Alphabet Inc.

Q1 2026 Earnings Call — April 29, 2026

Brian Nowak (Morgan Stanley): Thanks for taking my questions. I have two. The first one, Sundar, on a recent podcast, you talked about how you were acutely constrained that compute, something you focused on almost every week to sort of make sure you're deploying capacity correctly. So let me ask you this. As you sort of look at the search business, what are the areas that you are most excited about applying next-generation compute toward to sort of generate an ROIC on that return in search in the next 12 months? And then the second one is on the sale of the TPUs to third parties. Just can you help us philosophically understand the strategy around pricing them, given the high ROIC of using TPUs to power multi-year Google Cloud workloads a little bit? Thanks.

Sundar Pichai (CEO): I'll take the search one first. You know, obviously, you've seen we are taking advantage of all our investments in building the Gemini models and both obviously applying it in search and the Gemini app, driving innovations in AI overviews and AI mode, and they're all contributing to the increased usage of the product. I do think looking ahead across both these surfaces, you know, there is a massive opportunity to go deeper in what we do for our users, I think, you know, bringing agentic flows, workflows to consumers in a way that it's easy for them to do, including in the context of search, I see as a huge opportunity ahead. And obviously, we are in very, very early innings of all that. But our investments in our full stack of AI approach, I think, puts us in a good position to bring those experiences to search. And I'm pretty excited about it.

On the second question around TPUs, you know, obviously, you know, we do think about it as, you know, what are we doing through Google Cloud to help our customers? And, you know, that's the framework with which we think about it. In that context, you know, there are situations where it makes sense, for example, you take customers like Capital Markets where they are running this, you know, highly performant, you know, AI workloads. They wanted, you know, TPUs in their data centers. So there are, you know, and those trends are true across a diverse set of industries and in certain cases frontier AI labs too. And so we are, you know, opportunistic about it. But I do think we step back and think about it overall as the opportunity for Google Cloud. A lot of it is providing infrastructure through cloud. At times, it is direct sales of TPU hardware to a select group of customers. But again, we do take ROIC approach, and some of it helps us get more economies of scale, scale in our overall computer environment as well, and so helps us invest in the cutting edge, which we need to do the next generation as well.

Doug (J.P. Morgan): Thanks so much for taking the questions. One for Anat and one for Philip. Anat, you talked about 2027 CapEx that it'll increase significantly, and I know you didn't quantify it, but how do you think about the current CapEx trajectory, the ability to service this massive backlog that you've built up in just the last quarter and what will no doubt increase going forward? And then, Philip, can you just talk more about the drivers of search queries at an all-time high and then how you're thinking about how much room there may be to increase coverage of search queries, just the ability to show ads against a higher percentage of queries than the 20% you've been at historically? Thanks.

Anat (CFO): Let me start with your first question on CapEx and how we think about CapEx increase going into 2027. So you've seen us over the past several years increase CapEx every year, and we have done it very thoughtfully to meet the demand that we are seeing, both from external customers as well as demands across the organization. And you're seeing the proof point, the ROIC on that, in terms of just the growth rate we're seeing, whether it's growth rate within search or certainly the cloud business and the opportunity we have within the cloud backlogs. So as we're seeing that robust demand across the business, we are looking at what can we do to support that growing demand and the opportunity ahead of us, and increasing CapEx to meet that demand will provide more clarity in future earnings call about what that number will be, but that's the opportunity we're seeing ahead of us. It's quite meaningful, and we want to make sure we capitalize that and we do it in a way that's responsible as we've done to date.

So on the second part of your question, first of all, just to zoom out for a second, I mean, we're very pleased with the performance of our ads business here. And as Anat shared, Google services benefited from a strong FX tailwind. That's important to keep in mind. The strength we saw in search was not due to a single driver, but was really the result of many parts of our business showing strength and working very well together. If I just deep dive for a second into the vertical perspective, retail finance, I talked about it in health, drove the greatest contribution, although all major verticals actually contributed. And we make hundreds of changes every quarter to improve the user experience, the advertising experience, and so that's really contributing to our performance here and we've also been able to generate very strong performance while significantly evolving the search results page here. The queries continue to grow and as Sundar mentioned, they were at an all-time high. We see AI overviews and AI mode continue to drive greater search usage and growth in overall queries including in commercial queries. You specifically asked about the 20% on the coverage side.

And as I said before, I think with the ability of AI to better understand intent and a lot of other vectors around it, I think there is upside in that coverage number. And overall, just the understanding that we have with Gemini on its hand has just significantly expanded our ability to deliver ads on longer, more complex searches that were previously really difficult to monetize. And so, as I shared earlier, we're deploying our Gemini models now across all of our ad infrastructure, and it's really driving improvements across the big three areas that I highlighted in my prepared remarks.

Eric Sheridan (Goldman Sachs): Thanks so much for taking the questions. Maybe two if I could. The first one, just building on the answers so far, when you look at the backlog you disclosed today, so I would love to know if you can come back to your comments on AI infrastructure and your unique approach and how that positions you to either build capacity, scale, compute, and do it in a way that is, as Anat said, efficient, sort of effective from a margin standpoint as well as a compute standpoint, just to understand where you sit competitively in your mind relative to others. That would be one. And then, Philip, to bring you into the conversation, you referenced UCP, and there's been a lot of industry inertia around UCP very quickly. Talk to us a little bit about what UCP means for the services business as agenda commerce scales in the years ahead. Thanks so much.

Sundar Pichai (CEO): Look, I do think part of – I mean, I do think we are genuinely differentiated. We are unique in the market because of our vertically optimized AI stack and the way we co-develop the components from our infrastructure and models to platforms and the tools to applications and agents. And the fact that we – you know, own frontier models, own the silicon, you know, really helps us stay ahead of the curve. And on top of it all, just to put an extra point on it, the deep investment in our security layers to keep everything safe. And I think we are the only provider in the market that offers all of these in a vertical stack. And so overall, again, to my earlier comments to Brian, I think about it all as Google Cloud. We have many different ways to serve our customers so we can meet them in a way suited to their needs, I think better than other players here. And I do think, you know, looking ahead, our ability to invest in this moment and stay at the frontier, you know, I think puts us in a strong position. And I think we are doing it based on tangible demand signals we are seeing. And it's not just on the revenue side, but, you know, I'm talking from our ROIC framework. And, you know, that's what is helping us navigate this moment responsibly.

And to the second part of your question, look, we're in the early stages of the agentic era. Agentic is more than just completing transactions. We all know this. We see agentic experiences as additive, and it will really transform how we shop from discovery to decisions while helping, obviously, brands differentiate themselves. We've been very intentional about creating an agentic experience that works for our users, our partners, for the entire ecosystem. And our goal is really to remove the grunt work of shopping so consumers can focus on the enjoyable parts. For decades, you could either shop fast or smart. And I think with agenda commerce, you no longer have to actually choose between speed and certainty here. And the vision is to make commercial experiences across the board, assistive, more personal, more fluid. And we're carefully designing space and agentic workflows for users to really see valuable components of their shopping journey beyond just price, such as customer service, brand loyalty, and more while removing the friction of the process that I just talked about.

And this is exactly where the part of your question kicks in, the Universal Commerce Protocol, a new open standard for agentic commerce that works actually across the entire shopping journey, from the discovery to the buying and the post-purchase support that we just talked about. And it was really co-developed with the industry leaders, including, I mentioned them, Shopify, Etsy, Walmart, and so on. And we've received tremendous feedback so far from hundreds of top tech companies, payments partners, retailers really interested in integrating. And it will help power a new checkout experience in AI mode, in search, in the Gemini app, and allowing shoppers to actually check out from select merchants right as they're researching on Google and going through this journey. So we're very, very excited about it.

Ross Sandler (Barclays): Yeah, just following up on the last question on agentic shopping. So it seems like we're at the point in time where this is actually going to start happening finally. So, Philip, just to elaborate a little bit, as you look at carrying the AdWords business from kind of the old way of doing things to this new agentic, frictionless shopping way, how do you see the price and volume kind of growth trends for core AdWords evolving as you start implementing more agentic workflows in search?

Philip (Executive): Look, our number one focus is obviously on the user experience here. And I think the most important part in this is what I mentioned before. We're carefully designing the space in the agentic workflows for the users to actually see the valuable components within that shopping journey. And the second you have the space, you obviously have the ability for interesting advertising models. I think it's also worthwhile noting that beyond just the traditional agents, there's a lot of additional ways we can actually use AI to improve the shopping experience. You can think about it like our apparel try-on tools that is now available in the U.S. You can think about Google Lens. So there's a lot more to do here, but I think the key part is actually what I said before. We focus on the user experience here and then think. I think all else will follow if we pay attention to the points I mentioned.

Michael Nathanson (Moffett Nathanson): Thanks. One for Sundar, one for Philip. Sundar, if I can connect Brian's question and Eric's question and go a little bit higher, I want to understand how are you deciding, how are you allocating which divisions and projects get excess capacity even though you're constrained, right? So how do you decide between all the internal projects you have and the external projects, right? So what types of screens are you running to decide, you know, who gets the incremental capacity? And then for Philip, I noticed that you said it's on the Gemini app. There's more and more images that come to you in the shopping journey. Can you tell me your thoughts about adding advertising on that app and what's guiding your decision-making here on adding ads on Gemini? Thanks.

Sundar Pichai (CEO): I think a great question on an ongoing basis. I'm looking forward to Gemini helping me more and more as I'm thinking that through. Look, I do think that the foundation where we start with it is what do we need from a R&D standpoint to develop models of the frontier. So what do you need for, you know, training these models and so effectively the compute needed for GDM because it's a foundation for everything we do. And so that's a core principle with which we operate. And then, obviously, you know, we, with the ability to plan ahead, we are, we do, you know, we do long-range plans on our core areas, be it search, be it YouTube, and so on, as well as what we see in Google Cloud. And obviously, in Google Cloud, you know, we have, we are providing enterprise AI solutions which this quarter had an 800% year-on-year increase from the prior year. So we're seeing strong demand for Gemini Enterprise, our AI solutions there. We see strong demand for infrastructure in Google Cloud. And as I said earlier, in some cases, we are seeing demand for TPU hardware, TPU hardware and others data centers as well.

So, you know, we are modeling these out and working to allocate across these areas. Obviously, we are compute constrained in the near term, and as an example, our cloud revenue would have been higher if we were able to meet the demand. So we are working through that moment, and, you know, we are investing, but we have a robust, you know, long-range planning framework, and, you know, we see extraordinary opportunities ahead, and, you know, we are allocating with that framework in mind.

And to the second part of your question, as I said in my previous answer, we are obviously focused on the user first and creating a really great user experience with all of our products, especially annual products. And specifically on monetization in the Gemini app, our focus right now is on AI mode. But it's fair to say that we really believe a format that works well in AI mode would transfer successfully to Gemini app. And so today in the Gemini app, we're focused on the free tier and subscriptions, and our AI plans were a sizable contributor to our Google One revenue growth. But let's also be clear, ads have always been a big part of scaling products to reach billions of people. And if done well, ads can be really valuable and really helpful commercial information. And at the right moment, we'll share any plans, as we have said, but we're not rushing anything here.

Mark Schmulich (Alliance Bernstein): Yes, thanks for taking the question. Philip, one more on search performance, if I can. You know, you talked a few times about kind of optimizing for the consumer experience. And I guess besides higher query volume, is it fair to conclude that consumers are using these AI tools, Google's or otherwise, and it's shrinking their purchasing journeys significantly, converting at higher rates? And if so, is there a way to dimensionalize how much of the strength in search is being driven by that behavioral change against perhaps some of the newer advertiser AI tools that you've been launching and rolling out? Thank you.

Philip (Executive): I think the way to think about it is really to think about the expansionary moment we see here for search. This is the key part. AI is fundamentally changing how the world searches for and how it accesses information. Queries are at all-time highs, understand this. Traditional search really started with 10 buildings, and now we have AI overviews and AI mode, and they have made search more intelligent than ever, and they let you ask far more complex questions. And we have Lens or Circle to Search, and we have Search Live. Search Live is now available to all countries and languages that support AI mode. Again, it shows you the expansionary nature of it, and we have our AI-driven search campaigns, and we have now SMBs that can reach customers that feel that it really wasn't possible even a few years ago, and you can add in Google Translate and so on. So I feel if you factor all of this in, we're in a pretty good place and are quite excited about where this is going.

Ron Josie (Wood City): Great. Thanks for taking the question. Maybe this one is for Anat. You know, with margins continue to expand here, I wanted to understand maybe if you could break down the cost drivers or really the drivers of margin expansion, particularly amongst cloud. There's a thesis out there that AI revenues are a lower margin in general, but we are seeing margins improve. So more insights on just the cloud business and what's driving that margin expansion. Obviously, demand may be pricing, but that would be helpful. Thank you.

Anat (CFO): Sure. Let me help unpack the margin expansion. Obviously, we're pleased to see that there are pushes and pulls across the business, including within cloud specifically. And I would start with the top line. When we see this robust, strong revenue growth, both in cloud and Google services, it does provide leverage all the way down to the bottom line within the income statement. And, you know, we've been working hard to ensure we're running a productive and efficient organization. And it's not just how we operate the business, but even in areas such as our technical infrastructure, where we are investing these significant CapEx investments in our data centers and servers, we are looking at how we drive scientific process innovation within that organization. And that is reflected both in cloud and Google services as we allocate costs based on consumption. In the past, I did talk about the depreciation associated with these investments that is hitting both Google Cloud and Google Services. Google Cloud expanded margin quite significantly from a year ago, as you've seen in our numbers that we've just previewed.

And a lot of it, again, is the top-line growth that Google Cloud is providing or producing, as well as an incredibly efficient way of running the business. I will give Thomas and the team a lot of credit for running a very productive organization and making sure that we are supporting our customers and providing the services and products that they want and benefit from, continuing to drive top-line growth and doing this well within the middle of the income statement, all the way from a very efficient technical infrastructure, thinking through how do we leverage AI across our business. Sundar mentioned the use of coding internally, how Gemini helps us there at optimizing our real estate footprint. And we're going to continue to do this. We're not going to stop here. We're going to continue to push for more efficiency, knowing that we're going to have the headwind associated with the depreciation coming with higher CapEx level.

Ken Gorofsky (Wells Fargo): Thank you very much. Two, if I may, please. First, on the cloud and capacity, could you speak about how your verticalized capabilities enable you to navigate a complicated supply chain, especially one experiencing inflation and constraints? Are you factoring any supply chain price inflation into 26 and 27 CapEx commentary? And as part of that, maybe Anat, could you update us on the allocation of compute capacity, internal versus external cloud? And then one more, please. When you think about search query volume growth, we're clearly seeing expanding use cases. Historically, it's always been free to the consumer and completely ad-supported. Do you see future use cases where certain consumer use cases are more effectively monetized via subscriptions and maybe a different mix of the consumer, quote-unquote, search, the new search opportunity? Thank you.

Anat (CFO): All right, Ken. Maybe there are a few parts to it. Maybe I'll touch on it. And, you know, on overall compute, you know, I think I spoke earlier on how we think about allocation of compute across our businesses. And, you know, I think, again, the long-range planning and the ROIC frameworks, you know, give us a good way to plan ahead. I do think we, I mean, obviously, we are, you know, working through a complicated supply chain environment, as you point out, and we're factoring that into any commentary we give. But I think the scale at which we are operating and our ability to work across all layers, both, you know, our supply chain partners see the strength of our diversified businesses and the demand we drive and our frontier technology and the investments all through the stack. I think they help us get into deeper partnerships all across the supply chain. And I think that's, and I mentioned earlier, the economies of scale point as well. So all of that factors in a positive way there, I think.

In terms of search, look, I think we are proud that we build models that all, you know, we are at the frontier across the period of frontier. We do think about capability and the cost frontier deeply so that we can serve users at scale. But at the same time, we can bring in the most powerful models for the most demanding queries. But the future, as you are right, in a valuable, as we sell more and more valuable use cases, there are going to be use cases where people will want to use the most powerful model. And there may be different ways to accomplish that. So we're going to put the user first and support them in the way that they want to use the product. And we already provide various tiers of our subscription plans in which you can get access to more powerful models, and that applies across your Google user experience, including in Search. And, you know, you've seen the momentum. You know, we saw a very robust quarter in terms of our AI subscriptions growth, you know, driven by interest in getting access to better Gemini models. And so I think that sets us up well to serve the breadth of use cases people would want in all phases, including in Search.

Justin Post (Bank of America): Great. Thank you for taking my question. I expected a lot of interest in your TPU sales. So can you help us think about how you're thinking about the opportunity there and then maybe how much break down the backlog growth a little bit between TPUs and cloud? And then the second question, just think about the margins on these big generative AI cloud deals. How do you think about these $100 billion deals coming in and the margins associated with those? Can they be similar to your cloud business as it is? Thank you.

Sundar Pichai (CEO): Look, you know, overall I would say, look, we see tremendous interest in – there's tremendous demand for both AI solutions as well as AI infrastructure, including, you know, massive interest in our, you know, GPU offerings as well as TPUs. And so we are, you know, we are, you know, proud that we can provide customers with a very diverse – you know, with the breadth of our offerings and, you know, let them, we can meet them in terms of where their needs are.

Philip (Executive): And maybe I'll pass it on to give some color on the backlog growth. Yep. So the backlog, the TPU hardware agreements that Sundar referenced in his prepared remarks are reflected in our cloud backlog of the $462 billion, although the majority of the backlog is still GCP agreements. Now, if you think about the total backlog, just over half of it will convert to revenue in the next 24 months. And the TPU hardware sales, more specifically, we expect a small percent of them to see coming through as revenue later this year, and then the majority to be realized as revenue in 2027.

And then anything on the big AI deal margins with the generative AI companies? Look, I think nothing to comment on any specific contracts, but overall, earlier there was a lot of questions about how do we allocate, and remember, in a constrained environment, when we are choosing to allocate across all these opportunities, we are working off a robust ROC framework.

Management: Thank you, and that concludes our question and answer session for today. I'd like to turn the conference back over to Jim Friedland for any further remarks. Thanks, everyone, for joining us today. We look forward to speaking with you again on our second quarter 2026 call. Thank you and have a good evening. Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect.

Q4 2025 Earnings Call — February 4, 2026

Brian Nowak (Morgan Stanley): Thanks for taking my questions. I have two, one on Agentech, one on YouTube. The first one on Agentech Thunder, I'd be curious to hear about, as you look back at 2025, where do you think you made the most progress on new types of agentic commerce products? And then looking at the 26, where are you most optimistic to sort of have even more progress and utility for users and your advertisers? And the second one is on YouTube. You know, we've seen a lot of the new content creation models like Genie, et cetera. Walk us through sort of the alphabet long-term vision for how Genie and some of these content creation tools could be integrated into YouTube over time.

Management: First, maybe I'll take the agent tech part first. I definitely think 25 was more about laying the foundation, getting the models to start being more robust in agent tech use cases. And obviously, coding is the area where the progress was the most felt. In areas like commerce, I think we spent the year working with the ecosystem to develop the underlying protocol that's going to be needed for this agentic world. The launch of Universal Commerce Protocol at NRF in January with a bunch of partners, founding partners, I think has been super well received. So I'm excited now that we've laid the foundation of interoperability on which agentic commerce can work. And now we are integrating those experiences into Gemini AI mode and so on. So I think this is the year where you will see consumers actually being able to use all of this. And I'm excited about the opportunity ahead.

On YouTube, look, super excited by Genie. I'm blown away by, you know, spent a lot of time creating this incredible worlds. I think it's going to have a wide level of applicability. I think an area where we shine in general is multimodality and representing the real world. And I think Genie is a further step in that direction in terms of building world models. All the innovation we are doing, be it, you know, Genie, all that work we bring in into our products and to our cloud customers. And YouTube is going to be a natural place for creators. We are going to keep incorporating these tools. Already creators are responding by adopting these, but we do want to put creators at the center of the experience. And that's very, very important to us. And, you know, So it's for us making sure YouTube is a voice for creator expression as the foundation by which we will approach this.

Eric Sheridan (Goldman Sachs): Thanks so much for taking the question, too, if I could. Over the last couple of earnings calls, we've talked a lot about imbalances between demand and capacity for AI, both internally and externally. With the step function change and absolute capital dollars you're projecting now in 26, can you talk about the pathway to closing the gaps for the need for compute, both internally and externally, and how to think about some of the outputs of closing that gap? As the year progresses. And again, the second part would be against that level of spend that you're now projecting for 26. How do you think about continuing to find operating efficiencies inside the business to fund those growth investments as well?

Management: Thanks, Eric. You know, you are right. And, you know, we've been supply constrained, even as we've been ramping up our capacity. Obviously, you know, our CapEx spend this year is an eye towards the future. And you have to keep in mind some of the time horizons are increasing in the supply chain, et cetera. So we are constantly planning for the long term and working towards that. And obviously, how we close the gap this year is a function of what we have done in the prior years, right? And so there is that time delay to keep in mind. I expect the demand we are seeing across the board, across our services, what we need to invest for future work for Google DeepMind, as well as for cloud, I think is exceptionally strong. And so I do expect to go through the year in a supply-constrained way.

And maybe Anat can touch on the second part. Thanks, Eric, for the question. Now, I've mentioned on one of the previous earnings call our approach to how we look at efficiency and productivity. And we don't view this as an episodic one-time project or effort, but rather how we run the business on a regular basis and always seek additional opportunities to drive efficiency across the business. And certainly with the demand we're seeing, whether it's from external customers or across the organization, the more capital we can free up within the organization to invest, the better we can turn this flywheel of making investments to drive future growth. And we're doing this across the organization, whether it's within our technical infrastructure, certainly when we invest at these amounts, we look at how we can ensure that we are the most efficient with every dollar that goes towards our technical infrastructure.

There are scientific innovations that are part of that process. Technical innovation, as you know and we've mentioned before, we primarily focus on construction of our own data centers. We do partner with some external parties on lease on occasion, but most of our data center we construct ourselves. And we ensure that we do it in the most efficient way, in a way that matches our workloads and our needs. We look at coding productivity that Sundar mentioned in the past. About 50% of our codes are written by agents, coding agents, which are then reviewed by our own engineers. But certainly it helps our engineers do more, move faster with the current footprint. We look at how we run the business across the organization. So using AI within the business to drive daily operations. It can be all the way from the engineering team to small teams within our back office. Even within my finance team, for example, we deployed agents within our treasury organization. We're deploying agents within how we run, how we pay and reconcile invoice, et cetera. So there are opportunities across the business that we evaluate on a regular basis to ensure we can free up more of that capacity to invest in our future.

Doug Anouf (J.P. Morgan): Thanks for taking the questions. I have two. Over the last couple of years, we've seen considerable large language model leapfrogging, and many expect that to continue. What are the ways that Google can build and maintain its Gemini position around data and distribution and product integration? And then how should we think about the potential for TPUs to move outside of Google Cloud and into external data centers and develop as an incremental revenue stream?

Management: Look, I think the LLM frontier, it's been an exciting trajectory, and I think 2026 will continue to show that progress. We're obviously improving these models across many paradigms, right, on pre-training, post-training, test time compute, and so on. And we are bringing multimodal models into the picture. We are bringing agent tech capabilities, you know, the coding area showing a lot of progress and obviously integrating all of this together and offering a great experience. You know, customer experience through our products, as well as through our API, APIs to our cloud customers, you know, to me feels like there's a lot of headroom ahead. And as you've seen our trajectory over the past two years in terms of how we've been making progress, I think we are in a very, very, you know, relentless innovation cadence. And I think we are confident about maintaining that momentum as we go through 26.

In terms of TPUs, I would think about it as it's reflected in our overall part of what makes Google Cloud an attractive choice is the wide choice of X-Raters we bring to bear here. And we meet customers in terms of what their needs are and the choice, as well as other things we bring as part of Google Cloud, the end-to-end efficiencies in our data centers, all of that comes to bear. And that's what you see in the strong momentum in Google Cloud. And given the overall investment we are making, we expect to be able to drive that momentum there. So that's how I would think about it.

Mark Mahaney (Evercore): Thanks. Two questions. One, could you just comment a little bit on the YouTube ad revenue, that 9% year-over-year growth. It sounded like direct response was good, and it sounded like from search that retail came in relatively strong. So it's a little surprising that didn't kind of come through in the YouTube ads revenue growth. And then Sundar, can I ask you to try to get ahead of a debate in the market, which is kind of maybe at a deep-seek moment again. You talked earlier about Jim and I being the AI engine for some of the most successful software SaaS companies out there in the world, and it just seems like there's a market belief that the software companies are kind of losing seat power, losing pricing power, and it looks like it could be a really terrible customer base. I can't imagine that that's actually going to happen, but could you just talk about it? You're at the forefront of AI and the impact that that's having on software companies. Why wouldn't that be, or why would it be undermining the economics of your large software SaaS company base?

Management: So Mark, so first of all, thank you for the question. For the full year 2025, our YouTube's annual revenue surpassed 60 billion across ads and subscription. In Q4, YouTube ads was driven indeed by strong growth and dive response. On the brand side, the largest factor negatively impacting the year-over-year growth rate was lapping the strong spend on US elections. We also saw a slight impact in some other brand-related verticals. But taking a step back, I think it's important to think about YouTube ads and subs holistically, because when a user shifts from being an ad-supported user to YouTube Music and Premium customer, it has a slightly negative impact on YouTube ads revenues, but a positive impact on our business. And we had strong revenue growth in YouTube subscriptions this quarter, particularly in the YouTube Music and Premium category.

Maybe the interesting part is what we're actually excited about of roadmap and brand, the opportunity on connected TVs, more innovative ad formats. For example, the shoppable mastheads I spoke about earlier that we piloted during Cyber 5. We're working really, really hard to further connect brands and creators, scaling sponsorships and enabling advertisers to showcase their products, their services during high visibility spotlight moments. We continue to expand the functionality of the Creator Partnership Hub making it a lot easier for brands to actually find creators and develop campaigns. We're heavily focusing on brand deals, on measurement efforts. So there's a lot of interesting work in the pipeline. And on top of that, we actually see opportunity also for upside with performance advertising. There's a lot of momentum with demand gen adoption across small and medium advertisers. We're also excited about the opportunity for continued ads innovation and direct response, like, for example, shoppable formats, including in the living room, which is then helping drive strength in retail, the continued momentum in shorts and so on. So overall, we're quite excited.

Great. And Mark, in terms of Gemini adoption and what this moment means for SaaS, et cetera, look, at least from my vantage point, I definitely see we have very, very good SaaS customers who are leaders in their respective categories. And what I see the successful companies doing is they are definitely incorporating Gemini into deeply in critical workflows, be it on improving their product experience and driving growth or using it to drive efficiency within their organizations. And I think it is an enabling tool, just like it has been an enabling tool for us across our products and services, be it search, YouTube, et cetera. I think the companies who are seizing the moment, I think have the same opportunity ahead and at least we are excited about the partnerships we have there and the momentum, if I look at it in terms of their tokens usage, et cetera, the growth has been very robust in Q4.

Mark Smolik (Alliance Bernstein): Yes, thanks for taking the questions, too, if I may. The first one is, can you talk a little bit more about the relationship between investment levels and how you kind of expect core performance to trend? Is there like an operating income or a free cash flow objective that you solve towards? Or how do you think about greenlighting resources and projects? And then the second question for all of you, you know, a year ago, we probably could have guessed the answer to this question. But given where we are today, for each of you, what keeps you up at night here as you think about the Google story and what's next?

Management: Thanks, Mark. Let me start with a question on the investment framework, and it's an important one, and as you can imagine, an important one for us as well. We have a highly rigorous framework that we use internally where we look at all the needs for investment, whether it's from our own organization or from external customers' and have an estimate of what that investment could potentially yield, obviously not just near-term but long-term as well. So we take that into consideration when we make the following decision. The first one is the total investment that we make across the company. This was, for example, in 2025, the $91 billion we invested in CapEx. And our estimate for CapEx investment this year. So what's the total envelope that we want to invest to ensure that we can drive both near-term and long-term growth for the company? And then the second way we use that framework is to just allocate these funds across the organization, determine where we should make these investments. And throughout the year, as you can imagine, we always look to understand where things are moving, whether it's the external dynamics or internal dynamics. And I've mentioned some of the supply chain pressures we're seeing externally. So we look at this with a highly rigorous framework to make sure that we're making the right decision.

You know, it was exciting to see the fact that we're already monetizing, and you saw it in the results that we've just issued this quarter, the investments that we've made in AI. It's already delivering results across the business. I know in cloud, it's very obvious external, but you've heard the comments on the success we're seeing in search, the comments from Sundar and from Philip, and then the frontier model development that really serves as the foundation for the organization. We then also look at just the cash flow, cash flow generation and the health of our financials and the balance sheet, that's important as well. So we take that into consideration when we make the decision about the overall level of investment. We want to make sure we do it in a fiscally responsible way and that we invest appropriately, but we do it in a way that maintains a very healthy financial position for the organization.

And yeah, maybe I can answer on what keeps us up at night. Look, I think overall, we've been on this AI-first trajectory for over a decade now, and it's what we've been methodically thinking our way through. It's the reason why we've been working on TPUs for over a decade as an example. But I think specifically at this moment, maybe the top question is definitely around compute capacity. All the constraints, be it power, land, supply chain constraints. How do you ramp up to meet this extraordinary demand for this moment? Get our investments right for the long term and do it all in a way that we are driving efficiencies and doing it in a world-class way. And so that's where I think we are meeting the moment well. But it's definitely an area where I'm spending a lot of time on.

Michael Nathanson (Moffitt Nathanson): Thanks. One for Sundar, one for Anat. Sundar, you mentioned the Universal Commerce Protocol a bunch of times. I wanted to spend some time talking about the rationale for developing it, the opportunity that you see it solves for, and what it means for the product discovery funnel for consumers. And for Anat, any quality you can provide on a capex guide between longer duration assets like buildings, and infrastructure and shorter cycle assets like technical equipment, that'd be helpful.

Management: Thanks, Michael. And obviously, people go through a lot of commercial journeys across many of our surfaces, search, YouTube, Gemini app, and so on. So I think there's, as well as we support through cloud and ads, our entire retail partners as well. And the opportunity to, you know, improve the experience, I think, can be a kind of a huge foundational uplift here. But it's important to be approaching it keeping in mind that our users as well as, you know, merchants here and figuring out that value. Part of what's been good in designing the Universal Commerce Protocol is it makes it much easier for users to complete transactions, but at the same time, it allows merchants to help showcase the range of their offerings if they want to make promotions, et cetera. So all of that is built into the protocol. And I think you have to get that value prop for the ecosystem right to make the experience better. And so it's foundational and more importantly, we are now implementing the protocols and our Gemini models are making progress in those agentic capabilities. And I think, so I'm excited about a future where as people are going through discovery, searching, finding new things, if they're interested in acting upon it, all of that is seamless. And so it overall creates an expansionary moment.

And the question with regards to the capex and what makes up the total that we've announced for this year and last year, approximately 60% of our investment in 2025, and it's going to be fairly similar in 2026, went towards machines, so the servers. And then 40% is what you refer to as long duration assets, which is our data centers and networking equipment. And I think you're probably referring to the depreciation delta between them. Those long-term duration asset depreciate over, you know, the building could be 40 years or longer. Other components may be less than that. Another important component is how we allocate this capex. And we've commented in the past about the allocation of our ML compute across the business. And for 2026, just over half of our ML compute is expected to go towards the cloud business.

Ross Sandler (Barclays): Great. Just a question on the native Gemini 750 million. So we added 100 million MAUs in the fourth quarter. Could you just talk high level about usage and retention of native Gemini? And is this 750 the right way to measure your progress against companies like ChatGPT? Or is there another cohort of users that aren't in that 750 that maybe we should also consider?

Management: Ross, I think we definitely saw, I would say, an extraordinary period of growth in Q4 for Gemini app. It's not just the growth in monthly active users, but there is definitely, there was a sharp increase in engagement between per user on the app. So all the metrics, be it active usage, the intensity of usage, retention, all showed distinct progress across iOS, web, Android, et cetera, and geographically, globally. So it definitely all the product experience improvements, the work we did with NanoBanana, the progress with the Gemini models, all translated into strong momentum and that momentum is continuing. So we are excited about that and we'll continue to invest. Obviously, there are many people who are getting a deeply AI native experience in the context of AI mode and search as well. And we are definitely seeing a strong growth and progress and the introduction of Gemini 3 in AI mode was a very positive driver as well. And obviously, you know, we'll continue to evolve these experiences and I'm excited about the opportunities there.

Ken Gorolsky (Wells Fargo): Thank you very much. Two, if I may, both on search. First, could you walk us through how you are evolving your views on the monetization of AI search activity, given the more conversational nature and longer periods of engagement per session? Consumer utility is increasingly driven by the on-platform results, not specifically the link outs and referrals. In that construct, how do you think about increasing the revenue opportunity to match the consumer utility? And is this increasingly where premium subscriptions play? And then question two, and it's related, as you think about partnerships such as the new Apple partnership on Siri, how do you think about the right way to align for success with those partners? Previously, as disclosed in the DOJ documents, etc., it was a revenue share relationship. But now, if you think about the utility that you're driving through AI Search and through Gemini on those platforms, it may be less related to the actual, quote-unquote, search revenue. Could you just talk a little bit about how you align with partners for success there?

Management: So first of all, it may be worthwhile to say that the acceleration we saw in the search was not due to a single driver, but was really the result of many different parts of our business showing strength and working well together. And maybe I quickly add the vertical perspective, retail, finance, health, drove actually the greatest contribution to search revenue, though nearly every major vertical actually accelerated in Q4. More specifically to your question, the ongoing innovation is, as you know, core to what we do and the enhancements to the user and the advertiser experience really continue to drive our performance and we make hundreds of these changes every quarter.

We see air overviews and air mode continue to drive greater search usage and growth in overall queries including important and commercial queries. Gemini based improvements and search ads help us better match queries and craft creatives for advertisers. I talked about the understanding of intent and how this has significantly expanded our ability to deliver ads on longer and more complex searches that were frankly previously difficult to monetize. AI Max, for example, is already used by hundreds of thousands of advertisers and continues to unlock billions of net new queries. In that sense, we see strength with SMB advertisers expanding their budgets and adopting automation tools leading to better ROI. On the creative side, we're using Gemini to generate millions of creative assets via text customization in AI Max and P Max and so on. We're very pleased with what we're seeing here.

Justin Post (Bank of America): Great. I just want to follow up on the Gemini app. Obviously, great growth there. Are you seeing any cannibalization of search as far as activity as people start using that app more? And then second, on monetization, where are you on that? And with Agentic and other ads coming, could that be incremental to your growth over the next few years?

Management: Right now, overall, look, I think we are giving people choice. People are obviously using search, experiencing AI overviews and AI mode as part of it, and Gemini app as well. And the combination of all of that, I think, creates an expansionary moment. I think it's expanding the type of queries people do with Google overall. And so overall, some of it all is what we see as a growth opportunity. And we haven't seen any evidence of cannibalization there. And maybe Philip can comment on the monetization.

Management: Yeah, I think Sundar previously commented on agentic and how we think about it. And look, in general, as with all of our products, we really focus first and foremost on creating a great user experience. And we're very excited about where we are with the ads and AI overviews. Early experiments in AI mode including innovations like direct offers and our roadmap for the future in terms of the Gemini app today we are focused on a free tier and subscriptions and seeing great growth as Sundar discussed but ads have always been part of scaling products to reach billions of people and if done well ads can be really valuable and helpful commercial information and the right moment will share any plans but as we've said we're not rushing anything here.

Management: And that concludes our question and answer session for today. I'd like to turn the conference back over to Jim Friedland for any further remarks.

Management: Thanks, everyone, for joining us today. We look forward to speaking with you again on our first quarter 2026 call. Thank you and have a good evening.

Management: Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect.