Alphabet Inc. Q2 FY2025 earnings call

• AI is driving robust growth across all segments. Search saw double-digit revenue growth, with AI Overviews having over 2 billion monthly users. • Cloud had strong growth, with an annual revenue run rate over $50 billion and improved profitability. • YouTube had strong watch time, with shorts generating significant views and new AI tools for creators. • Waymo continued scaling, launching in new cities and expanding service territories. • Google Services saw growth in search and other revenues, driven by retail and financial services, and YouTube advertising grew due to direct response and brand. • Innovations like Gemini models, Veo 3 video generation, and AI tools in Workspace were highlighted.

Google Services revenues increased 12% to $82.5 billion. Google Search and other revenues rose 12% to $54.2 billion. YouTube advertising revenues grew 13% to $9.8 billion, while network advertising revenue decreased 1% to $7.4 billion. Subscription platforms and devices revenues climbed 20% to $11.2 billion. Google Cloud revenues surged 32% to $13.6 billion. Other Bets had revenues of $373 million with an operating loss of $1.2 billion.

• Alphabet updated CapEx for 2025 to $85 billion from $75 billion, driven by cloud demand. • Expect further CapEx increase in 2026 due to cloud customer demand. • Q3 revenue may have a tailwind from current spot rates, but FX volatility could impact results. • Cloud demand remains high, with backlog at $106 billion, but supply constraints may ease into 2026.

• Exchange rate volatility could affect revenue. • Tight supply environment may impact cloud capacity. • Legal charges and significant depreciation increase could affect operating margin.

Q: Eric Sheridan asked about product evolution and YouTube subscriptions.

A: Sundar Pichai spoke about AI driving product evolution and Philipp Schindler discussed YouTube subscriptions as an important part of the business with a double tier strategy.

Q: Doug Anmuth inquired about compute access and search growth.

A: Sundar Pichai addressed CapEx investments and supply tightness, while Philipp Schindler talked about avoiding overly broad conclusions on pay clicks and CPCs.

Q: Brian Nowak asked about agentic search and internal efficiency.

A: Sundar Pichai discussed technological hurdles for agentic capabilities and internal efficiency gains from GenAI tools.

Q: Michael Nathanson asked about AI devices and Search vs Gemini app.

A: Sundar Pichai spoke about AI in new devices and the differences between AI Mode and Gemini app usage.

Q: Mark Shmulik asked about AI talent and resourcing.

A: Sundar Pichai and Anat Ashkenazi discussed attracting and retaining AI talent and integrating resourcing into cost structure.

Q: Ross Sandler asked about Search CTR and OpenAI partnership.

A: Philipp Schindler commented on Search CTR with AI Overviews and Sundar Pichai talked about OpenAI partnership on Google Cloud.

Q: Mark Mahaney asked about ad environment and Search surfaces.

A: Philipp Schindler spoke on ad environment uncertainty and Sundar Pichai discussed the two surfaces approach for Search.

Q: Ken Gawrelski asked about Cloud outlook and agentic experience.

A: Anat Ashkenazi clarified Cloud back half outlook and Sundar Pichai opined on agentic experience democratizing the web.

Q: Justin Post asked about Gemini subscriptions and CapEx ROI.

A: Sundar Pichai talked about Gemini subscription traction and confidence in CapEx ROI from cloud growth and customer satisfaction.