Q1 earnings call: CEO’s remarks

Editor’s note: Our Q1 results were led by strong performance from Search, YouTube and Cloud. On today’s 2024 Q1 earnings call Google and Alphabet CEO Sundar Pichai outlined how the company is thinking about the AI opportunity ahead. Below is an excerpt from his remarks.

Hello everyone.

It was a great quarter, led by strong performance from Search, YouTube and Cloud. Today I want to share how we’re thinking about the business and the opportunity more broadly. Of course that’s heavily focused on AI and Search.

Momentum and strategy

Taking a step back: It took Google more than 15 years to reach $100 billion in annual revenue. In just the last six years, we’ve gone from $100 billion to more than $300 billion in annual revenue.

Of course, Search continues to power that, as you see in our Q1 results. But in addition, we expect YouTube overall and Cloud to exit 2024 at a combined annual run rate of over $100 billion. This shows our track record of investing in and building successful, new, growing businesses.

The opportunity ahead

Now, let’s look at how well we’re positioned for the next wave of AI innovation, and the opportunity ahead. There are 6 points to make:

1. Research leadership
2. Infrastructure leadership
3. Innovation in Search
4. Our global product footprint
5. Velocity and execution
6. Monetization paths

1. Our foundation of research leadership

We’ve been an AI-first company since 2016, pioneering many of the modern breakthroughs that power AI progress, for us and for the industry.

Last week we further consolidated teams that build AI models under Google DeepMind.

This will help simplify development and establish a single access point for our product teams as they build generative AI applications with these models. The teams are making rapid progress developing Gemini and other models.

In February, we rolled out Gemini 1.5 Pro, which shows dramatic performance enhancements across a number of dimensions.

It includes a breakthrough in long-context understanding, achieving the longest context window of any large-scale foundation model yet. Combining this with Gemini’s native multimodal understanding across audio, video, text, code and more — it’s highly capable.

We’re already seeing developers and enterprise customers enthusiastically embrace Gemini 1.5 and use it for a wide range of things.

Beyond Gemini, we’ve built other useful models, including our Gemma open models, as well as Imagen visual models and others.

2. Infrastructure leadership

We have the best infrastructure for the AI era.

Building world-leading infrastructure is in our DNA, starting in our earliest days when we had to design purpose-built hardware to power Search.

Our data centers are some of the most high-performing, secure, reliable and efficient in the world. They have been purpose-built for training cutting edge AI models, and designed to achieve unprecedented improvements in efficiency.

We’ve developed new AI models and algorithms that are more than one hundred times more efficient than they were 18 months ago. Our custom TPUs, now in their fifth generation, are powering the next generation of ambitious AI projects. Gemini was trained on, and is served, using TPUs.

We are committed to making the investments required to keep us at the leading edge in technical infrastructure. You can see that from the increases in our capital expenditures. This will fuel growth in Cloud, help us push the frontiers of AI models, and enable innovation across our services, especially in Search.

3. AI innovations in Search

We’ve been through technology shifts before — to the web, to mobile and even to voice technology. Each shift expanded what people can do with Search, and led to new growth.

We’re seeing a similar shift happening now with generative AI:

• For nearly a year, we’ve been experimenting with SGE in Search Labs across a wide range of queries. And now we’re starting to bring AI overviews to the main search results page. We are being measured in how we do this, focusing on areas where gen AI can improve the Search experience, while also prioritizing traffic to websites and merchants.
• We’ve already served billions of queries with our generative AI features. It’s enabling people to access new information, to ask questions in new ways, and to ask more complex questions.
• Most notably, based on our testing, we’re encouraged that we’re seeing an increase in Search usage among people who use the new AI overviews, as well as increased user satisfaction with the results.
• And with Circle to Search, people can now circle what they see on their Android screens, ask a question about an image or object in a video, and get an AI overview with Lens.

4. Our global product footprint

We have six products with more than 2 billion monthly users, including 3 billion Android devices. Fifteen products have half a billion users. And we operate across 100+ countries.

This gives us a lot of opportunities to bring helpful Gen AI features and multimodal capabilities to people everywhere and improve their experiences. We’ve brought many new AI features to Pixel, Photos, Chrome, Messages and more. We’re also pleased with the progress we’re seeing with Gemini and Gemini Advanced — through the Gemini app on Android, and the Google App on iOS.

5. Improved velocity and execution

We’ve been really focused on simplifying our structures to help us move faster:

• In addition to bringing together our model building teams under Google DeepMind, we recently unified our ML infrastructure and ML developer teams to enable faster decisions, smarter compute allocation, and a better customer experience.
• Earlier this year we brought our Search teams together under one leader.
• And last week, we took another step, bringing together our Platforms and Devices teams. The new combined team will focus on delivering high quality products and experiences, bolstering the Android and Chrome ecosystems, and bringing our best innovations to partners, faster.

We also remain focused on long-term efforts to durably reengineer our cost base. You can see the impact of this work reflected in our operating margin improvement.

We continue to manage our headcount growth and align teams with our highest priority areas. This speeds up decision making, reduces layers and enables us to invest in the right areas.

Beyond our teams, we’re very focused on our cost structures, procurement and efficiency:

• A number of technical breakthroughs are enhancing machine speed and efficiency, including the new family of Gemini models and a new generation of TPUs.
• For example, since introducing SGE about a year ago, machine costs associated with SGE responses have decreased 80 percent from when first introduced in Labs, driven by hardware, engineering and technical breakthroughs. We remain committed to all of this work.

6. Our paths to monetization

We have clear paths to AI monetization through Ads and Cloud, as well as subscriptions.

• New AI features are helping advertisers, including bringing Gemini models into Performance Max.
• Our Cloud business continues to grow, as we bring the best of Google AI to enterprise customers and organizations around the world.
• And Google One now has crossed 100 million paid subscribers, and in Q1 we introduced a new AI Premium plan with Gemini Advanced.

More to come

Overall it was a great quarter, and there’s more to come. I/O is in less than three weeks, followed by Brandcast and Google Marketing Live.

I want to thank our employees around the world who are at the heart of this progress, and who continue to focus on building innovative products, helpful services, and new opportunities for businesses and partners around the world.