Alphabet Inc. (GOOGL) Earnings Call Transcript & Summary

Hi, everyone. I'm Alison Wagonfeld with Google Cloud. Welcome to Google Cloud Next, and thank you to our Google orchestra composed by Bay Area Googlers. We are coming to you live from our Google Cloud campus in Silicon Valley, where I'm here with Sundar Pichai and Thomas Kurian. We have an incredible lineup over the next 3 days with live keynotes, demos and Q&A with our leadership and over 140 sessions covering all our cloud solutions. Our customers and partners would share how they're using Google Cloud and Google Workspace technology to tackle their greatest challenges and opportunities. We are humbled to support their work and share their stories. Thank you for being here with us. And now please join me in welcoming Google and Alphabet CEO, Sundar Pichai.

Hi everyone. Welcome to Google Cloud Next 2021. We are happy you're here. Of course, I'd be happier if you could actually be here in person. Don't get me wrong, Thomas is great company, but he still doesn't laugh at my container jokes. So while many of us are still waiting for a return to normal, it does feel like we're on our way. The question is, will we recognize normal when we get there. The pandemic has sped up digitization in all aspects of our lives. It's changed how we visit a doctor, how our kids learn in school and how we connect with one another. And it's made the future of work all present, giving us renewed opportunity to transform our organizations. From our work with customers, Thomas and I have learned there are 3 things that position us to be most helpful to businesses. First, our Cloud Platform. It's designed to help enterprises transform through digitization, built on the deep investments we've made in technical infrastructure over the past 23 years. Looking at our networking and data center investments alone, we have the largest network with the lowest latency of any cloud provider. With our expansions into Warsaw, Delhi, Melbourne and Toronto this year, we now have 28 regions with plans for 10 more. And it's all connected by 19 subsea cables. Our Grace Hopper transatlantic cable will be the first incorporated novel optical fiber switching. Second, our enterprise customers benefit from our consumer scale and innovation. We have a deep and broad consumer ecosystem of devices and services. YouTube connects a global community of viewers and creators. Android, Nest, Assistant and Maps are loved by people around the world. We have the unique ability to connect consumer ecosystems with enterprise ecosystems. For example, the realistic voices and language understanding that powers Google Assistant can improve enterprise customer experiences and increase satisfaction. And the underlying visual technology that enables Google Lens to help people shop or learn about a new flower in their garden can help manufacturers identify defects. Third, we offer comprehensive security that helps organizations, including ours, protect what matters. Security is foundational to everything we do. We have a long history of building it into every layer of the computing environment. We are a pioneer of zero trust computing and have deep experience running this model at scale. On its own, any one of these pillars would be helpful to customers. Put together, they can be transformative, which is the mission of Google Cloud. We continue to drive innovation through our products. Over the past year, we have had more than 1,500 product and feature releases. That's about 4 a day. They're all designed to be helpful from Smart Canvas and Google Workspace that makes collaboration richer to new AI-powered industry solutions and BigQuery Omni for data analytics across any cloud. We've also made significant partnership announcements. For example, we teamed up with global telecom leaders such as Ericsson, Nokia and T-Systems to deliver 5G edge and hosted computing solutions. What I'm most excited about is how our strengths in cloud, consumer and security are helping top enterprises accelerate their transformation. Ford chose Google as their transformation partner because of our strength in consumer and cloud. Together, we are innovating in electrification, connectivity and self-driving technologies. Ford is harnessing Google Maps to help drivers navigate, Google Assistant to help drivers concentrate and Google Play to keep passengers learning and entertained. L'Oreal partnered across Google to build a virtual try-on experience. They are harnessing the best AI models as well as using YouTube to build a community of fans and Google Shopping to make it easy to discover and buy their products. We are humbled that so many organizations continue to put their trust in Google Cloud. And we are committed to helping you solve the biggest challenges you face. I'll be back a little later to talk more about how we do that. But first, I'll turn the stage over to Thomas Kurian, CEO of Google Cloud, to talk more about our mission.

Thank you, Sundar. Hello, everyone. It's a pleasure to be here on Google's Silicon Valley campus. Today, for the moment, we all look forward to all year long, the opportunity to connect with you, our customers, partners and developers, and to share all the amazing, exciting stuff we've been working on. A special thank you to all our sponsors, especially our luminary sponsors, Accenture, Atos Maven Wave and Deloitte. Let's first hear from some of our customers about the amazing ways in which they have accelerated transformation with Google Cloud. [Presentation]

Now it's not secret that many of the biggest and most innovative technology companies, leaders such as Spotify, Twitter, Shopify, Mercado Libre, ShareChat, Dapper Labs and so many other exciting startups and tech leaders choose Google Cloud to help them build, scale and innovate. Still, other customers are transforming using our purpose-built industry solutions. The Home Depot, for instance, use Contact Center AI to reduce customer resolution time by 91 million minutes. Procter & Gamble creates personalized omnichannel journeys from over 275 million consumer records. IKEA Retail use Recommendations AI to increase e-commerce click-through rates by 30% and increase order value by 2%. FIH, a Foxconn company, used Visual Inspection to identify defects 10x more accurately. Mr. Cooper, a leading mortgage services provider, use Document AI to process mortgage documents 400% more efficiently. And Bank of New York Mellon developed a liquidity solution that predicts nearly 40% of security settlement failures with 90% accuracy. We're helping many businesses drive durable innovation through long-term partnerships with Google's transformation cloud. Now to help them transform, we focus on 5 key themes. One, are we the best at understanding and using data in an industry? Two, do we have the industry's leading technology infrastructure? Three, are we creating the best hybrid workplace for our passionate and talented employees? Four, do we know that our data, systems and users are secure now and that they will be secure in the future? And five, are we working together to address the most important challenges facing our world today? We help organizations address these important questions. Let's start with the first question. Are we the best at understanding and using data in an industry? We help organizations unify their data across multiple clouds and silos, combining structured and unstructured data and making data every employee's superpower. Using data analytics and AI together, Schrödinger accelerated clinical drug discovery by 60%, finding new breakthroughs faster. Like many states around the United States, the Wisconsin Department of Workforce Development confronted a wave of new unemployment claims. Using Google's Data Cloud, they cleared over 750,000 unemployment claims, reducing claim times from weeks to just days and dispersing over $2 billion in unemployment benefits. Walmart is transforming the experience for the approximately 220 million shoppers around the globe who visit a Walmart store, club or e-commerce website each week. I'm honored today to welcome Suresh Kumar, Executive Vice President, Walmart's Global Chief Technology Officer and Chief Development Officer.

Hi, Thomas, and hello, everyone. I'm excited to be here today to share about how we at Walmart are innovating on behalf of our customers, our associates and the role that our partners like you, Google, have played in our innovation journey. Now I came to Walmart at a time of incredible digital transformation and, jointly with my team, created a robust execution plan to accelerate the transformation across 3 areas: building great customer experiences, optimizing our business and modernizing our platform and our infrastructure. Each of these 3 priorities are individually important. But when you bring them together at the scale of a business like Walmart, it has a massive impact. If you move with speed, you can completely transform global operations and disrupt entire industries. Some of our most data intensive or critical decisioning process are getting the BigQuery treatment. Through this, not only have we seen significant savings that will continue as we migrate more and more data over, we are also seeing the ability to use the data in interesting ways, including enabling analytics at scale and turning data into actionable insights. From a data migration to BigQuery standpoint, 97% of the payables used for data warehouse have already migrated to the cloud. And 30% of the big data have been migrated with plans to almost double that by the end of this fiscal year. And the cherry on the top is that BigQuery has allowed us to integrate with pretty much any data visualization tool and analytics tool that's out there, thereby improving our processing time by 23%, and of course, needless to say, a much better user experience. Using BigQuery has had a direct impact on our business. An excellent example is our ability to close our financial books in 3 days instead of 5 days, and that's a pretty big deal. Leveraging our cloud has enabled us to unleash the potential of AI across our entire business. This goes from predicting demand to managing in-stock levels, to optimizing supply chain, to freeing up time for our associates to serve our customers. As one example, Express Delivery, which is our 2-hour delivery service, which we launched last year, actively uses AI behind the scenes as the customer is creating their order. Multiple algorithms work in unison to optimize the delivery route and determine if the customer is eligible for Express Delivery. We are building our own AI and ML capabilities to power multiple areas of our business, including classification, natural language processing, forecasting, regression, computer vision, predictions, process automations and a whole lot more. So to wrap up, I'm really excited about the opportunity Walmart has to drive innovation and to further disrupt the retail industry. I hope you will agree that our got together is making a huge difference for our customers and our associates. Thank you for having me.

Thank you, Suresh. And tens of thousands of incredible organizations like Walmart choose Google's Data Cloud for 4 reasons. First, Google's Data Cloud is the most complete and unified data and AI platform to help you manage every stage of the data life cycle from running operational transactions to developing analytical applications. We help customers unify data lakes and warehouses as data lakehouses to reduce complexity and to combine structured and unstructured data. Built in data science and AI with support from MapReduce, Spark and Presto enables continuous learning and experimentation. And we support real-time streaming that natively uses open-source standards like Beam and Flink. Google's Data Cloud is also unmatched for speed, scale, security and reliability. BigQuery, one of the most successful and beloved data warehouse solutions with its unique serverless approach during a typical week, helps more than 3,000 different organizations analyze more than 200 petabytes of data. And thousands of customers use Dataproc to run Spark and Hadoop clusters easily. Spanner, a fully managed relational database with unlimited scale and multi-zone and multi-region consistency, serves more than 1 billion requests per second and provides a 99.999% SLA. Google Data Cloud's Vertex AI offers the AI pioneered at Google Research and DeepMind so that every data scientist and ML engineer can now build, deploy and scale AI models faster and with 80% less code, using AI the same way Google does. For instance, GE Appliances, an appliance manufacturing leader for more than a century, is using Google Cloud, including AI at the edge, to build innovative digital products with over-the-air updates. Finally, Google's Data Cloud is more open standards-based. You can choose from Postgre, MySQL, Redis, MongoDB or migrate from Oracle or SQL server. And we have strategic partners with leading data-driven applications. For instance, C3 AI has made its entire lineup of AI-based applications available on Google Cloud. Our customers can analyze, govern and visualize data from many databases and storage system on Google or other clouds, including all of Google's databases, Google Sheets and BigQuery using Looker, our premier BI and embedded analytic solution. Today, we're thrilled and excited to announce that we will be integrating Tableau, a leader in data visualization, with Looker, Google Sheets and BigQuery. Tableau customers will soon be able to use Looker semantic model, enabling new levels of data governance and access to data. Let's take a look at this. Aleks, over to you.

Thank you, Thomas. In this demo, we're going to show you how you can seamlessly use Looker and Tableau together to answer your critical business questions. Let's say I work at an e-commerce company, and our Looker model provides a consistent view across the organization for our most important business metrics. Here, for example, you can see the definition for gross margin. Our Looker dashboard is based on that same semantic model. Since it provides trusted insights at a glance, I can immediately see that sales are up. However, did I miss anything? Let's find out. Say I'm more comfortable working in spreadsheets. I can now take advantage of the new integration between Looker and Google Sheets. With a couple of clicks, I have access to my governed and trusted Looker data in Sheets and I can easily connect to my data models. To understand which factors are impacting sales, I'll drag and drop fields from my model into a pivot table to break out sales by category over time. Since it's pulling from Looker, I can trust that all the data definitions are consistent. I can use familiar Sheets formulas and formatting to get insights faster and understand how specific products are selling. We see a notable downward trend month-over-month for activewear. I want to share these findings with my marketing team who is using Tableau. Now I can use the new Tableau and Looker integration to combine data from my Looker data model with marketing data to build a more comprehensive view of my business. Next, I'm going to plot sales by category and then add marketing spend to the view. Tableau makes it easy for me to drill down on relevant data. Now I can see that social marketing spend was significantly lower for activewear. And this is why there's a downward trend in activewear sales. I'm going to publish this result on Tableau Online and tag my marketing team, so they can take action. Leveraging integrations between Tableau, Sheets and Looker allows our teams to build powerful visualizations using trusted data. We can then share these visualizations throughout our organization to drive informed decisions, action and impact. Back over to you, Thomas.

Thank you, Aleks. The second question customers ask, do we have industry-leading technology infrastructure? We're experiencing great momentum with our open infrastructure cloud. Many of the most demanding and technically advanced customers in the world disproportionately choose us. Take for example leading media companies and streaming services such as Univision and Global, the largest media group in Latin America. They use our high-performance networking, computing and storage to broadcast media, including live events such as the recent Tokyo Olympics. Leading telecommunications companies are also choosing Google Cloud. Reliance Jio, the world's second largest mobile carrier, is automating its 5G network. Vodafone is processing over 1 billion network events each day. AT&T is delivering new multi-access edge computing solutions. And TELUS is migrating critical IT and network workloads, all to Google Cloud. Leading data management companies, including Databricks, Redis, Cockroach Labs, Couchbase, Elastic, InfluxData, MariaDB, MongoDB, Neo4j and SingleStore are all growing faster on Google Cloud than on any other cloud. And they love our storage scalability and advanced infrastructure. MongoDB, for instance, has more net new customers via Google Cloud Marketplace than on any other cloud. Leading cybersecurity companies such as Palo Alto Networks, Exabeam, F5 Shape, Splunk, Broadcom and ForgeRock are also choosing Google Cloud for its performance, global scale and underlying security. Customers are migrating and transforming SAP and VMware workloads to Google Cloud. In just the last year, we've added 3x the number of SAP customers as the prior year, and we're accelerating. PayPal, for instance, has an SAP HANA scale-out system, supporting 40 million business transactions daily, 200 billion records touched in just 30 seconds. Mitel in Canada migrated over 1,000 VMware virtual machines in less than 90 days to Google Cloud VMware Engine. Nylas, an API platform company, shows our Tau virtual machines, along with Google Kubernetes Engine, as they saw over 40% better price performance than in a competitor. Customers choose our open cloud infrastructure for 3 main reasons. First, we make your path to migrate and modernize using cloud easy with migration tools, new serverless and container capabilities and managed services as your developers spend more time, building experiences that your customers love. Second, we offer transformative capabilities with cutting-edge performance and security. And our network offers 3x the throughput of other cloud providers. Third, we remain and were the very first and only cloud provider with a clear multi-cloud strategy. We provide you with a consistent developer experience, built an open source to write once and deploy anywhere. Many customers like Plaid, a financial services leader, use Anthos to deploy, operate and manage applications across multiple clouds. Recently, we introduced Anthos for virtual machines, standardizing the way that you manage applications across both virtual machines and containers. For multi-cloud data, BigQuery Omni lets customers analyze data across Google Cloud, AWS and Azure. With it, Johnson & Johnson, for instance, was able to combine data in Google Cloud and AWS S3 using BigQuery Omni without needing to migrate data. Customers also want to expand where they use Google Cloud, whether in their private data centers or out on the edge. For instance, some workloads cannot move to the public cloud entirely due to the need for large amounts of local data processing, extremely low latency or strict regulations. To solve these challenges, we're announcing today Google Distributed Cloud, a portfolio of hardware and software solutions that extend our infrastructure to the edge and even into your own data center. To tell you more about it, please welcome Ines from our Google Cloud -- Distributed Cloud team.

Thank you, Thomas. Google Distributed Cloud is a set of fully managed services running on Google-managed server. Based on open APIs and built on Anthos, it gives customers greater deployment flexibility and ensures more consistent operations across hybrid and multi-cloud environments, more than any other cloud provider. There are 4 deployment scenarios, depending on your specific needs. Google's network edge, this allows customers to leverage over 140 network edge locations around the world. Operator edge, this scenario is designed to accommodate emerging services and applications with a stringent latency and reliability requirements for a specific operator. Customer edge, this scenario supports customer own edge locations such as retail stores, factory floors or branch offices, which require localized compute and processes. And finally, customer data centers, this deployment option is specific to customer-owned data centers and caller facilities. Google Distributed Cloud also includes a hosted mode to run sensitive workloads and address data sovereignty, security and privacy requirements. It does not require connectivity to Google Cloud at any time to manage infrastructure, services, APIs or tooling. You have the choice to manage it yourself or host through a designated trusted partner. Back to you, Thomas.

Thank you, Ines. Partners like HPE, Dell, Cisco and NetApp are key as we deploy Google Distributed Cloud globally on best-in-class hardware. I'm pleased to announce the expansion of our partnership with Network Appliance in 2 important ways. First, NetApp is our primary partner supporting Google's Distributed Cloud storage infrastructure. Second, for customers using Google Cloud VMware Engine, they now have preview access for NetApp cloud volumes. We are the only hyperscaler to provide customers with this choice. Deep partnerships with T-Systems and TELUS have also enabled us to address the evolving sovereignty requirements for cloud technology in Germany and France. The next question we hear is how can we provide the best environment to help employees create and innovate together, especially in a hybrid workplace? Hybrid is redefining how we all work, making it less about where we work, but more about the quality of our experience. Studies estimate that more than 48% of employees will work remotely post-COVID. Google Workspace is the best platform for hybrid work with simple, powerful and secure tools to help people communicate and collaborate with one another, no matter where they are. We introduced Smart Canvas to help content creators remove friction from workflows and enable teams to stay connected outside of meetings to foster wellbeing and reduce video call fatigue. We made communication and collaboration completely seamless. For instance, users can easily present and collaborate in meetings, create meeting notes from their calendar, present and meet directly from doc sheets or slides and collaborate directly from Chat and Spaces. We optimized collaboration from all mobile devices to provide great experiences for frontline workers who make up 80% of the global workforce. One of America's largest hospital systems, CommonSpirit Health, is advancing its mission during the pandemic by making its frontline doctors and nurses productive with Google Workspace. Since hybrid work has removed the notion of a physical location for work, Google Workspace created Spaces, a unified digital location for work. Today, more than 3 billion users move security and seamlessly between mail, chat, audio, video and now Spaces. And you too can choose among the over 5,300 public apps in our marketplace. And you can also add thousands of private apps to enhance your workspace. Now I want to step aside for just a minute and tell you about a hidden secret in our portfolio of products. AppSheet, our no-code platform that makes it easy for everyone, not just professional developers, to build amazing apps and workflows. For instance, property managers at Carrefour Properties (sic) [ Property ] used AppSheet to build a mobile app to log, track and resolve problems with headquarters, replacing a multistep manual process. We're also partnering with Citrix because employees sometimes need access to Windows and macOS applications and desktops directly served from the cloud. We're expanding our partnership with Citrix today to deliver an integrated desktop as a service solution purpose-built on Google Cloud. Now customers ask us, do we know that our data systems and users are secure? And how do we keep them secure in the future? As more digital users access more data from more locations, the risk of cybersecurity breaches is accelerating. By pioneering new approaches to security, Google keeps more people safe online than anyone else in the world. Take, for instance, JetBlue. It's keeping its system secure, protecting the data of all its travelers and modernizing its security operations using Chronicle to detect threats across petabytes of security telemetry, eliminating data blind spots. Commerzbank, one of Germany's largest banks, is using our new certificate authority service to verify machine and workload identity, improving security, simplifying operations, eliminating entire classes of threats. Secure by default drives customers to choose Google Cloud. First, we've implemented zero trust at the core of our services and our operations, enabling you to trust nothing. Second, we've built cloud scale threat detection and response, allowing you to detect everything. And third, we know it's not just about tools. We provide the advisory services you need to transform security operations. We keep customers safe with BeyondCorp Enterprise, which enables zero trust access for all you users. Today, we're expanding BeyondCorp to all your applications, modern and legacy, web and desktop and even to production environments. We keep customers safe by eliminating software supply chain vulnerabilities. Over the past 2 decades, we pioneered an approach to secure our own software supply chain. We are now making that technology available through the SLSA open source framework and as managed services in our cloud to help you secure your own software supply chain. We keep customers safe by integrating Chronicle's threat detection capability with our Security Command Center, allowing you to respond faster to potential risks. And we keep customers safe by bringing our security expertise to you with our Google Cybersecurity Action Team, a team of our leading security experts who can help shape your security transformation from your very first implementation through responding to a major incident and engineering new solutions as needs change. Finally, we continue to expand our security ecosystem with companies like Fortinet, Palo Alto Networks, Qualys and so many more. Today, I'd like to welcome a new security partner, Cybereason, with whom we are collaborating to deliver a new extended detection and response offering that will combine Chronicle's capability with Cybereason's MalOp engine for faster, easier threat detection and response. Our products, our new Cybersecurity Action Team and our partnerships, all make the world safer from cyber threats. To talk more about how we help keep each and every one of you secure and how we're addressing some of the most important challenges facing our world, I'd like to invite Sundar back. Thank you.

Thank you, Thomas. Security is top of mind for businesses of all sizes as well as the public sector. And despite the progress that has been made in cybersecurity, large-scale breaches continue to make headlines. That's why in August, Google announced we'll invest $10 billion over the next 5 years to strengthen cybersecurity. That includes expanding zero trust programs, helping secure the software supply chain and enhancing open source security. A new challenge is keeping collaborations secure and private as we move to hybrid work environments. To help, we are introducing a new Work Safer program. It provides the highest level of security for your e-mail, meetings, messaging and more and brings together Google Workspace with tightened security keys, BeyondCorp, and other secure technologies, products and partners. Now every kind of organization and business can access the same security protections that make work safer at Google. Security is an issue that affects us all. And this brings us to the last question Thomas posed. Are we addressing the most important challenges facing our world? Climate change is one of the most profound challenges we face. It'll take all of us working together to solve it. Sustainability has been a core value for us for more than 2 decades. Google has been carbon-neutral since 2007, and we've matched our operations with 100% renewable energy over 4 consecutive years. Last year, we set out to make our third decade of climate action, our biggest yet. That included a bold commitment to operate on 24/7 carbon-free energy across our offices and data centers by 2030. And last week, we announced new ways we are helping 1 billion people make more sustainable choices. When it comes to enterprises, one of the most important sustainability choices is where to run your technology. IDC predicts cloud migrations over the next 4 years could reduce carbon emissions by over 1 billion metric tons or the equivalent of removing 200 million cars off the road for a year. We are proud that Google Cloud is the cleanest cloud in the industry. Earlier this year, we introduced a way for customers to choose the cleanest regions to run their workloads. Today, we are expanding our portfolio of solutions and partnerships to help reduce your carbon footprint. First, we are focused on giving you greater transparency around carbon emissions data. We are announcing Carbon Footprint, a new service to measure, track and report the gross carbon emissions associated with your Google Cloud usage. Having this data at your fingertips is really important. And we know that many customers track sustainability data in other places. That's why I'm happy to announce that Google Cloud emission data will integrate directly into Salesforce Sustainability Cloud. We also want to give you the tools to act on the data. So today, we are introducing a new tool that will alert you when you have idle workloads and make recommendations to reduce carbon emissions. It's all part of our goal to help make your cloud transformation secure and sustainable and solve for what's next. So on behalf of Thomas and myself, let me thank you once again for trusting us to be a partner with you on this journey. And we hope you enjoy the next 3 days. Thank you.