Alphabet : 2022 Q3 Earnings Press release

Alphabet Announces Third Quarter 2022 Results

MOUNTAIN VIEW, Calif. - October 25, 2022 - Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended September 30, 2022.

Sundar Pichai, CEO of Alphabet and Google, said: "We're sharpening our focus on a clear set of product and business priorities. Product announcements we've made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetize YouTube Shorts. We are focused on both investing responsibly for the long term and being responsive to the economic environment."

Ruth Porat, CFO of Alphabet and Google, said: "Our third quarter revenues were $69.1 billion, up 6% versus last year or up 11% on a constant currency basis. Financial results for the third quarter reflect healthy fundamental growth in Search and momentum in Cloud, while affected by foreign exchange. We're working to realign resources to fuel our highest growth priorities."

Q3 2022 financial highlights

The following table summarizes our consolidated financial results for the quarters ended September 30, 2021 and 2022 (in millions, except for per share information and percentages; unaudited).

		Quarter Ended September 30,
		2021		2022
Revenues	$	65,118	$	69,092
Change in revenues year over year		41 %		6 %
Change in constant currency revenues year over year(1)		39 %		11 %
Operating income	$	21,031	$	17,135
Operating margin		32 %		25 %
Other income (expense), net	$	2,033	$	(902)
Net income	$	18,936	$	13,910
Diluted EPS	$	1.40	$	1.06

1. Non-GAAPmeasure. See the table captioned "Reconciliation from GAAP revenues to non-GAAP constant currency revenues" for more details.

Q3 2022 supplemental information (in millions, except for number of employees; unaudited)

Revenues, Traffic Acquisition Costs (TAC) and number of employees
		Quarter Ended September 30,
		2021			2022
Google Search & other	$	37,926	$	39,539
YouTube ads		7,205			7,071
Google Network		7,999			7,872
Google advertising		53,130			54,482
Google other		6,754			6,895
Google Services total		59,884			61,377
Google Cloud		4,990			6,868
Other Bets		182			209
Hedging gains (losses)		62			638
Total revenues	$	65,118	$	69,092
Total TAC	$	11,498	$	11,826
Number of employees		150,028			186,779
Segment Operating Results
		Quarter Ended September 30,
		2021			2022
Operating income (loss):
Google Services	$	23,973	$	19,781
Google Cloud		(644)			(699)
Other Bets		(1,288)			(1,611)
Corporate costs, unallocated		(1,010)			(336)
Total income from operations	$	21,031	$	17,135

Webcast and conference call information

A live audio webcast of our third quarter 2022 earnings release call will be available on YouTube at https://youtu.be/ AWRe3SGZFsU. The call begins today at 2:00 PM (PT) / 5:00 PM (ET). This press release, including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, is also available at http://abc.xyz/investor.

We also provide announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs, on our investor relations website (http://abc.xyz/investor).

We also share Google news and product updates on Google's Keyword blog at https://www.blog.google/, which may be of interest or material to our investors.

Forward-looking statements

This press release may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021 and our most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which are on file with the SEC and are available on our investor relations website at http://abc.xyz/investor and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022. All information provided in this release and in the attachments is as of October 25, 2022. Undue reliance should not be placed on the forward-looking statements in

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this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

About non-GAAP financial measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: free cash flow; constant currency revenues; and percentage change in constant currency revenues. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of our recurring core business operating results, such as our revenues excluding the effect of foreign exchange rate movements and hedging activities. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

There are a number of limitations related to the use of non-GAAP financial measures. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures and evaluating these non-GAAP financial measures together with their relevant financial measures in accordance with GAAP.

For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliation from net cash provided by operating activities to free cash flow" and "Reconciliation from GAAP revenues to non-GAAP constant currency revenues" included at the end of this release.

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Alphabet Inc.

CONSOLIDATED BALANCE SHEETS

(In millions, except par value per share amounts)

	As of December 31,		As of September 30,
		2021			2022
					(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	20,945	$	21,984
Marketable securities		118,704			94,275
Total cash, cash equivalents, and marketable securities		139,649			116,259
Accounts receivable, net		39,304			34,697
Income taxes receivable, net		966			1,479
Inventory		1,170			3,156
Other current assets		7,054			10,518
Total current assets		188,143			166,109
Non-marketable securities		29,549			30,419
Deferred income taxes		1,284			2,991
Property and equipment, net		97,599			108,363
Operating lease assets		12,959			13,677
Intangible assets, net		1,417			2,192
Goodwill		22,956			28,834
Other non-current assets		5,361			5,670
Total assets	$	359,268		$	358,255
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	6,037	$	6,303
Accrued compensation and benefits		13,889			12,366
Accrued expenses and other current liabilities		31,236			35,038
Accrued revenue share		8,996			7,662
Deferred revenue		3,288			3,585
Income taxes payable, net		808			1,025
Total current liabilities		64,254			65,979
Long-term debt		14,817			14,653
Deferred revenue, non-current		535			594
Income taxes payable, non-current		9,176			8,572
Deferred income taxes		5,257			476
Operating lease liabilities		11,389			11,984
Other long-term liabilities		2,205			2,371
Total liabilities		107,633			104,629
Contingencies
Stockholders' equity:
Preferred stock, $0.001 par value per share, 100 shares authorized; no
shares issued and outstanding		0			0
Class A, Class B, and Class C stock and additional paid-in capital, $0.001 par
value per share: 300,000 shares authorized (Class A 180,000, Class B
60,000, Class C 60,000); 13,242 (Class A 6,015, Class B 893, Class C 6,334)
and 12,971 (Class A 5,978, Class B 884, Class C 6,109) shares issued and
outstanding		61,774			66,258
Accumulated other comprehensive income (loss)		(1,623)			(8,852)
Retained earnings		191,484			196,220
Total stockholders' equity		251,635			253,626
Total liabilities and stockholders' equity	$	359,268		$	358,255

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Alphabet Inc.

CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts, unaudited)

		Quarter Ended September 30,			Year to Date September 30,
		2021			2022			2021			2022
Revenues	$	65,118	$	69,092	$	182,312	$	206,788
Costs and expenses:
Cost of revenues		27,621			31,158			77,951			90,861
Research and development		7,694			10,273			22,854			29,233
Sales and marketing		5,516			6,929			15,308			19,384
General and administrative		3,256			3,597			9,370			10,628
Total costs and expenses		44,087			51,957			125,483			150,106
Income from operations		21,031			17,135			56,829			56,682
Other income (expense), net		2,033			(902)			9,503			(2,501)
Income before income taxes		23,064			16,233			66,332			54,181
Provision for income taxes		4,128			2,323			10,941			7,833
Net income	$	18,936	$	13,910	$	55,391	$	46,348
Basic earnings per share of Class A, Class B, and	$	1.42	$	1.07	$	4.14	$	3.53
Class C stock
Diluted earnings per share of Class A, Class B, and	$	1.40	$	1.06	$	4.08	$	3.50
Class C stock
Number of shares used in basic earnings per share		13,315			13,018			13,386			13,118
calculation
Number of shares used in diluted earnings per share		13,530			13,097			13,588			13,229
calculation

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