Alphabet Inc. Q4 FY2024 earnings call

AI Progress - AI Infrastructure: Sophisticated global network of cloud regions and data centers, with 11 new cloud regions and data centers built in 2024, and 7 new subsea cable projects announced. Google data centers are nearly 4x more efficient in computing power per unit of electricity compared to 5 years ago. - World-Class Research: Unveiled Gemini 2.0, with experimental versions like Gemini 2.0 Flash and Thinking Model. Gemini 2.0 advances in multi-modality and tool use enable new agents like Deep Research. - Products and Platforms: Gemini is powering AI overviews in Search, available in over 100 countries, and Circle to Search on over 200 million Android devices. ### Cloud Highlights - Won customers like Mercedes-Benz, Mercado Libre, and Servier. First-time commitments more than doubled in 2024. Closed strategic deals over $1 billion and deals over $250 million doubled. - AI Hypercomputer and Trillium TPU saw strong uptake. Vertex AI customers increased 5x year-over-year, with Vertex usage up 20x in 2024. - Introduced Google Agentspace and gave Google Workspace customers access to Gemini AI capabilities. ### YouTube Updates - YouTube is number one in streaming watchtime in the U.S. with record high share. Podcasts integrated into YouTube, making it the most used service for consuming podcasts in the U.S. - Expanded YouTube Shopping to 3 additional countries. Announced Veo 2 video generation model for creators. - Shorts monetization rate increased over 30 percentage points in the U.S. in 2024, and makes up 15% of Shorts viewing on connected TV. ### Platforms and Devices - Google One is a fast-growing subscription product. Android 16 beta announced with deeper Gemini integration on Samsung Galaxy S25 series. Android XR platform built for the Gemini era developed with Samsung and Qualcomm. ### Waymo - Safely served over 4 million passenger trips in 2024, averaging over 150,000 trips per week. Expanding network and operations partnerships, with vehicles arriving in Tokyo for international road trips, and developing the sixth-generation Waymo Driver to lower hardware costs.

Google Services revenues were $84 billion for the quarter, up 10%, with Search and other advertising revenues increasing by 13% to $54 billion. YouTube advertising revenue increased 14% to $10.5 billion, while network advertising revenue was down 4%. Subscription platforms and device revenues increased 8% to $11.6 billion. Google Cloud revenue in the fourth quarter was $12 billion, up 30%. Other Bets had revenue of $400 million in the fourth quarter with an operating loss of $1.2 billion.

Revenue Impact - Expect a headwind to revenues from the strengthening of the U.S. dollar relative to key currencies in Q1 2025 compared to Q4 2024. - Expect a headwind from having one less day of revenue in Q1 2025 compared to leap year in Q1 2024. - Google Services advertising revenue in 2025 will be impacted by lapping the strength in the financial service vertical in 2024. - Cloud revenue growth may vary depending on timing of new capacity deployment in 2025. ### CapEx - Expect to invest approximately $75 billion in CapEx in 2025, with approximately $16 billion to $18 billion of debt in the first quarter.

- Foreign exchange rate fluctuations could impact revenues. - Capacity constraints in the cloud business, as demand for AI products exceeded available capacity in the fourth quarter of 2024. - Market conditions could impact advertising revenues, such as lapping strong advertising revenue in prior periods.

Q: Brian Nowak from Morgan Stanley asked about Search's evolution with Gen AI and OpEx efficiencies.

A: Sundar Pichai discussed continuing to bring AI in more powerful ways to Search, including multi-modal uses, and Anat Ashkenazi talked about OpEx efficiencies in technical infrastructure, headcount growth, real estate optimization, and using AI tools to run the business.

Q: Doug Anmuth from JPMorgan asked about ads on AI overviews and cloud growth deceleration.

A: Philipp Schindler said ads on AI overviews have similar monetization rates to existing search, and Anat Ashkenazi explained cloud growth deceleration was due to lapping strong prior quarter deployment and tight supply-demand with high demand exceeding available capacity.

Q: Eric Sheridan from Goldman Sachs asked about China news and AI cost curve.

A: Sundar Pichai mentioned Gemini models are efficient with a full stack approach, and the trend of increasing inference spend compared to training is positive for ROIC.

Q: Michael Nathanson from MoffettNathanson asked about AI tools on eCommerce and long-term capital intensity.

A: Philipp Schindler talked about AI improving Google Shopping experience, and Anat Ashkenazi discussed responsible capital expenditure management with focus on cost-efficient data center investments and repurposing capacity.

Q: Mark Shmulik from Bernstein asked about consumer agents and Google Search.

A: Sundar Pichai said Gemini 2.0 enables agentic use cases and there's room for multiple use cases to flourish.

Q: Ross Sandler from Barclays asked about Gemini inference cost and Search revenue lapping.

A: Sundar Pichai discussed Gemini's cost advantage from full-stack optimization, and Anat Ashkenazi noted Search revenue lapping financial services strength in 2025 but didn't provide specific numbers.

Q: Justin Post from Bank of America asked about Search usage and YouTube UGC.

A: Philipp Schindler said Search usage is healthy with AI overviews driving stronger growth, and Sundar Pichai discussed YouTube's strong ad metrics and confidence in creator position with UGC.

Q: Ken Gawrelski from Wells Fargo asked about Gemini usage growth and monetization.

A: Sundar Pichai talked about Gemini's organic growth through product innovation and partnerships, and focus on free tier and subscriptions with future monetization ideas tied to user experience.