Sundar Pichai
Chief Executive Officer at Alphabet
Thank you, Jim, and hello, everyone. We are holding our call from London today. It's an important hub for us, and I'm excited to spend time with our local teams, including Google DeepMind, as well as leaders and partners from across the region.
This quarter, we shared great progress at I/O, Brandcast and Google Marketing Live, and we are looking forward to Cloud Next in August. The momentum across the company drove our results this quarter. We delivered solid performance in Search and YouTube and ongoing strong growth in Cloud, where we remain focused on long-term value creation. And we continue our important work to operate more efficiently, creating durable savings to fund investments in our biggest priorities. Today, I'll talk about this momentum, including our continued leadership in AI and our excitement about the evolution of Search.
At I/O, we shared how we are making AI helpful for everyone in four important ways. First, improving knowledge and learning. This is our seventh year as an AI-first company, and we intuitively know how to incorporate AI into our products. Large language models make them even more helpful, models like PaLM 2 and soon Gemini, which we are building to be multimodal. These advances provide an opportunity to reimagine many of our products, including our most important product, Search. We are in a period of incredible innovation for Search, which has continuously evolved over the years.
This quarter saw our next major evolution with the launch of the Search Generative Experience or SGE, which uses the power of generative AI to make Search even more natural and intuitive. User feedback has been very positive so far. It can better answer the queries people come to us with today, while also unlocking entirely new types of questions that Search can answer.
For example, we found that generative AI can connect the dots for people as they explore a topic or project, helping them weigh multiple factors and personal preferences before making a purchase or booking a trip. We see this new experience as another jumping-off point for exploring the web, enabling users to go deeper to learn about a topic. I'm proud of the engineering excellence underlying our progress.
Since the May launch, we've boosted serving efficiency, reducing the time it takes to generate AI snapshots by half. We will deliver even faster responses over time. We are engaging with the broader ecosystem, and we'll continue to prioritize approaches that send valuable traffic and support a healthy, open web.
Ads will continue to play an important role in this new Search experience. Many of these new queries are inherently commercial in nature. We have more than 20 years of experience serving ads relevant to users' commercial queries and SGE enhances our ability to do this even better. We are testing and evolving placements and formats and giving advertisers tools to take advantage of generative AI. Philipp will talk more about how we are using generative AI in our ads products to better serve both advertisers and users.
Second, we are helping people use AI to boost their creativity and productivity. One example is Bard, our experiment in conversational AI. Since launching in March, it continues to get better. We rolled out a number of exciting features and capabilities earlier this month. Bard is now available in most of the world and over 40 of the most widely spoken languages. We also added Google Lens capability, so you can take an image and ask all kinds of questions, turn it into code and more. This new feature has been really popular, and it's been great to see people sharing their experiences. Bard can now read its responses aloud and you can adjust them for tone and style. We continue to see great interest in using Bard for coding tasks.
On productivity, earlier this year, we introduced Duet AI in both Google Cloud and Workspace. It helps people collaborate with AI, code, write and get better insights from data and more. Today, more than 750,000 Workspace users have access to the new features in preview.
Third, we are making it easier for others to innovate using AI. One way is by providing Google Cloud's high performance infrastructure optimized for a range of generative AI models. It's being used by thousands of customers and partners to transform their businesses. I'll give an update on the Cloud business in just a moment.
Finally, we are making sure we develop and deploy AI technology responsibly, so that everyone can benefit. Last week, we signed onto joint commitments with other leading AI companies at the White House, building on the principles that have guided our work for many years. To take advantage of the AI opportunities ahead, we have been sharpening our focus as a company, investing responsibly with great discipline, and finding areas where we can operate more cost effectively.
We have made good progress in data center machine efficiency, which will pay dividends as we continue to invest in AI. We continue to slow our expense growth and pace of hiring and ensure our teams are aligned to our highest priorities. This quarter, we reallocated a number of teams, including aligning Waze's [Phonetic] ad sales with our existing business organization. We are combining various engineering efforts across core infrastructure and cloud. Products like Bard and SGE are being built by small fast-moving teams that have been reallocated to these high priority efforts. Overall, we are actively moving people to higher priority activities within the company, and we continue to optimize our real estate footprint for current and future needs.
Next, Google Cloud. We see continued growth with Q2 revenue of $8 billion, up 28% and operating profit of $395 million. Our AI optimized infrastructure is a leading platform for training and serving generative AI models. More than 70% of gen AI unicorns are Google Cloud customers, including Cohere, Jasper, Typeface and many more. We provide the widest choice of AI supercomputer options with Google TPUs and advanced NVIDIA GPUs, and recently launched new A3 AI supercomputers powered by NVIDIA's H100. This enables customers like AppLovin to achieve nearly two times better price performance than industry alternatives.
Our new generative AI offerings are expanding our total addressable market and winning new customers. We are seeing strong demand for the more than 80 models, including third-party and popular open-source in our Vertex, Search and conversational AI platforms, with the number of customers growing more than 15x from April to June. Among them, Priceline is improving trip-planning capabilities; Carrefour is creating full marketing campaigns in a matter of minutes; and then Capgemini is building hundreds of use cases to streamline time-consuming business processes. Our new anti-money laundering AI helps banks like HSBC identify financial crime risk and our new AI-powered Target and Lead Identification Suite is being applied at Cerevel to help enable drug discovery.
Our generative AI capabilities also give us an opportunity to win new customers and upsell into our installed base of 9 million paying Google Workspace customers. I mentioned Duet AI earlier. Instacart is using it to improve customer service workflows and companies like Extend [Phonetic] are scaling sales outreach and optimizing customer service. Customers confidently choose Workspace because of the safety and security we provide their distributed workforces.
Our AI capabilities are helping us differentiate core products like cybersecurity. We have integrated AI throughout our portfolio, winning organizations like Pfizer, who are using Google Cloud to transform their security operations. Chronicle Security Operations suite with Mandiant fully-integrated is helping customers stay protected at every stage of the security lifecycle. In the first half of 2023, we saw a 35% increase in incident response engagements compared to the same period last year.
Finally, our AI capabilities are also expanding our partner ecosystem. With hundreds of ISVs and SaaS providers such as Vox, Salesforce and Snorkel and the world's largest consulting firms like Accenture and Deloitte. They've collectively committed to train more than 150,000 people on Google Cloud generative AI.
Turning next to YouTube. Earlier this year, we shared that revenues across YouTube products were nearly $40 billion for the 12 months ending in March. I'm really pleased with how YouTube is growing audiences and driving increased engagement. YouTube Shorts are now watched by over 2 billion logged-in users every month, up from 1.5 billion just one year ago. The Living Room remained our fastest-growing screen in 2022 in terms of watch time. We're reaching more than 150 million people on Connected TV screens in the U.S. and seeing growth and momentum internationally. And on subscriptions, there is good growth. Late last year, we announced over 80 million YouTube Music and Premium subscribers. Sign-ups for NFL Sunday Ticket kicked off in April, and we look forward to hosting our first football season on YouTube this fall.
Finally, hardware and Android. Pixel continues to have strong sales momentum. We introduced new Pixel devices at I/O, including Pixel Fold, Pixel Tablet and Pixel 7a, and we've had a great response. Android 14, our latest OS, will incorporate our advances in generative AI to personalize Android phones. The Pixel and Android teams are working together to advance the latest devices. The Pixel fold is a great example, with its many hardware and software innovations.
Before I close, you may have seen that we just announced some exciting news that Ruth is taking on the important new role of President and Chief Investment Officer. As our longest serving CFO, she has helped guide the company through an amazing period of growth, the global pandemic and the ongoing economic uncertainty that has followed. I'm excited to continue to work with Ruth, who will lead our 2024 planning and remain as CFO, while we do a full search for a successor. So it's business as usual now and no change in approach for the future. I look forward to seeing the impact Ruth will have in her new role, driving our investments, engaging with our stakeholders and creating opportunities for people and communities everywhere.
To close, I'm energized by the pace of innovation and the momentum across the company with 15 products that each serve a 0.5 billion people and six that serve over 2 billion each. We have so many opportunities to deliver on our mission. Thank you to our employees around the world for their great work this quarter.
Over to you, Philipp.
