Thank you. Good afternoon, everyone, and welcome to Alphabet's Second Quarter 2022 Earnings Conference Call. With us today are Sundar Pichai, Philipp Schindler, and Ruth Porat. Now I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the risk factors discussed in our most recent Form 10-K filed with the SEC. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at abc.xyz/investor. And now I'll turn the call over to Sundar.

Thank you, Jim, and good afternoon, everyone. I'm proud of how our teams continue to build helpful products and experiences for people and partners. Reflecting this, our performance in Search in the second quarter was strong. We are also seeing momentum in Cloud. 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. 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. At Google I/O in May, I talked about two key ways we move that mission forward, advancing both knowledge and computing. Those goals are at the heart of what we do. We know that our services are particularly helpful to people and businesses during uncertain moments, whether it's using Search or YouTube to find anything from anywhere or highly efficient tools like Search Ads that help businesses of all sizes reach customers or Google Cloud, which helps companies adapt to hybrid work and find efficiencies. We'll continue to invest in areas like AI, Search, and Cloud, and we'll do it responsibly and in a way that is responsive to the current environment. Earlier this month, I announced that we'll be slowing our hiring and sharpening our focus as a company. We are focused on hiring engineering, technical, and other critical roles. And we are working to improve productivity and ensure that the great talent we do hire is aligned with our long-term priorities. Turning now to product highlights. Years ago, we made a big bet on AI. We believe that it would be transformational for our business and for the world. We are still in the early days, yet AI already underpins many of our most helpful products and services. For example, AI is helping us create entirely new ways to search. People are using Google Lens to do visual searches more than 8 billion times per month. A new feature called multisearch helps people find what they need using words and images at the same time. Later this year, multisearch will be able to help people find local results near them. AI is also helping improve translation. With the new monolingual approach to translation, we've added 24 new languages to Google Translate, spoken by 300 million people. And a new immersive view in Maps uses computer vision, AI, and billions of images to create high fidelity representations of places around the world. Beyond AI, we are also seeing a new frontier with augmented reality. We have been testing exciting prototypes in our labs like the device we shared at Google I/O that puts real-time translation and transcription in your line of sight. It's one example of how AR can solve real needs in the real world. And last week, we announced that we will soon begin early testing of AR prototypes in real-world scenarios. Our goal is to learn how they can help people in their everyday lives. Our investments in commerce are another way we deliver helpful experiences. People are shopping across Google more than 1 billion times each day. We see hundreds of millions of shopping searches on Google Images each month. 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. We're also focused on bringing together hardware, software, and AI in a range of helpful devices. At I/O, we announced great new products, including Pixel 6A, Pixel Buds Pro, and Pixel Watch. We are currently taking preorders for Pixel 6A and Pixel Buds Pro. It's been great to see the positive feedback so far. And on platforms, I'm proud that Android remains the world's most popular operating system with more than 3 billion monthly active devices worldwide. Last year alone, consumers activated 1 billion Android phones. We are making it easier for Android users to share photos and communicate with friends and family with a modern messaging standard called Rich Communication Services or RCS. Across our platforms and beyond, we keep more people safe online than anyone else in the world. Safe browsing on Chrome browsers helps protect billions of people every day by warning them when they try to access dangerous sites or files. Earlier this year, we rolled out a new machine learning model that identifies more than twice as many potentially malicious sites and phishing attacks as the previous model, helping to contribute to a safer and more secure web. We've also unified our password managers across Chrome and Android. Now stored passwords can be grouped and protected across devices, apps on the web. Taking a closer look at YouTube. YouTube Shorts are watched by over 1.5 billion signed-in users every month with more than 30 billion daily views. In Q2, YouTube TV surpassed 5 million subscribers, including trailers. There's also a lot of potential for shopping on YouTube. Just last week, we announced a partnership with Shopify; It will help creators easily connect their stores to YouTube and enable shopping across their live streams and videos. There's more to come here. Moving on to Cloud, which surpassed a $6 billion quarterly revenue mark for the first time. Q2 revenue grew to $6.3 billion, with momentum across Google Cloud Platform and Workspace. We saw continued demand in all geographies with global brands like Target in North America, H&M Group in Europe, Banco BV in Latin America, and BioPharma in Asia. We launched Google Public Sector in June, expanding our commitment to help U.S. government agencies and public institutions accelerate their digital transformations from New York State and Arizona State University to the U.S. Forest Service and the state of Rhode Island. Customers are choosing Google Cloud as their technology partner because of our leadership in four areas. First, we continue to lead in the data cloud market because we unify data lakes, data warehouses, data governance, and advanced machine learning into a single platform that can analyze data across any cloud. Companies like S.C. Johnson, Northwell Health, and the Golden State Warriors choose Google Cloud for our strength in data analytics. Our capabilities helped Swiss Air optimize its flight operations. They're also helping Engie explore ways to optimize wind energy management and other organizations to create smarter factory floors. Second, companies like BetaBank and Mayo Clinic choose their open cloud infrastructure to modernize their IT systems on our cloud at the edge or in their data centers. Our infrastructure scales to help customers like Deutsche Telekom modernize its network, Wipro to modernize its core systems, and Garvan Institute of Medical Research to process 14,000 genomes in under two weeks. Our multi-cloud strategy remains a differentiator for customers like Elevance Health, formerly known as Anthem, and AMD. Third, cybersecurity. Google has always provided a secure cloud infrastructure, and we continue to introduce new cybersecurity products that help customers detect, protect, and respond to a broad range of cybersecurity threats. Customers like GitLab, Highmark Health, and Iron Mountain protect their critical systems and data with our products. Carryable Coffee and Etsy are among the 5 million websites protected by our cybersecurity technology. Finally, Google Workspace's easy-to-use and secure communication and collaboration tools continue to be chosen by many organizations as they return to hybrid work. Google Workspace helped St. Luke's Medical Center, a leading healthcare system in the Philippines address a 38% increase in telehealth visits during the pandemic. Results like this are driving growth in many customer segments around the world, including digital natives like Canva, large enterprises like Travis Perkins plc, and public sector institutions, including the Central Dutch Government. Finally, our other bets. Waymo expanded rider-only testing with employees to include Downtown Phoenix and started testing at Phoenix's Sky Harbor Airport. It also began charging trusted tested riders in San Francisco, a step closer to launching a commercial service with fully autonomous trips. Waymo also opened a new facility to support Waymo Via, their autonomous Class 8 trucking solution as they continue to increase their operations and investment across the Southwest region. Calico is testing an investigational drug treatment in patients with ALS, developed in collaboration with AbbVie. It's an early step of many in the development process. Wing recently surpassed 250,000 commercial deliveries and unveiled a series of delivery drone prototypes able to carry different sized packages. There is good progress here and we will continue to be intentional across the portfolio. To close, while the economic outlook is uncertain, it's been great to see people gathering in person again. We are pleased to see people coming back into the office more often, resulting in more opportunities for collaboration. It's a privilege to build technology that's helpful in both good times and uncertain ones. And I want to thank everyone at Alphabet and Google for their work and support of people, businesses, and all of our partners everywhere. Over to you, Philipp.

Thanks, Sundar, and hi, everyone. It's always great to be with you all. As Sundar indicated, we're as focused as ever on helping businesses navigate complexity and operate from a position of confidence. AI-powered tools, insights, and automation are arming customers and partners with the ability to stay agile and responsive so they can capture short-term opportunities while also building for the long term. You've seen our own commitment to the long term in our latest innovation announcements at I/O, Google Marketing Live, and Brandcast. Sundar covered a number of these. I'll dive deeper into a few more, including how we're improving our advertiser experiences and building simpler, more useful products for our partners. Within Google Services, Search delivered strong revenue growth in the second quarter, driven by performance in both travel and retail. In travel, users' appetite continued to remain strong heading into the summer season. Searches for places to visit in summer were up 2x globally year-over-year, while searches for last-minute hotel deals were up 50%. However, as we've all seen in the news recently, the travel sector has been experiencing some challenges. As always, we're committed to helping our travel partners navigate this with insights and new tools. Then there's retail, where we had another solid quarter. At GML, we highlighted how we're continuing to innovate to help merchants make the most of how quickly consumer shopping is evolving, like Best Buy was embracing a full omnichannel approach from measurement to bidding to using omni ad formats across Google. By adopting omni across its local inventory ads portfolio and showcasing curbside and in-store pickup, Best Buy increased in-store revenue from Google Ads by 34% last year. Today's customers expect to shop wherever, whenever, and they care as much about local as they do about finding inspiration for the next purchase online. In Q2, searches for 'open now, near me' were up 8x globally year-over-year, while searches for designer outlets jumped 90%. We also saw strong interest in apparel categories like women's clothing and in beauty categories like perfume and fragrances. With AI-powered tools like Performance Max, which local and smart shopping campaigns will upgrade to in time for the holidays, we're helping businesses move at speed and scale to reach new and existing customers wherever they are in their shopping journey with relevant, useful content. We've seen strong momentum with P-Max. Advertiser adoption is up 5x year-to-date. Sustainable apparel brand, Rothy's drove a 59% increase in conversions and a 60% increase in revenue after turning to P-Max. By leveraging its creative assets and showing them at scale, Rothy's reached more customers in a way they hadn't been able to do before. Innovating across Search and YouTube also remain top priorities. Sundar mentioned new 3D AR features. Target and Wayfair are testing these to help customers see and shop products in real life. We launched new ad formats for more visual browsing search experiences. And then there's cool live commerce capabilities like live direct which let creators start a shopping live stream on their channel and then redirect viewers to a brand's channel for more. Let's dive deeper into YouTube. In the second quarter, the biggest factor in the year-over-year comparison was the lapping of a very strong second quarter in 2021 when we experienced a strong recovery from the impact of COVID in early 2020. Ruth will provide more details on this later on. As we continue to help advertisers manage through uncertainty, I would point out three key highlights for YouTube. First, Brandcast joined the upfronts in New York in May for the first time ever, a reflection of how digital and linear TV worlds are converging for both viewers and advertisers. As the #1 streaming video platform to reach viewers across all devices with billions of hours of video watched every day, YouTube remains well positioned to deliver the reach, results, and relevance that advertisers need. In fact, even in TV's biggest moments, YouTube is still delivering huge incremental reach. According to Comscore, 49.9% of adults that saw a Super Bowl ad on YouTube on the day of the Super Bowl did not see the ad on TV. And as more advertisers tap into connected TV, they're also driving results. According to Google Commission Nielsen meta-analysis of MMMs that measured YouTube CTV and TV across U.S. consumer packaged goods, on average, YouTube CTV effectiveness was 3.1x greater than TV. Take GSK Consumer Healthcare, now Haleon, who piloted CTV campaigns across its top 10 global markets to drive effectiveness at scale and tap into the shift to streaming. The results, 73% of campaigns drove substantial lift in brand and unbranded searches, and viewers were up to 14x more likely to search for Haleon related terms. Adding CTV to its existing plans also led to greater efficiencies and savings. Haleon has since opted its 2022-2023 investment and is now expanding CTV across LATAM and EMEA markets. Second, as Sundar said, our momentum in Shorts continues. Last quarter, we shared that we're in the early stages of testing monetization with ads, and we continue to be encouraged by the results so far. Third, there's full funnel, which we've covered before, and more advertisers are embracing. On average, YouTube advertisers using a full funnel strategy experienced 80% unique reach across brand and action campaigns. With this incremental reach across upper and lower funnel formats, advertisers meet different audiences based on where they are in the purchase journey. Estee Lauder Taiwan's recent campaign for its advanced night repair serum is a great example. Branded content collaboration with top creators raised awareness, while YouTube shopping shelf feature boosted consideration and to generate new leads and sales, a series of well-orchestrated action formats did the trick. This full funnel strategy drove 29% more unique visits to its website and a 95% increase in sales. With our performance products, advertisers can confront demand. With our massive reach products, they create net new demand at scale. Lastly, an update on how we're bringing the best across Google to our partners and key ecosystems. First, in gaming to help Bandai Namco entertainment drive immersive gaming experiences and build a more robust IP strategy. We're partnering across Cloud, Geo, Ads, YouTube, and more. And then there's news. Google News Showcase now has 1,500-plus partnerships with publications across 17 countries, including recent agreements with publications in the U.K., Romania, and Slovakia. I'll close, as I always do with gratitude for customers and partners and for Googlers across sales, partnerships, product engineering, and our many, many support teams. Thank you for your tireless commitment to making a positive impact around the world. Ruth, over to you.

Thank you, Philipp. Our financial results for the second quarter reflect strength in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $69.7 billion, up 13% or up 16% in constant currency. Our total cost of revenues was $30.1 billion, up 15%, primarily driven by other cost of revenues, which was $17.9 billion, up 17%. The biggest factor here was costs associated with data centers and other operations. Operating expenses were $20.1 billion, up 24%, reflecting the following: first, the increase in R&D expenses, which was driven primarily by headcount growth. Second, the growth in sales and marketing expenses, which was driven primarily by increased spending on ads and promotions followed by headcount growth. And finally, the growth in G&A, which reflects increases in both professional service fees and in head count, partially offset by a decline in charges related to legal matters. Operating income was $19.5 billion, flat versus last year, and our operating margin was 28%. Other income and expense was a loss of $439 million. Net income was $16 billion. We delivered free cash flow of $12.6 billion in the quarter and $65 billion for the trailing 12 months. We ended the quarter with $125 billion in cash and marketable securities. Let me now turn to our segment financial results. Starting with our Google Services segment. Total Google Services revenues were $62.8 billion, up 10%. Google Search and other advertising revenues of $40.7 billion in the quarter were up 14%, driven by both travel and retail. YouTube advertising revenues of $7.3 billion were up 5%. The modest year-on-year growth rate primarily reflects lapping the uniquely strong performance in the second quarter of 2021. Network advertising revenues of $8.3 billion were up 9%, driven by AdSense. The quarter-on-quarter deceleration in both YouTube and network advertising revenues primarily reflects pullbacks in spend by some advertisers. Other revenues were $6.6 billion, down 1%, reflecting a year-on-year decline in Play, primarily driven by the fee changes we have discussed previously. We also saw a slowdown in buyer spend due to a number of factors, including lower engagement levels compared with earlier stages of the pandemic. In terms of costs within Google Services, TAC was $12.2 billion, up 12%. Google Services operating income was $22.8 billion, up 2%, and the operating margin was 36%. Turning to the Google Cloud segment. Revenues were $6.3 billion for the second quarter, up 36%. GCP's revenue growth was again greater than Cloud's, reflecting significant growth in both infrastructure and platform services. Strong revenue growth in Google Workspace was driven by solid growth in both seats and average revenue per seat. Google Cloud had an operating loss of $858 million. As to our other bets for the second quarter, revenues were $193 million and the operating loss was $1.7 billion. Let me close with some comments on our outlook. In terms of the Google Services segment, we are pleased with our performance in Search in the second quarter, which continued to deliver strong results. As a reminder, the 2022 revenue growth rates are presented against particularly tough comps as we lapped the recovery in the second quarter of 2021 from the impact of the pandemic in early 2020. Going forward, the very strong revenue performance last year continues to create tough comps that will weigh on year-on-year growth rates of advertising revenues for the remainder of the year. In YouTube and Network, the pullbacks in spend by some advertisers in the second quarter reflects uncertainty about a number of factors that are challenging to disaggregate. Within other revenues in the third quarter, we expect an ongoing headwind from the fee changes and the slowdown in buyer spend that impacted results in the second quarter. Turning to Google Cloud. Customers are transforming their businesses, utilizing GCP's secure infrastructure with data, analytics, and AI capabilities, uncovering real-time insights and leveraging the collaborative tools of Workspace. They are in the early days of this transformation, and we continue to invest in our products, go-to-market capabilities, and cloud regions. In terms of foreign exchange, our second quarter results reflect the U.S. dollar strengthened versus last year from a significant tailwind last year to a 3.7 percentage point headwind in Q2. Looking to the third quarter, based on the strengthening of the U.S. dollar quarter-to-date, we expect an even larger headwind from foreign exchange. As a reminder, all segment revenues are reported on a GAAP basis. We provide fixed FX revenues only at the consolidated level and by geographic region. In addition, as we've said previously, the impact of foreign exchange is greater on operating income than it is on revenues given that our expense base is weighted more toward the U.S. with most of our R&D efforts located here. With respect to Alphabet head count, we added 10,108 people in the second quarter with the majority of hires for technical roles. Given the uncertain global economic outlook and the hiring progress achieved to date, as Sundar previously announced, we intend to slow the pace of hiring. We expect our actions on hiring to become more apparent in 2023. Our headcount additions in the third quarter will reflect we already have a strong number of commitments, including new graduate hires. As a reminder, we also expect the acquisition of Mandiant to close by the end of the year, which will further increase head count on top of hiring. Although we expect the pace of headcount growth to moderate next year, we will continue hiring for critical roles, particularly focused on top engineering and technical talent. Turning to CapEx. The largest investments in the second quarter were in servers followed by data centers and office facilities. After several large transactions closed in the first quarter, investment in office facilities was once again focused on fit-outs and ground-up construction on existing projects. We continue to expect an increase in CapEx in 2022 versus last year. For the balance of 2022, the increase will be particularly reflected in investments in technical infrastructure globally with servers as the largest component. Thank you. Sundar, Philipp, and I will now take your questions.

Great. Hopefully, you can hear me. I want to ask two questions. First, Sundar, just in your letter, you talked about how the economic challenges will serve as an opportunity for Alphabet to deepen its focus and invest for the long term. Just wanted to get a sense of how that might change the investment profile in areas of priority for the company. And then, Ruth, I was hoping you could provide some color perhaps on how growth trended more through the second quarter? And if you have any comments on what you're seeing so far in Q3 in July?

Thanks, Doug. I believe it's a good time for us to sharpen our focus. Personally, I find these moments to be clarifying. It's an opportunity to reflect and ensure we are working on the right initiatives for the long term, especially in investing in deep technology and computer science while doing differentiated work. This also allows us to evaluate everything we do critically and reallocate resources to our most important priorities. It presents a chance to leverage the strong growth we've experienced over the past few years, and we will approach this with discipline. Our focus on long-term areas such as AI, Cloud, and other essential sectors will continue.

In terms of your second question, I'm going to leave the modeling to you. Just a bit of context, Sundar and I, I think, Philipp, as well used the term uncertainty because we do think that's the best way to characterize what we're seeing the data are complicated. Our results have reflected lapping, continued to reflect lapping of the significant growth rates last year. On top of that, there is uncertainty in the global economic environment. And then, there are issues that differ across industry. You've seen it in the news for some; it's supply chain, for some it's inventory issues. So we will leave the forecasting to you and try to give you sort of the components as we went through Q2 here.

Sundar, I wanted to follow up on the last question a bit. The tone regarding investment for the year seems to have changed over the past few weeks. After experiencing a slowdown in hiring through July, you've now reported a hiring pause. You mentioned that you’re finding opportunities to optimize spending during this time. Can you discuss what you're observing in your business, particularly in advertising or cloud services, that drives the need for optimization? Are you noticing pullbacks, or is it more about reacting to macroeconomic news and wanting to take preemptive measures?

I believe Ruth highlighted the uncertainties we are facing, and I share that perspective. We are all responding to a diverse range of dynamics, making it challenging to summarize the situation since the underlying factors differ across geographies and sectors. However, there are common elements related to the macro environment that we are monitoring closely, and we aim to be more disciplined moving forward. This serves as an overarching theme. In terms of specific areas, I am primarily concentrating on identifying the right strategies with a long-term focus. I recognize that being in growth mode makes it difficult to consistently implement necessary adjustments, but moments like this provide an opportunity to do so. Therefore, I see this as a chance to sharpen our focus and capitalize on the current circumstances.

Maybe I can ask a two-parter on YouTube. You've called out the tougher comps over the last couple of quarters. Can you give us a better sense of how you move away from some of those tougher comps in the periods ahead of us, over the next 12 to 18 months and how maybe we should think about the digestion of the direct response growth and consumption growth that YouTube saw a year ago and how that might lead to better growth ahead for YouTube in the periods going forward? And then when you look at the broader competitive landscape for video. How do you think about positioning YouTube, short-form video versus long-form video or enabling creators and businesses to have tools to build their businesses within YouTube? How do you think about product development and aligning the product against the broader competitive landscape?

Thanks, Eric. There was a lot in your question, so I'll start and then I'll pass it to Philipp. An obvious point as we're pointing out the lapping of what truly were extraordinary growth rates as time will get us through the lapping. So that's obvious math, but you asked the question. So starting with that. And then I did note that we have seen pullbacks in spend by some advertisers that, in fact, was the biggest factor in the quarter-on-quarter change, the sequential decline in the growth rate. And we do view that as rather idiosyncratic as I said, some of it is supply chain, some of it's inventory. And so just working through that. But again, it goes really to continuing to invest in YouTube and the experiences and the opportunity to deliver for our entire ecosystem; users, creators. And why don't I pass it to Philipp to maybe take you a step deeper into those.

Despite some advertisers pulling back, we strongly believe that YouTube is well positioned to capitalize on the shift to digital video, particularly for brand engagement. This year marked our first participation in the upfronts, which is exciting and highlights YouTube's evolution. We are pleased with our strong growth and commitments during this period. Advertisers recognize the value of YouTube's reach and its ability to deliver results. I mentioned connected TV earlier and, as I stated in our last call, we are enthusiastic about our future plans in that area. We are also continuing to offer advertisers unique and creative storytelling options and the ability to focus on specific key performance indicators, having recently introduced important measurement tools. On the direct response front, we believe there is still significant potential to address commercial intent on YouTube through video action campaigns, app campaigns, product feeds, and new live commerce features, where we are experimenting with various approaches. We are excited about the chances to connect brands with creators. Additionally, we are seeing advertisers utilizing YouTube at all levels of the marketing funnel, which I discussed earlier. This allows advertisers to effectively drive reach, relevance, and action, showcasing YouTube's strengths. Looking at the bigger picture, we remain optimistic about the innovation potential in branded direct response and across YouTube. I’d also like to mention Shorts. We are witnessing an increase in the consumption of short-form videos, which is evident across various platforms, including YouTube. Sundar mentioned earlier that Shorts are being watched by over 1.5 billion logged-in users each month. Overall, we continue to observe strong user engagement on YouTube. In the last quarter, we noted that over the past two years, YouTube has experienced significant growth in watch time, even as people have resumed in-person activities. Time spent on YouTube globally has continued to rise. As I mentioned before, early results from Shorts' monetization are encouraging, and we are excited about the possibilities ahead.

Can I direct my first question to Ruth and Sundar and then follow up with one for Philipp? Ruth and Sundar, considering the strength of this company's balance sheet and profitability, I'm curious about your main priorities regarding your strategic focus. What factors are influencing your decision-making? Are you aiming for a specific margin or cash generation target? I’m trying to understand the framework you’re using to guide your efforts, especially in light of how other companies are pressured by their financial metrics. Now, for Philipp, I believe there’s some concern regarding the composition of your advertising base. It seems like some other companies might have profited from growth among younger, less profitable businesses. Could you discuss what trends you're observing in your ad base? Is there any noticeable shift toward Fortune 500 companies that are investing more from a potentially stronger starting position? Any insights you can provide on the composition of your ad base would be helpful.

One thing I want to mention during times like this is that for several years, we've emphasized our commitment to building sustainable value, especially in our newer areas. To me, this is a long-term approach. We have established areas, like Search, where we've been doing this for a while. However, in our newer areas, we need to ensure that while we invest for the long term, we are also thoughtfully considering the business model, value creation, and profitability over time. These are the frameworks we utilize. It's crucial, regardless of the overall financial health of each area, that everything we develop is sustainable on its own, and that we remain disciplined. I believe that situations like this provide us an opportunity to focus more intently and examine our strategies through that lens.

I would just add, we talked about this last year. Some of the operating margin upside last year was due to timing issues with the surge of revenues, and we indicated at the time there was a lag in part on some of the investments, whether that's data centers or otherwise. And so in part, you're seeing some of that. But very much to Sundar's point, the way we look at it is we are continuing to invest in long-term growth that has paid wonderful dividends for users and investors over the years. And we want to make sure we're doing it responsibly and judiciously. Some of these things pay out over the medium and longer term. And so as he said a couple of times now, this notion of wanting to look at what are meaningful investments to deliver continued extraordinary experiences for users and investors that then supports longer-term growth. It requires investments, and we just want to make sure that we're getting that balance right and that we're using resources effectively where we can to redeploy it and put it back into long-term investments. And so it's that sort of balancing act.

Look, when it comes to the second part of your question, we have a very, very broad base of customers; large, small, different verticals, different sectors, and different geographies across the world. They're very proud to serve such a large base with such a diversity of different players. It's a broad question you're asking, if you're leaning a little bit more towards the total addressable market here. Let me reiterate what I said before. We're not just addressing above-the-line marketing budgets, like traditional advertising or television advertising. There's a lot of upside that we've seen below the line, budgets, whether it's promotional pricing, product placements, sponsorships, and so on. That cuts across the universe of different players, sectors, verticals that I just described. But in the end, our main goal is on delivering great experiences for our users and driving incremental ROI for advertisers and then making them successful across this big universe of sectors I just talked about. And I'm positive that budget should continue to move our ways as long as we stay focused on this one.

I hope you can hear me okay. I wanted to ask about Cloud. You mentioned several times Cloud momentum, and I know it was a very tough year-over-year comp, but growth did slow. Wondering if you're seeing any pullback in new lift and ship projects or other new client adds? Or if you're seeing a little slowdown in volumes at all. And then on the margins, is there any urgency to move margins towards breakeven? Or is it still kind of investment mode here with a lot of different products and services to build?

On Cloud, we continue to see strong momentum and a substantial market opportunity, feeling like we are still in the early stages of this transformation. We are consistently in conversations with customers, both large and small, who are just beginning their journey, which highlights the opportunity ahead. There isn't anything particularly noticeable, except that given our presence in different geographies and sectors, we see a varied impact on some customers’ spending capabilities, with some taking longer to make decisions about the terms for bookings. However, I don't view this as a long-term trend but rather as navigating the macro uncertainty that everyone is facing.

And then in terms of your margin question, our view continues to be that this is an extraordinary opportunity. It's a long-term opportunity and enterprise customers are still early in their move to the cloud. And so we do very much have that debate that same question that you posed is the right one, which is a trade-off as between revenue growth and immediate profitability. And what we're focused on is ensuring that we're investing to support the long-term growth and given the upside that we see. And so continue to focus on it and are looking at the path to profitability, path to free cash flow positive to drive attractive returns. That's obviously in the overall model of it, but I very much believe in the long-term growth and believe this is the right level of investment across the business, go to market, the product teams continuing to build it out globally.

Ruth, good to see you lean into the buyback? I think it was your highest buyback ever, while other tech companies have kind of run away from it. I'm just curious if you could talk about your capital allocation strategy and ultimately how you're thinking about the buyback?

Thank you. I mean at the heart of the capital allocation strategy is really what we've been talking about on this call, investing in long-term growth and driving cash flow. So we have the opportunity to continue to invest and return capital to shareholders. We're very pleased that we were able to increase the authorization up to $70 billion. And do continue to believe it's yet another valuable tool in the overall set of investments that we make. So pleased to have it.

Philipp, you talked about the beginning of monetizing YouTube Shorts. Do you have any lessons that you've drawn so far? Or in the long term, is there any view you have on whether that inventory can be better or less monetized than other YouTube inventory that you've had traditionally historically? And then secondly, just on these comments on the pullback by some advertisers. So you talked about strength in retail and especially in travel, so what's left? Does that mean are you seeing weakness out of Western Europe in financial verticals and maybe automotive? Any color on which advertisers are pulling back would be helpful.

Regarding Shorts monetization, I stand by my previous statement. We are optimistic about the results we are seeing and excited about the potential, but there isn't much additional detail to share at this time. As Ruth noted, the reduction in spending by some advertisers in the second quarter on YouTube and network reflects various uncertainties. For each advertiser, distinguishing the uncertainty varies between companies and sectors. As reported in the news, several companies have been affected by multiple factors as well.

Maybe one follow-up, Sundar, on the sharpening of the focus you talked about, of course, AI and Cloud as being key areas of long-term focus. Are there any areas worth calling out that may be a lower priority now given that focus? And then secondly, you've given us some good data over the last year or so around conversational and visual search queries and strong growth there. Curious how that also translates into maybe different types of monetization relative to tech space search? Does this give you greater monetization capability in Search? Or how would that impact monetization?

Good question. One way to think about this is through moments like these. For instance, we are making significant investments in AI, engaging in everything from fundamental research to applied research, with projects closely tied to areas like Search and YouTube. You can envision a scenario where we are reallocating resources to ensure that we enhance product improvements, which aligns with these moments. This is an example of sharpening our focus. When I consider the opportunities in AI, especially after I/O this year, the progress we've made with multisearch, the advancements in multimodal capabilities, and the increase in voice and visual searches are all indications of how we're adding value to our core products. Similarly, at Google Marketing Live, the team highlighted numerous AI-driven products and features that effectively benefit advertisers while prioritizing privacy. In the cloud segment, most current AI opportunities are emerging from data analytics, which is where we see substantial strength. However, I believe there will be broader opportunities as we move forward. Additionally, our research teams continue to deliver groundbreaking work, whether it’s LaMDA 2, PaLM, Minerva, or other recent innovations. We will maintain our cutting-edge approach, advance progress, and focus on transforming that research into tangible products and applications, keeping a long-term perspective in mind.

I would like to follow up on the retail segment. Some of the largest retailers, such as Walmart, are facing challenges and are looking to reduce costs. From what Ruth mentioned regarding supply chain inventory inflation, it seems they might be scaling back on YouTube. I am interested in understanding what you are doing in Search from a product perspective to maintain strength in the retail category. You brought up P-Max for smaller advertisers and omnichannel strategies for larger ones, but could you elaborate on your strategy to ensure that spending continues? Or is this a temporary situation that could decline in the future?

Yes, that’s a great question. As I mentioned earlier, retail has been a significant contributor to our Search growth in the second quarter. We observed strong interest in various categories, particularly in women's apparel. It’s important to clarify that when we refer to retail growth, we mean our comprehensive retail strategy that encompasses all our advertising products. Our shopping strategy is a crucial part of this. Regarding trends, you are correct that omnichannel strategies are vital as retailers enhance their digital presence to boost both online and offline sales, and we are actively supporting them in this effort. Over the past few quarters, I have discussed how we are achieving this. In the second quarter, similar to the first, we witnessed a year-over-year increase in the adoption of local inventory ads, which are mobile-first and location-based, assisting businesses of all sizes in showcasing their products and stock, whether in-store or available for curbside pickup. Furthermore, we are transitioning from smart shopping campaigns to Performance Max, which advertisers have found beneficial for increasing reach and performance. Our main focus continues to be on creating tools and features that facilitate connections between both online and offline businesses and their customers across our platforms. We are excited about the future of retail commerce across our services, particularly in Search and YouTube, and we will keep focusing on developing valuable products and experiences for users and businesses alike.

Thanks, everyone, for joining us today. We look forward to speaking with you again on our third quarter 2022 call. Thank you, and have a good evening.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.