Alphabet’s Pichai Says AI to Power New Wave of Growth for Google Search

If you had to pick one personality trait that you’d most want to see in a pilot, it might likely be the ability to remain calm and collected in a stressful situation.

If you apply that same rationale to the leadership of a $1.5 trillion technology company that is in the midst of the sharpest (-30%) and longest (nearly nine months) correction in its 18-year history as a public company, than Sundar Pichai, the CEO of Google and parent company Alphabet, might be your kind of guy since the 50-year-old executive is showing zero signs of distress or dismay atop the company he’s piloted since 2015.

“With an uncertain global economic outlook, our strategy to invest in deep technology and computer science to build helpful products for the long term is the right one,” Pichai told investors tuned into the company’s Q2 earnings call livestreamed on its YouTube property after the close of trading Tuesday (July 26).

While pointing specifically to the performance of Search and the momentum of its Cloud business, while also being ever-cognizant of the reality that Google’s liquid pile of cash and equivalents still sits at $125 billion, the world’s largest search engine operator clearly has enough fuel, so to speak, to make a safe landing — whenever the “economic gods” decide that will actually happen.

“Our ability to take the long view stems from our timeless mission to organize the world’s information and make it universally accessible and useful,” Pichai added, pointing to the payoff Google is experiencing from years of investments in AI and computing, while also pledging to continue doing so.

Search to the Rescue

As much as Google’s budding Cloud business delivered outsized 35% revenue growth for the three months ended June 30, a pace that nearly tripled the 13% growth rate of the company’s total sales, the unit’s $6.2 billion contribution amounted to less than 10% of total revenues. Even so, Google’s infrastructure and platform services unit still booked an $858 million loss for the quarter.

With that in mind, the comparatively modest Search segment revenue growth of 13% pales in comparison, until you realize that the $40.7 billion topline contribution accounted for almost 60% of Google’s total revenues, and over 72% of sales in its massive advertising unit.

Is that growth rate and ad spend lower than last year and other periods of rapid growth at Google?

Absolutely.

But is the near-ubiquity of the term and act of “googling” someone or something about to change?

Absolutely not, and Pichai made it perfectly clear that Search, as we’ve all come to know and use it, will not shrink under his watch, any more than it will stay the same.

“AI is helping us create entirely new ways to search,” Pichai said. “People are using Google ads to do visual searches more than 8 billion times per month,” he added, before highlighting an upcoming new feature called “Multi Search” that later this year will help people simultaneously use words and images to find what they want.

To facilitate the growth and continued reliance on Search, Pichai also pointed out that Google’s translation function has just been expanded by 24 new languages that are spoken by an additional 300 million people.

See It, Buy It

If seeing is believing, Pichai said the company’s new “immersive view” in maps is just that, as it uses computer vision, AI and billions of images to create high fidelity representations of places around the world, as well as in other world’s — such as augmented reality.

At the same time, Pichai noted that consumers are still shopping across Google more than a billion times each day.

“We see hundreds of millions of shopping searches on Google images each month, and merchants will soon be able to submit 3D images of their products to appear directly on Google Search so customers can try before they buy,” he added.

Taken together, Google reported that its spending on research and development during the first six months of the year was up 25% versus 2021 to $19 billion.

Fasten Your Searchbelts

Like any choppy flight, there’s always a cabin crew on hand to warn of any dangers, and in Google’s case, that person is CFO Ruth Porat, who cautioned investors on the call that the current blip that’s being driven by travel and retail search and advertising was likely to face some tough turbulence for at least the next six months.

“Going forward, the very strong revenue performance of last year continues to create tough comparisons that will weigh on year-on-year growth rates of advertising revenues for the remainder of the year,” Porat said, noting her expectations for an ongoing headwind from the fee-changes and slowdown in ad spend that impacted results in the second quarter.

One casualty of that climate, Porat said, will be a moderation of the company’s previously torrential pace of hiring, which saw headcount rise 20%, or 30,000, to 174,000 in Q2.