%%% PAGENUMBER 1 %%% Alphabet Announces Fourth Quarter and Fiscal Year 2022 Results MOUNTAIN VIEW, Calif. - February 2 , 2023 - Alphabet Inc. (NASDAQ : GOOG , GOOGL ) today announced financial results for the quarter and fiscal year ended December 31 , 2022. Sundar Pichai , CEO of Alphabet and Google , said : " Our long -term investments in deep computer science make us extremely well-positioned as Al reaches an inflection point , and I'm excited by the Al-driven leaps we're about to unveil in Search and beyond . There's also great momentum in Cloud , YouTube subscriptions , and our Pixel devices. We're on an important journey to re - engineer our cost structure in a durable way and to build financially sustainable , vibrant , growing businesses across Alphabet. " Ruth Porat , CFO of Alphabet and Google , said : “ Our Q4 consolidated revenues were $ 76 billion , up 1 % year over year, or up 7% in constant currency, and $ 283 billion for the full year 2022 , up 10 % , or up 14 % in constant currency. We have significant work underway to improve all aspects of our cost structure , in support of our investments in our highest growth priorities to deliver long-term , profitable growth . " Q4 2022 financial highlights The following table summarizes our consolidated financial results for the quarters and years ended December 31 , 2021 and 2022 (in millions , except for per share information and percentages). Quarter Ended Year Ended December 31 , December 31 , 2021 2022 2021 2022 ( unaudited) (unaudited) Revenues $ 75,325 $ 76,048 $ 257,637 $ 282,836 Change in revenues year over year 32 % 1% 41 % 10 % Change in constant currency revenues year over year(1) 33 % 7% 39 % 14 % Operating income 21,885 $ 18,160 $ 78,714 $ 74,842 Operating margin 29 % 24 % 31 % 26 % Other income (expense ), net $ 2,517 $ ( 1,013 ) $ 12,020 $ (3,514 ) Net income 20,642 $ 13,624 $ 76,033 $ 59,972 Diluted EPS $ 1.53 $ 1.05 $ 5.61 $ 4.56 (1) Non-GAAP measure . See the table captioned "Reconciliation from GAAP revenues to non -GAAP constant currency revenues and GAAP percentage change in revenues to non - GAAP percentage change in constant currency revenues" for more details . %%% PAGENUMBER 2 %%% Q4 2022 supplemental information ( in millions, except for number of employees ; unaudited ) Revenues, Traffic Acquisition Costs ( TAC ) and number of employees Quarter Ended December 31 , 2021 2022 Google Search & other 43,301 $ 42,604 YouTube ads 8,633 7,963 Google Network 9,305 8,475 Google advertising 61,239 59,042 Google other 8,161 8,796 Google Services total 69,400 67,838 Google Cloud 5,541 7,315 Other Bets 181 226 Hedging gains (losses) 203 669 Total revenues $ 75,325 $ 76,048 Total TAC 13,427 $ 12,925 Number of employees 156,500 190,234 Segment Operating Results Quarter Ended December 31 , 2021 2022 Operating income (loss ) : Google Services 25,993 $ 21,101 Google Cloud (890 ) (480) Other Bets ( 1,450 ) ( 1,631 ) Corporate costs, unallocated (1,768 ) (830) Total income from operations $ 21,885 $ 18,160 Additional Information Relating to Fiscal Year 2023 (unaudited) Recent Announcements In January 2023 , we announced a reduction of our workforce of approximately 12,000 roles . We expect to incur employee severance and related charges of $ 1.9 billion to $ 2.3 billion , the majority of which will be recognized in the first quarter of 2023 . In addition, we are taking actions to optimize our global office space . As a result we expect to incur exit costs relating to office space reductions of approximately $ 0.5 billion in the first quarter of 2023. We may incur additional charges in the future as we further evaluate our real estate needs . Change in Useful lives of our server and network equipment In January 2023 , we completed an assessment of the useful lives of our servers and network equipment , resulting in a change in the estimated useful life of our servers and certain network equipment to six years , which we expect to result in a reduction of depreciation of approximately $ 3.4 billion for the full fiscal year 2023 for assets in service as of December 31 , 2022, recorded primarily in cost of revenues and research and development ( R & D) expenses . Segment Reporting Changes As Al is critical to delivering our mission of bringing our breakthrough innovations into the real world , beginning in January 2023 , we will update our segment reporting relating to certain of Alphabet's Al activities . DeepMind , previously reported within Other Bets , will be reported as part of Alphabet's corporate costs , reflecting its increasing collaboration with Google Services , Google Cloud , and Other Bets . Prior periods will be recast to conform to the revised presentation . 2 %%% PAGENUMBER 3 %%% Webcast and conference call information A live audio webcast of our fourth quarter 2022 earnings release call will be available on YouTube at https://youtu.be/ G8SDU18iPnl . 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 , 2021 and our most recent Quarterly Report on Form 10- Q for the quarter ended September 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 Annual Report on Form 10- K for the year ended December 31 , 2022. All information provided in this release and in the attachments is as of February 2 , 2023. 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 , which are recognized at the consolidated level . 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 and GAAP percentage change in revenues to non - GAAP percentage change in constant currency revenues" included at the end of this release . Contact Investor relations Media investor-relations@abc.xyz press@abc.xyz 3 %%% PAGENUMBER 4 %%% Alphabet Inc. CONSOLIDATED BALANCE SHEETS ( In millions , except par value per share amounts) As of December 31 , 2021 2022 (unaudited) Assets Current assets: SA Cash and cash equivalents 20,945 $ 21,879 Marketable securities 118,704 91,883 Total cash , cash equivalents, and marketable securities 139,649 113,762 Accounts receivable , net 39,304 40,258 Inventory 1,170 2,670 Other current assets 8,020 8,105 Total current assets 188,143 164,795 Non -marketable securities 29,549 30,492 Deferred income taxes 1,284 5,261 Property and equipment, net 97,599 112,668 Operating lease assets 12,959 14,381 Intangible assets, net 1,417 2,084 Goodwill 22,956 28,960 Other non - current assets 5,361 6,623 Total assets $ 359,268 $ 365,264 Liabilities and Stockholders' Equity Current liabilities : Accounts payable 6,037 $ 5,128 Accrued compensation and benefits 13,889 14,028 Accrued expenses and other current liabilities 32,044 37,866 Accrued revenue share 8,996 8,370 Deferred revenue 3,288 3,908 Total current liabilities 64,254 69,300 Long -term debt 14,817 14,701 Deferred revenue , non - current 535 599 Income taxes payable, non -current 9,176 9,258 Deferred income taxes 5,257 514 Operating lease liabilities 11,389 12,501 Other long -term liabilities 2,205 2,247 Total liabilities 107,633 109,120 Commitments and 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 12,849 ( Class A 5,964 , Class B 883, Class C 6,002 ) shares issued and outstanding 61,774 68,184 Accumulated other comprehensive income ( loss ) (1,623) (7,603) Retained earnings 191,484 195,563 Total stockholders' equity 251,635 256,144 Total liabilities and stockholders' equity $ 359,268 $ 365,264 %%% PAGENUMBER 5 %%% Alphabet Inc. CONSOLIDATED STATEMENTS OF INCOME ( In millions , except per share amounts) Quarter Ended December 31 , Year Ended December 31 , 2021 2022 2021 2022 ( unaudited ) (unaudited ) Revenues 75,325 $ 76,048 $ 257,637 $ 282,836 Costs and expenses: Cost of revenues 32,988 35,342 110,939 126,203 Research and development 8,708 10,267 31,562 39,500 Sales and marketing 7,604 7,183 22,912 26,567 General and administrative 4,140 5,096 13,510 15,724 Total costs and expenses 53,440 57,888 178,923 207,994 Income from operations 21,885 18,160 78,714 74,842 Other income (expense), net 2,517 ( 1,013 ) 12,020 (3,514 ) Income before income taxes 24,402 17,147 90,734 71,328 Provision for income taxes 3,760 3,523 14,701 11,356 Net income $ 20,642 $ 13,624 $ 76,033 $ 59,972 Basic earnings per share of Class A , Class B , and Class C stock 1.56 $ 1.06 $ 5.69 $ 4.59 Diluted earnings per share of Class A, Class B , and Class C stock 1.53 $ 1.05 5.61 $ 4.56 Number of shares used in basic earnings per share calculation 13,253 12,897 13,353 13,063 Number of shares used in diluted earnings per share calculation 13,450 12,947 13,553 13,159 5 %%% PAGENUMBER 6 %%% Alphabet Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS ( In millions) Quarter Ended December 31 , Year Ended December 31 , 2021 2022 2021 2022 (unaudited) (unaudited ) Operating activities Net income 20,642 $ 13,624 $ 76,033 59,972 Adjustments : Depreciation and impairment of property and equipment 3,215 4,065 11,555 15,287 Amortization and impairment of intangible assets 224 136 886 641 Stock-based compensation expense 3,954 5,100 15,376 19,362 Deferred income taxes 1,616 (1,924 ) 1,808 (8,081) (Gain ) loss on debt and equity securities, net (2,478 ) 1,663 (12,270 ) 5,519 Other ( 14 ) 661 (213) 1,030 Changes in assets and liabilities , net of effects of acquisitions : Accounts receivable, net (5,819 ) (4,615 ) (9,095 ) (2,317) Income taxes, net (3,369 ) 1,446 (625) 584 Other assets (399 ) (778 ) ( 1,846) (5,046 ) Accounts payable 1,157 (28) 283 707 Accrued expenses and other liabilities 4,541 3,424 7,304 3,915 Accrued revenue share 1,296 577 1,682 (445 ) Deferred revenue 368 263 774 367 Net cash provided by operating activities 24,934 23,614 91,652 91,495 Investing activities Purchases of property and equipment (6,383) (7,595) (24,640) (31,485 ) Purchases of marketable securities (40,090) (11,621 ) ( 135,196 ) (78,874) Maturities and sales of marketable securities 36,168 13,735 128,294 97,822 Purchases of non- marketable securities (770 ) (903 ) (2,838 ) (2,531 ) Maturities and sales of non - marketable securities 344 19 934 150 Acquisitions , net of cash acquired , and purchases of intangible assets (385 ) (84) (2,618 ) (6,969) Other investing activities 100 222 541 1,589 Net cash used in investing activities (11,016 ) (6,227) (35,523) (20,298 ) Financing activities Net payments related to stock- based award activities (2,923 ) (2,079 ) (10,162) (9,300) Repurchases of stock ( 13,473 ) (15,407) (50,274) (59,296 ) Proceeds from issuance of debt , net of costs 6,250 8,550 20,199 52,872 Repayments of debt (6,365) (8,718 ) (21,435) (54,068 ) Proceeds from sale of interest in consolidated entities , net 0 25 310 35 Net cash used in financing activities (16,511 ) ( 17,629 ) (61,362 ) (69,757) Effect of exchange rate changes on cash and cash equivalents (181 ) 137 (287) ( 506) Net increase (decrease) in cash and cash equivalents (2,774 ) (105) (5,520 ) 934 Cash and cash equivalents at beginning of period 23,719 21,984 26,465 20,945 Cash and cash equivalents at end of period $ 20,945 $ 21,879 $ 20,945 $ 21,879 6 %%% PAGENUMBER 7 %%% Segment results The following table presents our revenues and operating income ( loss ) ( in millions ; unaudited ) : Quarter Ended December 31 , 2021 2022 Revenues : Google Services 69,400 $ 67,838 Google Cloud 5,541 7,315 Other Bets 181 226 Hedging gains ( losses) 203 669 Total revenues 75,325 $ 76,048 Operating income ( loss ) : Google Services 25,993 $ 21,101 Google Cloud (890) (480 ) Other Bets (1,450 ) (1,631 ) Corporate costs, unallocated ( 1,768 ) (830) Total income from operations $ 21,885 $ 18,160 We report our segment results as Google Services , Google Cloud , and Other Bets : • Google Services includes products and services such as ads , Android , Chrome , hardware , Google Maps, Google Play, Search , and YouTube . Google Services generates revenues primarily from advertising ; sales of apps and in-app purchases , and hardware ; and fees received for subscription -based products such as YouTube Premium and YouTube TV. • Google Cloud includes infrastructure and platform services , collaboration tools , and other services for enterprise customers . Google Cloud generates revenues from fees received for Google Cloud Platform services , Google Workspace communication and collaboration tools , and other enterprise services. • Other Bets is a combination of multiple operating segments that are not individually material . Revenues from Other Bets are generated primarily from the sale of health technology and internet services . Unallocated corporate costs primarily include corporate initiatives , corporate shared costs , such as finance and legal , including certain fines and settlements , as well as costs associated with certain shared R& D activities . Additionally, hedging gains (losses) related to revenue are included in corporate costs. Other income (expense) , net The following table presents our other income (expense ) , net ( in millions ; unaudited ) : Quarter Ended December 31 , 2021 2022 Interest income 378 $ 659 Interest expense ( 117) (90) Foreign currency exchange gain ( loss ) , net (163 ) (185) Gain (loss) on debt securities , net ( 172) ( 176 ) Gain (loss ) on equity securities , net(1 ) 2,650 (1,487) Performance fees (228 ) 193 Income ( loss ) and impairment from equity method investments , net 49 (31 ) Other 120 104 Other income (expense), net 2,517 $ (1,013) (1) Includes all gains and losses , unrealized and realized , on equity securities . For Q4 2022 , the net effect of the loss on equity securities of $ 1.5 billion and the $ 193 million reversal of previously accrued performance fees related to certain investments decreased the provision for income tax, net income , and diluted EPS by $ 272 million , $ 1.0 billion , and $ 0.08 , respectively. Fluctuations in the value of our investments may be affected by market dynamics and other factors and could significantly contribute to the volatility of OI & E in future periods. 7 %%% PAGENUMBER 8 %%% Reconciliation from net cash provided by operating activities to free cash flow ( in millions ; unaudited ) : We provide free cash flow because it is a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities , including investing in our business and acquisitions , and to strengthen our balance sheet. Quarter Ended December 31 , 2022 Net cash provided by operating activities $ 23,614 Less: purchases of property and equipment (7,595) Free cash flow 16,019 Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures . Reconciliation from GAAP revenues to non -GAAP constant currency revenues and GAAP percentage change in revenues to non -GAAP percentage change in constant currency revenues ( in millions , except percentages ; unaudited ) : We provide non -GAAP constant currency revenues ( "constant currency revenues") and non - GAAP percentage change in constant currency revenues (“ percentage change in constant currency revenues" ) , because they facilitate the comparison of current results to historic performance by excluding the effect of foreign exchange rate movements ("FX Effect") as well as hedging activities , which are recognized at the consolidated level , as they are not indicative of our core operating results. Non-GAAP constant currency revenues is defined as revenues excluding the effect of foreign exchange rate movements and hedging activities and is calculated by translating current period revenues using prior period exchange rates and excluding any hedging effect recognized in the current period . We calculate the percentage change in constant currency revenues by comparing constant currency revenues to the prior year comparable period revenues , excluding any hedging effect recognized in the prior period . Revenues by Geography Comparison from the Quarter Ended December 31, 2021 to the Quarter Ended December 31 , 2022 Quarter Ended December 31 , 2022 % Change from Prior Period Quarter Ended December 31 , Constant Less Constant Less FX Currency As Hedging Less FX Currency 2021 2022 Effect Revenues Reported Effect Effect Revenues United States $ 34,790 $ 36,982 $ 0 $ 36,982 6% 0% 6% EMEA 23,153 21,762 (3,069 ) 24,831 (6)% (13)% 7% APAC 13,429 5% 12,732 11,979 (1,450) (6)% (11)% Other Americas 4,447 4,656 4,870 5% 10 % (214 ) (5)% Revenues , excluding hedging effect 75,122 75,379 (4,733) 80,112 0% (7)% 7% Hedging gains (losses) 203 669 Total revenues( 1) $ 75,325 $ 76,048 $ 80,112 1 % 1% (7)% 7% (1 ) Total constant currency revenues of $ 80.1 billion for the quarter ended December 31 , 2022 increased $ 5.0 billion compared to $ 75.1 billion in revenues, excluding hedging effect for the quarter ended December 31 , 2021 . 8 %%% PAGENUMBER 9 %%% Comparison from the Quarter Ended September 30, 2022 to the Quarter Ended December 31 , 2022 Quarter Ended December 31 , 2022 % Change from Prior Period Quarter Ended Constant Less Constant September December Less FX Currency As Hedging Less FX Currency 30, 2022 31 , 2022 Effect Revenues Reported Effect Effect Revenues United States $ 33,372 $ 36,982 $ 0 $ 36,982 11 % 0 % 11 % EMEA (580 ) 12 % 15 % 19,450 21,762 22,342 (3)% APAC 4% 7% 11,494 11,979 (366) 12,345 (3)% Other Americas 4,138 4,656 (141 ) 4,797 13 % (3)% 16 % Revenues , excluding hedging effect 68,454 75,379 ( 1,087) 76,466 10 % (2)% 12 % Hedging gains ( losses) 638 669 Total revenues( 1) $ 69,092 $ 76,048 $ 76,466 10 % 0% (2)% 12 % (1) Total constant currency revenues of $ 76.5 billion for the quarter ended December 31 , 2022 increased $ 8.0 billion compared to $ 68.5 billion in revenues , excluding hedging effect for the quarter ended September 30, 2022. Comparison from the Year Ended December 31 , 2021 to the Year Ended December 31 , 2022 Year Ended December 31 , 2022 % Change from Prior Period Year Ended December 31 , Constant Less Constant Less FX Currency As Hedging Less FX Currency 2021 2022 Effect Revenues Reported Effect Effect Revenues United States $ $ 134,814 $ 0 $ 134,814 14 % 0% 14 % 117,854 EMEA $ 82,062 4% 15 % 79,107 (8,979 ) 91,041 (11)% APAC 46,123 47,024 (3,915 ) 50,939 2% (8)% 10 % Other Americas 18 % 14,404 16,976 (430) 17,406 (3)% 21 % Revenues , excluding hedging effect 257,488 280,876 (13,324) 294,200 9% (5)% 14 % Hedging gains (losses) 149 1,960 Total revenues(1 ) $ 257,637 $ 282,836 $ 294,200 10 % 1 % (5)% 14 % (1) Total constant currency revenues of $ 294.2 billion for the year ended December 31 , 2022 increased $ 36.7 billion compared to $ 257.5 billion in revenues , excluding hedging effect for the year ended December 31 , 2021 . Total Revenues - Prior Year Comparative Periods Comparison from the Quarter Ended December 31, 2020 to the Quarter Ended December 31, 2021 Quarter Ended December 31 , 2021 % Change from Prior Period Quarter Ended December 31 , Constant Less Constant Less FX Currency As Hedging Less FX Currency 2020 2021 Effect Revenues Reported Effect Effect Revenues Revenues excluding hedging effect $ 56,900 $ 75,122 $ (273 ) $ 75,395 32 % (1)% 33 % Hedging gains (losses) 203 Total revenues $ 56,898 $ $ 32 % 0% 33 % 75,325 75,395 (1)% Comparison from the Year Ended December 31 , 2020 to the Year Ended December 31, 2021 Year Ended December 31 , 2021 % Change from Prior Period Year Ended December 31 , Constant Less Constant Less FX Currency As Hedging Less FX Currency 2020 2021 Effect Revenues Reported Effect Effect Revenues Revenues excluding hedging effect $ 182,351 $ 257,488 $ 3,330 $ 254,158 41 % 2% 39 % Hedging gains (losses) 176 149 Total revenues $ 182,527 $ 257,637 $ 254,158 41 % 0% 2% 39 %