Some have accused tech giants of blowing AI smoke on their earnings calls, touting the supposed benefits of large capital investments without reporting any concrete impact on productivity or cost savings. . But Google’s parent company, Alphabet, says it’s making significant progress on both fronts. More than a quarter of all new code at the search giant is now generated by AI, the search giant’s CEO Sundar Pichai said on Tuesday’s third-quarter earnings call.
This is just part of how Alphabet executives say the company’s long-standing AI efforts are starting to pay dividends on its balance sheet. The company said its impressive third-quarter performance (revenue exceeded analyst expectations) was due in part to its cloud business. The division’s quarterly revenue rose 35% year over year to $11.4 billion, and Pinchai said its artificial intelligence products helped it attract new business customers and win bigger deals.
Pichai repeatedly touted the company’s success in using various AI tools that run on Google’s Gemini model, saying it has deepened product adoption by 30% among existing customers.
“We are uniquely positioned to lead in the AI era with our differentiated full-stack approach to AI innovation, and we are now seeing this operationalized at scale,” he said. I am.
“AI fatigue” may have been a factor in the slight decline in the stock price, as the company’s second-quarter results were lower than expected and revenue was slightly higher. But investors welcomed the third-quarter news, sending the stock soaring about 6% on Wednesday morning.
Shareholder investment has increased nearly 30% this year, compared to the S&P 500’s 23% increase.
Google touts the benefits of AI beyond the cloud
Outside of the cloud, Pichai cited another milestone for the company. That’s the first time in the past four quarters that YouTube’s total ad and subscription revenue has exceeded $50 billion. This complements the strength of Google’s search business, which CFO Anat Ashkenazi said remains the company’s biggest contributor to revenue growth. did. The segment’s revenue was $49.4 billion, an increase of 12.3% year over year.
“AI really powers search,” Chief Business Officer Philipp Schindler said on a conference call. “New AI-powered features make search even more useful, and we continue to receive great feedback, especially from younger users.”
The AI revolution will also change the way companies hire. Alphabet’s overall workforce is more than 1,000 fewer than a year ago, according to Fortune Magazine’s Kari Hayes. Google is restructuring and consolidating its teams, including expanding the footprint of its core AI group, DeepMind.
Ashkenazi, who joined the company in June after 23 years at pharmaceutical company Eli Lilly, said his leadership team is focused on leveraging AI to streamline operations.
“I intend to intensify these efforts, but also assess where work can be accelerated and where we need to pivot to free up capital for more attractive opportunities,” she said. said.
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