Google search revenue gets a boost from AI features

Well, Alphabet earnings came in ahead of analyst expectations with the tech giant reporting higher than expected sales in the first quarter. Google’s ad sales revenue growing at 8.5% in the quarter’s slowest pace of growth since 2023, but still growing despite competition from AI search options. Google’s parent company also reaffirming its $75 billion AI capex for the year. Here to break down what this latest quarter means for the tech giant, Ronald Josie, he’s City’s senior analyst. Ronald, Ronald, it’s it’s great to have you here. So, talk me through the AI rundown and the impact that that had because there was this concern that to walk our audience through it, if you Google something right now, you’re most likely going to see a little AI rundown at the top before you get to all the stuff that has more ads on it. We were worried that was going to be a ding to them, but it didn’t happen. Talk me through it.

01:34 Ronald Josie

So, I would say this is the first quarter that we’ve heard them talk about the benefits from AI overall. We’ve been in a wait and see mode for some time just given their overall, you know, investment in Gemini in search in AI and the list goes on and on. And so this quarter, we actually heard that AI overviews, which specifically um is on the top of your search results, is helping to drive incremental clicks. And not only is it helping to drive incremental clicks, it’s helping to drive clicks more often. And these are more commercial type queries. And so frankly, what we heard this quarter was um actual search revenue grew 10% thereabouts. Uh that’s a positive, that’s better than we were expecting. AI overviews now rolled out to essentially the the vast majority of Google search users is delivering greater overall searches and and and engagement. And we also heard their newest version of of of search, which is called AI mode, which is actually to the left of that all section, um is is actually seeing promising results as well. And so, what I’m trying to get at here for the first time, I think we’re seeing and hearing their investments in Gemini and AI actually drive results. And that’s a very good first step. We’re not out of the woods, still a lot of question marks. Uh they’re playing from behind to a certain extent, but but that certainly was a major takeaway from from last night.