Alphabet, Google's parent company, posted results that beat market expectations on the back of strength in cloud. At the same time, it said it is considering introducing advertising to its in-house artificial intelligence (AI) model, Gemini.
Alphabet said on the 29th (local time) that first-quarter revenue this year rose 22% from a year earlier to $109.9 billion (about 163 trillion won). That beat the market forecast of $107.2 billion (about 159 trillion won) compiled by market research firm LSEG. It was also the highest quarterly growth rate since 2022.
Earnings per share (EPS) came in at $5.11, about double the market forecast of $2.63.
By institutional sector, cloud growth stood out. Google Cloud revenue rose 63% year over year to $20.02 billion (about 30 trillion won), topping $20 billion for the first time. That was well above the market estimate of $18.05 billion. Operating income in the segment grew to $6.6 billion (about 10 trillion won), about triple the $2.2 billion (about 3 trillion won) a year earlier.
Alphabet and Google Chief Executive Officer Sundar Pichai said, "Enterprise AI solutions became the key driver of cloud growth for the first time in the first quarter," adding, "Our AI investments and full-stack approach are delivering results across every part of the business."
Revenue in the core institutional sector of search rose 19% to $60.4 billion (about 90 trillion won). YouTube advertising revenue was $9.88 billion (about 15 trillion won). By contrast, revenue from other businesses, including self-driving subsidiary Waymo, dipped slightly to $411 million (about 600 billion won).
On a conference call the same day, Google also mentioned ways to monetize the AI service "Gemini." When asked whether there were plans to add ads to Gemini, Google Chief Business Officer Philipp Schindler said, "Right now we are focusing on subscriptions in the Gemini app," adding, "We will share plans (related to ads) when the time is right, but we will not rush."
Previously, OpenAI's ChatGPT introduced ads for free users. Anthropic, by contrast, said it would not introduce ads.
Google also disclosed that it has begun directly selling its in-house AI chip, TPU, to some customers.
CEO Pichai said, "As demand for TPUs increases in the capital markets corporations and high-performance computing app fields, we will directly supply TPUs to the on-premises data centers of selected customers."
Until now, Google has supplied TPUs only by lending computing capacity through the cloud. If it shifts to direct sales, competition with Nvidia and AMD will be inevitable.
Chief Financial Officer Anat Ashkenazi said, "Some of the revenue from (direct TPU sales) contracts will begin to be recognized toward the end of this year," adding, "Most of the revenue will be realized in 2027."