Philipp Schindler: Thanks, Sundar, and hello, everyone. I will quickly cover performance for the quarter, then frame the rest of my remarks around the progress we are delivering across Search, Ads, YouTube and Partnerships, highlighting the impact AI is having on our business and our customers. Google Services revenues were $84 billion for the quarter, up 10%, driven primarily by 11% year-on-year growth in advertising revenues. Strong growth in Search and YouTube advertising was partially offset by year-over-year decline in network revenues. In terms of vertical performance, the 13% increase in Search and other revenues was led by financial services followed by retail. The 14% growth in YouTube advertising revenues was driven by strong spend on U.S. election advertising, with combined spend from both parties almost doubling from what we saw in the 2020 elections. Now, in Q4, we saw continued strong growth in revenues from Search. We had lots of exciting updates in December, and we're rapidly integrating our AI innovation into our consumer experiences. We've already started testing Gemini 2.0 in AI overviews and plan to roll it out more broadly later in the year. In Search, we're seeing people increasingly ask entirely new questions using their voice, camera, or in ways that were not possible before, like with Circle to Search. We're making these benefits available to more consumers. Google is already present in over half of journeys where a new brand, product, or retailer are discovered. By offering new ways for people to Search, we're expanding commercial opportunities for our advertisers. Shoppers can now take a photo of a product and, using lens, quickly find information about the product, reviews, similar products, and where they can get it for a great price. Lens is used for over 20 billion visual search queries every month, and the majority of these searches are incremental. Retail was particularly strong this holiday season, especially on Black Friday and Cyber Monday, which each generated over $1 billion in ad revenue. Interestingly, despite the U.S. holiday shopping season being the shortest since 2019, retail sales began much earlier, in October, causing the season to extend longer than anticipated. People shop more than a billion times a day across Google. Last quarter, we introduced a reinvented Google shopping experience, rebuilt from the ground up with AI. This December saw roughly 13% more daily active users on Google shopping in the U.S. compared to the same period in 2023. Closing out on Search with travel, and sharing another interesting trend where we saw spend expand to travel Tuesday. This contributed to 20% year-on-year revenue growth for travel advertisers across Cyber Monday and Travel Tuesday. Moving to Ads. We continue investing in AI capabilities across media buying, creative and measurement. As I said before, we believe that AI will revolutionize every part of the marketing value chain, and over the past quarter, we've seen how our customers are increasingly focusing on optimizing their use of AI. As an example, Petco used DemandGen campaigns across targeting, creative generation, and bidding to find new pet parent audiences across YouTube. They achieved a 275% higher return on ad spend and a 74% higher click through rate than their social benchmarks. On media buying, we made YouTube select creator takeovers generally available in the U.S. and will be expanding to more markets this year. Creators know their audience the best and creator takeovers help businesses connect with consumers through authentic and relevant content. Looking at Creative, we introduced new controls and made reporting easier in PMAX, helping customers better understand and reinvest into their best performing assets. Using asset generation in PMAX. Event Ticket Center achieved a 5x increase in production of creative assets, saving time and effort. They also increased convergence by 300% compared to the previous period when they used manual assets. And finally, Measurement. Last week, we made Meridian, our marketing mix model, generally available for customers, helping more business reinvest into creative and media buying strategies that they know work. Based on a Nielsen meta-analysis of marketing mix models, on average, Google AI-powered video campaigns on YouTube deliver 17% higher return on advertising spend than manual campaigns. Turning to YouTube. We saw robust revenue growth backed by continued growth and watch time across ad supported and premium experiences. Our focus here remains on building a streaming platform that enables creators to thrive and unlock the full potential of AI. Expanding on our state-of-the-art video generation model, we announced Veo 2, which creates incredibly high quality video in a wide range of subjects and styles. It's been inspiring to see how people are experimenting with it. We'll make it available to creators on YouTube in the coming months. We continue to invest in helping YouTube creators work with brands. All advertisers globally can now promote YouTube creator videos and ad campaigns across all AI-powered campaign types in Google Ads. And creators can tag partners in their brand videos. Sephora used DemandGen's Shorts-Only channel to boost traffic and brand searches for the Holiday Gift Guide campaign and leverage creator collaborations to find the best gift. This drove an 82% relative uplift in searches for Sephora Holiday. Shorts continues its ascent and is closing the gap with long form. In 2024, the monetization rate of Shorts relative to in-stream viewing increased by more than 30 percentage points in the U.S., and we expect to make additional progress in 2025. We're making it easier for advertisers to benefit from Shorts on all screens. We're particularly excited by its success on connected TV, which now makes up 15% of shorts viewing in the U.S. Using a combination of ad formats, Louis Vuitton reached their overall objectives on both long-form and short-form content. Their shorts exceeded luxury goods benchmark for average view duration by 89% for equivalent video lengths, while their long-form content exceeded the benchmark by over 15%, with strong engagement from Gen Z and Millennials. Looking into the living room, we continue to be number one in streaming watch time in the U.S for nearly two years, according to Nielsen, and our share of streaming is at a record high. Viewers globally streamed over 1 billion hours of YouTube content daily on their TVs in 2024. YouTube makes multi-year investments to tap into shifting consumer behavior. The current surge in living room viewership directly reflects years of work to build the right products and partnerships. Creators are now prioritizing high-quality viewing experiences that truly shine on TV screens, inspiring even more viewers to tune in. In fact, the number of creators making majority of revenue from TV is up over 30% year-on-year. We have also invested in podcasts, where popular shows like Club Shay Shay and Lex Friedman are increasingly a visual format. YouTube creators and viewers are embracing this. In 2024, people watched over 400 million hours of podcasts each month on living room devices alone. YouTube is now the most popular service for podcast listening in the U.S., according to Edison. As always, let me wrap with the strong momentum we're seeing in partnerships, where the breadth of what Google has to offer is increasingly being recognized. Sundar mentioned our deepening partnership with Samsung. Another expanding partnership is with Citi, who is modernizing its technology infrastructure with Google Cloud to transform employee and customer experiences. Using Google Cloud, it will improve its digital products, streamline employee workflows, and use advanced high-performance computing to enable millions of daily computations. This partnership also fuels Citi's generative AI initiatives across customer service, document summarization, and search to reduce manual processing. With that, allow me a moment to thank Googlers everywhere for their extraordinary commitment and to our customers and partners for their continued trust. Anat, over to you.

Google Service Google Service revenues fourth quarter

Google Services revenues for the quarter


google services google search and other advertising revenue

Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.

Google Search and other advertising revenues first quarter


Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.

Google Services Google Search and other advertising revenues third quarter


Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.


Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.

Google Services Google Search and other advertising revenues first quarter


Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted 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. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we’re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.

Google Search and other advertising revenues revenues second quarter


Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.

Google Services Google Search and other advertising revenue third quarter


Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.

Google Service Google Search and other advertising revenues fourth quarter


Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.


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Subscription platforms and devices revenues revenues second quarter


Philipp Schindler: Thanks, Sundar, and hello, everyone. I'll start with performance for the quarter and then describe the progress we're seeing across ads, YouTube and partnerships, highlighting the impact AI is already having on our business. Google Services delivered revenues of $76.5 billion for the quarter, up 13% year-on-year. Search and other revenues grew 12% year-on-year, led by growth in the financial services vertical due to strength in insurance, followed by retail. YouTube ads revenues grew 12% year-on-year, driven by brand, closely followed by direct response. Network revenues were down 2% year-on-year. In subscriptions, platforms and devices, year-on-year revenues were up 28%, driven by growth in subscriptions as well as the launch of our Made by Google devices in the third quarter. Before I double-click into ads, YouTube and partnerships, a few comments on search. Whether they're using their voice to find answers on the go or opening their camera to explore the world around them, people are expanding how they ask questions in search as well as the type of questions they ask. New behaviors create new opportunities to help us connect businesses and consumers via amazing commercial experiences. As GenAI expands what's possible, we continue to see a significant opportunity in search. Let me take a minute to explain why. AI really supercharges search. Our new AI-powered features make searches more helpful, and we continue to see great feedback, particularly from younger users. For example, with Circle to Search, where we see higher engagement from users aged 18 to 24. AI is expanding our ability to understand intent and connect it to our advertisers. This allows us to connect highly relevant users with the most helpful ad and deliver business impact to our customers. Let me share two new ad experiences we have rolled out alongside our popular AI-powered features in search. First, as you heard from Sundar, every month, Lens is used for almost 20 billion visual searches with 1 in 4 of these searches having commercial intent. In early October, we announced product search on Google Lens. And in testing this feature, we found that shoppers are more likely to engage with content in this new format. We're also seeing that people are turning to Lens more often to run complex multimodal queries, voicing a question or inputting text in addition to a visual. Given these new user behaviors, earlier this month, we announced the rollout of shopping ads above and alongside relevant Lens visual search results to help better connect consumers and businesses. Second, AI Overviews, where we have now started showing search and shopping ads within the overview for mobile users in the U.S. As you remember, we've already been running ads above and below AI Overviews. We're now seeing that people find ads directly within AI Overviews helpful because they can quickly connect with relevant businesses, products and services to take the next step at the exact moment they need. As I've said before, we believe AI will revolutionize every part of the marketing value chain. Let's start with creative. Advertisers now use our Gemini-powered tools to build and test a larger variety of relevant creatives at scale. Audi used our AI tools to generate multiple video image and text assets in different links and orientations out of existing long-form videos. It then fed the newly generated creatives into demand gen to drive reach, traffic and booking to their driving experience. The campaign increased website visits by 80% and increased clicks by 2.7 times, delivering a lift in their sales. Last week, we updated image generation at Google Ads with our most advanced text-to-image model, Imagine 3, which we tuned using ads performance data from multiple industries to help customers produce high-quality imagery for their campaigns. Advertisers can now create even higher-performing assets for PMax, Demand Gen app and Display campaigns. Turning to media buying. AI-powered campaigns help advertisers get faster feedback on what creatives work, where and redirect their media buying. Using Demand Gen, DoorDash tested a mix of image and video assets to drive more impact across Google and YouTube's visually immersive surfaces. They saw a 15 times higher conversion rate at a 50% more efficient cost per action when compared to video action campaigns alone. Last and most importantly, measurement. This quarter, we extended availability of our open source marketing mix model, Meridian to more customers, helping to scale measurement of cross-channel budgets to drive better business outcomes. On YouTube, we remain focused on building a platform that enables creators to thrive and unlocking a whole new world of creativity with AI. Creators are at the heart of the YouTube ecosystem and the content they are making is driving robust growth in watch time across the platform. We're also using AI to greatly improve recommendations on YouTube. Driven by Gemini, our large language models have a deeper understanding of video content and viewers' preferences. As a result, they can recommend more relevant, fresher and personalized content to the viewer. Short-form creation continues to thrive on YouTube. Shorts monetization improved again this quarter, and we continue to significantly close the gap with in-stream video, particularly in the U.S. and other more highly monetizing markets. Of all the channels uploading to YouTube each month, 70% are uploading shorts. And we recently announced a top requested feature, the ability to upload shorts up to 3 minutes long. Also, advertisers can now book first position on Shorts blocks in close to 40 markets. We're unlocking more opportunities in the living room. Our momentum here continues as we maintain our status as the number one streamer in the U.S. according to Nielsen. This is driven by the strength of our creators, such as Michelle Carr and Rhett & Link, who are increasingly crafting experiences designed specifically for the big screen, and it's paying off. The number of creators making the majority of the YouTube revenue on TV screens is up more than 30% year-on-year. YouTube is becoming a premier destination for sports watching. People come for the game and stay for the commentary and around the game content from creators like Evelyn Gonzalez, Adam W and Brad Coleman. During the Olympics, content from Paris 2024 had over 12 billion views on YouTube. More than 850 million unique viewers watched over 40 billion minutes of content with 35% on their TV screens. And recently, we kicked off our second season of NFL Sunday Ticket on YouTube TV, which continues to receive a positive reception from advertisers, our partners at the NFL and fans. We have continued to invest in our product experience with improvements to multiview and deeper integrations for fantasy football fans. Following up on my remarks from last quarter about Brandcast, we had a strong upfront performance with commitments up about 20% year-on-year. As always, let me wrap with the strong momentum we're seeing in partnerships. More and more of our partners are recognizing the breadth of our technologies and building solutions that leverage the very best of Google. For example, our recently announced strategic partnership with Vodafone Group spans Google Cloud, AI, Android ads and digital services. This multibillion-dollar partnership will bring these technologies to more than 330 million customers across Europe and Africa. We are collaborating on more than 30 initiatives across 7 areas, including generative AI from consumers, a best-in-class TV platform, hardware and cybersecurity. With that, a heartfelt thank you to Google everywhere for their extraordinary commitment and to our customers and partners for their continued collaboration and trust. Anat, welcome to the team. It's great to have you with us. Over to you.

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YouTube advertising revenues revenues second quarter


Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.

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Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today’s call. And Christine, we are now ready for questions.

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expected adjusted diluted earnings per share percent