Alphabet Inc. Q1 FY2025 earnings call

• Strong results across the business with AI powering new features. Search saw double-digit revenue growth, AI Overviews with over 1.5 billion users per month, and positive reaction to AI Mode. Subscriptions surpassed 270 million paid subscriptions. Cloud grew rapidly with major innovations at Cloud Next. Rolled out Gemini 2.5, the most intelligent AI model. AI Infrastructure investments include global network and TPUs/GPUs. World Class Research released Gemini 2.5 Pro, Gemma 3, etc. Products and Platforms: 15 products with 0.5 billion users use Gemini models; Android, Pixel, Google Assistant integrating AI. Search: robust revenue growth, AI Overviews expanded, AI Mode released, Circle to Search on over 250M devices. Cloud: major innovations, leading cost performance, Vertex AI Platform with models, Agent Development Kit, Agent Designer. YouTube: 20th anniversary, strong ad and subscription growth, shorts engaged views up 20%, partnership with Roblox.

Google services revenues were $77 billion for the quarter, up 10% year-on-year. Google Search and other advertising revenues increased by 10% to $50.7 billion. YouTube advertising revenues increased 10% to $8.9 billion. Network advertising of $7.3 billion were down 2%. Subscription platforms and device revenues increased 19% to $10.4 billion. Google Cloud revenue increased by 28% to $12.3 billion in the first quarter. Other Bets had revenues of $450 million and an operating loss of $1.2 billion.

• Advertising revenue in 2025 will be impacted by lapping 2024's financial service strength. Cloud revenue growth may vary based on capacity deployment. Expected to invest ~$75B in CapEx for 2025, with depreciation expected to accelerate in 2025. Some headcount growth in key investment areas in 2025.

• Macro environment impacts on advertising revenues. Cloud demand-supply tightness in previous quarters and potential impact on revenue growth.

Q: Macro advertising backdrop and commercial queries in second quarter?

A: Broad-based strength in Q1, too early to comment on Q2; AI Overviews driving commercial queries.

Q: AI Overviews users and cost cutting?

A: AI Overviews launched to new users, monetization at same rate; focus on efficiency and productivity to offset costs.

Q: Gemini differentiation and investments?

A: Gemini has strong reception, investing more with product features; focus on productivity and efficiency in investments.

Q: YouTube brand and Direct Response growth?

A: Strong growth in Q1, brand advertisers enjoyed cultural moments; Q2 too early to comment.

Q: Gemini deployment and AI Mode vs Gemini app?

A: Gemini deployed across 15 products, internal use transformative; AI Mode has longer queries, different from Gemini app usage.

Q: Profitability and Waymo business model?

A: Levers to offset infrastructure costs, Waymo focused on building best driver with partnerships and optionality in business models.

Q: AI-powered Search experiences and gross margin?

A: AI Overviews, AI Mode, Gemini distinct but overlapping; gross margin improved by revenue mix and efficiency in headcount and compensation.