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She'll shares of Alphabet are up for our second day following earnings late Wednesday. The company, as you know said, demand for AI products boosted quarterly sales and now requires an extremely increasing capital expending, heightening pressure on the company to justify the cost of keeping up in the AI race. That's kind of the big picture Google Cloud revenue, and that's something we want to focus on and operating income.
Top analyst projections our own Bloomberg Intelligence is Man Deep Seeing, writing after earnings that Google's increase capex view by ten billion dollars for the full year suggests that cloud segment growth is likely to remain above thirty percent through the second half.
Well.
Our next guest is the chief operating officer of Google Cloud, in fact, it's first COO. Great to have with us is Francis Desuza. He joins us from the Bloomberg News bureau out in San Francisco. Francis, welcome, so nice to have you here with Tim and myself.
Great to be here, Thanks for having me. I want to.
Start with AI and cloud demand. As you know, it feels like so many conversations start with AI AI contributions to Google Cloud growth thirty two percent. What are you seeing currently and continuously when it comes to AI and cloud demand?
Yeah, right now, it feels like there are two powerful mega trends that are playing out in the enterprise market. The first is, you know, the continued move by companies of their workloads to the cloud, of their applications to the cloud. And the second, much bigger trend that's playing at right now is the adoption of AI by companies. And those two powerful mega trends are driving our business and fueling the growth that you saw in the quarter.
And so what we're seeing on the AI side is, you know, this is the fastest in my career that I've seen a technology move from pilots to production. And so what we're in talking to customers, what they're telling is is they're recognizing the benefits that AI can bring into their company. Across the board. You know, we have companies that like Verizon that are using AI to help
do customers support. We work at Seattle ChIL Dren's Hospital that's using AI to inform physicians in their communications with patients. We also have companies like Papa John's or McDonald's that are using AI in the franchises, and so we're seeing broad adoption by enterprises across a number of places where they can see the benefits from AI.
You just mentioned a few examples of companies that you work with. There are a lot of small businesses, though, and even large businesses that I think it's fair to say haven't fully harnessed what you view as the opportunity when it comes to AI. How big of an opportunity is it for Google Cloud? What's a number? How can you quantify this?
Yeah, I think you're absolutely right in that we're the very early stages of what is a very large sort of adoption market in front of us. Now. You know, you look at the numbers we delivered. You know, last quarter in Google Cloud, we delivered thirteen point six billion dollars in revenue, and as you said, that's up thirty two percent year over year. So although the numbers are already big, we're still just at the very very beginning
of AI adoption by companies. That's true whether you look at small companies who are starting to use it in terms of their outreach to customers to scale up their presence. From a marketing perspective, all the way to large enterprises. Were just at the very beginning of this big wave.
You know, one of the things francisaid, I'm so glad we could get some time with you, is that, you know, everybody kind of throws out AI and large language models generally, and we're just trying to get more of an understanding of how this all impacts our world. Drilled down a little bit further in terms of the customers that you are working with, big, medium and small, and how they are using AI and how it's going to impact our lives.
Yeah, we're seeing it show up in enterprises in a whole bunch of different ways, and so let me give you some examples. You know, some large manufacturers like Toyota, for example, or Honeywell are using AI on the factory floor to provide information to the people working on the factory floor to improve their operational ability, and also to provide access for their customers to engineering and technical support documents around the product, so make it easier for customers
to navigate and find the information they need. We're seeing some hospitals, as I talked about, helping using AI to help write physicians access to whether it's guidelines or any background information. In addition, we're seeing hospitals use AI to automatically transcribe the communications with their patients. So what AI will do is actually take the notes automatically and then
upload it into the systems that it needs to. What that does is it frees up time for the medical professionals to do what they do best, which is deal with patients. We're seeing small businesses they're using AI to
create marketing materials and do that much more efficiently. We're seeing large retailers like Wayfair that are using AI to create more personalized experiences for their customers when you come to the website, so you can imagine as you're using Wayfair, you can imagine how the furniture items will look in your environment. Rids a better shopping experience for customers. So we're seeing a wide swath of ways that AI is being used in companies.
I'm so glad you mentioned kind of the medical area and what they're doing, because I think a lot of folks come on our air and talk to the Bloomberg audience and talk about how AI might significantly impact not just hospitals, but just how we get medical care. You are the former CEO of Alumina, and I think about DNA sequencing and all of the information and data that could potentially improve how we are treated when it comes
to healthcare. How are you thinking about that space and what it might mean for Google Cloud and demand there.
Yeah, I think AI is going to have a very big impact in a number of ways across healthcare. Right, so, if we talked about some ways where it's helping in the delivery of care by freeing up medical professionals from administrative tasks and using more of their time to actually
interact with patients. In addition, it's also helping medical professionals get access to the information they need across a whole swath of information, so you know, they need to be able to stay on top of guidelines as they emerge, new research that's being published, as well as all the information on the patient, and increasingly, you know, we're getting
more and more personalized information on a patient. You talked about genomics, There are a lot of images as well as previous lab tests, and so what AI can do is sort of take all that information and present it in a more digestible way so that you can make better decisions. In addition, AI can also help you know earlier in the process of drug development. We've seen fantastic advances with tools like alpha fold, which allows you to, you know, deduce a three D protein structure across hundreds
of millions of protein types. But that does then, is that allows you to identify maybe new druggable targets that allow you to treat diseases. A. I can also help bring information together, you know, the genomic information, the phenotypic information, you know, the the imaging inform and help us get better understanding of what causes diseases and how they develop. And that could give us new insights that allow us to think about how we can treat those diseases better.
So in almost every part of the healthcare industry, you can see how AI can help improve that industry.
We're speaking with Francis Desu's a chief operating officer over at Google Cloud. Francis, I want to talk a little bit about competition. For years, Amazon has been number one. According to our Bloomberg Intelligence team and data from IDC. In twenty twenty three, AWS had about forty seven percent of the infrastructure as a service market share, Microsoft in second place with sixteen percent, and then Google coming in with about six percent. How do you get to number two and then number one?
What's really interesting is that is as I talk to customers with their things as a convergence of two really big important spaces. One is the cloud spaces you talked about, and two AI. So nearly every customer conversation I have now in prospect conversation I have is really all about AI and how it will impact businesses. And we are the only hyperscaler that actually has our own AI stack. So if you think about every part of the AI
technology stack, Google has leading technology. So for example, on the chip side, we're one of the largest partners in the world with Nvidia on GPUs, but we also have our own technology TPUs that are very highly performant and we run them in our data centers. In terms of the models, we work with a number of other model providers, so if you go into our model garden, you can
access models from companies like Anthropic and deep Seek. But we also have the world's leading model with Gemini two dot five, which is performing really well on the top of the leaderboards in almost every part of AI, and so here too we provide our own leading technologies and it's Gemini, but it's also our image models, our video models,
our time series models, our weather models. And then we also provide our own applications on top of that, like Agent Space that allow companies to easily develop their own agents.
And then we have a leading cybersecurity portfolio. And so where we are differentiated in the market is that as we talk to customers, we're really the only hyperscaler that can talk about our own native AI stack that's leading technologies in each part of the stack, as well as our cloud, and that's playing really well, and that's driving a lot of the results that you are seeing, including the results we just published, you know yesterday on the arnings.
Call, I got to say it's the thinking models, the Gemini two point five that really kind of are blowing everybody's minds. Hey, one thing I want to ask you, speaking of customers, Tim and I full disclosure, we talk about it a lot. Are a little bit obsessed with Weimo. How much is Weimo using Google Cloud. I'm just curious in terms of keeping that all going and running.
Yeah, I totally understand why you love Weimo. I love Weimo too. Living in San Francisco, I've been using it for a few years and my daughters and I love it. As you can imagine, you know, being sister, you know parts of Google Google we leverage technologies that Google Cloud is building as well as deep Mind is building, and so as you could imagine, you know, there's really close interactions from a technology perspective across these different parts of Google.
Hey, just thirty seconds left. Security. As we know your former background semantech, you understand the importance of security specifically, and I'm just curious what do you keep top of mind when you think about the security of Google Cloud and keeping it secure.
Yeah. As you point out, security is a really important area for us to focus on, and it's a core part of the value that we deliver to our customers in terms of providing a very resilient, protected cloud. There are a number of things that you know that are top of mind for us and for our customers as we talk about security, especially in a world of AI. One is it's important that security companies are leaning deep
into leveraging AI to improve their security capability. So we offer agents, for example, that customers can deploy as part of their security operations center, as part of their threat intelligence gathering, and so we're also doing research on how AI can be leveraged by the bad actors and think about how you can stay on top of providing defenses for things like you know, altered images and videos and
deep fakes. It's also important to our customers that the security we provide works multi clouds, so not just for Google Cloud, but that they can have the same security posture for workloads that they have on other clouds as well, and so that's an important part of the conversation too. So provide leading edge technologies, stay on top of AI and the expanding sort of threat landscape that opens up, and then also make sure that whatever you give us, you know, works across clouds.
So glad we could get some time with you. Francis Desuza he's the chief operating officer at Google Cloud, former CEO of Alumina, and also former president at Samantech, where he oversaw the security and data management portfolio.