized for training and serving, and able to take on the most demanding agentic workloads. TPU-8T provides high-performance model training with three times the processing power of ironwood and two times the performance. TPU-8I delivers cost-effective, low-latency inference with 80% better performance per dollar than the prior generation. This exceptional infrastructure powers a world-class AI research that includes models and tooling which continue to progress really well. Gemini 3.1 Pro continues to push the frontier in reasoning, multimodal understanding, and cost. We have quickly expanded the Gemini 3.1 series of models to offer more choices for developers, including our cost-efficient Flash models. 3.1 Flash Live, our latest audio model, has improved precision and reasoning, making voice interactions more natural and intuitive. It's now powering conversational features in search and the Gemini app. Speech-to-text is now available in 70 languages. And the 3.1 Pro, our deep research agent, got a big upgrade, including MCP support and native visualizations. Our generative media models are incredibly popular. Lyria 3 has generated over 150 million songs since launching on the Gemini app. NanoBanana 2 reached 1 billion images in nearly half the time of NanoBanana 1. And VO 3.1 Lite is the most cost-efficient video model to date. On top of this, we launched Gemma 4, our most intelligent open model. It's been downloaded over 50 million times in just a few weeks. In fact, our open models have now been downloaded over 500 million times. Looking ahead, we are focused on pushing the next frontiers of foundation models, including intelligence, agents, and agentic coding. And we are using the latest technologies to transform how we work as a company. For example, with anti-gravity, we are shifting to truly agentic workflows. Our engineers are now orchestrating fully autonomous digital task forces and building at a faster velocity. Much more to come here. Next, we are bringing helpful AI into the hands of billions of people every day through our products and platforms. Earlier this year, we introduced personal intelligence, which helps people get more personalized and helpful responses. It's now in the Gemini app, AI mode, and Gemini in Chrome. Early traction has been good, and this month we integrated Nano Banana 2 to make personalized image creation possible in the Gemini app. Maps recently got its most significant upgrade in over a decade with Gemini. Users can now have a conversation with Maps and get more personalized suggestions and intuitive directions. And the Pixel 10a launched to positive reviews, providing the best of Google's AI features like Gemini Live and AI-powered camera features. Turning to search, AI continues to drive search usage and queries are at an all-time high. We continue to invest in improvements to AI overviews, which are driving overall search growth, and we're also seeing strong growth in both users and usage of AI mode globally. Personal intelligence expanded broadly in the U.S., and we are seeing people ask more personal questions and getting responses that are uniquely relevant to them. We also shipped agentic experiences like restaurant booking to new countries and new multimodal capabilities like Search Live Globally. We are also continuing to improve efficiency and speed. Even as we have brought new AI features into our results page, we have reduced search latency by more than 35% over the past five years. And since upgrading AI overviews and AI mode to Gemini 3, we have reduced the cost of core AI responses by more than 30% thanks to continued hardware and engineering breakthroughs. We are excited to share more about search at I.O. Now, over to Google Cloud. Google Cloud is differentiated because we are the only provider to offer first-party solutions across the entire enterprise AI stack. Our growth in revenue, operating margin, and backlog highlights this differentiation. Our enterprise AI solutions have become our primary growth driver for cloud for the first time. In Q1, revenue from products built on our Gen AI models grew nearly 800% year over year. We are winning new customers faster with new customer acquisition doubling compared to the same period last year. We are seeing strong deal momentum, doubling the number of 100 million to $1 billion deals year on year and signing multiple billion dollar plus deals. And we are deepening relationships with existing customers Customers outpaced their initial commitments by 45%, accelerating over last quarter. At Cloud Next last week, we introduced hundreds of new capabilities across our vertically optimized AI stack that are designed to work together for our enterprise customers. We introduced a new Gemini enterprise agent platform that empowers users to build, orchestrate, govern, and optimize agents with the controls that enterprise customers need. Along with new capabilities in Gemini Enterprise app, like projects, canvas, long-running agents, and skills, every employee can build agents. In Q1, Gemini Enterprise paid monthly active users grew 40% quarter over quarter. That includes major global brands like Bosch, CityWealth, Merck, and Mars Incorporated. Our partner ecosystem plays an increasingly critical role in driving Gemini Enterprise adoptions. We saw 9X year-over-year growth, both in seats sold with partners and in the number of partners adopting it for internal use. This momentum is leading to accelerating usage of our models. Over the past 12 months, 330 Google Cloud customers each processed over 1 trillion tokens. 35 reached the 10 trillion token milestone. To give agents business context from enterprise data, to help them reason intelligently, we introduced a new agentic data cloud. It includes a cross-cloud lake house, knowledge catalog, and deep research agents, which combine research and analytical skills. As an example, using our data cloud, American Express is enabling agentic commerce at scale by moving an enterprise data platform along with hundreds of production applications to BigQuery. Vodafone is proactively resolving outages, automating network planning, and precisely targeting capacity. Enterprise data has become critical for agents to reason. Our strength with BigQuery and Gemini Enterprise has led Gemini-powered workflows in BigQuery to grow over 30x year over year. As cybersecurity threats from the use of AI models accelerate, our expertise in AI and cybersecurity is driving strong demand for our agentic defense offerings. In March, we closed the acquisition of Viz, a leading cloud and security AI platform, which is an incredible fit for the moment we are in. We have seen tremendous interest from customers in our unique cybersecurity and AI products and services to protect their IT estate. The performance of Viz so far has exceeded our expectations. Together with Google's direct intelligence, security operations, and AI models, business-helping organizations detect, prevent, and respond to threats. We introduced new Gemini-powered agents for threat detection, continuous red teaming, and automated remediation to protect software, code, and cloud systems. Customers like Deloitte, Priceline, and Shell are using our agentic defense to strengthen their security posture. All of this is powered by the AI infrastructure I mentioned earlier. Our TPUs continue our leadership in performance, cost, and power efficiency for customers like Thinking Machines Lab, Hudson River Trading, and Boston Dynamics. As TPU demand grows from AI labs, capital markets firms, and high-performance computing applications, we'll begin to deliver TPUs to a select group of customers in their own data centers in a hardware configuration to expand our addressable market opportunity. turning to YouTube where our momentum continues. In the living room, U.S. viewers are watching over 200 million hours of YouTube content daily. And as of March, we have reached a new milestone with over 10 million channels now publishing shorts each day. This level of daily activity is a testament to how people enjoy this content and how we have made it easier for creators. And in Q1, our YouTube music and premium offering saw its largest quarterly increase in the total number of non-trial subscribers, both globally and in the U.S., since YouTube Premium launched in June 2018. I hope you'll tune in to Brandcast on May 13th. Moving to other bets, Waymo is on a great trajectory. It launched in Nashville a few weeks ago. That makes six new cities so far in 2026 and operations in 11 major U.S. cities in total. Waymo also surpassed 500,000 fully autonomous rides per week, doubling in less than a year. Wink continues to expand across the U.S. in partnership with Walmart and DoorDash and announced plans to operate in the Bay Area. In summary, a terrific start to the year with so many great opportunities ahead. We are not slowing down. Huge thanks to all of our employees and our partners. See you at IO on May 19th.