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Form 8-K Alphabet Inc. For: Jul 26

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July 26, 2022 4:02 PM EDT
Exhibit 99.1
Alphabet Announces Second Quarter 2022 Results
MOUNTAIN VIEW, Calif. – July 26, 2022 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended June 30, 2022.
Sundar Pichai, CEO of Alphabet and Google, said: “In the second quarter our performance was driven by Search and Cloud. The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term.”
Ruth Porat, CFO of Alphabet and Google, said: “Our consistent investments to support long-term growth are reflected in our solid performance in the second quarter, with revenues of $69.7 billion in the quarter, up 13% versus last year or 16% on a constant currency basis. We are focused on responsible capital allocation in support of our growth opportunities.”
Stock Split Effected in the Form of a Stock Dividend (“Stock Split”)
On July 15, 2022, the company executed a 20-for-one stock split with a record date of July 1, 2022, effected in the form of a one-time special stock dividend on each share of the company's Class A, Class B, and Class C stock. All references made to share or per share amounts in this press release have been retroactively adjusted to reflect the effects of the Stock Split.
Q2 2022 financial highlights
The following table summarizes our consolidated financial results for the quarters ended June 30, 2021 and 2022 (in millions, except for per share information and percentages; unaudited).
Quarter Ended June 30,
20212022
Revenues$61,880 $69,685 
Change in revenues year over year (1)
62 %13 %
Change in constant currency revenues year over year(1) (2)
57 %16 %
Operating income$19,361 $19,453 
Operating margin31 %28 %
Other income (expense), net
$2,624 $(439)
Net income$18,525 $16,002 
Diluted EPS$1.36 $1.21 
(1)    Foreign currency movements affected year-over-year revenue growth rates by 3.7%. This reflects, when rounding to the one decimal place, the percentage change in consolidated revenues and consolidated constant currency revenues year over year of 12.6% and 16.3%, respectively.
(2)    Non-GAAP measure. See the table captioned “Reconciliation from GAAP revenues to non-GAAP constant currency revenues” for more details.



Q2 2022 supplemental information (in millions, except for number of employees; unaudited)
Revenues, Traffic Acquisition Costs (TAC) and number of employees
Quarter Ended June 30,
20212022
Google Search & other$35,845 $40,689 
YouTube ads7,002 7,340 
Google Network7,597 8,259 
Google advertising50,444 56,288 
Google other6,623 6,553 
Google Services total57,067 62,841 
Google Cloud4,628 6,276 
Other Bets192 193 
Hedging gains (losses)(7)375 
Total revenues$61,880 $69,685 
Total TAC$10,929 $12,214 
Number of employees144,056 174,014 
Segment Operating Results
Quarter Ended June 30,
20212022
Operating income (loss):
Google Services$22,343 $22,770 
Google Cloud(591)(858)
Other Bets(1,398)(1,686)
Corporate costs, unallocated(993)(773)
Total income from operations$19,361 $19,453 

Webcast and conference call information
A live audio webcast of our second quarter 2022 earnings release call will be available on YouTube at https://youtu.be/kBgHioOKpvI. 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 March 31, 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 June 30, 2022. All information provided in this release and in the attachments is
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as of July 26, 2022. 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
Investor relations
Media
investor-relations@abc.xyzpress@abc.xyz

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Alphabet Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value per share amounts)
As of December 31,As of June 30,
20212022
(unaudited)
Assets
Current assets:
Cash and cash equivalents$20,945 $17,936 
Marketable securities118,704 107,061 
Total cash, cash equivalents, and marketable securities139,649 124,997 
Accounts receivable, net39,304 35,707 
Income taxes receivable, net966 1,366 
Inventory1,170 1,980 
Other current assets7,054 8,321 
Total current assets188,143 172,371 
Non-marketable securities29,549 30,665 
Deferred income taxes1,284 1,490 
Property and equipment, net97,599 106,223 
Operating lease assets12,959 13,398 
Intangible assets, net1,417 1,377 
Goodwill22,956 23,949 
Other non-current assets5,361 5,712 
Total assets$359,268 $355,185 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$6,037 $4,409 
Accrued compensation and benefits13,889 10,852 
Accrued expenses and other current liabilities31,236 32,976 
Accrued revenue share8,996 7,889 
Deferred revenue3,288 3,272 
Income taxes payable, net808 1,956 
Total current liabilities64,254 61,354 
Long-term debt14,817 14,734 
Deferred revenue, non-current535 472 
Income taxes payable, non-current9,176 8,163 
Deferred income taxes5,257 924 
Operating lease liabilities11,389 11,697 
Other long-term liabilities2,205 2,422 
Total liabilities107,633 99,766 
Contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share, 100 shares authorized; no shares issued and outstanding0 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 13,078 (Class A 6,002, Class B 885, Class C 6,191) shares issued and outstanding
61,774 64,402 
Accumulated other comprehensive income (loss)(1,623)(5,828)
Retained earnings191,484 196,845 
Total stockholders’ equity251,635 255,419 
Total liabilities and stockholders’ equity$359,268 $355,185 

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Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts, unaudited)
Quarter Ended June 30,Year To Date June 30,
2021202220212022
Revenues$61,880 $69,685 $117,194 $137,696 
Costs and expenses:
Cost of revenues26,227 30,104 50,330 59,703 
Research and development7,675 9,841 15,160 18,960 
Sales and marketing5,276 6,630 9,792 12,455 
General and administrative3,341 3,657 6,114 7,031 
Total costs and expenses42,519 50,232 81,396 98,149 
Income from operations19,361 19,453 35,798 39,547 
Other income (expense), net2,624 (439)7,470 (1,599)
Income before income taxes21,985 19,014 43,268 37,948 
Provision for income taxes3,460 3,012 6,813 5,510 
Net income$18,525 $16,002 $36,455 $32,438 
Basic earnings per share of Class A, Class B, and Class C stock$1.38 $1.22 $2.72 $2.46 
Diluted earnings per share of Class A, Class B, and Class C stock$1.36 $1.21 $2.68 $2.44 
Number of shares used in basic earnings per share calculation13,379 13,133 13,422 13,168 
Number of shares used in diluted earnings per share calculation13,592 13,239 13,617 13,295 

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Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions, unaudited)
Quarter Ended June 30,Year To Date June 30,
2021202220212022
Operating activities
Net income$18,525 $16,002 $36,455 $32,438 
Adjustments:
Depreciation and impairment of property and equipment2,730 3,698 5,255 7,289 
Amortization and impairment of intangible assets215 201 443 392 
Stock-based compensation expense3,803 4,782 7,548 9,286 
Deferred income taxes379 (2,147)1,479 (4,237)
(Gain) loss on debt and equity securities, net(2,883)1,041 (7,634)2,478 
Other(8)62 (263)202 
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable(3,661)(1,969)(867)2,395 
Income taxes, net(1,082)(4,073)(297)(253)
Other assets(199)(845)(192)(1,621)
Accounts payable(130)1,201 (1,112)(1,172)
Accrued expenses and other liabilities3,731 1,497 201 (1,719)
Accrued revenue share473 (114)29 (942)
Deferred revenue(3)86 134 (8)
Net cash provided by operating activities21,890 19,422 41,179 44,528 
Investing activities
Purchases of property and equipment(5,496)(6,828)(11,438)(16,614)
Purchases of marketable securities(24,183)(21,737)(60,609)(50,199)
Maturities and sales of marketable securities21,419 25,595 60,667 55,374 
Purchases of non-marketable securities(766)(488)(1,412)(1,264)
Maturities and sales of non-marketable securities237 113 256 125 
Acquisitions, net of cash acquired, and purchases of intangible assets(308)(1,063)(1,974)(1,236)
Other investing activities23 221 53 576 
Net cash used in investing activities(9,074)(4,187)(14,457)(13,238)
Financing activities
Net payments related to stock-based award activities(2,453)(2,264)(4,637)(5,180)
Repurchases of stock(12,796)(15,197)(24,191)(28,497)
Proceeds from issuance of debt, net of costs6,699 12,806 7,599 29,228 
Repayments of debt(7,741)(13,162)(8,678)(29,582)
Proceeds from sale of interest in consolidated entities, net300 0 310 0 
Net cash used in financing activities(15,991)(17,817)(29,597)(34,031)
Effect of exchange rate changes on cash and cash equivalents183 (368)40 (268)
Net decrease in cash and cash equivalents(2,992)(2,950)(2,835)(3,009)
Cash and cash equivalents at beginning of period26,622 20,886 26,465 20,945 
Cash and cash equivalents at end of period$23,630 $17,936 $23,630 $17,936 

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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 June 30, 2022
Net cash provided by operating activities$19,422 
Less: purchases of property and equipment(6,828)
Free cash flow$12,594 
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 (in millions, except percentages; unaudited):
We provide non-GAAP constant currency revenues and the non-GAAP 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 and hedging activities, which are not indicative of our core operating results.
Comparison from the Quarter Ended June 30, 2020 to the Quarter Ended June 30, 2021
 Quarter Ended
June 30, 2020June 30, 2021% Change from Prior Year
EMEA revenues$11,363 $19,084 68 %
EMEA constant currency revenues17,659 55 %
APAC revenues6,945 11,231 62 %
APAC constant currency revenues10,881 57 %
Other Americas revenues1,839 3,364 83 %
Other Americas constant currency revenues3,252 77 %
United States revenues17,999 28,208 57 %
Hedging gains (losses)151 (7)
Total revenues$38,297 $61,880 62 %
Revenues, excluding hedging effect
$38,146 $61,887 
Exchange rate effect(1,887)
Total constant currency revenues$60,000 57 %

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Comparison from the Quarter Ended June 30, 2021 to the Quarter Ended June 30, 2022
 Quarter Ended
June 30, 2021June 30, 2022% Change from Prior Year
EMEA revenues$19,084 $20,533 8 %
EMEA constant currency revenues22,489 18 %
APAC revenues11,231 11,710 4 %
APAC constant currency revenues12,466 11 %
Other Americas revenues3,364 4,340 29 %
Other Americas constant currency revenues4,310 28 %
United States revenues28,208 32,727 16 %
Hedging gains (losses)(7)375 
Total revenues$61,880 $69,685 13 %
Revenues, excluding hedging effect
$61,887 $69,310 
Exchange rate effect2,682 
Total constant currency revenues$71,992 16 %
Comparison from the Quarter Ended March 31, 2022 to the Quarter Ended June 30, 2022
 Quarter Ended
March 31, 2022June 30, 2022% Change from Prior Quarter
EMEA revenues$20,317 $20,533 1 %
EMEA constant currency revenues21,164 4 %
APAC revenues11,841 11,710 (1)%
APAC constant currency revenues12,044 2 %
Other Americas revenues3,842 4,340 13 %
Other Americas constant currency revenues4,231 10 %
United States revenues31,733 32,727 3 %
Hedging gains (losses)278 375 
Total revenues$68,011 $69,685 2 %
Revenues, excluding hedging effect
$67,733 $69,310 
Exchange rate effect856 
Total constant currency revenues$70,166 4 %
Non-GAAP constant currency revenues and percentage change: We define non-GAAP constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and we use it to determine the constant currency revenue percentage change on year-on-year and quarter-on-quarter basis. Non-GAAP constant currency revenues are calculated by translating current quarter revenues using prior period exchange rates and excluding any hedging effect recognized in the current quarter. Constant currency revenue percentage change is calculated by determining the increase in current quarter non-GAAP constant currency revenues over prior period revenues, excluding any hedging effect recognized in the prior period.
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Other income (expense), net
The following table presents our other income (expense), net (in millions; unaudited):
Quarter Ended June 30,
20212022
Interest income$389 $486 
Interest expense(76)(83)
Foreign currency exchange gain (loss), net(51)(260)
Gain (loss) on debt securities, net111 (790)
Gain (loss) on equity securities, net(1)
2,772 (251)
Performance fees(523)318 
Income (loss) and impairment from equity method investments, net92 (118)
Other(90)259 
Other income (expense), net$2,624 $(439)
(1)Includes all gains and losses, unrealized and realized, on equity investments. For Q2 2022, the net effect of the loss on equity securities of $251 million and the $318 million reversal of previously accrued performance fees related to certain investments decreased the provision for income tax, net income, and diluted EPS by $14 million, $53 million, and less than $0.01, 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.
Segment results
The following table presents our revenues and operating income (loss) (in millions; unaudited):
Quarter Ended June 30,
20212022
Revenues:
Google Services$57,067 $62,841 
Google Cloud4,628 6,276 
Other Bets192 193 
Hedging gains (losses)(7)375 
Total revenues$61,880 $69,685 
Operating income (loss):
Google Services$22,343 $22,770 
Google Cloud(591)(858)
Other Bets(1,398)(1,686)
Corporate costs, unallocated(993)(773)
Total income from operations$19,361 $19,453 
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, digital content products, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.
•Google Cloud includes Google’s 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 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.
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