Alphabet : Q2 Press release

Alphabet Announces Second Quarter 2021 Results

MOUNTAIN VIEW, Calif. - July 27, 2021 - Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended June 30, 2021.

Sundar Pichai, CEO of Google and Alphabet, said: "In Q2, there was a rising tide of online activity in many parts of the world, and we're proud that our services helped so many consumers and businesses. Our long-term investments in AI and Google Cloud are helping us drive significant improvements in everyone's digital experience."

"Our strong second quarter revenues of $61.9 billion reflect elevated consumer online activity and broad-based strength in advertiser spend. Again, we benefited from excellent execution across the board by our teams," said Ruth Porat, CFO of Google and Alphabet.

Q2 2021 financial highlights

The following table summarizes our consolidated financial results for the quarters ended June 30, 2020 and 2021 (in millions, except for per share information and percentages; unaudited).

		Quarter Ended June 30,
		2020		2021
Revenues	$	38,297	$	61,880
Change in revenues year over year		(2)%		62 %
Change in constant currency revenues year over year(1)		0 %		57 %
Operating income	$	6,383	$	19,361
Operating margin		17 %		31 %
Other income (expense), net	$	1,894	$	2,624
Net income	$	6,959	$	18,525
Diluted EPS	$	10.13	$	27.26

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

Q2 2021 supplemental information (in millions, except for number of employees; unaudited)

Revenues, Traffic Acquisition Costs (TAC) and number of employees
		Quarter Ended June 30,
		2020			2021
Google Search & other	$	21,319	$	35,845
YouTube ads		3,812			7,002
Google Network		4,736			7,597
Google advertising		29,867			50,444
Google other		5,124			6,623
Google Services total		34,991			57,067
Google Cloud		3,007			4,628
Other Bets		148			192
Hedging gains (losses)		151			(7)
Total revenues	$	38,297	$	61,880
Total TAC	$	6,694	$	10,929
Number of employees		127,498			144,056
Segment Operating Results
		Quarter Ended June 30,
		2020			2021
Operating income (loss):
Google Services	$	9,539	$	22,343
Google Cloud		(1,426)			(591)
Other Bets		(1,116)			(1,398)
Corporate costs, unallocated		(614)			(993)
Total income from operations	$	6,383	$	19,361

Change in the useful lives of our server and network equipment (unaudited)

In January 2021, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years. This change in accounting estimate was effective beginning in fiscal year 2021 and the effect was a reduction in depreciation expense of $721 million and $1.6 billion and an increase in net income of $561 million and $1.2 billion, or $0.84 and $1.81 per basic and $0.83 and $1.78 per diluted share, for the three and six months ended June 30, 2021, respectively.

Stock Repurchase

As we previously announced in April 2021, the Alphabet board authorized the company to repurchase up to an additional $50 billion of its Class C capital stock under our stock repurchase program. On July 22, 2021, the board approved an amendment to the stock repurchase program permitting us to repurchase both Class A and Class C shares, in a manner deemed in the best interest of the company and its stockholders, taking into account the economic cost and prevailing market conditions, including the relative trading prices and volumes of the Class A and Class C shares.

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Webcast and conference call information

A live audio webcast of our second quarter 2021 earnings release call will be available on YouTube at https:// youtu.be/4ku-6h3vuNw. The call begins today at 1:30 PM (PT) / 4:30 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, 2020, and our most recent Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, 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 June 30, 2021. All information provided in this release and in the attachments is as of July 27, 2021. Undue reliance should not be placed on the forward-looking statements in 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.

Contact
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Alphabet Inc.

CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts which are reflected in thousands and par value per share amounts)

		As of			As of
	December 31,			June 30,
		2020			2021
					(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	26,465	$	23,630
Marketable securities		110,229			112,233
Total cash, cash equivalents, and marketable securities		136,694			135,863
Accounts receivable, net		30,930			31,967
Income taxes receivable, net		454			884
Inventory		728			907
Other current assets		5,490			6,076
Total current assets		174,296			175,697
Non-marketable investments		20,703			25,532
Deferred income taxes		1,084			1,153
Property and equipment, net		84,749			91,697
Operating lease assets		12,211			12,978
Intangible assets, net		1,445			1,626
Goodwill		21,175			22,406
Other non-current assets		3,953			4,298
Total assets	$	319,616		$	335,387
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	5,589	$	4,708
Accrued compensation and benefits		11,086			10,088
Accrued expenses and other current liabilities		28,631			28,981
Accrued revenue share		7,500			7,438
Deferred revenue		2,543			2,715
Income taxes payable, net		1,485			1,811
Total current liabilities		56,834			55,741
Long-term debt		13,932			14,328
Deferred revenue, non-current		481			510
Income taxes payable, non-current		8,849			8,651
Deferred income taxes		3,561			4,703
Operating lease liabilities		11,146			11,619
Other long-term liabilities		2,269			2,270
Total liabilities		97,072			97,822
Contingencies
Stockholders' equity:
Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no		0			0
shares issued and outstanding
Class A and Class B common stock, and Class C capital stock and additional paid-in
capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000,
Class B 3,000,000, Class C 3,000,000); 675,222 (Class A 300,730, Class B 45,843,
Class C 328,649) and 667,637 (Class A 301,040, Class B 45,546, Class C 321,051)		58,510			60,436
shares issued and outstanding
Accumulated other comprehensive income (loss)		633			190
Retained earnings		163,401			176,939
Total stockholders' equity		222,544			237,565
Total liabilities and stockholders' equity	$	319,616		$	335,387

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Alphabet Inc.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except share amounts which are reflected in thousands and per share amounts)

		Quarter Ended June 30,			Year To Date June 30,
		2020			2021			2020			2021
		(unaudited)						(unaudited)
Revenues	$	38,297	$	61,880	$	79,456	$	117,194
Costs and expenses:
Cost of revenues		18,553			26,227			37,535			50,330
Research and development		6,875			7,675			13,695			15,160
Sales and marketing		3,901			5,276			8,401			9,792
General and administrative		2,585			3,341			5,465			6,114
Total costs and expenses		31,914			42,519			65,096			81,396
Income from operations		6,383			19,361			14,360			35,798
Other income (expense), net		1,894			2,624			1,674			7,470
Income before income taxes		8,277			21,985			16,034			43,268
Provision for income taxes		1,318			3,460			2,239			6,813
Net income	$	6,959	$	18,525	$	13,795	$	36,455
Basic earnings per share of Class A and B common	$	10.21	$	27.69	$	20.16	$	54.32
stock and Class C capital stock
Diluted earnings per share of Class A and B common	$	10.13	$	27.26	$	20.00	$	53.54
stock and Class C capital stock
Number of shares used in basic earnings per share		681,768			668,958			684,117			671,089
calculation
Number of shares used in diluted earnings per share		687,024			679,612			689,646			680,842
calculation

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