During Tuesday’s results call, investors pressed Alphabet’s executives for additional details regarding the performance of its AI programs and their potential revenue streams, but the executives stayed silent.
One investor, referring to the launch of AI overviews to summarize Google Search results, inquired specifically about click-through rates and monetization levels of the AI overview versus regular searches.
Senior vice president and chief business officer Philipp Schindler and CEO Sundar Pichai both commented, although neither provided a precise figure.
According to Pichai, they have implemented it in the US and want to scale it up throughout the course of the year. We will see them develop the use cases around it, but they have started cautiously, focusing on quality, making sure the metrics are sound, and so forth. They have also expanded to other nations.
In response, Schindler said that past innovations and enhancements to the search user experience had created new avenues for advertisers, but he withheld any further details regarding Alphabet’s earnings from advertising on its AI capabilities.
Demis Hassabis, the CEO of Google DeepMind, announced in April that Google intends to invest over $100 billion in the development of AI technologies over the course of time.
The digital behemoth has previously invested $3 billion in building and expanding its data centers, $2 billion to the AI firm Anthropic, and $60 million to train its AIs on user posts on Reddit.
Pichai was pushed by a second investor to “dig a little bit deeper” into the adoption and application of AI, its potential impact on Alphabet’s cloud business’s strategic stance, and whether or not AI workloads may “be a stimulant to revenue growth.”
Regarding cloud and artificial intelligence, Pichai stated, “I think that in the long run, it’s something that will end up being a big driver.” “As I previously stated in my introductory remarks, we are undoubtedly gaining traction with our AI infrastructure and generative AI solutions for cloud across all of our offerings, including compute-related AI products like Gemini for Workspace and Gemini for Google Cloud, among others.
Pichai stated that demand for AI helped the company’s cloud division surpass $10 billion in revenue for the first time, reaching $10.3 billion.
However, he did not provide any details about how Alphabet intends to increase the monetization of its various AI initiatives. Instead, he stated that the company currently has “over 2 million developers playing around with these things,” demonstrating the significant expense the company has incurred in its quest for AI dominance without offering any assurances of a tangible return.
Some investors asked more specific questions, such as whether the lack of new data to train on or other constraints are near to “hitting some kind of wall on foundation model improvement in AI training” for the AI sector. Pichai retorted by emphasizing that investing too little money in projects now poses a bigger danger than investing too much.
According to Pichai, there is a far higher risk of underinvesting than overinvesting in this situation. Even in the event that it transpires that we are overspending, it is evident that these are infrastructure projects that are highly advantageous to us. Having stated that, he soon continued, “We obsess over every dollar we put in.”
Alphabet exceeded Q2 sales and profit expectations, but missed YouTube ad revenue. It also announced a $5 billion investment in Waymo self-driving taxis.
