Google Looking to Monetize GenAI

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Alphabet aka Google (Nasdaq: GOOG) recently reported a strong first quarter that beat analyst estimates driven by strong and profitable growth in Google Cloud.

Google’s Financials

Alphabet’s first quarter revenue grew 15% to $80.54 billion, beating analyst estimates of $78.59 billion. Net income jumped 57% to $23.66 billion or $1.89 per share, beating analyst estimates of $1.51.?

By segment, revenues from Google Services that includes Search, Advertising, Android, Chrome, Hardware, Google Maps, Google Play, and YouTube ads grew 13.5% to $70.4 billion. Advertising revenue grew 13.2% to $61.7 billion. Revenue from YouTube ads grew 20.9% to $8.1 billion beating analyst estimates of $7.7 billion. Network advertising revenues were flat at $7.4 billion. Operating income from the Google Services segment was $27.9 billion compared to $21.7 billion a year ago.

Google Cloud revenues grew 28% to $9.6 billion ahead of analyst estimates of $9.3 billion. Operating income was $900 million, compared to $191 million a year ago.?

Revenues from Other Bets grew 72% to $495 million. Operating loss was $1 billion, compared to $1.2 billion a year ago.

The company ended the quarter with a cash balance of $108.1 billion. It announced its first dividend of $0.2 per share and a $70 billion repurchase program.

It expects YouTube overall and Cloud to exit 2024 at a combined annual run rate of over $100 billion.

Google’s GenAI Platform

Google continued to push forth with its GenAI offerings. Last quarter, it had launched the large language model (LLM) Gemini, which is designed to understand and combine text, images, audio, video, and code in a natively multimodal way. It can run on everything from mobile devices to data centers. Gemini provides a great foundation for building next-generation AI applications.?

In February, the company rolled out Gemini 1.5 Pro, which includes a breakthrough in long context understanding for large-scale foundation models. It shows dramatic performance enhancements across a number of dimensions. It has now developed new AI models and algorithms that are more than 100 times more efficient than they were 18 months ago.?

It announced that over one million developers are now using its generative AI across tools, including AI Studio and Vertex AI. Discover Financial has begun deploying Gen AI-driven tools to its nearly 10,000 call center agents to achieve faster resolution times for customers.?

It also introduced Gemini for meetings and messaging and Gemini security for Workspace. Organizations like Uber, Pepperdine University, and PennyMac are using Gemini in Google Workspace.?

The company has been experimenting with Gemini in Search to make its Search Generative Experience faster for users. It has already served billions of queries with its generative AI features.?

Google has combined its platform and device teams. The new combined team will focus on delivering high quality products and experiences, bolstering the Android and Chrome ecosystems, and bringing its best innovations to partners faster.??

Google is now looking to monetize its GenAI offerings in ads and cloud. In the first quarter, it introduced a new AI premium plan with Gemini Advanced.?

Its stock is trading at $171.58 with a market capitalization of $2.11 trillion. It hit a 52-week high of $176.42 in April this year and a 52-week low of $108.48 in May last year.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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