Alphabet Inc 10-Q for FY2022 Q3

Alphabet Inc. (GOOGL)

10-Q 2022-10-26 For: 2022-09-30

Added on April 10, 2026

About this 10-Q

Alphabet Inc filed this 10-Q on October 26, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $69.09B; up 6.1% from $65.12B a year earlier
Net income: $13.91B; down 26.5% from net income of $18.94B a year earlier
Diluted EPS: $1.06; down 24.3% from $1.40 a year earlier

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Delaware			61-1767919
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value	GOOGL	Nasdaq Stock Market LLC
		(Nasdaq Global Select Market)
Class C Capital Stock, $0.001 par value	GOOG	Nasdaq Stock Market LLC
		(Nasdaq Global Select Market)


		Page No.
Note About Forward-Looking Statements		3

PART I. FINANCIAL INFORMATION
Item 1	Financial Statements	5
	Consolidated Balance Sheets - December 31, 2021 and September 30, 2022	5
	Consolidated Statements of Income - Three and Nine Months Ended September 30, 2021 and 2022	6
	Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2021 and 2022	7
	Consolidated Statements of Stockholders' Equity - Three and Nine Months Ended September 30, 2021 and 2022	8
	Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2021 and 2022	10
	Notes to Consolidated Financial Statements	11
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4	Controls and Procedures	47

PART II. OTHER INFORMATION
Item 1	Legal Proceedings	49
Item 1A	Risk Factors	49
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	50


Item 5	Other Information	49
Item 6	Exhibits	52
Signatures		53


	As of December 31, 2021		As of September 30, 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 (Note 9)
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


	Three Months Ended				Nine Months Ended
	September 30,				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 net income per share of Class A, Class B, and Class C stock	$	1.42	$	1.07	$	4.14	$	3.53









Diluted net income per share of Class A, Class B, and Class C stock	$	1.40	$	1.06	$	4.08	$	3.50


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended September 30, 2021
	Class A, Class B, Class C Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance as of June 30, 2021	13,353	$	60,436	$	190	$	176,939	$	237,565
Stock issued	33	1		0		0		1
Stock-based compensation expense	0	3,914		0		0		3,914
Tax withholding related to vesting of restricted stock units and other	0	(2,641)		0		0		(2,641)
Repurchases of stock	(92)	(517)		0		(12,093)		(12,610)
Sale of interest in consolidated entities	0	0		0		0		0
Net income	0	0		0		18,936		18,936
Other comprehensive income (loss)	0	0		(598)		0		(598)
Balance as of September 30, 2021	13,294	$	61,193	$	(408)	$	183,782	$	244,567


	Nine Months Ended September 30, 2021
	Class A, Class B, Class C Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2020	13,504	$	58,510	$	633	$	163,401	$	222,544
Stock issued	103	8		0		0		8
Stock-based compensation expense	0	11,546		0		0		11,546
Tax withholding related to vesting of restricted stock units and other	0	(7,390)		0		0		(7,390)
Repurchases of stock	(313)	(1,791)		0		(35,010)		(36,801)
Sale of interest in consolidated entities	0	310		0		0		310
Net income	0	0		0		55,391		55,391
Other comprehensive income (loss)	0	0		(1,041)		0		(1,041)
Balance as of September 30, 2021	13,294	$	61,193	$	(408)	$	183,782	$	244,567


	Three Months Ended September 30, 2022
	Class A, Class B, Class C Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance as of June 30, 2022	13,078	$	64,402	$	(5,828)	$	196,845	$	255,419
Stock issued	31	0		0		0		0
Stock-based compensation expense	0	5,018		0		0		5,018
Tax withholding related to vesting of restricted stock units and other	0	(2,315)		0		0		(2,315)
Repurchases of stock	(138)	(857)		0		(14,535)		(15,392)
Sale of interest in consolidated entities	0	10		0		0		10
Net income	0	0		0		13,910		13,910
Other comprehensive income (loss)	0	0		(3,024)		0		(3,024)
Balance as of September 30, 2022	12,971	$	66,258	$	(8,852)	$	196,220	$	253,626


	Nine Months Ended September 30, 2022
	Class A, Class B, Class C Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2021	13,242	$	61,774	$	(1,623)	$	191,484	$	251,635
Stock issued	98	8		0		0		8
Stock-based compensation expense	0	14,388		0		0		14,388
Tax withholding related to vesting of restricted stock units and other	0	(7,644)		0		(1)		(7,645)
Repurchases of stock	(369)	(2,278)		0		(41,611)		(43,889)
Sale of interest in consolidated entities	0	10		0		0		10
Net income	0	0		0		46,348		46,348
Other comprehensive income (loss)	0	0		(7,229)		0		(7,229)
Balance as of September 30, 2022	12,971	$	66,258	$	(8,852)	$	196,220	$	253,626


	As of December 31, 2021
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities
Level 2:
Time deposits(1)	$	5,133	$	0	$	0	$	5,133	$	5,133	$	0
Government bonds	53,288		258		(238)		53,308		5		53,303
Corporate debt securities	35,605		194		(223)		35,576		12		35,564
Mortgage-backed and asset-backed securities	18,829		96		(112)		18,813		0		18,813
Total	$	112,855	$	548	$	(573)	$	112,830	$	5,150	$	107,680


	As of September 30, 2022
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities
Level 2:
Time deposits(1)	$	4,925	$	0	$	0	$	4,925	$	4,920	$	5
Government bonds	42,863		0		(2,523)		40,340		93		40,247
Corporate debt securities	29,397		0		(1,833)		27,564		179		27,385
Mortgage-backed and asset-backed securities	16,599		0		(1,376)		15,223		0		15,223
Total	$	93,784	$	0	$	(5,732)	$	88,052	$	5,192	$	82,860


	As of September 30, 2022
Due in 1 year or less	$	7,998
Due in 1 year through 5 years	58,061
Due in 5 years through 10 years	11,848
Due after 10 years	11,353
Total	$	89,260


	As of December 31, 2021
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Government bonds	$	32,843	$	(236)	$	71	$	(2)	$	32,914	$	(238)
Corporate debt securities	22,737		(152)		303		(5)		23,040		(157)
Mortgage-backed and asset-backed securities	11,502		(106)		248		(6)		11,750		(112)
Total	$	67,082	$	(494)	$	622	$	(13)	$	67,704	$	(507)


Table of Contents			Alphabet Inc.


Table of Contents			Alphabet Inc.


Table of Contents			Alphabet Inc.


Table of Contents			Alphabet Inc.


	Equity Securities Sold
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2022		2021		2022
Total sale price	$	1,199	$	296	$	4,553	$	1,631
Total initial cost	188		310		955		738
Cumulative net gain (loss)(1)	$	1,011	$	(14)	$	3,598	$	893


	As of December 31, 2021		As of September 30, 2022
Derivatives Designated as Hedging Instruments:
Foreign exchange contracts
Cash flow hedges	$	16,362	$	17,513
Fair value hedges	$	2,556	$	2,435
Net investment hedges	$	10,159	$	8,993
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	$	41,031	$	36,988
Other contracts	$	4,275	$	6,728


		As of December 31, 2021
	Balance Sheet Location	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative Assets:
Level 2:
Foreign exchange contracts	Other current and non-current assets	$	867	$	42	$	909
Other contracts	Other current and non-current assets	0		52		52
Total		$	867	$	94	$	961
Derivative Liabilities:
Level 2:
Foreign exchange contracts	Accrued expenses and other liabilities, current and non-current	$	8	$	452	$	460
Other contracts	Accrued expenses and other liabilities, current and non-current	0		121		121
Total		$	8	$	573	$	581


	Gains (Losses) Recognized in OCI on Derivatives Before Tax Effect
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2022		2021		2022
Derivatives in Cash Flow Hedging Relationship:
Foreign exchange contracts
Amount included in the assessment of effectiveness	$	336	$	1,486	$	438	$	2,752
Amount excluded from the assessment of effectiveness	18		(77)		63		(131)

Derivatives in Net Investment Hedging Relationship:
Foreign exchange contracts
Amount included in the assessment of effectiveness	212		760		411		1,418
Total	$	566	$	2,169	$	912	$	4,039


	Gains (Losses) Recognized in Income
	Three Months Ended
	September 30,
	2021				2022
	Revenues		Other income (expense), net		Revenues		Other income (expense), net
Total amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded	$	65,118	$	2,033	$	69,092	$	(902)

Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:
Foreign exchange contracts
Amount of gains (losses) reclassified from AOCI to income	$	65	$	0	$	658	$	0
Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	(3)		0		(20)		0
Gains (Losses) on Derivatives in Fair Value Hedging Relationship:
Foreign exchange contracts
Hedged items	0		(69)		0		(226)
Derivatives designated as hedging instruments	0		69		0		226
Amount excluded from the assessment of effectiveness	0		2		0		6
Gains (Losses) on Derivatives in Net Investment Hedging Relationship:
Foreign exchange contracts
Amount excluded from the assessment of effectiveness	0		19		0		59
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	0		(148)		0		(495)
Other Contracts	0		(88)		0		34
Total gains (losses)	$	62	$	(215)	$	638	$	(396)


	As of December 31, 2021
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Net Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received		Non-Cash Collateral Received		Net Assets Exposed
Derivatives	$	999	$	(38)	$	961	$	(434)	(1)	$	(394)	$	(12)	$	121

	As of September 30, 2022
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Net Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received		Non-Cash Collateral Received		Net Assets Exposed
Derivatives	$	2,639	$	(50)	$	2,589	$	(755)	(1)	$	(1,609)	$	(32)	$	193


	As of December 31, 2021
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Net Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Pledged		Non-Cash Collateral Pledged		Net Liabilities
Derivatives	$	619	$	(38)	$	581	$	(434)	(2)	$	(4)	$	(110)	$	33

	As of September 30, 2022
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Net Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Pledged		Non-Cash Collateral Pledged		Net Liabilities
Derivatives	$	928	$	(50)	$	878	$	(755)	(2)	$	(15)	$	(2)	$	106


	Maturity	Coupon Rate	Effective Interest Rate	As of December 31, 2021		As of September 30, 2022
Debt
2014-2020 Notes Issuances	2024 - 2060	0.45% - 3.38%	0.57% - 3.38%	$	13,000	$	13,000
Future finance lease payments, net and other (1)				2,086		2,213
Total debt				15,086		15,213
Unamortized discount and debt issuance costs				(156)		(146)
Less: Current portion future finance lease payments, net and other current debt(1)(2)				(113)		(414)
Total long-term debt				$	14,817	$	14,653


	As of December 31, 2021		As of September 30, 2022
Land and buildings	$	58,881	$	64,679
Information technology assets	55,606		61,938
Construction in progress	23,172		26,899
Leasehold improvements	9,146		10,062
Furniture and fixtures	208		297
Property and equipment, gross	147,013		163,875
Less: accumulated depreciation	(49,414)		(55,512)
Property and equipment, net	$	97,599	$	108,363


	As of December 31, 2021		As of September 30, 2022
European Commission fines(1)	$	9,799	$	8,264
Accrued customer liabilities	3,505		2,943
Accrued purchases of property and equipment	2,415		3,255
Current operating lease liabilities	2,189		2,285
Other accrued expenses and current liabilities	13,328		18,291
Accrued expenses and other current liabilities	$	31,236	$	35,038


	Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Available-for-Sale Investments		Unrealized Gains (Losses) on Cash Flow Hedges		Total
Balance as of December 31, 2020	$	(864)	$	1,612	$	(115)	$	633
Other comprehensive income (loss) before reclassifications	(671)		(699)		366		(1,004)
Amounts excluded from the assessment of hedge effectiveness recorded in AOCI	0		0		63		63
Amounts reclassified from AOCI	0		(121)		21		(100)
Other comprehensive income (loss)	(671)		(820)		450		(1,041)
Balance as of September 30, 2021	$	(1,535)	$	792	$	335	$	(408)


		Gains (Losses) Reclassified from AOCI to the Consolidated Statements of Income
		Three Months Ended				Nine Months Ended
		September 30,				September 30,
AOCI Components	Location	2021		2022		2021		2022
Unrealized gains (losses) on available-for-sale investments
	Other income (expense), net	$	73	$	(464)	$	155	$	(953)
	Benefit (provision) for income taxes	(16)		102		(34)		210
	Net of income tax	57		(362)		121		(743)
Unrealized gains (losses) on cash flow hedges
Foreign exchange contracts	Revenue	65		658		(43)		1,355
Interest rate contracts	Other income (expense), net	1		2		4		5
	Benefit (provision) for income taxes	(6)		(113)		18		(228)
	Net of income tax	60		547		(21)		1,132
Total amount reclassified, net of income tax		$	117	$	185	$	100	$	389


Intangible assets	$	840
Goodwill(1)	4,772
Net assets acquired(2)	489
Total purchase price	$	6,101


	Amount (in millions)		Weighted-Average Useful Life (in years)
Patents and developed technology	$	349	4.8
Customer relationships	366		8.0
Trade names and other	125		5.9
Total intangible assets	$	840


	Google Services		Google Cloud		Other Bets		Total
Balance as of December 31, 2021	$	19,826	$	2,337	$	793	$	22,956
Acquisitions	1,146		4,875		113		6,134
Foreign currency translation and other adjustments	(227)		(23)		(6)		(256)
Balance as of September 30, 2022	$	20,745	$	7,189	$	900	$	28,834


	As of December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Patents and developed technology	$	4,786	$	4,112	$	674
Customer relationships	506		140		366
Trade names and other	534		295		239
Total definite-lived intangible assets	5,826		4,547		1,279
Indefinite-lived intangible assets	138		0		138
Total intangible assets	$	5,964	$	4,547	$	1,417


Remainder of 2022	$	134
2023	458
2024	439
2025	309
2026	232
Thereafter	386
Total	$	1,958


	Three Months Ended September 30,
	2021						2022
	Class A		Class B		Class C		Class A		Class B		Class C
Basic net income per share:
Numerator
Allocation of undistributed earnings	$	8,548	$	1,291	$	9,097	$	6,393	$	946	$	6,571

Denominator
Number of shares used in per share computation	6,010		908		6,397		5,983		885		6,150



Basic net income per share	$	1.42	$	1.42	$	1.42	$	1.07	$	1.07	$	1.07
Diluted net income per share:
Numerator

Allocation of undistributed earnings for basic computation	$	8,548	$	1,291	$	9,097	$	6,393	$	946	$	6,571


Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares	1,291		0		0		946		0		0
Reallocation of undistributed earnings	(156)		(20)		156		(45)		(6)		45
Allocation of undistributed earnings	$	9,683	$	1,271	$	9,253	$	7,294	$	940	$	6,616




Denominator
Number of shares used in basic computation	6,010		908		6,397		5,983		885		6,150
Weighted-average effect of dilutive securities
Add:
Conversion of Class B to Class A shares outstanding	908		0		0		885		0		0

Restricted stock units and other contingently issuable shares	0		0		215		0		0		79
Number of shares used in per share computation	6,918		908		6,612		6,868		885		6,229



Diluted net income per share	$	1.40	$	1.40	$	1.40	$	1.06	$	1.06	$	1.06


	Nine Months Ended September 30,
	2021						2022
	Class A		Class B		Class C		Class A		Class B		Class C
Basic net income per share:
Numerator
Allocation of undistributed earnings	$	24,867	$	3,776	$	26,748	$	21,213	$	3,137	$	21,998

Denominator
Number of shares used in per share computation	6,010		912		6,464		6,004		888		6,226



Basic net income per share	$	4.14	$	4.14	$	4.14	$	3.53	$	3.53	$	3.53
Diluted net income per share:
Numerator

Allocation of undistributed earnings for basic computation	$	24,867	$	3,776	$	26,748	$	21,213	$	3,137	$	21,998


Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares	3,776		0		0		3,137		0		0
Reallocation of undistributed earnings	(424)		(56)		424		(204)		(26)		204
Allocation of undistributed earnings	$	28,219	$	3,720	$	27,172	$	24,146	$	3,111	$	22,202




Denominator
Number of shares used in basic computation	6,010		912		6,464		6,004		888		6,226
Weighted-average effect of dilutive securities
Add:
Conversion of Class B to Class A shares outstanding	912		0		0		888		0		0

Restricted stock units and other contingently issuable shares	0		0		202		0		0		111
Number of shares used in per share computation	6,922		912		6,666		6,892		888		6,337



Diluted net income per share	$	4.08	$	4.08	$	4.08	$	3.50	$	3.50	$	3.50


	Unvested Restricted Stock Units
	Number of Shares	Weighted- Average Grant-Date Fair Value
Unvested as of December 31, 2021	338	$	81.31
Granted	199	$	131.77
Vested	(152)	$	87.13
Forfeited/canceled	(25)	$	96.04
Unvested as of September 30, 2022	360	$	105.70