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Alphabet's quarterly revenue up 22% to 163 trillion won…Cloud revenue surges 63%
Google announced that it is reviewing the long-term introduction of advertisements into its artificial intelligence (AI) model, Gemini.
Phillip Schindler, Google's Chief Business Officer (CBO), stated this during a conference call following parent company Alphabet's Q1 earnings announcement on the 29th (local time), in response to a question about 'plans to add advertisements to Gemini.' He said, "Advertising has always played an important role in scaling products to reach billions of users."
Schindler CBO explained that the current monetization focus is on 'AI Mode,' a chatbot accessed through Google Search, rather than the Gemini app, but added, "I believe that formats that work well in AI Mode can also be successfully applied to the Gemini app."
However, he added, "For now, we are focusing on subscription services within the Gemini app," and "We will share our (advertising-related) plans when the time is right, but we will not rush it."
If Google introduces ads to Gemini, it would be the second case after OpenAI's ChatGPT, which already displays ads to users on free and low-cost plans.
In contrast, Anthropic, a competitor of OpenAI, has even released a satirical ad mocking OpenAI's advertising policy, declaring that they will not attach ads to their AI.
Google also disclosed during the conference call that it has begun directly selling its proprietary AI chip, the Tensor Processing Unit (TPU), to some customers.
Sundar Pichai, CEO of Alphabet and Google, stated, "As demand for TPUs increases in capital market enterprises and high-performance computing app sectors, we plan to directly supply TPUs to the self-owned data centers of some selected customers."
Previously, Google had only provided TPUs by leasing computational capacity through Google Cloud, rather than directly supplying them.
If Google changes its distribution method and sells TPUs, it will be directly competing with companies like Nvidia and AMD in the AI chip sector.
Anat Ashkenazi, Chief Financial Officer (CFO), predicted, "Some of the revenue from (direct TPU sales) contracts will begin to be recognized by the end of this year," and "Most of the revenue will be realized in 2027."
Alphabet announced in its earnings report today that its Q1 revenue increased by 22% compared to the same period last year, reaching $109.9 billion (approximately 163 trillion won).
This exceeded the market forecast of $107.2 billion compiled by market research firm LSEG and represents the best quarterly growth rate since 2022.
In particular, earnings per share (EPS) were $5.11, nearly double the market consensus of $2.63.
By segment, cloud growth was notable. Google Cloud's revenue surged 63% year-over-year to $20.02 billion, reaching the $20 billion mark for the first time.
This performance significantly exceeded market expectations of $18.05 billion. The cloud segment's operating profit was $6.6 billion, three times that of the same period last year ($2.2 billion).
Revenue from core businesses such as Google Search increased by 19% to $60.4 billion, and YouTube ad revenue recorded $9.88 billion.
Revenue from other segments, including autonomous taxi Waymo, decreased slightly from last year to $411 million.
Pichai CEO emphasized, "Enterprise AI solutions became a key driver of cloud growth for the first time in Q1," and "2026 has started excellently, and our AI investments and full-stack approach are delivering results across all parts of the business."
Pichai CEO added that the number of paid monthly active users (MAU) for the enterprise AI model 'Gemini Enterprise' increased by 40% compared to the previous quarter, and the number of individual paid customers for YouTube and AI reached 350 million.
Furthermore, Alphabet raised its capital expenditure forecast for this year by $5 billion, from the original $175 billion-$185 billion to $180 billion-$190 billion.
Due to such astronomical AI infrastructure investments, Google's Q1 free cash flow plummeted to $10.116 billion, less than half of Q3 ($24.461 billion) and Q4 ($24.551 billion) of last year.
Alphabet's Class A common stock remained flat during regular trading hours today, but surged over 7.2% in after-hours trading following the earnings announcement, reaching $375.2 as of 8 PM ET.
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