GOOG - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Alphabet Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ellen West, Head of Investor Relations. ahead. go Please

Ellen West

Good quarter Candice. are and to welcome Pichai Thank earnings afternoon, conference fourth XXXX Ruth today call. Alphabet's and you, Porat. everyone, With Sundar us

cover quickly Now, Safe I'll the Harbor.

that of and actual and considered uncertainties of operations, level forward-looking we Some such expected to statements make regarding differ involve performance our may our expenditures capital cause risks statements that results today materially. of and could and business, be number the a

risk factors more in please information, to the filed SEC. For recent most the XX-K discussed Form refer our with

we Investor non-GAAP distributed today's is call, to website And abc.xyz/investor. Relations Sundar. earnings reconciliation turn this GAAP will measures. non-GAAP our which release, and During located call present at available both and of over I'll in to press now, financial to GAAP measures the the included is through A public

Sundar Pichai

Google the a want lot of There’s for me for enduring afternoon timeless want of at good as Google a and opportunity giving CEO I I as world. the and cover any to Ellen, us today, like a you to an impact leave and and all thanking may Sergey of have of for Larry to to call after also both CEO you, everyone. Alphabet and to an start Google. join years have the machine, plenty by questions It’s on time values Thank I’d and four privilege Ruth.

also growth total our with Search XXXX give to other in pleased $XX continue our revenues of insight Google seen have we’ve with areas. business. two newer growth. and new strong of great disclosures you release, and results in drive I’m billion greater As really added revenue into our press to properties

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Ruth Porat

Thanks, Sundar.

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Operator

Bellini first Heather Instructions] [Operator from Thank Sachs. question Goldman our And you. from comes

Your now open. line is

Heather Bellini

company. this on guess, thank I and or going and best Ruth I Sundar Thank you're I’ve the call much but I'm of, very disclosure times Alphabet enhanced been to covered Google since tonight, you so for think have million the sure is this call Hi. a you hear I the much

So, thank again. you

are at stuff on made to margins get You’ve revenue and a given we you margin look the run disclosing focus again. gross what were? this wanted to much of think and look the for Cloud a the collectively just they the do of for it or your you some to just might a think about there GCP, run that here. players business when little business, Thank different? comments I sense Cloud Or rates is to profile at, bit how reason of GCP similar fair either other slightly rate Google for given is if gross want their you that just about you a us this why were lot so

Ruth Porat

Thank for you those comments.

pleased momentum than in fourth momentum is and foremost, GCP as with meaningfully quarter higher fantastic revenue and overall. here. growing noted the First at pace really we’re obviously the we a Cloud had Google

of your very the look, obviously terms competitive I today. think are view In question, different the and Cloud dynamics is market margin our

We comments. I the to which clear aggressively tried given make are investing in opportunity opening

we and the opportunity we’ve triple the we’ve the sales our we’re about before as see investment the in a Given size and team goal talked go-to-market having, momentum our we’ve of force. accelerated set to

the product We’re you. also map footprint And of extending building the road focused will our on to infrastructure. leave out our and I global forecasting

Heather Bellini

you. Thank

Operator

our question you. next comes from Thank UBS. And from Eric Sheridan

is line open. now Your

Eric Sheridan

are that, you so of that were number and QX, revenue any in the could variability outperformance variability out growth the don’t had to same over Thank I you trying missed played revenue what various drive align, how terms you be first about display Ruth the of what put going to how can. would or Sundar, section what again QX, with QX you unless much. variability Thank two, the think That in color Ruth talked for you on you, that growth consumer two of year, I lot be parts to of sort but going so the you of forward into should I going her excited on segments we company innovation of if talked used see maybe forward. and you improves utility about one, when in past thinking quarter forward? along word – business? most expecting you last of commentary sustainability and about in give about you What Maybe a in company much. continues

Sundar Pichai

investing do, and actually to I but trends if case, everything used it the presume are seeing – for I on while, overall, think it I and we’ve users. I am driving applying that’s meaning a we you're been and we the mean across Eric, cases

experience big across in know to for see Play, in see kind our excited there results using and experiences search, natural technological of to lot which XX% our of a commercial hence of approach is opportunity. the dramatically we That’s properties, across a be and look YouTube create at businesses value processing When them. to hardware AI seeing more users. to better as our of strength opportunity across do you a bring I our it And something example, you improve we – know these opportunity Cloud, be of language make I’m to are a a better it So, or we all YouTube, search common lot we or addition and share Search a areas by.

And way a that to us areas so synergistic gives approach as these well.

Ruth Porat

is very best of on do ample for in we've in with lot in manage quarter. and And holds goes in of testing rate growth what's ads with our ahead. We XXXX of and true, the about talk it. it scale, variability which talked the your see any for our manage focused and users we pleased don't business much around then about question, here way second Search opportunity we particular the we're on we that past the at revenue, overall When a where

we're time the better focused on secular continue be variability that and to but is do we very digital, will be market, see – we opportunity, on be grow very And helps to to interest. in long-term opportunity shift addressable what's ads focused opportunity the continued better there Apart from the measurement, ad so better will significant. really that user long-term all on our there from continued benefit view and focused we're over the the the be right variability is delivery, because the experience, point

Eric Sheridan

you. Thank

Operator

you. from And question our Doug JPMorgan. comes Thank from next Anmuth

is open. now line Your

Doug Anmuth

see Great for first, you Thanks the Google One more to for billion Sundar for run hope about Great. talk could rate. one Cloud. just the Ruth. and $XX taking questions. Sundar,

latest across you potential year, And you give And then enter of thoughts you if growth additional and without curious just year, on the Bets? progress to see in Google help balancing competitive where the and areas businesses? you some Just can long-term increased the think do past profitability biggest Other you space? and drive segment over as profitability do of differentiation-why impacting increasingly this gauge Ruth, opportunities can of the an your the Thanks. the then

Sundar Pichai

I and number Doug, have in years, clearly a industry we about the senior we those including a partnership so hires last efforts, markets we leadership, progress strategic track supplementing year which TAM, under doubling I so think and down on team as expanding bringing on and force talk of a about on with Cloud, in in effectively products which Definitely it across bringing three lot of few the think maybe on the well. thoughts asked mentioned, made you serve. new sales certification, program. a Ruth some the Thomas' of differentiation, six compliance verticals focused XX our is channel on to triple and

Overall, and our great focus success contracting for progress one been the organization I seen progress for with these time the customer us. are, of all partner. framework have in larger deals, they every a in are especially technology I've our think customer effectively – we looking

capabilities, So, in terms what just differentiation have differentiated we in Cloud, it's but as of Google. cases, where bring many bring we to we is what not table

Alphabet. and healthcare, are Google, cases, in So, across if take in you area some an we making healthcare investments the all like

across we as Sabre, bring working at can verticals in travel them experience the If well. to you look partnership our

end working being So, I think as – on we and will over time, well. solutions up I a AI-based, also differentiating think industry-specific are the factor

Ruth Porat

investing balance approach the to guided question, talked for terms capital that and pace investing second we've previously. of three your by drivers continues of And growth in and the and we to be profitability, allocation the growth same about how

investing opportunities important see most First long-term and that there. the the to is growth earnings support and we

engineering, like we've When on Second, excellence support we, as already It investment biggest we includes we we've while at them investing do each within already and driving opening then prior this efficiencies we've new I physical investing a infrastructure, areas talked where early aggressively. talked on days area And out build a to remain we've about investing build is chains. It's product be in the also an heavily sizable we distribution to in Search, mentioned investments clearly we here. things the build services. building calls, I focused Google, as our our on supply developing then long-term the investing our making growth In of we're hardware look subscription in we're area. which in talked within as it to and and capabilities about. still see. been there starts operational to Cloud by support is investing and that about to view focused well businesses about spoke And out, a couple Hardware, today. comments, continue continue investment to taking YouTube, technical call, in as out as on optimizing third, that do with

additive. So, can at for core and remains been and we such can where That's efficiencies operational optimize looking portfolios growth. be long-term a we into here investing are where principle leaning while within

Doug Anmuth

both. you Thank Great.

Operator

Stanley. Thank Brian our you. next And Morgan Nowak comes from from question

Your line is now open.

Brian Nowak

I two. have taking question. Thanks my for

products Just, Sundar, focus payments those helpful, XXXX most focal I really on points to YouTube. helpful your comments users. curious creating trusted everyone was and most in then the for in of are thought I kind the for experience

payment years. over of the strategies You've had couple last lot a of

in are products at And remove what think you sort investments talk or to and you types friction need engagement now how to changes drive the on more drive then do better you really you types So, side, YouTube to it perspective, people adoption. YouTube to you need an order make really if payment even make on look what platform? foresee higher using of a helpful from YouTube the product engagement about of Thanks. of

Sundar Pichai

Brian thanks.

as including see learn the I ends discover, looking of with our intent experiences spoke payments and clearly they're properties, an up when come the to earlier a On payment do kind engage transact, side, and role. critical people about to playing well, across people commercially

to work So the have, it friction less tends better. you

bringing a past products product a more and traction our which our had we lot and getting we of up of are focused with lot XX users tremendously globally. on over from really months. successful in of launch in a been set the payments right are India we've We payments features, our and that had the we that revamping So, state. doing We've learnt

And which so XXXX. that in excited rollout, I'm up by is coming

I think that will the better. make experience

well. is our strong. On are we how in very to global newer question side, users see are Overall, increasingly They're guess your grow with about user nature the the YouTube product. all metrics verticals as beginning and engaging I

at and Search so seriously, makes that we working of done up more is sure, for more have YouTube work it search the us, us contextually responsibility things, improving. that content experiences which for merchandising, for it other it take well we when our be But And opportunity, creators with can see YouTube you works if also what types time, an ticket the scale. it's bring sets an and better we as ecosystem, I are When as makes make engaged relevant, term making that a over supplementing well. the We the content in there to there. horizontally see So, there, long product sales. think well valuable we there content content it ads advertisers accessorizing

Brian Nowak

Great. Thanks.

Operator

our comes And you. question Brent Thank Thill from Jefferies. next from

now is line open. Your

Brent Thill

years. Thank America some North the versus Facebook unusual? – we that was Is abnormally should looks in was America. of? cited North that weak Thanks. anything four aware America, was weakness in there you. there had number was It like your anomaly relatively there last Ruth, be any North

Ruth Porat

Thanks for that.

regional growth fairly Hardware relative revenues what was reflects mix reflect rate strong in U.S. year-on-year out XXXX to to regions. much and Hardware rate within a than the also product does in that. breakdown XQ a The revenue growth not decline more So, call

Operator

you. from Stephen Suisse. Ju Thank question from our And next comes Credit

now is line open. Your

Stephen Ju

Thank you.

you effort undoubtedly break I do looking what more come Thanks. in to line a of to the So, have we're I across been more teams, wondering what guess at but various are in up of some the software to siloed history? showing Sundar so hardware may pretty Google, through you've Google's you're like product integrated but sensitive the various interests stuff ranks synergies down, with might the cross the up and be guess, an Pixel, effort

Sundar Pichai

scale. execution at I think spoke about I –

are their their for product so teams bring have up sure that users, and which these we us all they cut work And and make are synergies setting focused but means, you areas, which can these across on areas scale. at

So, don't AI commonly engineers last like so can infrastructure I together. the across, use how can a all a that up user So, example of in shared infrastructure multiple year, bringing core think how been does the areas, these we set team, we work reinvent good across looks products? we wheel journey which that's what things at deploy does the teams

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Stephen Ju

you. Thank

Operator

Salmon Markets. question from from next our Capital And Dan you. BMO Thank comes

is now open. Your line

Dan Salmon

targeting picture on Ruth, two and and to how big the Ruth apply follow that one response creator share between a of the you with YouTube. you. for to we on the of ecosystem revenue everyone. brand distinction? one curious between you direct I and Is Is just, up maybe Sundar, Sundar. I ad also it different Hi. about pricing had it distinction picture talk then want from afternoon, make clear. One ask just questions. And are Certainly, comments growing. that direct to in Good then presence heard changes distinguished the advertising response. you very brand regulatory that and one, a for growth there were model? have be headwinds others clarifying or both? Those big just Would

line changes but You've important things that various you made operating two you to question, roll advertising I'd for as things of to is ecosystem last the on of system. an top course, a big most headwinds notable Chrome the the up of types I owner some billion these picture are well? seeing ask like sort important total if the ask platforms to changes we here Google really from in business, advertising of your platforms. what of one, growth? Are And how Android these your could in and changes largest, you're Thanks.

Ruth Porat

ad, call signing we a sort. a the response things continues is booking at appointment trip, it's or why quarter for the ads. – Direct very or on is an we're tailored downloading category. the action substantial in scheduling brand So, is brand those YouTube and at to an newsletter such insert in response one, direct healthy a response, distinction first talked That's growing format of and letting And as a video again talked app – as in here about or response. remains growth. pace to direct up for of direct brands the a largest have this about quarters, we've prior component The grow growing a

Sundar Pichai

for about you look a it's to and need to and on We well. we things to try the these broader ecosystem headwinds, focused to working is something at. stay partners our always sure realize take And on make we the need scale, questions users

work and anticipate on. in early them these engaged are we so And on issues and structurally we

these we So, broadly how things. it's approach

notable continued changes out nothing there's years to there our these in ahead. will to be to than adapt is key anticipate and and other so ecosystems And call the ability

Operator

comes Justin Bank from Lynch. And you. Post Thank our from next of question Merrill America

Your line open. now is

Justin Post

Great. the new couple disclosures. picture to Thank ask I'd bigger a of like you. on things

you first X So, it's $X or YouTube per about on monetization, user. billion users, have about $X assuming

feel revenue you you're that to then IaaS/PaaS that? raise feel about wondering to that backlog, Thank how when It level the six about have wondering the in these like our other all rates, deals profitability and you. versus you about Just of very Cloud is [XX.X], there, the at new last number strong monetization strong sounds that seeing the you room really usage it significant And been traction and a there months? given on social you've signed compare how just deals, good do how secondly, then networks? there, the

Sundar Pichai

of question opportunity the lot there On ahead. a I think YouTube, do on is

You're right; at platform scale. working a it's

I think response. – Ruth spoke brand and a little about bit direct

a a of YouTube, response when at direct And a for is experiences us. better and think us. also think how opportunity area lot as services commerce the increasingly, of I can goods big are fact is I create growth for in you part that look their huge experience people consuming we

across, So, mid room, more monetization think, significantly term on there more over is long levels. looking I room, to the

big larger and a opportunity these as beyond that deals. can see well are can definitely much span Cloud, we we sometimes as deals areas. increasingly are think touch I so they And doing it. And and investing for Cloud On many

to cases, some they as we across in well. an an all Android you're as and on strong to partners if happen platforms talking you be side automotive example, So be – Auto, can company, the Cloud, Waymo, advertising

do large build are deals, we serve been partner are so to in that has well, so these and can sustainable we these on way profitability focused and we very So, as the want a well. something

Ruth Porat

enterprise having. well, and to a to quantify little know the And where to over as number we you comes just for add to is And as that it the us, grow a way profitability billion cohorts. more as view tend in the phase, traction these the across backlog that, time, we're $XX.X such

here and and to to we trying make is that opportunity so. the and the given have we'll However, Cloud on the point call are of overall investing momentum in we the couple times continue see we we're do were that a having made aggressively

Justin Post

Thank you.

Operator

you. Thank comes Squali SunTrust. from Youssef next And our question from

Your line now open. is

Youssef Squali

Thank Great. you. Okay. Two ones. quick

talk you Sundar, pricing? Search as advertisers' bidding you. of much is you North do growth learning, America? then, about bidding? of And effective holiday is in First, AI, much Thank how season spending is automation, search an impact Ruth, on smart machine has and the on auto business spend shortened now how affecting think had And your –

Ruth Porat

shopping on really puts seasonal nothing to so the to takes holiday is any nothing season, in there there. there is note. are given really we and period, What So, find highlight

Sundar Pichai

have be advertisers and specific here, don't I our are significant see here. tremendous – On do these are we advertisers but numbers here, bidding, it leveraging it the effectively, traction with auto have, add bringing features there's in – areas to we traction we but bidding, here, smart

Youssef Squali

Thank you.

Operator

comes from you. Evercore. from And question next Kevin Rippey our Thank

open. Your now line is

Kevin Rippey

for Thanks question. for primarily is the Sundar. taking This Hi.

just but all brand over picture to underneath damage versus those do held you. could big that I like you separate were some about in Thank scenario profile about having how Verily you businesses healthcare, you you or risks, entirely autonomous something like risk have a of where do Google of think the manage if of the they're those time? cars that, enterprises? what like Waymo, perhaps do likely managing your As some in-house Alphabet know and could think in how umbrella, those risk which accident that sort

Sundar Pichai

Kevin. Thanks,

– spoke a part are of important in making management we the scale in areas. the across don't to investing structures governance as as the we reason so we I proper are sure these are remarks, We earlier that try

of it. – have are aspects to these regulatory Some

some and have people is board example, a well, investors, brought in for structures for great and these of setting are, up we We as with governance outside these. and bets Verily expertise proper

those So, but and need, AI the on both do investments, and evaluate shared as gives continue common have will, a independence when Alphabet we where to framework, like flexible bear bring our if all think that we'll a have us rigor can think synergies, well. you these I but help to that periodic basis to discipline, and bring we I more

Kevin Rippey

Thanks.

Operator

RBC. from comes Mark question from next our Mahaney And you. Thank

open. is now line Your

Ben Wheeler

and is is of kind taking on terms I Hi. focus to that potentially – should greater or there. Bets like in rationalization of is Other like a opposed Thanks of same of question. in the it we something is as more forward allocation that of on Mark. Ben Bets expect of more kind on trying the share or you just before of – like This more going buybacks basically like the investments that of lot. to Thanks Ruth, ask Was kind click maybe stuff segment for the I'm to want for same? said kind sharpening toward the that prioritizing kind a Other double signaling

Ruth Porat

and example, but external continuing Sundar when at we for indicated, do as long on an where we've with focus that. pace capital to look consistent support time approach, So, sense look performance. calibrate are top what saying putting our about we as what be return look looking talked to about at and Verily Bets of Other that sharper continue we the term, did The investments Other I at business, over of investments invest previously. long-term in bigger to growth capital technology, against investment, that We're and to approach execution, a and was work and the with And Google point the on continues when measuring and this, to Bets, is as with then to we've capital strategic it's we about primary return the shareholders. is, we in we milestones, make to and of financial of the it's as does very talked that at specific them metrics capital operating, it use we

Ben Wheeler

you. Thank

Operator

question from our And Thank from Ross Barclays. you. Sandler comes next

line Your now is open.

Ross Sandler

the strong Hi. Google fourth segment The Yes, margin two really in quarter. looked questions.

that you guys shift perspective. actually from I time helped margin is first the mix a think this

can So in going of dropping that as how about margin mentioned much versus you the And just increase XXXX. off accelerate forward, business is Ruth, that talk then improving look Hardware was you elsewhere? headcount from you year-on-year to

in opportunity response steady here lot So, increase? your direct the percent the second YouTube new this relative question, kind or driving there. is YouTube only view the impact you. what's kind of advertisers buying discussion YouTube growth of more Search buying color of decelerated this And little like quarter. of at Thank XXXX from are then looks the AdWords to year rate? that your on and on that a about Search versus bit What Any investment year and in disclosure just stage? a And an it full of fourth

Ruth Porat

Okay.

that. the taking part So, first of

the the of the quarter, margin items were number XXXX. in in discrete operating a terms quarter In of fourth fourth in there last year

sales to leave Search, we've bit invest to to in do cost the in in this to lower and Cloud, So op you we comparison with in favorable of in the a QX, that growth about related aggressively year, inc does to that you reflect call, areas last on that expenses main but point versus is already as And continue said, this think in Hardware did result I a support for in Google YouTube. year. intend talked particular, Hardware the year-on-year in quite other

headcount, in-house that where of the acquisition. tried then are growth to that comments investing year-on-year out Fitbit some I break boost that's putting expected the it with the couple we And terms In the it factors somewhat we're those long have other term. support for the to a rate. is closing of my is behind OpEx and bringing neutral, additional One starts in areas areas – headcount

the there's sure the mix, add terms of trying The much part I'm your recall it. terms to third in question, of In I'm of just to there. – not

Operator

Sebastian from of final the Colin our Thank from Baird. you. And line question comes

is line Your now open.

Colin Sebastian

talk acceleration the was funnel. the calling as the out of little like more there that just if part transactional size something given you. acceleration? And you. that about inflected and quick or new worth then a at a follow-up focus particular beyond in I Thank guess, bit there areas product of for GCP, drive in team you you see the first, opportunities the else wondering were innovation on the Thank to have the BigQuery might leadership could commerce, deals,

Sundar Pichai

delightful. we opportunity that retailers nature his of Bill part the here. experience of but see we to a the and in it brings deep the He overall making lot an really making Great. of a transactional he experience of our that bringing definitely work, partnerships and of seamless user where prior to On the experience. merchants commerce, it, it's And the Ready you more think to people I'm mentioned I transaction improve lot funnel present interested area visual terms results, is more in do excited complete he experience given are brings in And something, how when with happen. how make and

there execution GCP, about there we we see do and it's excited investing. in So, opportunity And and where well been we a data On did – been has engaging to – see it's are definitely, great. traction strong that's with lot the the on bear have these to deals we the bringing all resources analytics. and

our so, AI. definitely well a our is as strength there as as in overall significantly, company contributing And leadership

Colin Sebastian

you. Thank

Operator

session conference that you. over Thank for turn concludes for remarks. I'd back the And like Ellen question-and-answer to further today. our any to West

Ellen West

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

Operator

conference today’s participating you you this for gentlemen, Thank and now concludes Ladies disconnect. call. and may

Alphabet (GOOG) 4 Feb 202019 Q4 Earnings call transcript