During earnings call the word “AI” was mentioned 91 times (“only” 65 times during Q1 2024 call).
The best summary of Q2 2024 results is as follows:
1) Strong business performance, especially in Search and Cloud,
2) Strong AI investment and leadership,
3) Many examples of AI use at both the consumer and enterprise level, but it is still too early for (wide) monetization of AI.
Alphabet beat the revenue consensus for the 6th quarter in a row, in Q2 2024 Wall Street expected $84.35 billion, Alphabet delivered $84.74 billion (+0.5% beat). See Figure 1.
Other key data:
-2.5% miss: “Revenues excluding TAC” $71.36 billion (expected $73.20 billion), Figure 2,
+1.8% beat: "Google Search & Others" revenues $48.509 billion (expected $47.638 billion), Figure 3,
-3.2% miss: "YouTube Ads" revenues of $8.663 billion (expected $8.946 billion), Figure 4,
-5.5% miss: "Google Network" revenues of $7.44 billion (expected $7.87 billion), Figure 5,
+0.2% beat: "Google Advertising" revenues of $64.616 billion (expected $64.518 billion), Figure 6,
+2.6% beat: "Google Cloud" revenues of $10.347 billion (expected $10.088 billion), Figure 7,
+2.7% beat: EPS diluted $1.89, estimate $1.84, Figure 8
Sundar Pichai, CEO:
“(…) we are uniquely well-positioned for the AI opportunity ahead. Our research and infrastructure leadership means we can pursue an in-house strategy that enables our product teams to move quickly. Combined with our model building expertise, we are in a strong position to control our destiny as the technology continues to evolve. Importantly, we are innovating at every layer of the AI stack, from chips to agents and beyond, a huge strength”.
On Google Search:
“With AI, we are delivering better responses on more types of search queries and introducing new ways to search. We are pleased to see the positive trends from our testing continue as we roll out AI Overviews, including increases in Search usage and increased user satisfaction with the results. People who are looking for help with complex topics are engaging more and keep coming back for AI Overviews”.
On Waymo (autonomous ride-hailing service):
“Waymo served more than 2 million trips to date and driven more than 20 million fully autonomous miles on public roads. Waymo is now delivering well over 50,000 weekly paid public rides, primarily in San Francisco and Phoenix. And in June, we removed the wait list in San Francisco, so anyone can take a ride. Fully autonomous testing is underway in other Bay Area locations without a human in the driver seat”.
AI will take some time… to unlock value:
“ (…) if you take a look at our AI infrastructure and generative AI solutions for cloud across everything we do, be it compute on the AI side, the products we have through Vertex AI, Gemini for Workspace and Gemini for Google Cloud, etc., we definitely are seeing traction. People are deeply engaging with the Gemini models across Vertex and AI studio. We now have over 2 million developers playing around with these things, and you are definitely seeing early use cases. But I think we are in this phase where we have to deeply work and make sure on these use cases, on these workflows, we are driving deeper progress on unlocking value, which I'm very bullish will happen. But these things take time. But if I were to take a longer-term outlook, I definitely see a big opportunity here”.
On the AI capex:
“I think the one way I think about it is when we go through a curve like this, the risk of under-investing is dramatically greater than the risk of over-investing for us here, even in scenarios where if it turns out that we are over-investing, we clearly -- these are infrastructure which are widely useful for us. (…) But I think not investing to be at the front here, I think, definitely has much more significant downside”.
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