AI Helps Lift Alphabet’s Subscriptions 5x Higher Than 2019

For Alphabet, the artificial intelligence (AI) boon has helped boost subscriptions.

But advertising sales for the parent company of Google, having fallen just short of expectations despite surging 11%, were in focus. And as a result, investors took the shares down 3% in after-hours trading.

Sundar Pichai, CEO, said that subscriptions reached $9 billion in quarterly revenues in the December period, have reached $15 billion annualized, and are up fivefold since 2019.  

That accelerated growth, he said, “was driven by our GenAI and product leadership.” He pointed to Gemini and Gemini Ultra, which he said is “coming soon” for continued application in search functionality.

The company’s earnings release showed that Google Search revenues were up 12.6%, to $48 billion.

“In addition to search, we are also seeing a lot of interest in our AI-powered solutions for advertisers,” he said, adding that YouTube has also been a key driver of subscription revenues. The company’s YouTube advertising revenues were up 15.5% to $9.2 billion. Google One, said the CEO, is “just about to cross” 100 million subscribers.

Cloud Sees a Surge

Google Cloud-related revenues were up 25% to $9.2 billion. The “other bets” segment — tied to the sale of healthcare-related services and internet services — saw sales of $657 million, up from $226 million last year, but with an operating loss of $863 million in the latest December period.

Philipp Schindler, chief business officer, noted on the call that advertising and search were boosted by growth in the retail vertical. He said that overall, with DemandGen in place, tens of thousands of advertisers are seeing 6% more conversions per dollar when compared to image-only ads and discovery campaigns, and that demand has been strong especially among smaller businesses.

“As we look ahead, we’re also starting to put generative AI in the hands of more and more businesses to help them build better campaigns and even better performing ads,” he said. 

YouTube Shorts remain a priority with an average of 70 million daily views — and connected TVs remain an area where viewership is growing most quickly.

CFO Ruth Porat said the company continues to make “sizable investments with increased emphasis on our Pixel family particularly with AI-powered innovation” and said later in the call that “the strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area.”

During the question-and-answer session, Pichai noted that the NFL Sunday Ticket package “really helps solidify YouTube’s position as a ‘must have app’ on everyone’s TV set.”