Sundar Pichai says more than 25% of Google's new code is generated by AI

Sundar Pichai, CEO of Google and Alphabet

Sundar Pichai, chief executive of Google parent Alphabet, said on October 29 that more than a quarter of new code at the tech giant is generated by artificial intelligence (AI), highlighting how the company is leveraging this technology internally to boost productivity.

The code generated is then reviewed and accepted by engineers, Pichai said during the firm's Q3 earnings conference call. "This helps our engineers do more and move faster... I am energised by our progress, and the opportunities ahead. And we continue to be laser focused on building great products."

Over the past year, Google has been simplifying its organisational structure to improve efficiency, re-engineer its cost base, and operate with greater speed and agility.

Last year, the firm had merged its AI research units, DeepMind and Google Brain, into a single division called Google DeepMind, led by Demis Hassabis. In the subsequent months, Alphabet introduced the Gemini family of AI models that is expected to fuel the next generation of AI advancements.

Earlier in the month, Google also moved the Gemini app team to Google DeepMind in order to speed up deployment of new models, and streamline post-training work.

Pichai said that the company has made several structural changes that have unified teams in research, machine learning infrastructure and developer teams, as well as its security efforts and its platforms and devices team. "This is all helping us move faster. For instance, it was a small, dedicated team that built Notebook LM, an incredibly popular product that has so much promise," he said.

High-stakes AI battle

Google's moves come amid a high stakes battle for AI supremacy with rivals such as Microsoft, Facebook parent Meta, and OpenAI.

Pichai said that their long-term focus and investment in AI are "paying off and driving success" for the company and its customers.

For the third quarter, Alphabet saw a 15 percent year-on-year (YoY) jump in its revenues to $88.3 billion, driven by a strong performance by its cloud unit that grew by 35 percent YoY to $11.4 billion. Revenues from Google Services, which includes its flagship search engine business, rose 13 percent to $76.5 billion.

"We are uniquely positioned to lead in the era of AI because of our differentiated full stack approach to AI innovation, and we’re now seeing this operate at scale," Pichai said.

This approach comprises three pillars: a robust AI infrastructure, world-class research teams, and products and platforms that have a global reach to billions of users.

Pichai said they now have seven products and platforms that have more than 2 billion monthly users apiece, including Google Maps which recently surpassed this milestone. "All the seven products have done their first versions of incorporating Gemini (AI models), and there's an aggressive roadmap ahead for 2025," he said.

The Alphabet chief said that they have released two generations of Gemini models so far. "By any measure — token volume, API calls, consumer usage, business adoption — usage of the Gemini models is in a period of dramatic growth," he said.

Alphabet is now working on the third generation of model, Pichai said. "It is progressing well, and teams internally are now set up much better to consume the underlying model innovation and translate that into innovation within their products."

As a result of these efforts, Alphabet's capital expenditures have shot up to $13.1 billion for the third quarter, up 62 percent from the same period last year, with the majority spent on technical infrastructure such as servers and data centres.

AI spending to go up in 2025

The tech giant expects to substantially increase capital investment in 2025, said Alphabet Chief Financial Officer Anat Ashkenazi during the earnings call. "As we look forward, we are working to balance our investments in AI and other growth areas with the cost discipline needed to fund those investments," Ashkenazi said in her first earnings call as Alphabet CFO.

In a response to an analyst query on making Google's margins healthier, she said that one of her "key priorities" right now is to look across the organisation to see what could be done to drive further efficiency.

"There's really good work that was started by Ruth (Porat, the former CFO), Sundar, and the rest of the leadership team to re-engineer the cost base. But I think any organisation can always push a little further, and I will be looking at additional opportunities," she said.

"Think not just about the size of the organisation but mostly how we operate and how we run the business," said Ashkenazi. "I think when you simplify the organization...when we use AI within our own processes and how we get work done, there are some efficiencies or opportunities for efficiencies."