Alphabet Inc., Google’s parent company, announced its first quarter 2024 financial results today.
While Google reported double-digit growth in key revenue areas, the focus was on its AI developments, dubbed the “Gemini era” by CEO Sundar Pichai.
The Numbers: 15% Revenue Growth, Operating Margins Expand
Alphabet reported Q1 revenues of $80.5 billion, a 15% increase year-over-year, exceeding Wall Street’s projections.
Net income was $23.7 billion, with diluted earnings per share of $1.89. Operating margins expanded to 32%, up from 25% in the prior year.
Ruth Porat, Alphabet’s President and CFO, stated:
“Our strong financial results reflect revenue strength across the company and ongoing efforts to durably reengineer our cost base.”
Google’s core advertising units, such as Search and YouTube, drove growth. Google advertising revenues hit $61.7 billion for the quarter.
The Cloud division also maintained momentum, with revenues of $9.6 billion, up 28% year-over-year.
Pichai highlighted that YouTube and Cloud are expected to exit 2024 at a combined $100 billion annual revenue run rate.
Generative AI Integration in Search
Google experimented with AI-powered features in Search Labs before recently introducing AI overviews into the main search results page.
Regarding the gradual rollout, Pichai states:
“We are being measured in how we do this, focusing on areas where gen AI can improve the Search experience, while also prioritizing traffic to websites and merchants.”
Pichai reports that Google’s generative AI features have answered over a billion queries already:
“We’ve already served billions of queries with our generative AI features. It’s enabling people to access new information, to ask questions in new ways, and to ask more complex questions.”
Google reports increased Search usage and user satisfaction among those interacting with the new AI overview results.
The company also highlighted its “Circle to Search” feature on Android, which allows users to circle objects on their screen or in videos to get instant AI-powered answers via Google Lens.
Reorganizing For The “Gemini Era”
As part of the AI roadmap, Alphabet is consolidating all teams building AI models under the Google DeepMind umbrella.
Pichai revealed that, through hardware and software improvements, the company has reduced machine costs associated with its generative AI search results by 80% over the past year.
He states:
“Our data centers are some of the most high-performing, secure, reliable and efficient in the world. We’ve developed new AI models and algorithms that are more than one hundred times more efficient than they were 18 months ago.
How Will Google Make Money With AI?
Alphabet sees opportunities to monetize AI through its advertising products, Cloud offerings, and subscription services.
Google is integrating Gemini into ad products like Performance Max. The company’s Cloud division is bringing “the best of Google AI” to enterprise customers worldwide.
Google One, the company’s subscription service, surpassed 100 million paid subscribers in Q1 and introduced a new premium plan featuring advanced generative AI capabilities powered by Gemini models.
Future Outlook
Pichai outlined six key advantages positioning Alphabet to lead the “next wave of AI innovation”:
- Research leadership in AI breakthroughs like the multimodal Gemini model
- Robust AI infrastructure and custom TPU chips
- Integrating generative AI into Search to enhance the user experience
- A global product footprint reaching billions
- Streamlined teams and improved execution velocity
- Multiple revenue streams to monetize AI through advertising and cloud
With upcoming events like Google I/O and Google Marketing Live, the company is expected to share further updates on its AI initiatives and product roadmap.
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