Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: She'll shares of Alphabet are up for our second day
Speaker 2: following earnings late Wednesday. The company, as you know said,
Speaker 2: demand for AI products boosted quarterly sales and now requires
Speaker 2: an extremely increasing capital expending, heightening pressure on the company
Speaker 2: to justify the cost of keeping up in the AI race.
Speaker 2: That's kind of the big picture Google Cloud revenue, and
Speaker 2: that's something we want to focus on and operating income.
Speaker 2: Top analyst projections our own Bloomberg Intelligence is Man Deep Seeing,
Speaker 2: writing after earnings that Google's increase capex view by ten
Speaker 2: billion dollars for the full year suggests that cloud segment
Speaker 2: growth is likely to remain above thirty percent through the
Speaker 2: second half.
Speaker 3: Well.
Speaker 2: Our next guest is the chief operating officer of Google Cloud,
Speaker 2: in fact, it's first COO. Great to have with us
Speaker 2: is Francis Desuza. He joins us from the Bloomberg News
Speaker 2: bureau out in San Francisco. Francis, welcome, so nice to
Speaker 2: have you here with Tim and myself.
Speaker 3: Great to be here, Thanks for having me. I want to.
Speaker 2: Start with AI and cloud demand. As you know, it
Speaker 2: feels like so many conversations start with AI AI contributions
Speaker 2: to Google Cloud growth thirty two percent. What are you
Speaker 2: seeing currently and continuously when it comes to AI and
Speaker 2: cloud demand?
Speaker 3: Yeah, right now, it feels like there are two powerful
Speaker 3: mega trends that are playing out in the enterprise market.
Speaker 3: The first is, you know, the continued move by companies
Speaker 3: of their workloads to the cloud, of their applications to
Speaker 3: the cloud. And the second, much bigger trend that's playing
Speaker 3: at right now is the adoption of AI by companies.
Speaker 3: And those two powerful mega trends are driving our business
Speaker 3: and fueling the growth that you saw in the quarter.
Speaker 3: And so what we're seeing on the AI side is,
Speaker 3: you know, this is the fastest in my career that
Speaker 3: I've seen a technology move from pilots to production. And
Speaker 3: so what we're in talking to customers, what they're telling
Speaker 3: is is they're recognizing the benefits that AI can bring
Speaker 3: into their company. Across the board. You know, we have
Speaker 3: companies that like Verizon that are using AI to help
Speaker 3: do customers support. We work at Seattle ChIL Dren's Hospital
Speaker 3: that's using AI to inform physicians in their communications with patients.
Speaker 3: We also have companies like Papa John's or McDonald's that
Speaker 3: are using AI in the franchises, and so we're seeing
Speaker 3: broad adoption by enterprises across a number of places where
Speaker 3: they can see the benefits from AI.
Speaker 1: You just mentioned a few examples of companies that you
Speaker 1: work with. There are a lot of small businesses, though,
Speaker 1: and even large businesses that I think it's fair to
Speaker 1: say haven't fully harnessed what you view as the opportunity
Speaker 1: when it comes to AI. How big of an opportunity
Speaker 1: is it for Google Cloud? What's a number? How can
Speaker 1: you quantify this?
Speaker 3: Yeah, I think you're absolutely right in that we're the
Speaker 3: very early stages of what is a very large sort
Speaker 3: of adoption market in front of us. Now. You know,
Speaker 3: you look at the numbers we delivered. You know, last
Speaker 3: quarter in Google Cloud, we delivered thirteen point six billion
Speaker 3: dollars in revenue, and as you said, that's up thirty
Speaker 3: two percent year over year. So although the numbers are
Speaker 3: already big, we're still just at the very very beginning
Speaker 3: of AI adoption by companies. That's true whether you look
Speaker 3: at small companies who are starting to use it in
Speaker 3: terms of their outreach to customers to scale up their presence.
Speaker 3: From a marketing perspective, all the way to large enterprises.
Speaker 3: Were just at the very beginning of this big wave.
Speaker 2: You know, one of the things francisaid, I'm so glad
Speaker 2: we could get some time with you, is that, you know,
Speaker 2: everybody kind of throws out AI and large language models generally,
Speaker 2: and we're just trying to get more of an understanding
Speaker 2: of how this all impacts our world. Drilled down a
Speaker 2: little bit further in terms of the customers that you
Speaker 2: are working with, big, medium and small, and how they
Speaker 2: are using AI and how it's going to impact our lives.
Speaker 3: Yeah, we're seeing it show up in enterprises in a
Speaker 3: whole bunch of different ways, and so let me give
Speaker 3: you some examples. You know, some large manufacturers like Toyota,
Speaker 3: for example, or Honeywell are using AI on the factory
Speaker 3: floor to provide information to the people working on the
Speaker 3: factory floor to improve their operational ability, and also to
Speaker 3: provide access for their customers to engineering and technical support
Speaker 3: documents around the product, so make it easier for customers
Speaker 3: to navigate and find the information they need. We're seeing
Speaker 3: some hospitals, as I talked about, helping using AI to
Speaker 3: help write physicians access to whether it's guidelines or any
Speaker 3: background information. In addition, we're seeing hospitals use AI to
Speaker 3: automatically transcribe the communications with their patients. So what AI
Speaker 3: will do is actually take the notes automatically and then
Speaker 3: upload it into the systems that it needs to. What
Speaker 3: that does is it frees up time for the medical
Speaker 3: professionals to do what they do best, which is deal
Speaker 3: with patients. We're seeing small businesses they're using AI to
Speaker 3: create marketing materials and do that much more efficiently. We're
Speaker 3: seeing large retailers like Wayfair that are using AI to
Speaker 3: create more personalized experiences for their customers when you come
Speaker 3: to the website, so you can imagine as you're using Wayfair,
Speaker 3: you can imagine how the furniture items will look in
Speaker 3: your environment. Rids a better shopping experience for customers. So
Speaker 3: we're seeing a wide swath of ways that AI is
Speaker 3: being used in companies.
Speaker 2: I'm so glad you mentioned kind of the medical area
Speaker 2: and what they're doing, because I think a lot of
Speaker 2: folks come on our air and talk to the Bloomberg
Speaker 2: audience and talk about how AI might significantly impact not
Speaker 2: just hospitals, but just how we get medical care. You
Speaker 2: are the former CEO of Alumina, and I think about
Speaker 2: DNA sequencing and all of the information and data that
Speaker 2: could potentially improve how we are treated when it comes
Speaker 2: to healthcare. How are you thinking about that space and
Speaker 2: what it might mean for Google Cloud and demand there.
Speaker 3: Yeah, I think AI is going to have a very
Speaker 3: big impact in a number of ways across healthcare. Right, so,
Speaker 3: if we talked about some ways where it's helping in
Speaker 3: the delivery of care by freeing up medical professionals from
Speaker 3: administrative tasks and using more of their time to actually
Speaker 3: interact with patients. In addition, it's also helping medical professionals
Speaker 3: get access to the information they need across a whole
Speaker 3: swath of information, so you know, they need to be
Speaker 3: able to stay on top of guidelines as they emerge,
Speaker 3: new research that's being published, as well as all the
Speaker 3: information on the patient, and increasingly, you know, we're getting
Speaker 3: more and more personalized information on a patient. You talked
Speaker 3: about genomics, There are a lot of images as well
Speaker 3: as previous lab tests, and so what AI can do
Speaker 3: is sort of take all that information and present it
Speaker 3: in a more digestible way so that you can make
Speaker 3: better decisions. In addition, AI can also help you know
Speaker 3: earlier in the process of drug development. We've seen fantastic
Speaker 3: advances with tools like alpha fold, which allows you to,
Speaker 3: you know, deduce a three D protein structure across hundreds
Speaker 3: of millions of protein types. But that does then, is
Speaker 3: that allows you to identify maybe new druggable targets that
Speaker 3: allow you to treat diseases. A. I can also help
Speaker 3: bring information together, you know, the genomic information, the phenotypic information,
Speaker 3: you know, the the imaging inform and help us get
Speaker 3: better understanding of what causes diseases and how they develop.
Speaker 3: And that could give us new insights that allow us
Speaker 3: to think about how we can treat those diseases better.
Speaker 3: So in almost every part of the healthcare industry, you
Speaker 3: can see how AI can help improve that industry.
Speaker 1: We're speaking with Francis Desu's a chief operating officer over
Speaker 1: at Google Cloud. Francis, I want to talk a little
Speaker 1: bit about competition. For years, Amazon has been number one.
Speaker 1: According to our Bloomberg Intelligence team and data from IDC.
Speaker 1: In twenty twenty three, AWS had about forty seven percent
Speaker 1: of the infrastructure as a service market share, Microsoft in
Speaker 1: second place with sixteen percent, and then Google coming in
Speaker 1: with about six percent. How do you get to number
Speaker 1: two and then number one?
Speaker 3: What's really interesting is that is as I talk to
Speaker 3: customers with their things as a convergence of two really
Speaker 3: big important spaces. One is the cloud spaces you talked about,
Speaker 3: and two AI. So nearly every customer conversation I have
Speaker 3: now in prospect conversation I have is really all about
Speaker 3: AI and how it will impact businesses. And we are
Speaker 3: the only hyperscaler that actually has our own AI stack.
Speaker 3: So if you think about every part of the AI
Speaker 3: technology stack, Google has leading technology. So for example, on
Speaker 3: the chip side, we're one of the largest partners in
Speaker 3: the world with Nvidia on GPUs, but we also have
Speaker 3: our own technology TPUs that are very highly performant and
Speaker 3: we run them in our data centers. In terms of
Speaker 3: the models, we work with a number of other model providers,
Speaker 3: so if you go into our model garden, you can
Speaker 3: access models from companies like Anthropic and deep Seek. But
Speaker 3: we also have the world's leading model with Gemini two
Speaker 3: dot five, which is performing really well on the top
Speaker 3: of the leaderboards in almost every part of AI, and
Speaker 3: so here too we provide our own leading technologies and
Speaker 3: it's Gemini, but it's also our image models, our video models,
Speaker 3: our time series models, our weather models. And then we
Speaker 3: also provide our own applications on top of that, like
Speaker 3: Agent Space that allow companies to easily develop their own agents.
Speaker 3: And then we have a leading cybersecurity portfolio. And so
Speaker 3: where we are differentiated in the market is that as
Speaker 3: we talk to customers, we're really the only hyperscaler that
Speaker 3: can talk about our own native AI stack that's leading
Speaker 3: technologies in each part of the stack, as well as
Speaker 3: our cloud, and that's playing really well, and that's driving
Speaker 3: a lot of the results that you are seeing, including
Speaker 3: the results we just published, you know yesterday on the arnings.
Speaker 2: Call, I got to say it's the thinking models, the
Speaker 2: Gemini two point five that really kind of are blowing
Speaker 2: everybody's minds. Hey, one thing I want to ask you,
Speaker 2: speaking of customers, Tim and I full disclosure, we talk
Speaker 2: about it a lot. Are a little bit obsessed with Weimo.
Speaker 2: How much is Weimo using Google Cloud. I'm just curious
Speaker 2: in terms of keeping that all going and running.
Speaker 3: Yeah, I totally understand why you love Weimo. I love
Speaker 3: Weimo too. Living in San Francisco, I've been using it
Speaker 3: for a few years and my daughters and I love it.
Speaker 3: As you can imagine, you know, being sister, you know
Speaker 3: parts of Google Google we leverage technologies that Google Cloud
Speaker 3: is building as well as deep Mind is building, and
Speaker 3: so as you could imagine, you know, there's really close
Speaker 3: interactions from a technology perspective across these different parts of Google.
Speaker 2: Hey, just thirty seconds left. Security. As we know your
Speaker 2: former background semantech, you understand the importance of security specifically,
Speaker 2: and I'm just curious what do you keep top of
Speaker 2: mind when you think about the security of Google Cloud
Speaker 2: and keeping it secure.
Speaker 3: Yeah. As you point out, security is a really important
Speaker 3: area for us to focus on, and it's a core
Speaker 3: part of the value that we deliver to our customers
Speaker 3: in terms of providing a very resilient, protected cloud. There
Speaker 3: are a number of things that you know that are
Speaker 3: top of mind for us and for our customers as
Speaker 3: we talk about security, especially in a world of AI.
Speaker 3: One is it's important that security companies are leaning deep
Speaker 3: into leveraging AI to improve their security capability. So we
Speaker 3: offer agents, for example, that customers can deploy as part
Speaker 3: of their security operations center, as part of their threat
Speaker 3: intelligence gathering, and so we're also doing research on how
Speaker 3: AI can be leveraged by the bad actors and think
Speaker 3: about how you can stay on top of providing defenses
Speaker 3: for things like you know, altered images and videos and
Speaker 3: deep fakes. It's also important to our customers that the
Speaker 3: security we provide works multi clouds, so not just for
Speaker 3: Google Cloud, but that they can have the same security
Speaker 3: posture for workloads that they have on other clouds as well,
Speaker 3: and so that's an important part of the conversation too.
Speaker 3: So provide leading edge technologies, stay on top of AI
Speaker 3: and the expanding sort of threat landscape that opens up,
Speaker 3: and then also make sure that whatever you give us,
Speaker 3: you know, works across clouds.
Speaker 2: So glad we could get some time with you. Francis
Speaker 2: Desuza he's the chief operating officer at Google Cloud, former
Speaker 2: CEO of Alumina, and also former president at Samantech, where
Speaker 2: he oversaw the security and data management portfolio.