Google CEO Pichai: ‘Bullish’ On AI And Cloud ‘But These Things Take Time’

‘I think we are in this phase where we have to deeply work and make sure on these use cases and these work flows we are driving deeper progress in unlocking value, which I’m bullish will happen. But these things take time,’ says Alphabet CEO Sundar Pichai.

Google parent company Alphabet is uniquely well-positioned for the AI opportunities that are coming, the company’s CEO Sundar Pichai Tuesday told financial analysts.

“Our research and infrastructure leadership means we can pursue an in-house strategy that enables our product teams to move quickly,” Pichai said in his prepared remarks Tuesday to analysts on the company’s quarterly financial analyst conference call. “Combined with our model building expertise, we are in a strong position to control our destiny as the technology continues to evolve. Importantly, we are innovating at every layer of the AI stack, from chips to agents and beyond, a huge strength. We are committed to this leadership long-term.”

Pichai said the company’s Google Cloud business reached some major milestones, with quarterly revenue crossing the $10 billion mark for the first time while also passing the $1 billion mark in quarterly operating profit.

“Year to date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues, and are being used by more than 2 million developers,” Pichai said.

Alphabet is seeing tremendous momentum from its AI investments, with over 1.5 million developers now using the company’s Gemini AI model across its developer tools, Pichai said.

“We recently unveiled new models that are more capable and efficient than ever,” he said. “Gemini now comes in four sizes, with each model designed for its own set of use cases. It's a versatile model family that runs efficiently on everything from data centers to devices. At 2 million tokens, we offer the longest context window of any large-scale foundation model today, which powers developer use cases that no other model can handle.”

Alphabet’s Tensor Processing Unit, or TPU, AI accelerator ASICs have also proven to be a good bet for the company, Pichai said.

“Trillium is the sixth generation of our custom AI accelerator, and it’s our best performing and most energy efficient TPU to date,” he said. “It achieves a near 5X increase in peak compute performance per chip and is 67 percent more energy efficient compared to TPU v5e. And the latest Nvidia Blackwell platform will be coming to Google Cloud in early 2025.”

Alphabet continues to invest in designing and building robust and efficient infrastructure to support its AI efforts, Pichai said.

“As we do this, we'll continue to create capacity by allocating resources towards our highest priorities,” he said. “We are relentlessly driving efficiencies in our AI models. For example, over the past quarter, we've made quality improvements that include doubling the core model size for AI Overviews, while at the same time improving latency and keeping cost per AI Overview flat.”

Alphabet also continues to see strong customer interest in Google Cloud, Pichai said.

“Our momentum begins with our AI infrastructure, which provides AI startups like Essential AI with leading cost performance for models and high performance computing applications. We continue to drive fundamental differentiation with new advances since Cloud Next. This includes Trillium, which I mentioned earlier, and A3 Mega, powered by Nvidia H100 GPUs, which doubles the networking bandwidth of A3.”

When asked by an analyst during the question-and-answer portion of the conference call about how he sees AI gets adopted and implemented in the cloud and the potential stimulus for growth, Pichai said that the combination will be a big revenue driver over time.

“If you take a look at our AI infrastructure and generative AI solutions for cloud, across everything we do, be it compute on the AI side, the products we have for Vertex AI, Gemini for Workspace, and Gemini for Google Cloud, etc., we definitely are seeing traction,” he said. “People are deeply engaging with Gemini models across Vertex AI. We now have over 2 million developers playing with these things. And you’re definitely seeing early use cases. But I think we are in this phase where we have to deeply work and make sure on these use cases and these work flows we are driving deeper progress in unlocking value, which I’m bullish will happen. But these things take time.”

Alphabet By The Numbers

For its second fiscal quarter 2024, which ended June 30, Alphabet reported revenue of $84.74 billion, up 14 percent from the $74.60 billion the company reported for its second fiscal quarter 2023.

This included Google Cloud revenue of $10.25 billion, up nearly 28 percent from last year’s $8.03 billion, Google services revenue of $73.93 billion, up from $66.29 billion.

For the quarter, Alphabet reported GAAP net income of $23.62 billion or $1.80 per share, up from last year’s $18.37 billion or $1.44 per share.

Total Alphabet operating income for the quarter was $27.43 billion, up from last year’s $21.84 billion. Google Cloud reported an operating income of $1.17 billion, just about double the $395 million the company reported last year.