Alphabet Inc Earnings - Q1 2025 Analysis
Positives
- Consolidated revenues of $90.2 billion, increased by 12% or 14% in constant currency.
- Net income increased by 46% to $34.5 billion and EPS increased by 49% to $2.81.
- Revenue increased by 28% to $12.3 billion in Q1 reflecting growth in GCP across core and AI products at a rate that was much higher than Cloud's overall revenue growth rate.
- Operating income increased by 20% in Q1 to $31 billion, and operating margin increased to 33.9%, representing 2.3 points of margin expansion.
- The 10% increase in Search and other revenues was led by financial services, primarily due to strength in insurance followed by retail.
Q&A Highlights - Q1 2025
Analyst asked about the macro advertising backdrop, specifically regarding potential weakness in advertising verticals or regions in Q2 2025.
Sundar Pichai responded that the company is only a few weeks into Q2 and it's too early to comment on potential impacts, but they are not immune to the macro environment. He mentioned that the changes to the de minimis exemption will cause a slight headwind to their Ads business in 2025, primarily from APAC-based retailers. He also noted that the company has a lot of experience in managing through uncertain times and focuses on helping customers by providing deep insights into changing consumer behavior.
Analyst asked about the $1.5 billion AI Overviews users and how to think about the breadth of rollout.
Philipp Schindler responded that the company is happy with what they're seeing in AI Overviews and they are confident they can expand this to more products over time. He also mentioned that the company sees monetization at approximately the same rate, which gives them a strong base on which to innovate even more.
Analyst asked about the company's approach to productivity and efficiency.
Anat Ashkenazi responded that the company's approach has not changed and they are still focused on driving efficiency and productivity throughout the organization, both in their operating expenses and in their CapEx. They are looking at how to make sure every dollar is used efficiently and they have a highly rigorous process to determine the demand behind their investments and allocate the compute associated with their technical infrastructure investments. The company is also focused on moderating the pace of compensation growth, looking at real estate footprint and build-out and utilization of their technical infrastructure across the business.
Analyst asked about the deployment of Gen AI internally at Google and its usage across the company.
Sundar Pichai explained that Google is using Gen AI for a variety of purposes, including coding, customer service, and finance, and that it is deeply embedded in everything the company does. He stated that the company is focused on improving the product across all of AI Mode and AI Overviews and that they are seeing positive user traction.
Analyst asked about the company's profitability and whether they have enough levers to offset rising infrastructure costs.
Anat Ashkenazi responded that the company does have levers to pull, but that it will become more difficult as depreciation accelerates. She stated that the company is continuing to push across the organization, leveraging AI, and that there are opportunities for investment.
Analyst asked about Waymo's progress and its potential for growth.
Sundar Pichai responded that the company is focused on building the world's best driver and that it will give them optionality in business models and geographies. He mentioned partnerships with Uber, Moove, and OEMs as examples of the company's progress. He also stated that the company is exploring personal ownership and scaling up operations.
