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2,600 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Ruth Porat: And then in terms of CapEx, as I said in opening comments, we do expect the quarterly CapEx throughout the year to be roughly at or above the $12 billion cash CapEx we had here in Q1. As I said, you can always have variability in the reported quarterly CapEx just due to the timing of cash payments, but roughly at or above this level. And it really goes to Sundar's opening comment that we're very committed to making the investments required to keep us at the leading edge in technical infrastructure to support the growth in Cloud, all the innovation in Search that he and Philipp has spoken about and our lead with Gemini.
I will note that nearly all of the CapEx was in our technical infrastructure. We expect that our investment in office facilities will be about less than 10% of the total CapEx in 2024, roughly flat with our CapEx in 2023, but is still there. And then with respect to 2025, as you said, it's premature to comment so nothing to add on that.
Operator: Our next question comes from Eric Sheridan with Goldman Sachs.
Eric Sheridan: Maybe just one question of a big picture nature for Sundar. Sundar, if we come back to your earlier comments at the beginning of the call and framing up longer-term initiatives and longer-term narratives, I wanted to know if you could talk a little bit about both the opportunities and the challenges of operating at scale in a time like this where there's a lot of technology innovation going on and how you see the elements of trying to strike a balance towards moving the organization forward while still continuing to both invest for growth as well as balance margins. |
2,601 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Sundar Pichai: Thanks, Eric. Great question. Obviously, I think the AI transition, I think it's a once-in-a-generation kind of an opportunity. We've definitely been gearing up for this for a long time. You can imagine we started building TPUs in 2016, so we've definitely been gearing up for a long time. The real opportunities we see is the scale of research and innovation, which we have built up and are going to continue to deliver. I think for the first time, we can work on AI in a horizontal way and it impacts the entire breadth of the company, be it Search, be it YouTube, be it Cloud, be it Waymo and so on. And we see a rapid pace of innovation in that underlying. So it's a very leveraged way to do it, and I see that as a real opportunity ahead.
In terms of the challenges, I think it's been a mindset shift, which we've been driving across the company to make sure that we are embracing this opportunity but being very efficient in how we are approaching it, making sure we are redirecting our people to the highest priorities across the company, building on our 20 years of experience in driving machine efficiencies year-on-year so that we can put our dollars to work as efficiently as possible. So making sure balancing all of that moving forward in a very bold and responsible way at the same time. Those are the important things to get right from my perspective.
Operator: Our next question comes from Stephen Ju with UBS.
Stephen Ju: Philipp, I think it's approaching the 2-year anniversary for the launch of Ads on YouTube Shorts. And you've given us an update on monetization pickup sequentially. But with that in mind, I think YouTube has launched an array of ad products and automation tools to help advertisers transfer what they're doing to the vertical screen. So how is this translating into buy-in among your advertiser clients? |
2,602 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | And secondly, based on what you've seen over the last 2 years, are there any structural reasons that you can cite as to why the monetization cannot match what is already the case on the horizontal screen?
Philipp Schindler: Yes. Look, this is a great question, first of all. I mean, let's start with the fact that YouTube performance was very strong in this quarter. And on Shorts specifically in the U.S., I mentioned how the monetization rate of Shorts relative to in-stream viewing has more than doubled in the last 12 months. I think that's what you were referring to. And yes, we're obviously very happy with this development.
The way to think about it is advertisers really only spend with us when they see a positive ROI. So you can assume that this wouldn't be happening unless it were to work for advertisers in the short term and also in the long term. That's an important part, I think.
Overall, Shorts is a long-term bet for the business. It has really helped us respond to both creator and viewer demand for short-form video. We talked about the strong growth, averaging 70 billion daily views. I mentioned the number of channels uploading has increased 50% year-over-year, so again, very happy with us development. And to your question, structural reasons, whether we can't get to a match here, I have a hard time seeing those at the moment over time.
Operator: Our next question comes from Justin Post with Bank of America. |
2,603 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Operator: Our next question comes from Justin Post with Bank of America.
Justin Post: I'm going to ask another one on CapEx. It seems to be your biggest investment area. Just first, you saw the big uptick the last 2 quarters, but you've been investing in AI for years. Is the uptick because supply is getting easier to get? Or do you see more opportunities with the available supply to really fuel AI? So has the GPUs and everything gotten better that you feel more, investing more? And then thinking about the returns, both for Advertising and Cloud on the CapEx, do you feel like this is a higher cost of doing business? Or do you think this is an opportunity to even get better returns on your capital spend than you've had in the past?
Ruth Porat: So the increase in CapEx, as Sundar said and I said, really reflects the opportunity we continue to see across the company. It starts with all that we're doing in support of the Gemini foundational model but then also, clearly, the work across Cloud, on behalf of Cloud customers, and the growth that we're seeing with GCP and the infrastructure work there, and then, of course, as both Sundar and Philipp talked about the application across Search, YouTube and, more broadly, the services that we're able to offer. So it's the growing application and our focus on ensuring that we have the compute capacity to deliver in support of the services and opportunities we see across Alphabet.
And it really goes to the second part of your question, which is that as we're investing in CapEx and applying it across our various businesses, it opens up more services and products, which bring revenue opportunities. And we're very focused on the monetization opportunity. It does underlie everything that we're doing in Google Services and Google Cloud. And as Sundar noted, we're, at the same time, very focused on the efficiency of all elements of delivering that compute capacity from hardware, software and beyond.
Operator: Our next question comes from Mark Mahaney with Evercore. |
2,604 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Operator: Our next question comes from Mark Mahaney with Evercore.
Jian Li: This is Jian Li for Mark Mahaney. A couple of questions. One, just maybe an expansion on the Search, query questions on before, more like Search volume, and maybe in the context of the off-Google environment like AI chat bot, for example, we've seen kind of Meta AI directing to Google Search results. Do you think there's actually a scenario where like AI system can create a step function change in Search volume or use cases of Google? If you can give us more color on what are you seeing right now or what are you expecting to see in that area.
And then the second question on just the comment of YouTube and Cloud exiting at $100 billion run rate. What is informing this outlook or visibility for you? If you can talk about, is it driven by any sort of Cloud demand inflection or step change in the gen AI workload demand, if you can flesh it out a little bit?
Sundar Pichai: On your first question, look, I said this before but to be clear, we view this moment as a positive moment for Search. And I think it allows us to evolve our product in a profound way. And Search is a unique experience. People come, be it if you want answers, if you want to explore more, if you want to get perspectives from across the web, and to be able to do it across the breadth and depth of everything they are looking for and the innovation you would need to keep that up, I think it's what we've been building on for a long time. And so I feel we are extraordinarily well set up, particularly given the innovation path we are on. And overall, I view this moment as a positive moment. So that's how I would say it.
On the second part, Ruth?
Ruth Porat: Sorry, what was it?
Sundar Pichai: YouTube and Cloud.
Jian Li: Yes, in terms of your comment about $100 billion exit rate for YouTube and Cloud, what's driving this visibility for you and any kind of inflection you're seeing in the Cloud demand? |
2,605 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Ruth Porat: I would just say from Sundar's opening comments, it's just the ongoing momentum that we've seen in the business that we've been talking about, the ongoing growth and strong performance. And so what we were really getting at in that comment, what Sundar was getting at, is that we've continued to build strong businesses over time, and that just helps dimension it. We had similar comments last quarter when you talk about our subscription business. We're really proud of all the work that the teams are doing across the company, building new, strong opportunities, delivering for our users, for customers, for advertisers in profound ways. And so it was just helping to dimension what we have built over the years.
Operator: Our next question comes from Ken Gawrelski with Wells Fargo.
Kenneth Gawrelski: Two, if I may. First on GCP, you had nice acceleration in the quarter. Could you talk a little bit about the opportunities and constraints upon GCP's ability to continue to address that large addressable market and accelerate growth? Is it more sales-oriented? Is it more product sales solutions or both? And do you plan to address most of these organically? Or could a partner approach work for you?
And then the second one, just more detail on YouTube and sports rights. Could you reiterate your view on further live sports rights? There's some larger, mostly in the U.S., league rights coming up soon and will be more over the next several years. Could you just talk about your philosophy there beyond NFL Sunday Ticket? |
2,606 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Sundar Pichai: Look, on the Cloud side, obviously, it's definitely a point of inflection overall. I think the AI transformation is making everyone think about their whole stack, and we are engaged in a number of conversations. I think paid AI infrastructure, people are really looking to Vertex AI, given our depth and breadth of model choice, or using Workspace to transform productivity in your workplace, et cetera. So I think the opportunities there are all related to that, both all the work we've built up and AI being a point of inflection in terms of driving conversations. I think you'll see us do it both organically and with a strong partner program as well. So we'll do it with a combination.
And the challenges here, always, there are switching costs to Cloud and the challenges we see is how do we make it easier for people. There's a lot of interest, but there's definitely barriers in terms of people switching. And so that's an area where we are constantly investing to make it easier for our customers.
Philipp Schindler: And with regard to your sports rights question, look, I mean, we've had long-standing and significant partnerships with the most popular sports league here in the U.S., around the globe, federations teams, athletes, broadcasters. And obviously, these partnerships, in combination with our very vast audience of sports fans, drives investment in subscription experiences across many offerings: NFL Sunday Ticket, YouTube TV, YouTube Primetime Channels and so on. But there's nothing that we have to announce at the moment. We're obviously always looking at where we can create more value for our users, for our advertisers, for creators, but nothing specific to talk about at this moment.
Operator: Our next question comes from Ross Sandler with Barclays. |
2,607 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Operator: Our next question comes from Ross Sandler with Barclays.
Ross Sandler: Sundar, I had a question about smartphone-based AI searches. So you guys are powering all these new AI interactions and searches on Pixel and on Samsung devices. And I think there's speculation that Gemini might be used on iOS in a future state. So the question is, as users start searching on smartphones and those searches are basically rendered on the model, on the phone, without accessing the web, how do you guys anticipate monetizing some of these smartphone-based behaviors that are kind of run on the edge? Any thoughts on that?
Sundar Pichai: Look, I think if you look at what users are looking for, people are looking for information and an ability to connect with things outside. So I think there will be a set of use cases which you will be able to do on device. But for a lot of what people are looking to do, I think you will need the richness of the cloud, the Web and you have to deliver it to users. So again, to my earlier comments, I think through all these moments, you saw what we have done with Samsung with Circle to Search. I think it gives a new way for people to access Search conveniently wherever they are. And so we view this as a positive way to bring our services to users in a more seamless manner. So I think it's positive from that perspective.
In terms of on-device versus cloud, there will be needs which can be done on-device and we should to help it from a privacy standpoint. But there are many, many things for which people will need to reach out to the cloud. And so I don't see that as being a big driver in the on-cloud versus off-cloud in any way.
Operator: And our last question comes from Colin Sebastian with Baird. |
2,608 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Operator: And our last question comes from Colin Sebastian with Baird.
Colin Sebastian: I guess first, a follow-up on some of the questions on SGE in the core Search. I guess I'm wondering, along with some of those changes in behavior, is there a way to quantify that overall engagement shift, whether that's an increase in time spent or the level of increase in queries for both sort of traditional search as well as more generative answers.
And then secondly, on the hardware road map, I assume later this year, we'll hear more about some of the products. But any areas of particular focus or that you would point out that we should keep in mind in terms of hardware launches in the back half?
Sundar Pichai: On the first question on Search, not much more to add to what I said, but what we have seen. And we've been in live experiments just for a few weeks in U.S. and U.K. on a slice of our queries, and all indications are positive that it improves user satisfaction. We see an increase in engagement, but I see this as something which will play out over time.
But if you were to step back at this moment, there were a lot of questions last year, and we always felt confident and comfortable that we would be able to improve the user experience. People question whether these things would be costly to serve, and we are very, very confident we can manage the cost of how to serve these queries. People worried about latency. When I look at the progress we have made in latency and efficiency, we feel comfortable. There are questions about monetization. And based on our testing so far, I'm comfortable and confident that we'll be able to manage the monetization transition here well as well. It will play out over time, but I feel we are well positioned. And more importantly, when I look at the innovation that's ahead and the way the teams are working hard on it, I am very excited about the future ahead. |
2,609 | GOOGL | 1 | 2,024 | 2024-04-25 16:30:00 | Alphabet Inc. | 29,096 | Operator: And that concludes our question-and-answer session for today. I'd like to turn the conference back over to Jim Friedland for any further remarks.
James Friedland: Thanks, everyone, for joining us today. We look forward to speaking with you again on our second quarter 2024 call. Thank you, and have a good evening.
Operator: Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect. |
2,610 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Operator: Thank you for standing by for the Alphabet Inc. first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, I would now like to hand the conference over to your speaker today, Jim Friedland, Senior Director of Investor Relations. Please go ahead.
Jim Friedland: Thank you. Afternoon, everyone, and welcome to Alphabet Inc.'s first quarter 2025 earnings conference call. With us today are Sundar Pichai, Philipp Schindler, and Anat Ashkenazi. 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. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Forms 10-Ks and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statement. 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. Our comments will be on year-over-year comparisons unless we state otherwise. And now, I'll turn the call over to Sundar. |
2,611 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Sundar Pichai: Thanks, Jim. Good afternoon, everyone. We are pleased with our strong results this quarter. We continue to see healthy growth and momentum across the business, including AI powering new features. In Search, we saw continued double-digit revenue growth. AI Overviews is going very well with over 1.5 billion users per month, and we are excited by the early positive reaction to AI Mode. There's a lot more to come ahead. Subscriptions surpassed 270 million subscriptions with YouTube and Google One as key drivers. And cloud grew rapidly with significant demand for our solutions, and you saw our leadership in AI at Cloud Next across infrastructure, agents, and more. Our differentiated full-stack approach to AI continues to be central to our growth. This quarter was super exciting as we rolled out Gemini 2.5, our most intelligent AI model, which is achieving breakthroughs in performance, and it's widely recognized as the best model in the industry. That's an extraordinary foundation for our future innovation, and we are focused on bringing this to people and customers everywhere. Looking ahead to IO, Brandcast, and Google Marketing Live, I can't wait for our teams to showcase the innovation they've been working on. Turning to our AI progress this quarter, which continues to enable significant growth opportunities. The elements of the AI stack I've previously mentioned are AI infrastructure, world-class research including models and tooling, and our products and platforms. Starting with AI infrastructure, our long-term investments in our global network have positioned us well. Google's network is robust and resilient, supported by over 2 million miles of fiber and 33 subsea cables. Complementing this, we offer the industry's widest range of TPUs and GPUs, continue to invest in next-generation capabilities. Ironwood, our seventh-generation TPU and most powerful to date, is the first designed specifically for inference at scale. It delivers more than 10x improvement in compute power, or a recent |
2,612 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | is the first designed specifically for inference at scale. It delivers more than 10x improvement in compute power, or a recent high-performance TPU, while being nearly twice as power efficient. A strong relationship with NVIDIA continues to be a key advantage for us and our customers. We were the first cloud provider to offer NVIDIA's groundbreaking, B200 and GB200 Blackwell GPUs and will be offering their next-generation Vera Rubin GPUs. Second, this infrastructure powers our world-class research including our industry-leading models. We released Gemini 2.5 Pro last month, receiving extremely positive feedback from both developers and consumers. 2.5 Pro is state of the art on a wide range of benchmarks and debuted at number one on the chatbot arena by a significant margin. 2.5 Pro achieved big leaps in reasoning, coding, science, and math capabilities opening up new possibilities for developers and customers. Active users in AI Studio and Gemini API have grown over 200% since the beginning of the year. And last week, we introduced 2.5 Flash, which enables developers to optimize quality and cost. Our latest image and video generation models, Imagine three and VO2, are rolling out broadly and are powering incredible creativity. Turning to open models, we launched Gemma three last month, delivering state-of-the-art performance for its size. Gemma models have been downloaded more than 140 million times. Lastly, we are developing AI models in new areas where there's enormous opportunity. For example, our new Gemini robotics models. And in health, we launched AI coscientists, a multi-agent AI research system while AlphaFold has now been used by over 2.5 million researchers. Third, turning to products and platforms. All 15 of our products with a half a billion users now use Gemini models. Android and Pixel are two examples of how we are putting the best AI in people's hands. Making it super easy to use AI for a wide range of tasks. Just by using their camera, voice, or taking a screenshot. We are upgrading Google |
2,613 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | easy to use AI for a wide range of tasks. Just by using their camera, voice, or taking a screenshot. We are upgrading Google Assistant on mobile devices to Gemini and later this year, we'll upgrade tablets, cars, and devices that connect to your phone such as headphones and watches. The Pixel 9a launched very strong reviews, providing the best of Google's AI offerings like Gemini Live, and AI-powered camera features. And Gemini Live camera and screen sharing is now rolling out to all Android devices including Pixel and Samsung S25. Now moving on to key highlights from across Search Cloud, YouTube, and Waymo. First, Search. AI is one of the most revolutionary technologies for enabling and expanding our information mission. And for search, we see it growing the number and types of questions we can answer. We are already seeing this with AI Overviews, which now has more than 1.5 billion users every month. Nearly a year after we launched AI Overviews in The U.S, we continue to see that usage growth is increasing, as people learn that search is more useful for more of their queries. So we are leaning in heavily here continuing to roll the feature out in new countries to more users and to more queries. Building on the positive feedback for AI overviews, in March we released AI Mode: An Experiment in Labs. It expands what AI overviews can do with more advanced reasoning, thinking, and multimodal capabilities to help with questions that need further exploration and comparisons. On average, AI mode queries are twice as long as traditional search queries. We are getting really positive feedback from early users about its design, fast response time, and ability to understand complex nuanced questions. We also continue to see significant growth in multimodal queries. Circle to Search is now available on more than 250 million devices, usage increasing nearly 40% this quarter. And monthly visual searches with Lens have increased by 5 billion since October. Moving on to Cloud. At Cloud Next, we announced major innovations and |
2,614 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | with Lens have increased by 5 billion since October. Moving on to Cloud. At Cloud Next, we announced major innovations and over 500 companies shared the business results they are achieving by working with us. We provide leading cost, performance, and reliability for AI training and inference. This enables us to deliver the best value for AI leaders, like any scale and contextual AI. As well as global brands like Verizon. And for highly sensitive data and regulatory requirements, Google Distributed Cloud and our sovereign AI make Gemini available on-premises or in-country. Our Vertex AI platform makes over 200 foundation models available, helping customers like Lowe's integrate AI. We offer industry-leading models, including Gemini 2.5 Pro, 2.5 Flash, Imagine three, VO2, Chirp, and Lyria. Plus open source and third-party models like LAMA4 and Anthropic. We are the leading cloud solution for companies looking to the new era of AI agents. A big opportunity. Our Agent Development Kit is a new open-source framework to simplify the process of building sophisticated AI agents and multi-agent systems. An agent designer is a low-code tool build AI agents and automate tasks in over 100 enterprise applications and systems. We are putting AI agents in the hands of employees at major global companies like KPMG. With Google Agent space, employees can find and synthesize information from within their organization. Converse with AI agents, and take action with their enterprise applications. It combines enterprise search, conversational AI or chat, and access to Gemini and third-party agents. We also offer prepackaged agents across customer engagement, coding, creativity, and more, that are helping to provide conversational customer experiences accelerate software development improve decision making. And of course, Google Workspace, delivers more than 2 billion AI assists monthly, including summarizing Gmail, and refining Docs. Lastly, our cybersecurity products are helping organizations detect investigate and respond to |
2,615 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Gmail, and refining Docs. Lastly, our cybersecurity products are helping organizations detect investigate and respond to cybersecurity threats. Our expertise, coupled with integrated Gemini AI advances, detects malware, prioritizes threats, and speeds up investigative workflows. This quarter, we were excited to announce our intent to acquire Wizz a leading cloud security platform, that protects all major clouds and core environments. Together, we can make it easier and faster for organizations of all types and sizes to protect themselves. End to end and across all major clouds. We think this will help spur more multi-cloud computing, something customers want. Next, YouTube. Yesterday marked a historic milestone. The twentieth anniversary of the first video uploaded to YouTube. From that single nineteen-second upload, the platform has grown into a global phenomenon, fundamentally changing how billions of people create, share and experience content. Through all this growth, subscriptions are now a big part of the business. We continue to diversify subscription options recently expanding our Premium Light pilot to The U.S, giving users a new way to enjoy most videos on YouTube ad-free. TV is the primary device for YouTube viewing in The U.S. According to Nielsen, YouTube has been number one in streaming watch time in The U.S. For the last two years. And YouTube now has over 1 billion monthly active podcast users. YouTube Music and Premium reached over 125 million subscribers including trials globally. And finally, Waymo is now safely serving over a quarter of million paid passenger trips each week. That's up 5x from a year ago. This past quarter, Waymo opened up paid service in Silicon Valley, Through our partnership with Uber, we expanded in Austin, and are preparing for our public launch in Atlanta later this summer. We recently announced Washington, D.C. As a future ride-hailing city going live in 2026 alongside Miami. Waymo continues progressing on two important capabilities for riders, airport access and |
2,616 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | going live in 2026 alongside Miami. Waymo continues progressing on two important capabilities for riders, airport access and freeway driving. Thanks to all of our employees for their work this quarter. It was a great start to the year and Q2 will be even more exciting. With that, Philip, over to you. |
2,617 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Philipp Schindler: Thanks, Sundar, and hello, everyone. I'll quickly cover performance for the quarter and then frame the rest of my remarks around the progress we're delivering across search, ads, YouTube, and partnerships. Google services revenues were $77 billion for the quarter, up 10% year on year, driven by strong growth in Search and YouTube, partially offset by year-on-year decline in network revenues. To add some further color to the performance, the 10% increase in Search and Other revenues was led by financial services, primarily due to strength in Insurance followed by Retail. YouTube saw a similar performance across verticals. Its 10% growth in advertising revenues was driven by direct response followed by brand. So let's start with search, where we've seen robust growth in revenues. We around the world, over 2 billion people use Search every day. To find information, compare products, or shop. And there are more than 5 trillion searches on Google annually. We've continued our efforts to help more people ask entirely new questions bringing more opportunities for businesses to connect with consumers And as we've mentioned before, with the launch of AI overviews, the volume of commercial queries has increased. Q1 marked our largest expansion to date for AI overviews. Both in terms of launching to new users and providing responses for more questions. The feature is now available in more than 15 languages across 40 countries. For AI overviews, overall, we continue to see monetization at approximately the same rate, which gives us a strong base on which we can innovate even more. Turning to visual queries. On the last earnings call, I mentioned the success we're seeing with Lens, where shoppers use their camera or images to quickly find information in ways they couldn't before. In Q1, the number of people shopping on Lens grew by over 10%, and the majority of Lens queries are incremental. Sundar mentioned the significant growth we're also seeing with Circle to Search, multimodality continues to drive |
2,618 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | incremental. Sundar mentioned the significant growth we're also seeing with Circle to Search, multimodality continues to drive queries across search. Moving to ads. More businesses, big and small, are adopting AI-powered campaigns, and the deployment of AI across our ads business is driving results for our customers and for our business. Throughout 2024, we launched several features that leverage LLMs to enhance advertiser value, we're seeing this work pay off. The combination of these launches now allows us to match ads to more relevant search queries. And this helps advertisers reach customers in searches where we would not previously have shown their ads. Focusing on our customers, we continue to solve advertisers' pain points and find opportunities to help them create, distribute, and measure more performant ads. Infusing AI at every step of the marketing process. On audience insights, we released new asset audience recommendation which tell businesses the themes that resonate most with their top audiences. On creatives, advertisers can now generate a broader variety of lifestyle imagery customized to their business to better engage their customers. And use them across PMACs, demand gen, display, and app campaigns. Additionally, in PMax, advertisers can automatically source images from their landing pages and crop them, increasing the variety of their assets. On media buying, advertisers continue to see how AI campaigns help them find new customers. In DemandGen, advertisers can more precisely manage ad placements across YouTube Gmail, Discover, and Google Display Network globally. And understand which assets work best at a channel level. Thanks to dozens of AI part improvements launched in 2024, businesses using DemandGen now see an average 26% year-on-year increase in conversions per dollar spent for goals like purchases and leads. And when using DemandGen with product feed, on average, they see more than double the conversion per dollar spent year over year. As an example, Royal Cannon combined DemandGen |
2,619 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | they see more than double the conversion per dollar spent year over year. As an example, Royal Cannon combined DemandGen and PMax campaigns to find more customers for its cat and dog food products. The integration resulted in a 2.7 times higher conversion rate a 70% lower cost per acquisition for purchases, and increase the value per user by 8%. Turning to YouTube, where we saw strong growth in revenues across ads and subscriptions. This week, we're celebrating YouTube's twentieth anniversary, We're proud of its leadership as a streaming destination where people come to watch everything they love from live sports and creator-produced content to shorts and podcasts. Creators are what drives viewership. And on average, they upload 20 million videos a day to YouTube. Our biggest creators generate a level of fandom and viewer engagement around large cultural moments on YouTube that brands can't find anywhere else. During March Madness, brands aligned not only with clips and highlights from the game, but also with the creators who drive basketball culture, like Jesser and the Ringer's J Kyle Mann. In Q1, the growth of our reservation-based ad business more than doubled year over year. Brands and creators continue to use the opportunities that collaborations and partnerships offer. Toyota worked with Zach King, the king of short magical videos with over 42 million followers to take over his channel. The creator takeover and accompanying creator ad lifted Toyota's brand awareness by 25% compared to Control Group. And 9% compared to the Toyota brand ad. Looking at Shorts, engaged views grew by over 20% in the first quarter. We continue to be pleased with the progress we're making globally in Shorts monetization relative to in-stream viewing and are particularly encouraged by the trend in The U.S. As always, I'll wrap up with a strong momentum we're seeing in partnerships where our customers increasingly recognize the strength and breadth of what Google has to offer. For instance, Roblox is partnering Google Ad Manager |
2,620 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | recognize the strength and breadth of what Google has to offer. For instance, Roblox is partnering Google Ad Manager to bring immersive ads to gamers. Gen Z gamers are Roblox's biggest users, and thanks to our partnership, advertisers will be able to reach this audience with ads that blend seamlessly into the gaming experience. We also launched a YouTube shorts effect to help people release iconic Roblox heads and inspire fans to create content at scale. In closing, I'd like to thank Googlers everywhere for their contributions and commitment to our success and to our customers and partners their continued trust. Anat, over to you. |
2,621 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Anat Ashkenazi: Thank you, Philip. My comments will focus on year-over-year comparisons for the first quarter unless they state otherwise. I will start with results at the Alphabet Inc. level. And will then cover our segment results. I'll end with some commentary on our outlook for the second quarter and 2025. We had another strong quarter in Q1, Consolidated revenues of $90.2 billion increased by 12% or 14% in constant currency. Search and YouTube advertising, subscription platforms and devices, and Google Cloud, each had double-digit revenue growth this quarter reflecting strong momentum across the business. Total cost of revenue was $36.4 billion up 8%. Tech was $13.7 billion up 6%. We continue to see a revenue mix shift with Google Search growth at double-digit levels network revenues, which have much higher TAC rate, declined. Other costs of revenue was $22.6 billion up 9%, with the increase primarily driven by content acquisition costs largely for YouTube, followed by depreciation other technical infrastructure operations costs. Total operating expenses increased 9% to $23.3 billion R and D investments increased by 14%, primarily driven by increases in compensation, and depreciation expenses. Sales and marketing expenses decreased 4%, primarily reflecting a decline in compensation expenses. G and A expenses increased by 17% reflecting the impact of charges for legal and other matters. Operating income increased 20% this quarter to $31 billion and operating margin increased to 33.9% representing 2.3 points of margin expansion. Operating margin benefited from healthy revenue growth a moderated pace of compensation growth, and a favorable mix shift towards lower tech advertising revenues, partially offset by a year-on-year increase depreciation expenses of just over $1 billion Other income and expenses was $11.2 billion primarily due to unrealized gain on our non-marketable equity securities related to our investment in a private company, which we noted in our 10 as a subsequent event. Net income increased |
2,622 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | securities related to our investment in a private company, which we noted in our 10 as a subsequent event. Net income increased 46%, to $34.5 billion and earnings per share increased 49% to $2.81 We delivered free cash flow of $19 billion in the first quarter and $74.9 billion for the trailing twelve months. Ended the quarter with $95 billion in cash and marketable securities. Turning to segment results, Google services revenues increased 10% to $77.3 billion reflecting strength in Google Search, and YouTube advertising as subscription. Google Search and other advertising revenues increased by 10% to $50.7 billion The robust performance of search was once again broad-based across verticals led by financial services due primarily to strength in insurance, followed by retail. YouTube advertising revenues increased 10% to $8.9 billion driven by direct response advertising followed by brand. Network advertising of $7.3 billion were down 2%. Subscription platforms and device revenues increased 19% to $10.4 billion primarily reflecting growth in subscription revenues. This growth was primarily driven by YouTube subscription offerings followed by Google One, with growth in the number of subscribers being the biggest driver of revenue growth. Google services operating income increased 17% to $32.7 billion and operating margin increased from 39.6% to 42.3%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter, Revenue increased by 28% to $12.3 billion in the first quarter, reflecting growth in GCP across core and AI products at a rate that was much higher than cloud's overall revenue growth rate. Growth in Google Workspace was primarily driven by an increase in average revenue per seat. Google Cloud operating income increased to $2.2 billion and operating margin increased from 9.4% to 17.8%. As we scale our fleet, we continue to focus on driving improvements in product productivity, efficiency, and utilization to offset the growth in expenses particularly from higher |
2,623 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | improvements in product productivity, efficiency, and utilization to offset the growth in expenses particularly from higher depreciation. As to Other Bets, for the first quarter, revenues were $450 million and operating loss was $1.2 billion The year-on-year decline in revenue and increase in operating loss primarily reflect the milestone payment received in the first quarter of 2024 for one of our other bets. With respect to CapEx, our reported CapEx in the first quarter was $17.2 billion primarily reflecting investment in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google services, Google Cloud, and Google DeepMind. Q1, we returned value to shareholders, in the form of $15.1 billion in share repurchases and $2.4 billion dividend payments. As we announced today, our Board of Directors declared a 5% increase in our quarterly dividend and also approved and used $70 billion share repurchase authorization. Turning to our outlook, I would like to provide some commentary on several factors that will impact our business performance in the second quarter and the remainder of 2025. First, in terms of revenue, I'll highlight a couple of items that we mentioned last quarter that will have an impact on second quarter and 2025 revenue. First, in Google services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical. Throughout 2024. Second in cloud, we're in a tight demand supply environment, And given that revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on capacity deployment each quarter. We expect relatively higher capacity deployment towards the end of 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. We still expect to invest approximately $75 billion in CapEx this year. The expected CapEx investment level may |
2,624 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | full year 2025. We still expect to invest approximately $75 billion in CapEx this year. The expected CapEx investment level may fluctuate from quarter to quarter, due to the impact of changes in the timing of deliveries and construction schedules. In terms of expenses, first, as I mentioned on our previous earnings call, the significant increase in our investments in CapEx over the past few years will continue to put pressure on the P and L, primarily in the form of higher depreciation. The first quarter, we saw 31% year-on-year growth in depreciation from the increase in technical infrastructure assets placed in service. Given the increase in CapEx investments over the past few years, we expect the growth rate in depreciation to accelerate throughout 2025. Second, as we've previously said, we expect some headcount growth in 2025 in key investment area. As we've disclosed previously, due to a shift in the timing of our annual employee stock-based compensation award beginning in 2023, our first quarter stock-based comp expenses is relatively lower compared to the remaining quarters of the year. In conclusion, as you heard from Sundar and Philip, we're pleased with the progress we're making across the organization. The results for the quarter and the opportunities ahead. Our success as a company is grounded in our experience driving advancements in deep computer science that enables us to create innovative new products and services for users businesses, and partners around the world. We have a strong track record of incubating and then building these offerings into new profitable businesses for Alphabet Inc. As we announced last quarter, YouTube and Cloud exited 2024 at a combined annual run rate of $110 billion And as you heard from Sundar earlier, Waymo is continuing to progress in building on its impressive technological achievements to scale rapidly and develop a sustainable business model. Thank you. Sundar, Philip, and I will now take your questions. |
2,625 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Operator: Thank you. To prevent any background noise, we ask that you please mute your line once your question has been stated. And our first question comes from Brian Nowak from Morgan Stanley. Your line is now open.
Brian Nowak: Great. Thanks for taking my questions. I have two. First one is sort of the macro advertising backdrop. Maybe, Anat, I know it's April 2024, and you call out some factors. You're kind of thinking about the second quarter. Any other factors you're seeing in advertising verticals or regions or that could be showing any signs of weakness quarter dates? We should think through any other changes from typical seasonality in 2Q 2025 versus prior quarters? Then the second one on Philip, I think I heard you mention now the volume of commercial queries has increased. Maybe can you just walk us through which of the products are driving that increase in commercial queries And as you sort of think about the pipeline of search products are there any others that you're particularly excited about to kind of continue to drive further query growth throughout 2025-2026? Thanks. |
2,626 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Philipp Schindler: So let me take the first one as well. We saw broad-based strength across ad verticals in Q1, and we saw it give you a bit of vertical color here, search was led again, by finance due primarily to ongoing strength in the insurance, retail, health care, and travel were actually also sizable contributors here to growth. With regard to Q2, we're only a few weeks in, so it's really too early to comment. I mean, we're obviously not immune to the macro environment. But we wouldn't want to speculate about potential impacts beyond noting that the changes to the de minimis exemption will obviously cause slight headwind to our ads business in 2025, primarily from APAC-based retailers. And maybe to zoom out, I would say we have a lot of experience in managing through uncertain times, and we focus on helping our customers by providing deep insights into changing consumer behavior that is relevant to their business Examples are auction dynamics, query trend insights on topics replacement purchases, and so on. So we have a lot of experience in this area. On the commercial query side, AI overviews continue to drive higher satisfaction and search usage. And as I noticed, Q1 was really our largest expansion to date for AI overviews, both in terms of launching to new users and providing responses for more questions. That's really the core already of the answer. AI overview sits at the center of your question here. And when it comes to other products, look, I don't want to speculate on this, but we're happy with what we're seeing here on AI overviews. And I am confident we can expand this to more products over time.
Operator: Thank you. Your next question is from Doug Thomas from JPMorgan. Your line is now open. |
2,627 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Operator: Thank you. Your next question is from Doug Thomas from JPMorgan. Your line is now open.
Doug Thomas: Great. Thanks for taking the questions. Philip, maybe just to go back to AI overviews for a moment. Can you just tell us how we should think about the one and a half billion AI overviews users just in terms of breadth of rollout? And I know you're saying monetization at approximately the same rate. But what does that mean in terms of click-through rates and conversion? And then, Anat, just curious if there have been any changes to Google's approach to durably reengineering the cost base since you've joined, and if macro weakens and we see more of a slowdown, would you expect to find additional opportunities to cut back more on costs? Thank you.
Philipp Schindler: Yeah. Look. On the ads of in AI Overviews, late last year actually we launched them within the AI Overviews on mobile in The U.S and this builds on our previous rollout of ads above and below. So this was a change we have But as I talked about it before, for AI overviews overall, we see the monetization at approximately the same rate, which gives us a strong base on which we can innovate even more. So I'm very happy with this. I don't think this is the moment to go into the details of click-through rates and conversion and so on. But overall, we're happy with what we're seeing. |
2,628 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Anat Ashkenazi: And to your question on our approach to productivity and efficiency, it hasn't really changed. I've mentioned my approach and our approach as a company. On, at the end of 2024. And we're still focused on driving efficiency and productivity throughout the organization. Both in our operating expenses and in our CapEx. I've mentioned some of these during my prepared remarks. But certainly, this helps us as we think about the investments we need to make in innovation to drive long-term sustainable growth profile for the company, we're able to repurpose some of these efficiencies into these investments as well as as you think about the increase in CapEx we've seen over the past several years and what we're investing this year, this will put additional pressure on the income statement and the form of depreciation. So we're working hard to try and offset some of these headwinds. As well as within the CapEx investments themselves. $75 billion. We're looking at how do we make sure every dollar is used efficiently We have a highly rigorous process to determine the demand behind it and then the allocation of the compute associate with our technical infrastructure. Investments, ensuring that we're utilizing that appropriately and that we're highly efficient with everything we're doing. You see you've seen some of the announcement and, some of the changes, but we're focusing on continue to moderate the pace of compensation growth, looking at our real estate footprint, and, again, the build-out and utilization of our technical infrastructure across the business.
Operator: Great. Thank you, both. Thank you. Our next question comes from Eric Sheridan from Goldman Sachs. Your line is now open. |
2,629 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Eric Sheridan: Thank you for taking the questions. First, maybe for Sundar. You look across the consumer AI landscape today, how are you thinking about continuing to drive differentiation for Gemini as a platform through the lens of usage, utility or putting product innovation at the forefront of driving consumer habits? And then the second one may be for Anat. You know, if the macro environment were to change and become more downwardly volatile, how should investors think about the investments that are must make this year almost fixed in nature versus where there might be more flexibility to alter the investment priorities of the company if the macro environment were to worsen. Thank you so much. |
2,630 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Sundar Pichai: Thanks, Eric. Obviously, it's an exciting moment on the AI front. I think the foundation for everything is obviously the front year model progress we are seeing, and particularly with 2.5 Pro and Flash, I think we're well positioned. We are seeing tremendous reception from developers, enterprises, and consumers too. And obviously, we are delivering consumer AI experiences across our product portfolio, including the primary way people experience it is obviously in search with AI overviews and very early days with AI mode, but that will be a consumer AI forward experience. And we're already seeing very positive feedback. Queries are you know, people are typing in roughly 2x longer queries compared to a traditional search. So there's a lot of excitement there. And in the Gemini app, which you asked about, we've really seen increased momentum, particularly over the last few weeks as we have rolled out not just the newer models, but we are seeing users are really responding well to all the innovation Gemini Live, which we is based on Project Astra, has been very well received. Deep research I think, based on 2.5 Pro is SOTA, and that's been well received in Canvas. We've had a lot of traction as well. And so we are definitely investing more. We have recently organized ourselves better to capitalize on this momentum, and I'm excited about our road map there. |
2,631 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Anat Ashkenazi: And on the investments this year and overall, there be any macroeconomic changes, as I said, we're still planning to invest approximately $75 billion in CapEx this year. We do see a tremendous opportunity ahead of us across the organization, whether it's to support Google services, Google Cloud, and Google DeepMind. Recall, I've stated on the Q4 call that we exited the year in cloud specifically with more customer demand than we had capacity. And that was the case this quarter as well. So we want to make sure we ramp up to support customer needs and customer demands. Having said that, we're investing in long term, and we're investing in innovation. That's the essence of our business. And we want to do it in a responsible fashion. So you've seen us over the past, couple years, and we're continuing to do this, and you're seeing this in our results. Drive efficiency and productivity throughout the business. And, you know, we've announced things such as consolidation of teams which helps not just with cost, but with velocity and speed. We're able to get things to market faster. So that's one of the areas we're focused on. You heard from Sundar the last couple calls on just a rapid pace of innovation we're bringing to the marketplace. So it the way we're doing this across the business to drive productivity and efficiency should help us have a more resilient organization irrespective of macroeconomic condition. But, certainly, we don't ignore We always look at what's happening outside the work the organization as well as inside but invest appropriately to drive both the short-term growth as well as the long-term growth.
Operator: Thank you. Thank you. Our next question comes from Ross Sandler from Barclays. Your line is now open. |
2,632 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Operator: Thank you. Thank you. Our next question comes from Ross Sandler from Barclays. Your line is now open.
Ross Sandler: Great, thanks. One for Sundar, one for Philip. Sundar, it was disclosed this week in the trial that's going on that Gemini has 35 million DAUs, and just curious, that number obviously trails by a pretty wide margin. You talk about the strategy to get that DAU figure much higher that you guys are deploying And then Philip, just curious to hear what what you're seeing on the brand advertising side at YouTube. In 1Q and and into early 2Q. Are brands holding up relatively well like Direct Response, or are they starting to react to some of these macro jitters that we're all experiencing? Any thoughts there? Thank you very much.
Sundar Pichai: Thanks, Ross. I think I touched upon this to Eric's question as well, but we are definitely, I think, know, there's been a lot of momentum in terms of product features we've been introducing, and, you know, we are definitely seeing reception including increased adoption and usage based on those features. So I think we are in a good positive cycle, the recent advances on the model frontier. By many metrics, I think we have the best model out there now, and I think I think that's gonna drive increased adoption as well. And again, I would reiterate, people are using obviously, we have 1.5 billion users through AI overviews interacting with AI in a deep way, in a very engaged way. Obviously, we are innovating with AI mode. And, you know, we have a very exciting road map ahead with the Gemini app as well. So across the board, super, super excited about what's ahead. |
2,633 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Philipp Schindler: And on your brand question, look, brand and, by the way, also Direct Response had a very solid growth in Q1. Brand advertisers really enjoyed cultural moments we had, like Coachella, for example, or March Madness. We had strong overall from the finance and retail verticals in Q1. On the side as well. The operating metrics for YouTube were strong in Q1. Watch time growth remains robust. Particularly in key monetization opportunity areas such as shorts and living room. It's also, by the way, nice to see the strong position of our creators who obviously benefit from the brand piece. Gives us a lot of confidence when we look at it more closely. And on the Q2 side, I think I mentioned it's too early to really comment on that.
Operator: Thank you. Your next question is from Mark Smolik from Bernstein.
Mark Smolik: Great. Thanks for taking my questions. Sundar, appreciate the color on Gemini deployment across kind of that 15 products with half a billion users or more. It would be great to hear more about where you're seeing the most usage and of Gen AI internally at Google. Perhaps whether the capabilities are they in a place today in terms of either supplementing or augmenting the workforce? And then just to build on that earlier AI mode type questions, appreciate AI mode has you know, 2x longer queries than traditional search. But any color you can share perhaps on how AI mode behavior differs from how consumers are using the Gemini app? Thank you. |
2,634 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Sundar Pichai: Look, on internally, I mean, this has been an extraordinary amount of focus and excitement both because I think we are the early use cases have been transformative in nature, and I think there's still feels like early days and long ways to go. Obviously, I had mentioned a few months ago, in terms of how we are using AI for coding, we are continuing to make a lot of progress there in terms of people using coding suggestions. I think the last time I had said the number was, like, 25% of code that's checked in. It involves people accepting AI suggested solutions. That number is well over 30% now. But more importantly, we have deployed more deeper flows And particularly with the newer models, I think we are working on early agentic workflows and how we can get those coding experiences to be much deeper. We are deploying it across all parts of the company, you know, Our customer service teams are deeply leading the way there. We've both dramatically enhanced our user experience as well as made it much more efficient to do so. And we are actually bringing all our learnings and expertise in our solutions through cloud to our other customers. But beyond that, all the way from the finance team preparing for this earnings call to everything. It's deeply embedded in everything we do, but I still see it as early days and there's going be a lot more to do. On AI mode, look, think we are just leaning in on the early positive feedback as we scale up AI overviews. It's been one of our most positive launches and but it's been clear people have wanted even more of it. And so with AI Mode, are bringing our state-of-the-art Gemini models right into search. I mentioned people typing in longer queries. There's a lot more complex, nuanced questions. People are following through more people are appreciating the clean design, the fast response time and the fact that they can kind of be much more open-ended can undertake more complicated tasks, product comparisons, for example, has been a positive one exploring how-tos, |
2,635 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | open-ended can undertake more complicated tasks, product comparisons, for example, has been a positive one exploring how-tos, planning a trip. So those are the kinds of early feedback we are seeing. And I think we are really focused on improving the product across all of AI mode, AI overviews, the Gemini app, and we are seeing positive user traction as well. |
2,636 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Operator: Thank you. Your next question is from Mark Mahaney from Evercore. Your line is now open.
Mark Mahaney: Okay, thanks. One for Anat and one for Sundar. Anat, getting back to a question I think that Doug was asking earlier on, you just put up record high or multi-year record high margins for both Google services and for Google Cloud. You talked, Phil, about depreciation expenses. Accelerating rapidly, you know, throughout the year because of all the investments you've already, you know, you'd warn people about. Do you back in the September, you seem relatively confident that you had enough levers to kind of offset kind of rising infrastructure costs. Was that still your you know, six months later, is that still your view that, you've got enough levers that even with the rising infrastructure costs, you can there's enough in there to kind of counterbalance that. And then just briefly on Waymo, the it continues to rise aggressively, the numbers, Sundar. The long-term business model for Waymo, is there a reason to make a decision on that soon? Or have you already made the decision of whether this is a long-term licensing model, or you really want to run this as a standalone ride-sharing delivery, you know, autonomous vehicle business. Thank you very much. |
2,637 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Anat Ashkenazi: Thanks. On your first question on profitability and what levers do we have, and do we still have levers to pull first, I think, every organization can always push a little further. I don't view productivity goals or efficiency as an episodic kind of project-based effort, but rather a continuous effort that when you get to a certain place, you push a little further. Having said that, we do have significant investments we're making across the organization and we have been making them for the past several quarters. And we've been able to do it because we were able to find to fund those investments across the organization. Those are for products and services that are gonna drive long-term growth for the company. So while we're trying to as much of the headwind associated with the increase in infrastructure costs, it will become more difficult. As I said, the depreciation will accelerate. We had about a 31% year-over-year growth in depreciation this quarter, and it will be higher as we go throughout the year. So think about that kind of as a headwind that we have to manage against But we're continuing with, pushing across the organization, leveraging Sundar mentioned, the use of AI and kind of an AI-first Google across several of our functions to help us manage a larger, scope of work using our AI, AI agents, and AI tools. As Sundar mentioned, we did leverage it. In preparation for the earnings call, and we're leveraging across, several functions. So there are opportunities, but there are also great opportunities for investment, and we want to make sure that we make room for, to make these investments to drive long-term growth and ensure we have a very, resilient long-term growth, profile for the company. |
2,638 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Sundar Pichai: And, Mark, thanks. I think this is probably the first question I've got on our earnings call on Waymo. So thank you. And I think it's a sign of its progress. Look, the thing that excites me is I think we've been laser-focused and we'll continue to be on building the world's best driver. And I think doing that well really gives you a variety of optionality and business models across geographies, etcetera. It'll also require a successful ecosystem of partners, and, you know, we can possibly do it all ourselves. And so I'm excited about the progress the teams have made through a variety of partnerships. Obviously, highlight of it is a partnership with Uber. We are very pleased with what we are already seeing in Austin in terms of rider satisfaction. We look forward to offering the first paid rides in Atlanta via Uber later this year. But we are also building up a network of partners, for example, for maintaining fleets of vehicles and doing all the operations related to that. With the recently announced partnership with Moo in Phoenix and Miami, obviously partnerships with OEMs. There are future optionality around personal ownership as well. So we are widely exploring and but at the same time, clearly staying focused and making progress, both in terms of safety, the driver experience and progress on business model and operationally scaling it up.
Mark Mahaney: Okay. Thank you very much.
Operator: Thank you. Our next question comes from Ken Gawrelski from Wells Fargo. Your line is now open. |
2,639 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Operator: Thank you. Our next question comes from Ken Gawrelski from Wells Fargo. Your line is now open.
Ken Gawrelski: Thank you. Two if I may please. First on AI-powered search, you have a number of AI-powered search interfaces including three most prominently, AI Overviews, AI Mode, and Gemini. In the future, should we think of these as distinct experiences that will be long-lasting or more experimental now and will and Google will eventually focus on one approach going forward? The second one is more on the financial side. You continue to experience very healthy gross margin expansion. We see the TAC, sure, but you Anat, you also talked about the offsetting depreciation expense. Could you talk about beyond those two buckets where you're seeing the real savings on the COGS line and driving that gross margin expansion? And maybe even how we should be thinking about that going forward? Thank you. |
2,640 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Sundar Pichai: Okay. Now maybe on AI-powered Search and how do we see our consumer experience. Look, I do think Search and Gemini obviously will be two distinct efforts. Right? I think there are obviously some areas of overlap, but there are also, you know, like expose very, very different use cases. And so for example, in Gemini, we see people iteratively coding and going much deeper on a coding workflow, as an example. I think both will be around. Within search, you know, would think of AI overviews scaling up and working for our end-user base, but an AI mode is the tip of the tree for us pushing forward on an AI-forward experience. There will be things which we discover there which will may will make sense in the context of AI overviews, so I think will flow through to our base. You almost want to think of what are the most advanced 1 million people using Search for, the most advanced 10 million people, and then how do a billion and a half people use Search for. And we want to innovate and so I think this allows us to do that. But the true north through all of this is user feedback, user satisfaction, user experience. And so that will determine where this all works out in the future. |
2,641 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Anat Ashkenazi: And to your question on gross margin, a couple of trends to highlight there. And I've mentioned this in the prepared remarks, you've seen improvement in tech that's really driven by the change in revenue mix with a continued search, growth and then network revenue declines. Network revenue has a much higher tech rate. So that mix is helping us from a gross margin perspective. So think about that as well. Now we do have depreciation for technical infrastructure hits in two places primarily in two places in the income statement One is in other cost of sales, and the rest is in R and D. So it is in that line item that's impacting cost of sales. Now we've had some efficiencies there, and I did mention the improvement in our overall cost of or headcount growth and compensation kind of moderating those growth. So that helps us as well more than offset the depreciation increases in Q1. But as I mentioned, this number will be higher in the coming quarters. Recall, we have we set approximately $75 billion in CapEx, which is up from 55 or just over 50 billion, last year So there's, expected to be quite a significant increase in depreciation.
Operator: Thank you. And our last question comes from Ron Josey from Citi. Your line is now open.
Ron Josey: Thanks for taking the question. Philip, I wanted to touch a little more on your comments around direct response and YouTube. I think it's been improving and been a driver over the past couple quarters. Love to hear more just about what's driving that. Is that the demand gen and integration with Pmax? Or are users perhaps more involved on direct response now that Short's usage is driving? Would love your thoughts there. Thank you. |
2,642 | GOOGL | 1 | 2,025 | 2025-04-24 16:30:00 | Alphabet Inc. | 29,096 | Philipp Schindler: Yeah. I think there's a lot of different factors. Mostly, we continue to help our customers really using our AI-powered tools. You mentioned a few of them to drive performance. That's a very big one. As I mentioned before, we're also happy with the progress we're seeing on shorts. And closing to the monetization gap here to the overall business, which is actually really nice to see, especially in The U.S. So we're very happy with that.
Sundar Pichai: Yeah. And, you know, I'll just chime in to say, YouTube just celebrated its twentieth birthday, and, you know, we now have more than 20 billion videos on YouTube, and we get 20 million videos uploaded every day. So I think it's a tremendous platform, and thanks to all the creators and users who have supported us there over the years.
Ron Josey: Great. Thank you.
Operator: Thank you. And that concludes our question and answer session for today. I would like to turn the conference back over to Jim Friedland for any further remarks.
Jim Friedland: Thanks, everyone, for joining us today. We look forward to speaking with you again on our second quarter 2025 call. Thank you, and have a good evening.
Operator: Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect. |
2,643 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Good morning. My name is Katie, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs Fourth Quarter 2024 Earnings Conference Call. On behalf of Goldman Sachs, I will begin the call with the following disclaimer. The earnings presentation can be found on the Investor Relations page of the Goldman Sachs website and contains information on forward-looking statements and non-GAAP measures. This audio cast is copyrighted material of The Goldman Sachs Group Inc., and may not be duplicated, reproduced, or rebroadcast without consent. This call is being recorded today, January 15, 2025. I will now turn the call over to the Chairman and Chief Executive Officer, David Solomon; and Chief Financial Officer, Dennis Coleman. Thank you. Mr. Solomon, you may begin your conference. |
2,644 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Thank you, operator, and good morning, everyone. Thank you all for joining us. Before I start my prepared remarks, I'd like to take a moment to touch on the devastating fires that have spread across Los Angeles. Our thoughts are with the people of LA, including our colleagues and clients. We join everyone else in thanking the brave five firefighters and first responders working tirelessly to protect that community. Now let me turn to our results. I'm very pleased with our strong performance as we continue to serve our clients in a dynamic environment. In the fourth quarter, we generated revenues of $13.9 billion, earnings per share of $11.95, and ROE of 14.6% and an ROTE of 15.5%. For the full year, we increased our revenues by 16% to $53.5 billion. We grew our EPS by 77% to $40.54 and improved our ROE by over 500 basis points to 12.7% demonstrating strong operating leverage. Before we review our financials in detail, I will start today's presentation with a strategic update. Beginning on Page 1, we have a clear purpose at Goldman Sachs. We aspire to be the world's most exceptional financial institution, united by our shared values of client service, partnership, integrity and excellence. These values are the foundation of our strategy and enable us to deliver for our clients and our shareholders. As shown on Page 2, our interconnected client franchises are at the core of our growth strategy. Our Global Banking and Markets business is distinguished by its scale, profitability and leadership positions. In Investment banking, we once again ended the year as the number one M&A advisor. In markets, we have the number one equities business and a leading fit franchise. These leadership positions have been built over decades of investment and they reflect the confidence and trust that our clients have in us. Our Asset and Wealth Management business is comprised of a leading global active asset manager, a top five alternatives franchise and a premier ultra-high net worth wealth management business. This |
2,645 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | active asset manager, a top five alternatives franchise and a premier ultra-high net worth wealth management business. This scaled business has over $3.1 trillion in assets under supervision with global breadth and depth across products and solutions. Importantly, our One Goldman Sachs operating philosophy drives the interconnectedness between these two world-class businesses, enabling us to seamlessly deliver a variety of unique solutions and execution capabilities to our clients. Turning to Page 3. Delivering excellence to our clients is only possible because of our greatest asset, our people. Their exceptional focus and dedication supported by our culture of collaboration and excellence is critical in solving our clients' most consequential problems. Our people, history and culture have made Goldman Sachs an aspirational brand around the globe, which allows us to attract quality talent across the organization from our summer interns all the way to our partners, and we invest heavily in our people. Many of them have long careers at the firm, exemplified by the fact that over 40% of our partners started as campus hires. Of course, not all of our people stay at Goldman Sachs for their entire careers. Many believe for opportunities to lead other companies and investment firms. And these firms, in turn, often become important clients of Goldman Sachs. Today, more than 275 of our alumni are in C-suite roles at companies with either a market cap greater than $1 billion or assets under management of over $5 billion and hundreds of other alumni end up coming back to the firm as Boomerang hires, including roughly 25 partners and managing directors last year alone, a testament to our enduring brand and culture. All in, we have an exceptional client franchise supported by our best-in-class talent and culture, which enables us to drive our strategy forward, and it is critical that we continue to invest in our people. Now turning to Page 4. At our first Investor Day in 2020, we laid out a comprehensive strategy to |
2,646 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | to invest in our people. Now turning to Page 4. At our first Investor Day in 2020, we laid out a comprehensive strategy to strengthen and grow the firm. We also laid out a number of targets that we could be held accountable for our progress. Today, the evidence is clear, we have met or exceeded almost all of these targets. We have grown our revenues from $37 billion to $54 billion, nearly 50% while improving the durability of those revenue streams. In Global Banking and Markets, we've maintained our position as the leading M&A adviser in Investment banking and have improved our standing with the top 150 clients and thicken equities over the past five years. At the same time, we've significantly increased our more durable FICC and equity financing revenues, which together have grown at a 15% CAGR to a new record of $9.1 billion this year. In Asset & Wealth Management, we've consistently grown our more durable management and other fees in private banking and lending revenues, both of which were record in 2024. Notably, management and other fees surpassed $10 billion, exceeding our 2024 target. In addition, alternative fundraising surpassed $70 billion. The success is a direct result of our continued innovation developing new strategies and our long-standing track record of investment performance. Additionally, we further narrowed our strategic focus. We closed on the sale of GreenSky entered into an agreement with General Motors to transition their credit card program and sold our portfolio of seller financing loans. Turning to Page 5. Global Banking & Markets, our leading franchise has produced average revenues of $33 billion and an average ROE of 16% over the last five years across a variety of market environments, demonstrating the diversity and strength of this business. While no one has a crystal ball, there are a number of catalysts that we believe will continue to drive activity. There has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election. Additionally, there |
2,647 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election. Additionally, there is a significant backlog from sponsors and an overall increased appetite for dealmaking supported by an improving regulatory backdrop. The combination of these conditions should spur further activity in 2025. One large strategic opportunity we are particularly focused on relates to financing. Goldman Sachs operates the fulcrum of one of the most important structural trends currently taking place in finance. The emergence and growth of our private credit and other asset classes that can be privately deployed. Our unique origination capabilities position us to both connect companies' dependable capital and connect investors to assets that can produce superior returns. Earlier this week, we announced the formation of our Capital Solutions Group, which will harness the power of One Goldman Sachs to provide our clients a comprehensive suite of our financing, origination, structuring and risk management offerings across both public and private markets. We are taking the current capabilities of our financing group, adding coverage of financial sponsors and alternative asset management firms to better innovate and accelerate the delivery of services to clients. We are also creating an alternative origination group focused on sourcing to provide seamless coverage to our private credit and private equity clients. We are excited about providing our clients with access to differentiated sourcing and investment capabilities, which will in turn help us accelerate growth across the franchise. Now let me turn to Asset & Wealth Management on Page 6. Our assets under supervision reached another record, reflecting our 28th consecutive quarter of long-term fee based net inflows. In Wealth Management, our total client assets rose to $1.6 trillion. We also bolstered our more durable revenue streams. Management and other fees and private banking and lending revenues together have grown at a CAGR of 12% since |
2,648 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | revenue streams. Management and other fees and private banking and lending revenues together have grown at a CAGR of 12% since 2019, and we continue to expect to drive high-single digit annual growth in the coming years. Turning to Page 7. We meaningfully improved our AWM pretax margin in 2024, achieving our medium-term target. In our journey to further improve the return profile of the firm, we are committed to driving this business towards mid-teens returns. We see significant growth opportunities across wealth management, alternatives and solutions. In Wealth Management, we are growing this business by increasing the number of advisers in the field and surrounding them with content specialists. We are expanding our loan product offerings, and we're elevating our overall client experience with further investment in our digital capabilities. In alternatives, we are scaling our flagship fund program and developing new strategies. We remain focused on penetrating the institutional client base and expanding our wealth channel. Additionally, we are investing in tailored solutions for institutional and third-party wealth clients, who continue to see customization across SMAs, direct indexing and ETFs in a structured form. On Page 8, we demonstrate the durability of the revenues across the firm. This is not the first time we've laid out this information, but it serves as a good reminder. Baseline revenues are shown in gray, which represent the sum of the trailing 10-year lows for each of the businesses that are considered to be more cyclical advisory, underwriting and intermediation. As I said last year, we believe this is a very conservative measurement because it's unlikely that every one of these businesses would ever hit a low point all at the same time. In the 25 years since we became a public company, it hasn't happened once. The dark blue represents more durable revenues from financing, management and other fees as well as private banking and lending, which grew 13% versus 2023. Taken together, these two |
2,649 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | management and other fees as well as private banking and lending, which grew 13% versus 2023. Taken together, these two components made up approximately 70% of total revenues in 2024. In addition, given our diversified franchise, we have consistently demonstrated our ability to generate upside across different market environments, which further highlights the revenue generating power of our firm. Moving to Page 9. Operating efficiency remains one of our key strategic objectives. And while we have made progress, we believe there are significant opportunities to drive further efficiencies across our business. We've established a three year program as a part of our business planning process that will help us dynamically manage our expense base, harness technology and automation, and reinvest in our businesses. First, we are optimizing our organizational footprint by expanding our presence in strategic locations and calibrating our pyramid structure. Second, on spend management, we are optimizing transaction based expenses and looking to more efficiently manage our vendor and consultant relationships. We will also continue to reduce operating expense associated with our consolidated investment entities as we further sell down those assets. Lastly, we are leveraging AI solutions to scale and transform our engineering capabilities, simplify and modernize our technology stack, drive productivity. These efficiencies will allow us to further invest for growth and improve client experience. Moving to Page 10. We believe the path to our return targets is straightforward. First, we have demonstrated our ability to deliver mid-teens returns on our leading global banking and markets franchise. Second, we are making strong progress against our plan to drive asset wealth management to mid-teens and beyond. And lastly, we are driving platform solutions to pretax breakeven in 2025. Taken together, we have a clear path to producing our target returns, which will further unlock shareholder value. Before turning it over to Denis, I |
2,650 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | a clear path to producing our target returns, which will further unlock shareholder value. Before turning it over to Denis, I want to spend a moment on regulation. Last month, trade groups representing the major U.S. banks, including Goldman Sachs, filed suit against the Federal Reserve. We have long been concerned that the lack of transparency and the Fed's current stress testing creates uncertainty and at times produces results we cannot understand and which can lead to higher industry-wide borrowing costs, reduced market liquidity and inefficient capital allocations. For the industry, the bar to take this step was incredibly high. And while the Fed has announced that it's seeking to improve the stress test, the suit was filed to protect our rights. We believe it is our responsibility to continue to press for a more transparent regulatory process in order to foster a more efficient financial system that supports growth and competitiveness of the U.S. economy. In closing, I'm very confident about the trajectory of Goldman Sachs. We are incredibly well positioned to serve our clients and to continue to drive strong returns for shareholders as we execute with a relentless emphasis on client service, partnership, integrity and excellence. Let me now turn it over to Denis to cover our financial results in more detail. |
2,651 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Thank you, David, and good morning. Let's start with our results on Page 11 of the presentation. In the fourth quarter, we generated net revenues of $13.9 billion, EPS of $11.95, and ROE of 14.6% and an ROTE of 15.5%, resulting in full year EPS of $40.54 and an ROE of 12.7%. As David highlighted, we made significant progress this year on executing our strategic priorities. In aggregate, these select items had a de minimis impact on the firm's full year results. Turning to results by segment. Starting on Page 14. Global Banking & Markets produced revenues of $35 billion for the year, up 16% amid broad based strength versus last year. In the fourth quarter, Investment banking fees of $2.1 billion rose 24% year-over-year. Advisory revenues came in at $960 million and equity underwriting revenues increased substantially year-over-year to $499 million, as strong equity markets supported robust issuance activity. Net underwriting revenues rose 51% to $595 million amid higher leveraged finance activity, given the strengthening financing conditions post-election. For 2024, we maintained our number one position in the league tables for announced and completed M&A, ranked third in equity underwriting, and second in leverage lending. Despite strong accruals in the fourth quarter, our Investment Banking backlog rose sequentially and remains robust, particularly in advisory. The intensity of our client dialogues has been increasing, and we're seeing renewed CEO confidence and desire from sponsors to transact. While there remains some policy uncertainty, there is an expectation that the regulatory burden will be reduced, which should serve as a tailwind to risk assets and capital deployment. We are optimistic on the outlook for 2025 and expect a further pickup in M&A and IPO activity. FICC net revenues were $2.7 billion in the quarter, up 35% year-over-year. In intermediation, we saw strength in currencies and mortgages. Record FICC financing revenues rose 34% versus last year, primarily on better results |
2,652 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | saw strength in currencies and mortgages. Record FICC financing revenues rose 34% versus last year, primarily on better results within mortgages and structured lending. Equities net revenues were $3.5 billion in the quarter. Equities intermediation revenues were $2 billion, up 30% year-over-year, primarily driven by strong performance in cash products. Record Equities financing revenues of $1.5 billion rose 36% versus the prior year amid higher average balances in prime and stronger performance in portfolio financing. For the full year, total equities net revenues were a record $13.4 billion amidst strong levels of client engagement and higher client balances. Across FICC and Equities, financing revenues rose 17% in 2024 to a record $9.1 billion. Moving to Asset & Wealth Management on Page 15. For 2024, revenues of $16.1 billion rose 16% year-over-year as our more durable revenues grew to new records. In the quarter, management and other fees were a record $2.8 billion, up 8% sequentially and 15% year-over-year. Private banking and lending revenues rose 11% year-over-year to $736 million. Incentive fees for the quarter were $174 million, bringing our full year incentive fees to $393 million. We expect to make further progress in 2025 towards our annual target of $1 billion. Equity and debt investment revenues totaled $993 million for the quarter, reflecting markups across our private and public portfolios and NII in our debt portfolio. For the full year, these combined revenues totaled $2.4 billion. Now moving to Page 16. Total assets under supervision ended the quarter at a record $3.1 trillion, driven by $70 billion of liquidity products net inflows and $22 billion of long-term fee based net inflows across asset classes. Turning to Page 17 on alternatives. Alternative assets under supervision totaled $336 billion at the end of the fourth quarter, driving $621 million in management and other fees. Gross third-party fundraising was $20 billion in the fourth quarter and $72 billion for the year. For 2025, we |
2,653 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | and other fees. Gross third-party fundraising was $20 billion in the fourth quarter and $72 billion for the year. For 2025, we expect fundraising to be consistent with levels achieved in recent years. On Page 19, our total loan portfolio at quarter end was $196 billion, up year-over-year, reflecting an increase in other collateralized lending. Our provision for credit losses was $351 million in the quarter, primarily driven by net charge-offs in our credit card portfolio and balance growth, partially offset by reserve releases in the wholesale portfolio. Let's turn to expenses on Page 20. Total operating expenses for the year were $33.8 billion. Our 2024 compensation ratio net of provisions was 32%. Quarterly non-compensation expenses were $4.5 billion, down 8% year-over-year. As David mentioned, we're driving efficiencies across our organizational structure, spend management and automation efforts, which will enable us to further invest across the client franchise. These efforts are designed to enhance productivity and help drive operating leverage, as we work towards achieving our through-the-cycle targets. Our effective tax rate for 2024 was 22.4%. For 2025, we expect a tax rate of approximately 20%. Next, capital on Slide 21. Our common equity Tier 1 ratio was 15% at the end of the fourth quarter under the standardized approach, a 130 basis points above our current capital requirement of 13.7%. In the fourth quarter, we returned approximately $3 billion to common shareholders, including common stock repurchases of $2 billion and dividends of $965 million. In conclusion, our strong performance this year reflects the strength of our client franchise, our intense focus on execution and an improving operating environment. We continue to maintain our leadership positions across Global Banking & Markets and are leaning into secular growth opportunities across Asset & Wealth Management. As we enter 2025, we remain confident in our ability to deliver for clients and drive strong returns for shareholders. With that, |
2,654 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | we enter 2025, we remain confident in our ability to deliver for clients and drive strong returns for shareholders. With that, we'll now open up the line for questions. |
2,655 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Thank you. [Operator Instructions] We'll go first to Ebrahim Poonawala with Bank of America.
Ebrahim Poonawala: Good morning. I guess maybe just David following up on the comments you made around regulations. Like, when you talk to investors, I mean, we saw what happened with the SCB last year. And I think there's been a laser focus on being more punitive on capital markets post GFC for many justifiable reasons. But just talk to us when you think about the regulatory outlook and I appreciate significant uncertainty we're waiting for policymakers to kind of take new feed, but how do you think that plays out? And in particular, in terms of the operating backdrop for your capital markets business, investment banking business, like, how should we think about how could it be different over the next two to three years relative to the last five or even 10 years? |
2,656 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Well, it's hard -- I mean, it's hard for me to speculate given where we are, and I appreciate the question. It's something, obviously, we're spending a lot of time thinking about, but I think they're obviously -- when you talk about capital, there are obviously three avenues. First, there is CCAR and you'd note the industry took an action because the industry doesn't think that the way CCAR operates and the lack of transparency is appropriate or candidly legal. And so that's why we took the action that we did. The Fed has commented that it plans to make changes in adjustments. But obviously, there are changes going on with the administration shift. There are changes going on at the Fed. And it's hard for me to speculate how that will all play forward other than to say that the industry believes, as an industry, we believe strongly, and we believe this for years, this is not working appropriately at a system with more transparent and consistent capital that you can plan around makes a more efficient and more productive system. And so we're hopeful that we'll make some progress with that. The second, obviously, is Basel III. And given the change in administration and the change of leadership inside the Fed, our expectation would be that there'll be a different approach than what have been put forward. But again, we'll have to watch, and we'll have to wait. And then last, there's G-SIB and the calibration of G-SIB. G-SIB was always supposed to be calibrated to growth in market cap economies it hasn't been. And so that's another avenue of dialogue. Net-net, unpredictable. I don't want to predict. I don't want to speculate. But certainly, it feels like we're in an environment where there could be a constructive discussion about improving the transparency, clarity and consistency around this. And I think that would be very, very good, both for the system and capital markets broadly (ph). |
2,657 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Ebrahim Poonawala: That's fair. And just a follow-up on the Slide 5, you mentioned the forward catalyst, increased sponsor activity. We've been waiting for this. We have seen some signs of a pickup there. You've talked about M&A being sort of sub 10-year averages. Give us a sense of just how quickly -- I mean, we know the DOJ, FTC backdrop will be more conducive for dealmaking, just how quickly could we see a more significant ramp up around deals, IPOs? Is it a second half event? Could we see that as early as the next couple of months?
David Solomon: I think you're going to see it throughout 2025. I don't want to speculate where it will land versus 10 year averages, but it's certainly setting up to be much more constructive and robust. And the data set that we would have that allows us to articulate that is, we can obviously track our backlog, but we can also track increased activities, dialogues inside the firm. And I’d say there’s been a meaningful pickup in large-cap M&A dialogue and inquiry. There’s been a meaningful pickup in sponsor inquiry and dialogue, and we continue to see strong positive backlog trends as Denis highlighted to you.
Operator: We'll take our next question from Christian Bolu with Autonomous Research.
Christian Bolu: Good morning, David and Denis. Maybe just follow-up, maybe take a question here. But if I'm reading the slides correctly, footnotes 11 and 12, which help bridge your ROE gap to 15%. Are you assuming sort of roughly $9 billion of capital return from HPI platform solutions to shareholders? Because if you are, maybe talk through how that puts against things like SLR constraints at that level of capital return? And then just more broadly on capital, just given the improving opportunity set here, how are you balancing returning capital to shareholders versus investing in the business? |
2,658 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Sure. So I'll start, and Denis will add, particularly on capital return. But our path to mid-teens is a simple analysis than what you laid forward. The firm is driving toward having two fundamental business platforms and we've been very clear on this as we've narrowed our focus, Global Banking & Markets and Asset & Wealth Management. We still have the legacy platforms, but we continue to make progress around that. Global Banking & Markets, I think, has shown over the course of the last five years that this business should be mid-teens throughout the cycle. On Asset & Wealth Management, we've commented to you that we've met our medium-term margin, target margin, but we have not yet improved the returns in that business to the levels that we believe that we can return them. We believe over the next couple of years, continued scaling and profitability in our alternative platform combined with our ability to continue to grow management fees and at the same time, also free up capital from legacy principal investments will allow us to bring the returns in Asset & Wealth Management to the mid-teens or higher. In addition, Platform Solutions, where we still have the Apple Card platform, this year, depending on how you look at it, and I'll give you rough numbers was a 75 basis point to 100 basis point drag on the firm's overall ROE, that will improve in 2025 and 2026. And so it's just math. If you have a mid-teens Global Banking & Markets business, if we get Asset & Wealth Management, the mid-teens plus and we removed the drag from the platform that gets you to a mid-teens business. We have a high level of confidence in our ability to execute against that. Denis will give you a comment. We're obviously generating a lot of capital. We do see opportunities to deploy. So Denis will give you some comments on how we're thinking about capital deployment and also returns. |
2,659 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Sure. Thanks, David. And Christian, I think you're making references some capital release numbers. Within the overall remaining portfolio of HPI, we do note that there's about $4 billion of retaining attributable – of remaining attributable equity. And then, obviously, over time, we both have to narrow the pretax drag in Platform Solutions and ultimately, someday may be able to release all of the equity associated with that business as well. So those are obviously contributors to our longer-term return target achievement. I think as it relates to capital return, as we sit headed into 2025, we have 130 basis points of cushion versus Reg Min (ph). As David has commented, as the firm believes there should be a significant uptick in client opportunity. As always, we would look to fill that demand as best we possibly can as a matter of priority. We remain committed to sustainably growing our dividend, and then obviously, seek to return excess capital. You all will have noted last year was a record year for capital return by Goldman Sachs. So we were able to grow the franchise, grow the firm as well as return record levels of capital to shareholders. As we head into '25, we'll support clients, invest in sustainably grow our dividend and then to the extent we have excess capital return it to shareholders, all the while managing an appropriate buffer given some of the ongoing regulatory uncertainty.
Christian Bolu: Okay. Got you. Maybe David, look, kudos to you on the firm, you're clearly taking share across your businesses, whether it's markets or alternatives and in private wealth doing a great job. But just given to your point, the improved opportunity set here and perhaps more friendly regulatory environment. Any thoughts on doing a strategic deal to accelerate your growth prospects within alts or private wealth? |
2,660 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Yeah. I appreciate the question, Christian. And look, we always think about, particularly around our Asset & Wealth platform, are there things that could accelerate our growth and journey and the overall mix of the firm. As I've said before, the bar for doing something is high. I'd also say, these businesses are sold, they're not bought. And at the moment, the market is valuing these businesses with an extraordinary amount of forward growth. But we obviously watch the space. And over time, could there be opportunities? Yes. But at the moment, we’re very focused on execution. I think one of the things we’re so excited about for the firm is we have an ability to continue to execute organically on what we’ve laid out in front of you and continue to improve the returns of the firm. Plus, I think as you point out, we have tailwinds from both the environment and improving environment for the kinds of activities that flow into our ecosystem and also the overall business and regulatory environment. So I think execution right now continues to be our primary focus.
Operator: We'll take our next question from Betsy Graseck with Morgan Stanley.
Betsy Graseck: Hi. Good morning.
David Solomon: Good morning, Betsy.
Betsy Graseck: Hi. I did just want to follow up on one thing here regarding the point you were making on Platform Solutions. It's a drag right now, 75 bps to 100 bps on ROE, but '25 and '26, that will improve. So could you just step us through -- I mean, we know what your plans are for Platform Solutions. But I'm wondering what's happening in '25 and '26 that will drive the reduction of the drag in this year and next, if you could speak through that. |
2,661 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Yeah. At a high level, Betsy, we're obviously -- the primary thing is in Platform Solutions is the Apple partnership. As you know, we have a contract with Apple to run that partnership until 2030, although, there's some possibility that it won't continue until that time frame. The most important thing that's happening is the card continues to improve and its performance and the card is driving towards profitability. And so the improvement in the profitability of the card has an impact on the short-term drag. Ultimately, whether it's in the medium-term or through the life of the contract, that's not going to be a long-term business for the firm, and that will ultimately allow us to exit and return capital, but I'm really not in a position to comment any more specifically other than the direction of travel that you're aware of.
Betsy Graseck: Okay. Great. And then separately on the changes that were discussed with regard to how you're structuring the financing team that's within investment banking, if I got it right. Could you just help us understand, how does this management structuring change the revenue growth outlook that you're looking for? Like, why did this deliver better growth? |
2,662 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Sure. So -- yeah. So first of all, it's in Global Banking & Markets. And so I think the way, Betsy, you should think about Global Banking & Markets, and we've been on a journey to really think about all the efficiencies that exist between what was the traditional investment banking business, what we'll call the financing or capital markets businesses and then the global markets businesses, which are the trading businesses, and we brought them all together in Global Banking & Markets. I think you should now think about that big business, that big $35 billion business as kind of having three big platforms. One is what we call traditional investment banking; two is what we call capital solutions; and three is what we call global markets or trading. The organizational structure that we're creating allows us, we believe, to take advantage of something that Goldman Sachs is very uniquely positioned at the fulcrum of which is this intersection between both public markets and private markets and the way you marry capital with issuers, but also marrying issuers and their need for capital with all different kinds of investors. And I think the thing that we're very uniquely positioned on is, one, we have extraordinary relationships with 12,000 companies in the world. Two, we have extraordinary what I'll call public market financing capabilities. But three, we also have an ability, whether it's through our balance sheet, whether it's through what you'll call traditional distribution channels into institutional clients or it's through our asset management platform and our own asset management products have a range of alternatives that we can marry to issuers to make sure they get the best product service and results. And so this is a way of getting that all coordinated in OneGS fashion across the firm. And so we've taken the traditional financing businesses and capital markets businesses. We've taken all the coverage of financial sponsors. We've taken all the coverage of alternative firms in our trading |
2,663 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | We've taken all the coverage of financial sponsors. We've taken all the coverage of alternative firms in our trading businesses and we are putting them together and we're bringing talent that understands both our own balance sheet and capital deployment and the ability to distribute these products together to try to optimize our capability around that. And this is where we actually think there's going to be growth in the capital markets. And so our ability to capture more of that share, we think the setup allows us on a relative performance basis to do better. |
2,664 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: And Betsy, one thing I'd add just in terms of overall financials, obviously, our segments are not changing. The subsegments that we report into are not changing. These -- this sort of streamlined synthesized origination capability, we think will enable us to accelerate revenue growth by serving our clients more efficiently, but the suite of activities that are undertaken by these originators and instructors we'll continue to populate the same financial line items that we have today. We just think this is a better way of organizing our people against the client opportunity set and doing everything else that David just enumerated.
David Solomon: And look, if you go back in history, Betsy, just to expand on it. I mean years ago, the capital markets business is 25 years ago, the Capital Markets business has sat in the trading businesses. And 20 years ago, it was a dramatic thing to put them in investment banking, so they were closer to clients. And so our mindset is always how do we organize our people and our resources, create a OneGS ethos and be is connected to our clients to make the experience for our clients as seamless and is simplified and is leveraging as possible.
Operator: We'll take our next question from Brennan Hawken with UBS.
Brennan Hawken: Hi. Good morning. Thanks for taking my question. You spoke earlier to the capital unlock within the improving ROEs in AWM. But some of the more business oriented components would be driving lending solutions within wealth and scaling the flagship products and all, which I thought was interesting. I was hoping you could speak to lending penetration and where that sits versus your target within the wealth business and whether there's been an uptick in demand more recently, given some of the market developments and what contribution you're expecting from ranking the flagships and maybe highlighting some of those franchises? Thanks. |
2,665 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Sure, Brennan. Thanks a lot for the question. I appreciate it. So obviously, the strategy to grow wealth is three part in terms of primary focus: Wealth Management, Alts and Solutions. Within Wealth Management, you enumerate one particularly attractive opportunity set for us, which is lending. And we've noted previously that we believe that we are relatively underpenetrated, relative to some of our competitors across our wealth platform. And we've been making investments in our human capital expertise, educating our client-facing professionals that we have capabilities and ambitions to support clients through lending activities. We did grow our private wealth lending balance is about $5 billion on the year. We are committed to a multiyear journey of increased penetration. I think relatively, we are still very low. So we are making progress. We are optimistic, but I think we have a lot of room to improve that. In terms of the Alts business, there are a number of ways that we continue to grow and make progress in our Alts franchise. It continues to be an attractive and appropriate component of our wealth clients portfolio. We have very good manufacturing capabilities as a firm and also a robust third-party wealth channel as well that clients can take advantage of within the portfolio of alternative offerings that we make available to clients. We have certain of our flagship funds and those are raised from time-to-time, and those are attractive opportunities for us to secure client for deployment, and they also position the firm well as a known and credible deployer of capital. So we'll continue to raise those funds over time. And as we have more assets under management per strategy, if you will, better depth that will enable us to improve the overall operating leverage of that component of the Asset & Wealth Management business. |
2,666 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Brennan Hawken: Great. Thanks for that color. And David spoke to some of the operating efficiencies when reviewing -- when giving the strategic update. It's interesting because how do we think about the push and pull of expenses and efficiencies as we move into 2025 given the expectations for pretty robust and all the indications you've given for a pretty robust improvement in capital markets activity or maybe if it's easier to answer, what's the right way to think about incremental margins on revenue growth as we move forward. |
2,667 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Sure, Brennan. I appreciate that. We're actually trying to do a number of things at the same time, which is what gives rise to your question. So first and foremost, we continue to see good opportunities to grow the firm, and we expect that as we continue to grow the firm, we should be able to continue to deliver incremental operating leverage. You saw in the course of the last year that our efficiency ratio improved by 1,200 basis points. Now it's on the order of 63%, moving closer to our target of 60%. So scaling the business, driving incremental operating leverage continues to be a huge focus of this management team. It's also the case that we see very attractive opportunities to make investments to scale the firm, to improve client experience, to improve our employees' productivity, and we want to be able to finance some of that incremental investment spend, a lot of which takes place in the engineering space by driving incremental efficiencies across the firm. And thinking about, as David ran through the ways we organize ourselves, the way we locate our professionals, the way we manage our spend processes, accountability this program that David made reference to has accountability up to the management committee of the firm. It's an important piece of how we focus on running the firm efficiently, and we think it's something that's designed to give us capacity to fund some of the investments that we think are the best ways to continue to scale the firm make it more resilient and improve overall client and employee experience.
Operator: Thank you. We'll take our next question from Mike Mayo with Wells Fargo Securities. |
2,668 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Thank you. We'll take our next question from Mike Mayo with Wells Fargo Securities.
Mike Mayo: Hi, David. There was another Wall Street's CEO who said he was the most positive he's been in 25 years. So how good could things get in your mind because you're saying the regulatory environment, the economic environment, the backlogs are up and that if I was doing a model for the industry, if we go back to the '21 pandemic highs? And on the other side of this, as highlighted by Slide 9, you're all focused on expenses. And on the -- maybe if rates go up too much, what level of a 10 year yield do you think it puts a wrinkle in the kind of the bullish thesis you're laying out here, a 10 year 5%, 6%, 7%. What's the most likely thing that would drill your lofty expectations? |
2,669 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Look, Mike, I appreciate the question, and I'd say at a high level, there's no question that I highlighted in my remarks. There's been a sentiment shift broadly as I talk to CEOs since the election. But that doesn't stop us from at Goldman Sachs constantly thinking by nature of risk managers thinking about how the environment can change, how that can evolve. I think at the moment, for our business and our business mix, particularly, around capital markets activity, etc. We have -- it feels like we have a tailwind going into 2025. And I do think that levels that have been below historical averages are going to a minimum normalize, maybe do better. I certainly wouldn't say, I have any expectation of capital markets activity going back to 2021, anomalies anytime soon, but it is a more constructive environment. And so that, of course, is something that we think about as we think about deployment of resources and investment in the business. Now all that said, we can't predict the environment. The environment changes and we're running the firm for the medium and the long term. And so we are very, very focused on our growth and returns over the medium term, our growth of the firm over the medium term and our ability to serve our clients and execute well. And I am very confident, very, very confident that no matter what the world throws at us, Goldman Sachs over time will continue on that journey of doing really well and growing the returns of the firm and serving our clients with excellence and distinction. I think the environment feels good, but I'm not at all confused that I could wake up in three months and there could be things going on in the world that would change that perspective. And we're always thinking about that, always trying to look around corners and are always going to manage the firm for the medium and the long-term. |
2,670 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Mike Mayo: And then specifically, I guess why is Platform Solutions still around? I mean you're number one in deal making and you haven't been able to work that out. And on the other hand, the financing organic growth, how big is that today and how big do you expect that to be in five years, and what about credit risk that's related to that? Thanks.
David Solomon: Yeah. On the first question, I don't really have anything to say. It's different than what I've said about our journey around the consumer platforms in the business, but I appreciate the question. On the second point, we continue to believe that there's opportunity for our -- for us to grow our financing business. Our financing business scales with growth in the world. Of course, we're incredibly focused on risk management and credit risk and the scale of that business against our equity base and our balance sheet, etc. But as the world grows, we believe there's opportunity for us to continue to grow and scale that business. And I think we've proven that over time. I mean, Denis, do you want to add anything around that?
Denis Coleman: Yeah. Just I draw a connection back, Mike, to some of the comments that David made earlier, which is, if really the secret sauce in driving some of these activities for clients is origination, distinction and differentiation. The establishment of the Capital Solutions Group enables us to have all of that origination centralized and we can, from that origination continue to grow the FICC financing balance sheet in an appropriate risk adjusted fashion. We can underwrite and distribute some of that product to other investors across our franchise, and we can also help AWM source investments that provide attractive risk adjusted returns to the clients at AWM. So there's an opportunity to continue to invest in growing the financing capabilities that we've been reporting on, but we also have incremental outlets for the origination excellence given the demand that we see across various types of investors around the market. |
2,671 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Thank you. We'll take our next question from Devin Ryan with Citizens JMP.
Devin Ryan: Thanks so much. Good morning, David and Denis. First question just on the banking and markets, market share, wallet share, obviously, incredibly impressive over the last handful of years. And I think just a testament to the execution. When we look at this kind of new capital solutions organization, it would seemingly better positioned with sponsor clients and just, I think, gives that indication of where you guys are going there. How do you think about your market share today with sponsors and not sure if you can give any framework or numbers there? And then, how you think about the ability to take share in that group and how important that will be to driving further kind of wallet share gains from here like you've done in the past? Thanks. |
2,672 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Yeah. We -- I mean, we've -- over the last 20 years, we've made enormous investment in our relationships and our coverage and sponsor community. We have leading share with the sponsors. I don't think we quantify it specifically. But we have -- it's fair to say, we have leading share with sponsor community. I think we're very well positioned as they're active to capture our fair share and even sometimes more than our fair share of that activity. What I'd say is, it's been an environment where they've been incredibly quiet both from a deployment perspective, also a monetization perspective, and that's just not consistent. I've said consistently that sponsors make money by doing two things: buying new things, selling old things. And so the fact that we've gone through a period of time where they haven't done a lot of either of those things, that will normalize over time. Part of it was a reset in kind of valuation expectations. Some of it was growing into valuation expectations that are kind of run ahead, but I do believe very strongly that the next 24 months will be a much more constructive environment to response to activity. And our share positioning with them is very good. I think these organizational changes will only strengthen that position.
Devin Ryan: Great. Thank you. And then, just in terms of on the alternative asset management fundraising has been terrific. How should we think about the pace of deployment of kind of that record fundraising and then just kind of the trajectory of kind of the acceleration in performance fees because it would seem that, that -- there could be a pretty big step function higher in performance fees, but you need to deploy that capital first. So just the time line to kind of think through that path. Thank you. |
2,673 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Sure, Devin. So we're focused on that as well. And it's a good question because it hits a number of topics. So obviously, we had good success raising Alts funds and surpassed all the various targets that we set out repeatedly, but now it's an opportunity for us to deploy. And the deal making environment and the transaction volumes moving to the market over the last couple of years being subdued has also impacted our ability to deploy into transaction. So as the overall backdrop improves, that should be a more attractive opportunity for us to start deploying the money that we've raised and drive our AUS. At the same time, that same slightly more muted environment for transaction activity has been -- there's been less by way of monetization activity. And so as we, again, enter into, hopefully, a more supportive backdrop, there will be better opportunities for us to continue to monetize investments across our fund structures, and as we reach the end of investment cycles and fully monetize and become in a position to start returning capital to our investors, then you'll see the incentive fees start to come through our financials as well. Our incentive fees were up sharply on a year-over-year basis, but they're still short of our $1 billion annual target. Our expectation is that we will continue to make progress towards that target over the course of 2025, the extent of that progress, obviously, will be a function of the environment, but we should continue to make progress towards the $1 billion target, given where we sit in the outlook that we have.
Operator: Thank you. We'll take our next question from Dan Fannon with Jefferies. |
2,674 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Thank you. We'll take our next question from Dan Fannon with Jefferies.
Dan Fannon: Thanks. Good morning. I wanted to follow up on the alternatives. You talked about consistent levels of fundraising as we look at '25. Could you maybe talk to the asset classes or the funds that you think will drive that growth going forward and how the fees may be different or are they the same as kind of what's in the ground of your existing book of alternatives today?
Denis Coleman: Sure. So given the breadth of our alternatives platform, the fundraising has come in from a number of different channels has been very diversified. And I think that's one of the strengths of our platform is one of the ways it positions us as one of the top five alternative players in the market. So as we move forward, we would continue to expect to raise money across the various asset classes within our alternatives platform. We are not seeing significant fee compressed, if you will. That's a question that we get on the Alts side. So we'd expect to be raising the same type of funds with roughly the same fee structure, there obviously can be variations in mix. And so different types of alts products sourced through different channels bring with them different fees. So that can change average effective fees in the Alts space. But in terms of our strategy, continue to raise a diversified suite of funds, expect a reasonably consistent volume and don't expect fees per type of origination activity to meaningfully change.
Dan Fannon: Understood. And then just as a follow-up, both Asset & Wealth Management revenues on the management fee side, we saw good growth year-over-year, both for the year and the fourth quarter. There was a little bit higher growth in wealth, both in the fourth quarter and the year. I guess, as you look at those businesses going forward, do you expect to see a divergence in either of those segments or do you think that consistently, they will both grow at similar levels? |
2,675 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: So look, there are obviously different idiosyncratic factors within both the asset management and the wealth management sectors. We obviously like the optionality to continue to raise and grow our management fees across both of those subsegments. And we re-underwrite our expectation that we will continue to grow AWM management and other fees, high-single digits over the next several years. We've obviously outpaced that recently, but we sort of would re-underwrite our forward growth expectations to be high-single digits.
Operator: Thank you. We'll go next to Gerard Cassidy with RBC Capital Markets.
Gerard Cassidy: Hi, David. Hi, Denis. David or Denis, can you share with us -- I mean, the outlook, many of us -- you folks included, I think, looks very positive for the capital markets businesses, the economy, etc. And aside from the geopolitical risks that are obvious to all of us. Can you guys give us two or three risks where could derail this shared optimism we have for the outlook for the business? |
2,676 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: I mean the world -- I mean, I appreciate the question, right. The world is a complicated place, and there's a lot going on in the world. Markets reacting can change their sentiments very, very quickly. We obviously have a new administration with that change. There are a bunch of things people are talking about that have people excited from a business environment, a lower regulatory touch environment, etc. But at the same point, there are a broad array of policy initiatives that can all have an impact on market sentiment and the direction of travel. And I'd say, at the moment, there's uncertainty. When you look broadly across immigration policy, trade policy, tax policy, energy policy, we'll get more clarity around all of this, but there are different outcomes. There can be sentiment shifts plus there's a lot going on in the world. And there are all sorts of significant risk we spend a lot of time thinking about. We think about cyber risk a lot. It's something we haven't talked about in a while on this call. So the world is a complicated place. Fundamentally, at our core risk managers, we try to think about these things, make sure the firm is resilient and well positioned to navigate them. And I would say, at the moment, the environment is quite constructive. The economy in the U.S. is quite constructive still. But it's a complicated world. And I think we all should be on our toes and be prepared for the unexpected because I tell you every single year the consensus that people tell me in January, the year turns out to be different than the consensus. And I'm sure this year, there'll be some surprises to the ups, and there'll be some surprises to the downs as there always are. |
2,677 | GS | 4 | 2,024 | 2025-01-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Gerard Cassidy: Yeah. No, I agree with that. That's for sure. Thank you, David. And then coming back to, obviously, you guys have been investing heavily in technology for years in driving those operating efficiencies. In Slide 9, you talk about them, particularly in automation. And then you talk about leveraging the AI solutions. As outsiders, when do you think we'll be able to see the success that you're having with AI. I know there's probably early successes already, but will there become a time when we'll be able to say, wow, earnings were actually favorably impacted by X percent because of the success in the AI implementation that you've done?
David Solomon: We are having early success. And this firm is zealously focused on its expense base and creating efficiencies that give us the capacity to invest in our franchise and grow our client franchise. Can we get to a point where you can say it's affected by this percent? I don't necessarily think that's the way to think about it. We're going to continue to use technology to make the firm more productive. We're going to continue to scale and create automation of platforms that allow us to deploy resources and other places will allow us to serve our clients better and grow our franchise. And that's something we're going to continue to be operationally very focused on. We've made good progress on it, but we have -- we see and we have and Denis explained this in his comments and I hinted at it too. We see lots of opportunities to continue to do that in the coming years. And I think the way that investors should look at it and think about it, it's that focus on that and the capacity it creates allows us to scale investments that can continue to strengthen the franchise. And so that's the way I think we think about it and we try to operate.
Operator: Thank you. At this time, there are no further questions. Ladies and gentlemen, this concludes the Goldman Sachs fourth quarter 2024 earnings conference call. Thank you for your participation. You may now disconnect. |
2,678 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Good morning. My name is Katie and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs' Third Quarter 2024 Earnings Conference Call. On behalf of Goldman Sachs, I will begin the call with the following disclaimer. The earnings presentation can be found on the Investor Relations page of the Goldman Sachs website and contains information on forward-looking statements and non-GAAP measures. This audiocast is copyrighted material of The Goldman Sachs Group, Inc., and may not be duplicated, reproduced, or rebroadcast without consent. This call is being recorded today, October 15th, 2024. I will now turn the call over to Chairman and Chief Executive Officer, David Solomon; and Chief Financial Officer, Denis Coleman. Thank you. Mr. Solomon, you may begin your conference. |
2,679 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Thank you, operator, good morning, everyone. Thank you all for joining us. In the third quarter, we produced net revenues of $12.7 billion and generated earnings per share of $8.40 an ROE of 10.4% and an ROTE of 11.1%. Overall, I am pleased with our performance especially in a quarter where our results were impacted by selected items including the narrowing of our consumer footprint which reduced our ROE by 80 basis points. Our performance demonstrates the strength of our world-class and interconnected franchises where we were effectively serving clients in a complex backdrop. Global Banking and Markets, we remained premier M&A advisor and a leading global risk intermediary. Across investment banking, corporate and sponsors remained actively engaged and we see significant pent-up demand from our clients. Our backlog rose again this quarter driven by advisory and we expect our leading investment banking franchises to benefit from the continued resurgence in activity. In FIC, we delivered record financing revenues and facilitated our clients’ risk intermediation needs, particularly as activity levels picked up towards the end of the quarter. And in equities, we reported a very strong performance across both intermediation and financing. Overall, our global broad e-platform remained exceptionally well positioned to support our clients’ evolving needs across products and asset classes. In the Asset and Wealth Management, our position as a leading global active asset manager the top five alternatives player and a premier ultra-high network franchise afford us significant opportunities in secular growth areas. Our assets under supervision reached another record this quarter surpassing $3 trillion, and representing our 27th consecutive quarter of long-term net inflows. We demonstrated further growth and more durable management, other fees and private banking and lending revenues, which together were a record $3.4 billion this quarter and up 9% versus last year. We remain confident in our ability to grow |
2,680 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | which together were a record $3.4 billion this quarter and up 9% versus last year. We remain confident in our ability to grow these more durable revenues at a high single digit pace over the coming years, and alternatives fundraising remains strong. We raised over $50 billion year-to-date, and now expect 2024 fundraising to exceed 60 billion, as we see ongoing demand across asset classes, including private credit, private equity, secondaries, and infrastructure. Wealth management, we grew our total client assets to $1.6 trillion, and our ultra-high net worth franchise is well positioned to continue to grow globally as we expand our advisor footprint and our leading offerings and our lending offerings to clients. Our pre-tax margin and AWM is up meaningfully from last year and in line with our mid-20s target. We remain focused on further improving the margins and returns in this business, while also investing to drive growth across wealth management alternatives and solutions. As I look at the operating backdrop, the U.S. economy continues to be resilient. Inflation has been coming down, the recent unemployment data is supportive, and while we have seen some softness in consumer behavior, the tone of my recent conversations with clients has been quite constructed. The beginning of the rate cut cycle has renewed optimism for a soft landing, which should spur increased economic activity. More broadly, clients remain highly focused on the trajectory of rates in jurisdictions around the world. The policy implications of global elections, particularly in the U.S. and the high levels of geopolitical instability. Against this backdrop are leading global franchises in supporting our clients as they navigate risks and position themselves for a range of outcomes. Before I turn it over to Denis, I want to spend a moment on capital and Basel III revision. Although, we have closely followed the recent remarks from regulatory officials about the upcoming reproposal, we continue to have concerns about the overall regulatory |
2,681 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | remarks from regulatory officials about the upcoming reproposal, we continue to have concerns about the overall regulatory process. There remains a lack of transparency and appreciation for the interconnectedness of capital requirements across the proposed fundamental review of the trading book, CCAR and the G-SIB buffer. We recognize this is an ongoing process that will take time, but as we've said before, we need to get this right. The final rule have a significant impact on the growth and competitiveness of the U.S. economy. Requiring too much capital will increase the cost of credit for businesses large and small, and will impact growth across the country. We look forward to receiving more clarity from our regulators once the reproposal is published and participating in the new comment period. We remain very engaged both as an industry and as a firm. In closing, I feel very good about the trajectory of Goldman Sachs. We are leaning into our strengths. Our client franchise is stronger than ever, and we continue to harness our one Goldman Sachs approach. Our world-class talent, execution capabilities, and risk management expertise are core to who we are as a firm and allow us to provide differentiated service to our clients and outperform for shareholders through the cycle. Let me now turn it over to Denis to cover our financial results in more detail. |
2,682 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Thank you, David. Good morning. Let's start with our results on Page 1 of the presentation. In the third quarter, we generated net revenues of $12.7 billion, up 7% year-over-year. Earnings per share of $8.40 up 54% year-over-year. ROE was 10.4% and ROTE of 11.1%. As David mentioned, our results were impacted by select items, including agreements to transition the GM card platform and to sell our portfolio of seller financing norms. In aggregate, these items reduced EPS by $0.62 and our ROE by 80 basis points. Now turning to performance by segment starting on Page 4. Global Banking and Markets produced revenues of $8.6 billion in the third quarter. Advisory revenues of $875 million were up both sequentially and versus the prior year period. We remain number one in the league tables for announced and completed M&A for the year to date. Equity underwriting revenues rose 25% year over year to $385 million. As equity capital markets have continued to reopen, though volumes are still well below longer term averages. Debt underwriting revenues rose 46% year over year to 605 million amid higher leverage finance and investment grade activity. We are seeing increased client demand for committed acquisition financing, which we expect to continue on the back of increasing M&A activity. Overall, our investment banking backlog rose quarter on quarter driven by advisory. FIC net revenues of $3 billion in the quarter were down from a strong performance last year amid a relatively quieter summer, though we saw a meaningful pickup in activity in September. A decline in intermediation revenues was partially offset by record FIC financing revenues of $949 million, which rose 30% year over year, primarily on better results within mortgages and structured lending. Equities net revenues were $3.5 billion dollars in the quarter up 18% versus the prior year. Equities intermediation revenues were $2.2 billion, up 29% year over year, primarily driven by strong performance across derivatives and cash products. Equities |
2,683 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | were $2.2 billion, up 29% year over year, primarily driven by strong performance across derivatives and cash products. Equities financing revenues of $1.3 billion rose versus the prior year amid higher average balances. Across FIC and equities financing revenues were a record $6.6 billion for the year to date. A direct result of the successful execution on our strategic priority to improve the durability of our revenue base. Moving to Asset and Wealth Management on Page 5. Revenues of $3.8 billion were up 16% year over year. Our more durable management and other fees and private banking and lending revenues reached a new record this quarter of $3.4 billion. Management and other fees increased 3% sequentially to a record $2.6 billion for the quarter and $7.6 billion for the year to-date well on the way to achieving our $10 billion annual target for 2024. Private banking and lending revenues rose sequentially to 756 million. We are seeing positive momentum in this business, and we remain focused on increasing lending penetration and expanding our loan product offerings. Incentive fees for the quarter were $85 million. We continue to expect to reach our annual target of $1 billion over the medium term, supported by approximately $4 billion of unrecognized incentive fees as of the last quarter. Equity and debt investments revenues totaled $294 million reflecting NII in our debt portfolio and markups in our public equity portfolio. For the year to date, we generated one and a half billion in combined equity and debt investments revenues. Now moving to Page 6. Total assets under supervision ended the quarter at a record of $3.1 trillion, bolstered by $37 billion of liquidity products net inflows, and $29 billion of long-term net inflows across asset classes. We continue to see traction in our solutions business where we are leveraging our SMA capabilities and outsource CIO platform to deliver customized multi-asset solutions. Turning to Page 7 on alternatives. Alternative AUS totaled $328 billion at the end of the |
2,684 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | customized multi-asset solutions. Turning to Page 7 on alternatives. Alternative AUS totaled $328 billion at the end of the third quarter, driving $527 million in management and other fees. Gross third-party fundraising was $16 billion in the third quarter and over $50 billion for the year-to-date. This brings cumulative third-party fundraising to more than $300 billion since our Investor Day in 2020. We further reduced our historical principal investment portfolio by $1.7 billion in the third quarter to $10.9 billion, bringing year-to-date reductions to $5.4 billion. On Page 9, firmwide net interest income was $2.6 billion in the quarter up versus the prior year period, reflecting an increase in interest earning assets. Our total loan portfolio at quarter end was $192 billion up year-over-year, driven by an increase in other collateralized lending. For the third quarter, our provision for credit losses was $397 million, primarily driven by net charge offs in our credit card portfolio and partially offset by $70 million of net recoveries on previously impaired wholesale loans. Turning to expenses on Page 10. Total quarterly operating expenses were $8.3 billion. Our year-to-date compensation ratio net of provisions is 33.5%. Quarterly non-compensation expenses were $4.2 billion down 14% year-over-year. We remain focused on driving efficiencies across the firm, given ongoing inflationary pressures, competition for talent, and our desire to invest in our engineering and technology platforms. Our effective tax rate for the first nine months of 2024 was 22.6%. For the full year, we continued to expect the tax rate of approximately 22%. Next capital on Slide 11. In the quarter, we returned $2 billion to common shareholders, including dividends of 978 million and stock repurchases of $1 billion. Our common equity Tier 1 ratio was 14.6% at the end of the third quarter under the standardized approach. During the quarter, the Federal Reserve reduced our SEB requirement by 20 basis points to 6.2%, following a successful |
2,685 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | During the quarter, the Federal Reserve reduced our SEB requirement by 20 basis points to 6.2%, following a successful appeal process, resulting in a standardized common equity Tier 1 ratio requirement of 13.7%, which became effective October 1st. We remain very engaged with our regulators on creating a less volatile and more transparent process. Given our 90-basis point buffer, we continue to have flexibility on capital deployment and are very well positioned to serve our clients and return capital to shareholders. In conclusion, our overall performance reflected the strength of our client franchise and the improving operating environment. We are executing on our strategy where we are maintaining and strengthening our leadership positions across Global Banking and Markets and leaning into secular growth opportunities in Asset and Wealth Management. Across both businesses, we are making strong progress in growing our more durable revenue streams. Simply put, we are playing to our strengths as a firm and we remain confident in our ability to drive returns for shareholders while continuing to support our clients. With that, we will now open up the line for questions. |
2,686 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: [Operator Instructions] We'll take our first question from Glenn Schorr with Evercore.
Glenn Schorr: So, trading question, I mean, markets business has been great, markets have been supportive. But I guess my question is to your comments on the regulatory perception perhaps of trading in general, and August looked like a spike in volatility, but looks like you did really well. This marks many quarters that you and others have done very well for years. Do you feel the business is managed better? Do you feel like your results mean anything towards the outcome on the regulatory side? I'm just curious on what the, if the evidence matters. |
2,687 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: I appreciate the question, Glenn, and I mean, it's a hard question to answer. I think we've been clear on some of the advocacy we're doing around the regulatory process, but I've also been clear on regulatory environments, ebb and flow and that people can be policy. And so, overtime, you see shifts in all this. And our job, and I think we've done this effectively over a very long period of time, is to adapt and adjust and be nimble to the different regulatory environments. With respect to the business of markets which includes FIC intermediation and FIC financing and equities intermediation and equities financing, I think we have an extraordinary leading franchise that we've invested in over a long period of time. We have deep, deep client relationships, clients who rely on us for a package of services and that's not going away. And certainly, in this environment, this is an environment that's filled with uncertainty their need to constantly be engaging and repositioning and reshaping continues to make them very, very active, on a broad global scale. I think that we've done a number of things to evolve the way we run the business over time that I think have made the business more durable. Certainly, our focus and our emphasis on financing and the way we've grown and managed the financing businesses puts a level of durability into the business that's different than when the businesses were predominantly intermediation businesses. But intermediation continues to be an important service, and when you really step back and you step out a quarter to quarter and you look more year to year or year over year, these are very broad franchises across numerous silos, and they tend to be more resilient and more consistent than one might see when you look quarter to quarter. So, we feel good about the way the franchise is positioned, we’ll continue to invest in it and grow it. I think one of the things that people forget is that these businesses are correlated to growth in the world. They're correlated to market |
2,688 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | of the things that people forget is that these businesses are correlated to growth in the world. They're correlated to market cap growth in the world. And as long as you believe, over the medium and long term, those trends will continue with our capital generation we have the ability to invest in those franchises and grow those franchises over time, and we continue to see attractive return opportunities to do that. How the regulators respond to that over time, I really think is a separate question. And we'll continue to be actively engaged, as we've said to you, we are to ensure that we can manage that appropriately. |
2,689 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Glenn Schorr: I appreciate that. This one will be a short follow-up. With HPI was weak, but that'll happen on any given quarter. I think if you look over a long period of time, you've earned good returns on your historical principal investments. But as that book shrinks the 10.9 that's left, the 4 billion attributed to it, if I take a, should I -- is it okay to take a historical ROE on that capital to think about the lower revenue corresponding to the lower book going forward on HPI?
Denis Coleman: Glenn, its Denis. I guess what I would suggest you take a look at, we have obviously a commitment to reducing the balance of the historical principal investments. As we continue to have success doing that, there will be less revenue associated with the positions that have now been moved off of the balance sheet. But you will still see revenue generation associated with some of the co-invest positions that we retain as a piece of driving our overall growth of our third party fund management business as to guidance on future projected returns on that portfolio, I don't think I have a good answer as to exactly what future returns will be relative to prior returns, but I would suggest to you that we have a very diversified portfolio of exposures and a long standing track record of delivering good returns for our clients.
Operator: We'll take our next question from Ebrahim Poonawala with Bank of America.
Ebrahim Poonawala: I just had a follow-up first on trading and maybe David would appreciate your perspective around when we read about non-bank trading venues, getting into fixed income markets, potentially sort of disrupting the business for the incumbents. Comment on that you may, you could in terms of other parallels to the equity business that we should draw? And how much of a competitive threat are the non-bank/non-regulated entities, especially given your comments around the regulatory backdrop and kind of the Basel game, reproposal and the opaqueness around that? Thank you. |
2,690 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Yes, sure Ebrahim, and I appreciate the question. This gets a lot of attention, particularly in the press. But I think there are a couple of things when you stand back that are important to think about. And look, the equities journey is a relatively good journey. There's been lots of -- first of all, there's lots of competition in all these businesses. There's always been competition, but there are very few platforms that offer the leading capital allocators and asset managers in the world, the scale and the breadth across all the services that they need in an integrated basis. And that's very, very important to those clients when you go out and you talk to those clients. There can always be competition and there always will be competition. I just highlight, our equity business is as large and as scaled and as profitable as ever. Even though over the last 25 years, there's been enormous competition in the equity business. There's been digitization, there's been changed, there are now a handful. By handful, I'd say less than a handful. There are now one or two players that are trying to compete in some of the credit spaces, et cetera. And will they compete and will they win business? Of course, they'll win business. But these are big, big markets. We offer scaled solutions that are integrated for our clients and we continue to be enormous liquidity provider, financier of those clients, which by the way is very, very important to them for the way their overall ecosystem works. While these businesses always will be competitive and they continue to be competitive, again, we feel very good about the way our franchise is positioned to continue to be a leading player for our clients in these spaces. |
2,691 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Ebrahim Poonawala: Understood. And just a follow-up on -- back to ROE and conversations with investors around. You have done a good job over the last year or two, performance has been strong. Stocks reflected that. As we think about the journey here from a 12%, 13% ROE to something that's maybe 15% plus, the building blocks, one could argue that the market backdrop, not the best, but not the worst. What needs to happen for Goldman to get to a point where we are registering a 15%-type ROE on a more recurring basis? Thank you. |
2,692 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Well, I appreciate the question. And we've been very clear, we have a mid-teens target and that we believe we are on the journey of executing towards it. I think the first thing that has to happen is we need to continue to execute over a period of time to deliver on that. And again, I think it's a pretty simple building block of a story. First, we have a Global Banking and Markets business, and you can go look at the performance over the last five years of that business and the returns that, that business has delivered. I would say that I still believe we have some tailwind dynamics around the investment banking activity, and I just highlight that while investment banking revenues have improved, and we've made progress, we are still not operating at 10-year averages in M&A and equity volumes. M&A volumes year-to-date are 13% below 10-year averages. Now that's better than the 25% below 10-year averages that they were for the first nine months of last year and equity volumes at 27% below 10-year averages. Now that's better than the 34% to 35% that they were below 10-year averages for the first nine months last year. But there's no reason why we're not going to get back to 10-year average is a tailwind, but you can look at the performance in banking and markets, and that's one building block in the foundation for mid-teens returns. The second is our continued progress, which requires more time and more execution on our part around Asset and Wealth Management. And while we've improved the margins, we still have work to do on the margins and also the returns, and we continue to be very focused. But we are confident over the course of the next few years that we can bring the returns of our Asset & Wealth Management franchise into the mid-teens. The next building block or the last building block is we continue to narrow our consumer footprint and the drag associated with the platform business, that will get to a point where it basically becomes negligible. It's getting closer to that. And so, if you put |
2,693 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | business, that will get to a point where it basically becomes negligible. It's getting closer to that. And so, if you put those building blocks together, Global Banking and Markets, its actual performance with a little bit more of a tailwind, which obviously it benefits from continued progress on Asset and Wealth Management, that is our business, and we should be able to deliver those returns. We're focused on it. We have more work to do, but that is the path, and I think it's pretty clear. |
2,694 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: We'll take our next question from Christian Bolu with Autonomous Research.
Christian Bolu: Can you hear me? I just have a question on the trading business and the competitive landscape. How are you thinking about the -- maybe the broader competitive landscape with the -- with other banks? Your market share seemed to peak in 2022. It's been a bit choppy since then as a market share. Just curious, are you seeing signs of competitors coming back, increasing competition from anywhere. I'm just curious on your thoughts there.
David Solomon: When you have leading market shares, our Global Banking & Markets franchise, you bounce around at different levels based on short-term activity, but what I'd say is if you step back and you look over the last five years, we took a step function up in our market share broadly across the plot. And so, from quarter-to-quarter, you'll see variability. But I still think those market shares are positioned in a leading position, and we're zealously focused on them. We're zealously focused on the top 150 clients, which obviously make a huge contribution to the markets business. We're obviously always focused on our overall banking footprint and the opportunities there. And obviously, in a better M&A environment where there's more large cap M&A. You do see some movement in our market share. So that's a market share tailwind for us. They've always been competitive business, Christian. Again, we think we're very well positioned with our clients and have deep trusting long-term relationships and through our one Goldman Sachs operating ethos, a history of delivering for them through the cycle. There's always going to be competition, but we like the way our business is positioned. And I don't see anything that fundamentally changes that, but have operated in these businesses. We've operated in these businesses for a long time. There are always going to be competitive businesses. |
2,695 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Chinedu Bolu: Okay. On Private Banking, just another set of very strong results there, I think revenue growth up 10%. And if I'm doing my math correctly, organic flows are in the high single-digit range, which would put you, I think, best in class. So just remind us again like what's driving strength there? And then maybe any key initiatives for growth over the next couple of years that should help sustain this growth.
David Solomon: Sure, I'll start. I don't know Denis might have something to add. But at a high level, this is a strategic decision that we have this big ultra-high net worth platform, and we were underinvested in lending to those clients. And there's a lot of historical reasons for why that's the case, starting with the fact that 15 years ago, we want a bank. And so, we really didn't look at the world that way. But lending into an ultra-high net worth franchise is a very good business, and it's a very important part of the business. And we understand that we've learned and we've seen it through investment banking, and we've seen it through market that when you holistically look at the integration of services that you provide to your client, including lending, you improve your market share position. So, when you look at our wealth franchise versus under other wealth franchises, we've been underpenetrated the lending to those wealth clients and we put in place resources a leadership team on a focused effort to increase that activity to these clients. While we've moved the needle, we're still underweighted versus other competitors like JPMorgan, and I would expect that we have a relatively good growth trajectory to continue to invest in that capability for our clients. And Denis I don't know if there's anything you want to add on that? |
2,696 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: The only thing I'd amplify, which I think we've mentioned before, we feel like we've run this play before. So, we worked on a strategy to holistically cover clients in banking by integrating lending as part of the holistic suite of services we provided them, improved our market share position with those clients. We've implemented the same thing across the GBM public businesses of FICC and equities. We stand underpenetrated relative to peers today, and we believe that by taking the same holistic approach to the clients in the wealth business that we can improve our market shares and the nature of our relationship with those clients. As David said, we are allocating incremental resources, more specialist capabilities and giving our advisers the confidence to offer a competitive product to their clients to improve the overall relationship they have with their clients.
Operator: We'll go next to Mike Mayo with Wells Fargo Securities.
Mike Mayo: The first question relates to why do you stop platform solution sets of business line? And what's happening with the Apple Card? And do you plan to exit that and take charges for that? And kind of what's going on with that? Again, two-thirds of the firm's global banking market, one-third is wealth and asset management, and then you have this kind of extra business there.
David Solomon: Yes. Thanks, Mike. I mean I know there's a lot of focus on that. I think we've been pretty clear in our messaging that we are continuing to narrow our consumer footprint. I don't have a lot more to say about where we are with Apple Card other than we're running it and improving it. And that's really all that I have to say. But I think the direction of travel at this point is pretty clear. |
2,697 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Mike Mayo: Well, back to the core business then, you said M&A is still 13% below 10-year averages. To what degree are 10-year averages less relevant because of the sponsor activity. You guys have said -- it seems like everyone has a different number, whether it's $1 trillion or $3 trillion of dry powder out there by sponsors that are ready, willing and able to pursue acquisitions. And I don't think you've ever had that level of dry powder before. So, could this be an M&A super cycle because all that money gets put to work? And if so, how would you change that 10-year average to adjust for that?
David Solomon: I mean, one, I think there are long-term secular trends around M&A and market cap, which, by the way, are also meaningfully below trend I think that's more driven by the current regulatory environment and the fact that there has not been a lot of large-cap M&A with the market cap expansion, especially around TAP, that might be permanent. It might not, but my guess is that will ebb and flow from time to time. But your sponsor point, Mike, is a very, very good point. And the bottom line is the sponsors have been slower to turn on than I would have expected, but they will turn on. By the way, if that -- all that dry powder is deployed okay, M&A volumes versus the 10-year averages will go up. But by the way, if we were sitting here five years ago, 10-year average was lower five years ago than it is today because the 10-year average is definitely correlated to market cap growth and economic growth. So, I do think we'll operate a 10-year averages. I do think over time, by the end of the decade, the 10-year average will actually be higher that it's been with a historical lens. But I will say at the point lower to deploy than we would have expected, but we see more activity. Some of that is indicative of the growth in our backlog that we've highlighted. And I do think that sponsor activity will continue to accelerate over the next 6, 12, 24 months.
Operator: We'll go next to Betsy Graseck with Morgan Stanley. |
2,698 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: We'll go next to Betsy Graseck with Morgan Stanley.
Betsy Graseck: Can you hear me okay? Okay, super. Yes, I totally agree. We've been calling for capital markets rebound. It's really nice to see it coming through. Two questions. One on the expanding loan offerings that you mentioned earlier. And I know we touched on it briefly in the Q&A. Just a few questions ago. What I wanted to make sure I understood is, when you think about the RWA impact of reducing the private investments that you're doing, you're reducing that portfolio and then increasing the expanded loan offerings into Asset & Wealth Management. Do you see that as RWA neutral is the density of the loan offerings higher or lower than the investment, the private equity investments that you've got?
Denis Coleman: Sure, Betsy. Very good question. So generally speaking, the density of the HPI that we have left to sell down is high and the density asset and wealth loans is low. So, migrating RWA towards the lending businesses improves the durability, the predictability, the recurring nature of it, it brings forth the holistic access to the clients, all their wealth management needs and it is more capital efficient for us. So that is an underpinning component of the strategy as well.
Betsy Graseck: Okay, super. Right, because it's collateralized heavily, right? Okay. Then the other question I had was just on the GM cut. I wanted to make sure I understood this. So as far as I get it's signed but not closed yet. So, can you give us a sense as to when you think it's going to close? And are there any trailers in your P&L when it does close, for example, anything we should be aware of with regard to either payments to on the contract to GM? Or is there like a lot of cap that you have to be involved in? I'm just trying to make sure I understand how to model this as we go forward. |
2,699 | GS | 3 | 2,024 | 2024-10-15 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Sure, Betsy. So, in terms of timing, it's signed but not closed. There has to be a conversion to the new issuer and then ultimately at closing of the platform transfer expectations we're targeting Q3 of 2025. So that's sort of timing from a modeling perspective. And I guess what I would tell you, we obviously have responsibility for operating the platform until that point in time. So, we will continue to incur call it, the run rate operating losses associated with that business. As a guide, I'd point you to where we were in Q1 and Q2 of this year, something on the order of negative $50 million or $60 million per quarter, just to give you a sense for how that rolls forward from here until closing.
Operator: We'll go next to Brennan Hawken with UBS.
Brennan Hawken: I wanted to follow up a little bit on the investment backlog commentary. I know you said that advisory drove a lot of the growth in the backlog. But we did see some sponsors recently to the IPO market with some success. And so curious about what you're seeing on the ECM and IPO side, particularly as we see early signs of sponsors reengaging with that distribution channel?
David Solomon: So, thanks for the question, Brennan. I mean there's no question equity activity picked up. But as I highlighted a few moments ago, volumes are still running 25% below 10-year averages. And IPOs running even more significantly below 10-year averages. I do think the sponsors, again, some of it is sponsor monetization. And because sponsors have had their portfolios marked a little bit higher, they've been slow and they're kind of waiting for growth to bring up some of the values. But I do see an acceleration of activity and I expect it to continue, and there's no fundamental reason why equity volumes ultimately shouldn't run a 10-year averages. And that those averages will grow over time with a growth in market cap and a growth in the deployment of sponsored capital. |
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