goog-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________________________________________

FORM 10-Q

________________________________________________________________________________________

(Mark One)


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

For the quarterly period ended June 30, 2023


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

For the transition period from _______ to _______

Commission file number: 001-37580

________________________________________________________________________________________

Alphabet Inc.

(Exact name of registrant as specified in its charter)

________________________________________________________________________________________


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

1600 Amphitheatre Parkway

Mountain View, CA 94043

(Address of principal executive offices, including zip code)

(650) 253-0000

(Registrant's telephone number, including area code)


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)

________________________________________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 18, 2023, there were 5,933 million shares of Alphabet’s Class A stock outstanding, 875 million shares of Alphabet's Class B stock outstanding, and 5,801 million shares of Alphabet's Class C stock outstanding.


Table of Contents			Alphabet Inc.

Alphabet Inc.

Form 10-Q

For the Quarterly Period Ended June 30, 2023

TABLE OF CONTENTS


		Page No.
Note About Forward-Looking Statements		3

PART I. FINANCIAL INFORMATION
Item 1	Financial Statements	5
	Consolidated Balance Sheets - December 31, 2022 and June 30, 2023	5
	Consolidated Statements of Income - Three and Six Months Ended June 30, 2022 and 2023	6
	Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30, 2022 and 2023	7
	Consolidated Statements of Stockholders' Equity - Three and Six Months Ended June 30, 2022 and 2023	8
	Consolidated Statements of Cash Flows - Six Months Ended June 30, 2022 and 2023	10
	Notes to Consolidated Financial Statements	11
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4	Controls and Procedures	48

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


Item 5	Other Information	49
Item 6	Exhibits	52
Signatures		53


Table of Contents			Alphabet Inc.

Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, among other things, statements regarding:

•the growth of our business and revenues and our expectations about the factors that influence our success and trends in our business;

•fluctuations in our revenues and margins and various factors contributing to such fluctuations;

•our expectation that the continuing shift from an offline to online world will continue to benefit our business;

•our expectation that the portion of our revenues that we derive from non-advertising revenues will continue to increase and may affect our margins;

•our expectation that our traffic acquisition costs (TAC) and the associated TAC rate will fluctuate, which could affect our overall margins;

•our expectation that our monetization trends will fluctuate, which could affect our revenues and margins;

•fluctuations in our revenues, as well as the change in paid clicks and cost-per-click and the change in impressions and cost-per-impression, and various factors contributing to such fluctuations;

•our expectation that we will continue to periodically review, refine, and update our methodologies for monitoring, gathering, and counting the number of paid clicks and impressions;

•our expectation that our results will be affected by our performance in international markets as users in developing economies increasingly come online;

•our expectation that our foreign exchange risk management program will not fully offset our net exposure to fluctuations in foreign currency exchange rates;

•the expected variability of gains and losses related to hedging activities under our foreign exchange risk management program;

•the amount and timing of revenue recognition from customer contracts with commitments for performance obligations, including our estimate of the remaining amount of commitments and when we expect to recognize revenue;

•fluctuations in our capital expenditures;

•our expectation that we will continue to invest in our technical infrastructure;

•our plans to continue to invest in new businesses, products, services and technologies, systems, land and buildings for data centers, and infrastructure, as well as to continue to invest in acquisitions and strategic investments;

•our pace of hiring and our plans to provide competitive compensation programs;

•our expectation that our cost of revenues, research and development (R&D) expenses, sales and marketing expenses, and general and administrative expenses may increase in amount and/or may increase as a percentage of revenues and may be affected by a number of factors;

•estimates of our future compensation expenses;

•our expectation that our other income (expense), net (OI&E), will fluctuate in the future, as it is largely driven by market dynamics;

•fluctuations in our effective tax rate;

•seasonal fluctuations in internet usage and advertiser expenditures, underlying business trends such as traditional retail seasonality, which are likely to cause fluctuations in our quarterly results;

•the sufficiency of our sources of funding;

•our potential exposure in connection with new and pending investigations, proceedings, and other contingencies, including the possibility that certain legal proceedings to which we are a party could harm our business, financial condition, and operating results;


Table of Contents			Alphabet Inc.

•our expectation that we will continue to face heightened regulatory scrutiny, and the sufficiency and timing of our proposed remedies in response to decisions from the European Commission (EC) and other regulators and governmental entities;

•the expected timing, amount, and effect of Alphabet Inc.'s share repurchases;

•our long-term sustainability and diversity goals;

•the unpredictability of the ongoing broader economic effects resulting from the war in Ukraine on our future financial results;

•the expected financial effect of our announced workforce reduction and office space optimization;

•our expectation that the change in estimated useful lives of servers and certain network equipment will have a favorable effect on our 2023 operating results;

as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may appear throughout this report and other documents we file with the Securities and Exchange Commission (SEC), including without limitation, the following sections: Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Forward-looking statements generally can be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "will be," "will continue," "may," "could," "will likely result," and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, and in particular, the risks discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

As used herein, "Alphabet," "the company," "we," "us," "our," and similar terms include Alphabet Inc. and its subsidiaries, unless the context indicates otherwise.

"Alphabet," "Google," and other trademarks of ours appearing in this report are our property. We do not intend our use or display of other companies' trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.


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PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Alphabet Inc.

CONSOLIDATED BALANCE SHEETS

(in millions, except par value per share amounts)


	As of December 31, 2022		As of June 30, 2023
			(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	21,879	$	25,929
Marketable securities	91,883		92,403
Total cash, cash equivalents, and marketable securities	113,762		118,332
Accounts receivable, net	40,258		38,804
Inventory	2,670		2,231
Other current assets	8,105		9,421
Total current assets	164,795		168,788
Non-marketable securities	30,492		31,224
Deferred income taxes	5,261		9,357
Property and equipment, net	112,668		121,208
Operating lease assets	14,381		14,469
Intangible assets, net	2,084		1,966
Goodwill	28,960		29,210
Other non-current assets	6,623		6,822
Total assets	$	365,264	$	383,044
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,128	$	5,313

Accrued compensation and benefits	14,028		11,260
Accrued expenses and other current liabilities	37,866		49,300
Accrued revenue share	8,370		7,990
Deferred revenue	3,908		3,846
Total current liabilities	69,300		77,709
Long-term debt	14,701		13,705
Deferred revenue, non-current	599		667
Income taxes payable, non-current	9,258		8,753
Deferred income taxes	514		558
Operating lease liabilities	12,501		12,746
Other long-term liabilities	2,247		1,765
Total liabilities	109,120		115,903
Commitments and 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); 12,849 (Class A 5,964, Class B 883, Class C 6,002) and 12,629 (Class A 5,934, Class B 876, Class C 5,819) shares issued and outstanding	68,184		72,248
Accumulated other comprehensive income (loss)	(7,603)		(5,991)
Retained earnings	195,563		200,884
Total stockholders’ equity	256,144		267,141
Total liabilities and stockholders’ equity	$	365,264	$	383,044

See accompanying notes.


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Alphabet Inc.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts; unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2023		2022		2023
Revenues	$	69,685	$	74,604	$	137,696	$	144,391
Costs and expenses:
Cost of revenues	30,104		31,916		59,703		62,528
Research and development	9,841		10,588		18,960		22,056
Sales and marketing	6,630		6,781		12,455		13,314
General and administrative	3,657		3,481		7,031		7,240
Total costs and expenses	50,232		52,766		98,149		105,138
Income from operations	19,453		21,838		39,547		39,253
Other income (expense), net	(439)		65		(1,599)		855
Income before income taxes	19,014		21,903		37,948		40,108
Provision for income taxes	3,012		3,535		5,510		6,689
Net income	$	16,002	$	18,368	$	32,438	$	33,419




Basic net income per share of Class A, Class B, and Class C stock	$	1.22	$	1.45	$	2.46	$	2.63









Diluted net income per share of Class A, Class B, and Class C stock	$	1.21	$	1.44	$	2.44	$	2.61

See accompanying notes.


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Alphabet Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions; unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2023		2022		2023
Net income	$	16,002	$	18,368	$	32,438	$	33,419
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(1,665)		235		(1,626)		831
Available-for-sale investments:
Change in net unrealized gains (losses)	(926)		(570)		(3,404)		296
Less: reclassification adjustment for net (gains) losses included in net income	233		198		381		490
Net change, net of income tax benefit (expense) of $227, $106, $860 and $(224)	(693)		(372)		(3,023)		786
Cash flow hedges:
Change in net unrealized gains (losses)	915		151		1,029		77
Less: reclassification adjustment for net (gains) losses included in net income	(336)		(5)		(585)		(82)
Net change, net of income tax benefit (expense) of $(113), $(11), $(69) and $19	579		146		444		(5)
Other comprehensive income (loss)	(1,779)		9		(4,205)		1,612
Comprehensive income	$	14,223	$	18,377	$	28,233	$	35,031

See accompanying notes.


Table of Contents			Alphabet Inc.

Alphabet Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions; unaudited)


	Three Months Ended June 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 March 31, 2022	13,175	$	62,832	$	(4,049)	$	195,221	$	254,004
Stock issued	36	1		0		0		1
Stock-based compensation expense	0	4,823		0		0		4,823
Tax withholding related to vesting of restricted stock units and other	0	(2,434)		0		(1)		(2,435)
Repurchases of stock	(133)	(820)		0		(14,377)		(15,197)
Net income	0	0		0		16,002		16,002
Other comprehensive income (loss)	0	0		(1,779)		0		(1,779)
Balance as of June 30, 2022	13,078	$	64,402	$	(5,828)	$	196,845	$	255,419


	Six Months Ended June 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	67	8		0		0		8
Stock-based compensation expense	0	9,370		0		0		9,370
Tax withholding related to vesting of restricted stock units and other	0	(5,329)		0		(1)		(5,330)
Repurchases of stock	(231)	(1,421)		0		(27,076)		(28,497)
Net income	0	0		0		32,438		32,438
Other comprehensive income (loss)	0	0		(4,205)		0		(4,205)
Balance as of June 30, 2022	13,078	$	64,402	$	(5,828)	$	196,845	$	255,419


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	Three Months Ended June 30, 2023
	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 March 31, 2023	12,722	$	70,269	$	(6,000)	$	196,625	$	260,894
Stock issued	38	0		0		0		0
Stock-based compensation expense	0	5,815		0		0		5,815
Tax withholding related to vesting of restricted stock units and other	0	(2,831)		0		0		(2,831)
Repurchases of stock	(131)	(1,005)		0		(14,109)		(15,114)
Net income	0	0		0		18,368		18,368
Other comprehensive income (loss)	0	0		9		0		9
Balance as of June 30, 2023	12,629	$	72,248	$	(5,991)	$	200,884	$	267,141


	Six Months Ended June 30, 2023
	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, 2022	12,849	$	68,184	$	(7,603)	$	195,563	$	256,144
Stock issued	68	0		0		0		0
Stock-based compensation expense	0	11,128		0		0		11,128
Tax withholding related to vesting of restricted stock units and other	0	(4,924)		0		0		(4,924)
Repurchases of stock	(288)	(2,140)		0		(28,098)		(30,238)
Net income	0	0		0		33,419		33,419
Other comprehensive income (loss)	0	0		1,612		0		1,612
Balance as of June 30, 2023	12,629	$	72,248	$	(5,991)	$	200,884	$	267,141

See accompanying notes.


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Alphabet Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)


	Six Months Ended
	June 30,
	2022		2023
Operating activities
Net income	$	32,438	$	33,419
Adjustments:
Depreciation and impairment of property and equipment	7,289		6,339
Amortization and impairment of intangible assets	392		244
Stock-based compensation expense	9,286		11,058
Deferred income taxes	(4,237)		(4,269)
Loss (gain) on debt and equity securities, net	2,478		425
Other	202		650
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	2,395		1,506
Income taxes, net	(253)		8,520
Other assets	(1,621)		(1,259)
Accounts payable	(1,172)		14
Accrued expenses and other liabilities	(1,719)		(4,037)
Accrued revenue share	(942)		(418)
Deferred revenue	(8)		(17)
Net cash provided by operating activities	44,528		52,175
Investing activities
Purchases of property and equipment	(16,614)		(13,177)
Purchases of marketable securities	(50,199)		(35,589)
Maturities and sales of marketable securities	55,374		37,049
Purchases of non-marketable securities	(1,264)		(1,513)
Maturities and sales of non-marketable securities	125		181


Acquisitions, net of cash acquired, and purchases of intangible assets	(1,236)		(340)
Other investing activities	576		(357)

Net cash used in investing activities	(13,238)		(13,746)
Financing activities
Net payments related to stock-based award activities	(5,180)		(4,725)

Repurchases of stock	(28,497)		(29,526)
Proceeds from issuance of debt, net of costs	29,228		8,050
Repayments of debt	(29,582)		(8,207)
Proceeds from sale of interest in consolidated entities, net	0		5
Net cash used in financing activities	(34,031)		(34,403)
Effect of exchange rate changes on cash and cash equivalents	(268)		24
Net increase (decrease) in cash and cash equivalents	(3,009)		4,050
Cash and cash equivalents at beginning of period	20,945		21,879
Cash and cash equivalents at end of period	$	17,936	$	25,929

See accompanying notes.


Table of Contents			Alphabet Inc.

Alphabet Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Nature of Operations

Google was incorporated in California in September 1998 and re-incorporated in the State of Delaware in August 2003. In 2015, we implemented a holding company reorganization, and as a result, Alphabet Inc. ("Alphabet") became the successor issuer to Google.

We generate revenues by delivering relevant, cost-effective online advertising; cloud-based solutions that provide enterprise customers with infrastructure and platform services as well as communication and collaboration tools; sales of other products and services, such as apps and in-app purchases, and hardware; and fees received for subscription-based products.

Basis of Consolidation

The consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models. Intercompany balances and transactions have been eliminated.

Unaudited Interim Financial Information

These unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP), and in our opinion, include all adjustments of a normal recurring nature necessary for fair financial statement presentation. Interim results are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. We have made estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates.

These consolidated financial statements and other information presented in this Form 10-Q should be read in conjunction with the consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC.

Change in Accounting Estimate

In January 2023, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from four years to six years and the estimated useful life of certain network equipment from five years to six years. This change in accounting estimate was effective beginning in fiscal year 2023. Based on the carrying value of servers and certain network equipment as of December 31, 2022, and those placed in service during the six months ended June 30, 2023, the effect of this change in estimate was a reduction in depreciation expense of $966 million and $2.0 billion and an increase in net income of $752 million and $1.5 billion, or $0.06 and $0.12 per basic and $0.06 and $0.12 per diluted share, for the three and six months ended June 30, 2023, respectively.

Prior Period Reclassifications

Certain amounts in prior periods have been reclassified to conform with current period presentation.


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Note 2. Revenues

Disaggregated Revenues

The following table presents revenues disaggregated by type (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2023		2022		2023
Google Search & other	$	40,689	$	42,628	$	80,307	$	82,987
YouTube ads	7,340		7,665		14,209		14,358
Google Network	8,259		7,850		16,433		15,346
Google advertising	56,288		58,143		110,949		112,691
Google other	6,553		8,142		13,364		15,555
Google Services total	62,841		66,285		124,313		128,246
Google Cloud	6,276		8,031		12,097		15,485
Other Bets	193		285		633		573
Hedging gains (losses)	375		3		653		87
Total revenues	$	69,685	$	74,604	$	137,696	$	144,391

The following table presents revenues disaggregated by geography, based on the addresses of our customers (in millions):


	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022				2023				2022				2023
United States	$	32,727	47	%	$	35,073	47	%	$	64,460	47	%	$	67,937	47	%
EMEA(1)	20,533		29		22,289		30		40,850		30		43,367		30
APAC(1)	11,710		17		12,728		17		23,551		17		24,409		17
Other Americas(1)	4,340		6		4,511		6		8,182		6		8,591		6
Hedging gains (losses)	375		1		3		0		653		0		87		0
Total revenues	$	69,685	100	%	$	74,604	100	%	$	137,696	100	%	$	144,391	100	%

(1) Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific (APAC); and Canada and Latin America ("Other Americas").

Revenue Backlog

As of June 30, 2023, we had $60.6 billion of remaining performance obligations (“revenue backlog”), primarily related to Google Cloud. Our revenue backlog represents commitments in customer contracts for future services that have not yet been recognized as revenue. The amount and timing of revenue recognition for these commitments is largely driven by our ability to deliver in accordance with relevant contract terms and when our customers utilize services, which could affect our estimate of revenue backlog and when we expect to recognize such as revenue. We expect to recognize approximately half of the revenue backlog as revenues over the next 24 months with the remaining to be recognized thereafter. Revenue backlog includes related deferred revenue currently recorded as well as amounts that will be invoiced in future periods, and excludes contracts with an original expected term of one year or less and cancellable contracts.

Deferred Revenues

We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. Deferred revenues primarily relate to Google Cloud and Google other. Total deferred revenue as of December 31, 2022 was $4.5 billion, of which $2.1 billion was recognized as revenues during the six months ended June 30, 2023.


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Note 3. Financial Instruments

Fair Value Measurements

Investments Measured at Fair Value on a Recurring Basis

Cash, cash equivalents, and marketable equity securities are measured at fair value and classified within Level 1 and Level 2 in the fair value hierarchy, because we use quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets.

Debt securities are measured at fair value and classified within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. For certain marketable debt securities, we have elected the fair value option for which changes in fair value are recorded in other income (expense), net. The fair value option was elected for these securities to align with the unrealized gains and losses from related derivative contracts.

The following tables summarize our cash, cash equivalents, and marketable securities measured at fair value on a recurring basis (in millions):


		As of December 31, 2022
	Fair Value Hierarchy	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities
Fair value changes recorded in other comprehensive income
Time deposits	Level 2	$	5,297	$	0	$	0	$	5,297	$	5,293	$	4
Government bonds	Level 2	41,036		64		(2,045)		39,055		283		38,772
Corporate debt securities	Level 2	28,578		8		(1,569)		27,017		1		27,016
Mortgage-backed and asset-backed securities	Level 2	16,176		5		(1,242)		14,939		0		14,939
Total investments with fair value change reflected in other comprehensive income(1)		$	91,087	$	77	$	(4,856)	$	86,308	$	5,577	$	80,731
Fair value adjustments recorded in net income
Money market funds	Level 1							$	7,234	$	7,234	$	0
Current marketable equity securities(2)	Level 1							4,013		0		4,013
Mutual funds	Level 2							339		0		339
Government bonds	Level 2							1,877		440		1,437
Corporate debt securities	Level 2							3,744		65		3,679
Mortgage-backed and asset-backed securities	Level 2							1,686		2		1,684
Total investments with fair value change recorded in net income								$	18,893	$	7,741	$	11,152
Cash								0		8,561		0
Total		$	91,087	$	77	$	(4,856)	$	105,201	$	21,879	$	91,883

(1)Represents gross unrealized gains and losses for debt securities recorded to accumulated other comprehensive income (AOCI).

(2)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $803 million as of December 31, 2022 is included within other non-current assets.


Table of Contents			Alphabet Inc.


		As of June 30, 2023
	Fair Value Hierarchy	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities
Fair value changes recorded in other comprehensive income
Time deposits	Level 2	$	2,913	$	0	$	0	$	2,913	$	2,913	$	0
Government bonds	Level 2	45,339		49		(1,588)		43,800		2,481		41,319
Corporate debt securities	Level 2	23,480		8		(1,162)		22,326		0		22,326
Mortgage-backed and asset-backed securities	Level 2	18,047		4		(1,092)		16,959		0		16,959
Total investments with fair value change reflected in other comprehensive income(1)		$	89,779	$	61	$	(3,842)	$	85,998	$	5,394	$	80,604
Fair value adjustments recorded in net income
Money market funds	Level 1							$	9,472	$	9,472	$	0
Current marketable equity securities(2)	Level 1							4,088		0		4,088
Mutual funds	Level 2							315		0		315
Government bonds	Level 2							2,158		546		1,612
Corporate debt securities	Level 2							3,831		2		3,829
Mortgage-backed and asset-backed securities	Level 2							1,955		0		1,955
Total investments with fair value change recorded in net income								$	21,819	$	10,020	$	11,799
Cash								0		10,515		0
Total		$	89,779	$	61	$	(3,842)	$	107,817	$	25,929	$	92,403

(1)Represents gross unrealized gains and losses for debt securities recorded to AOCI.

(2)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $892 million as of June 30, 2023 is included within other non-current assets

Investments Measured at Fair Value on a Nonrecurring Basis

Our non-marketable equity securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable equity securities is adjusted to fair value upon observable transactions for identical or similar investments of the same issuer or impairment. Non-marketable equity securities that have been remeasured during the period based on observable transactions are classified within Level 2 or Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities we hold. The fair value of non-marketable equity securities that have been remeasured due to impairment are classified within Level 3.

As of June 30, 2023 the carrying value of our non-marketable equity securities was $29.1 billion, of which $1.5 billion were remeasured at fair value during the three months ended June 30, 2023 and primarily classified as Level 3.


Table of Contents			Alphabet Inc.

Debt Securities

The following table summarizes the estimated fair value of investments in available-for-sale marketable debt securities by effective contractual maturity dates (in millions):


	As of June 30, 2023
Due in 1 year or less	$	15,403
Due in 1 year through 5 years	43,749
Due in 5 years through 10 years	15,162
Due after 10 years	13,686
Total	$	88,000

The following tables present fair values and gross unrealized losses recorded to AOCI, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions):


	As of December 31, 2022
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Government bonds	$	21,039	$	(1,004)	$	13,438	$	(1,041)	$	34,477	$	(2,045)
Corporate debt securities	11,228		(440)		15,125		(1,052)		26,353		(1,492)
Mortgage-backed and asset-backed securities	7,725		(585)		6,964		(657)		14,689		(1,242)
Total	$	39,992	$	(2,029)	$	35,527	$	(2,750)	$	75,519	$	(4,779)


	As of June 30, 2023
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Government bonds	$	19,195	$	(580)	$	13,976	$	(1,008)	$	33,171	$	(1,588)
Corporate debt securities	3,915		(69)		17,573		(1,008)		21,488		(1,077)
Mortgage-backed and asset-backed securities	6,352		(153)		10,095		(939)		16,447		(1,092)
Total	$	29,462	$	(802)	$	41,644	$	(2,955)	$	71,106	$	(3,757)

We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. The following table summarizes gains and losses for debt securities, reflected as a component of other income (expense), net (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2023		2022		2023
Unrealized gain (loss) on fair value option debt securities	$	(367)	$	(24)	$	(569)	$	121
Gross realized gain on debt securities	29		28		69		85
Gross realized loss on debt securities	(368)		(303)		(639)		(795)
(Increase) decrease in allowance for credit losses	(84)		(5)		(18)		(8)
Total gain (loss) on debt securities recognized in other income (expense), net	$	(790)	$	(304)	$	(1,157)	$	(597)


Table of Contents			Alphabet Inc.

Equity Investments

The carrying value of equity securities is measured as the total initial cost plus the cumulative net gain (loss). Our share of gains and losses, including impairments, are included as a component of other income (expense), net, in the Consolidated Statements of Income. See Note 6 for further details on other income (expense), net.

The carrying values for marketable and non-marketable equity securities are summarized below (in millions):


	As of December 31, 2022						As of June 30, 2023
	Marketable Equity Securities		Non-Marketable Equity Securities		Total		Marketable Equity Securities		Non-Marketable Equity Securities		Total
Total initial cost	$	5,764	$	16,157	$	21,921	$	5,647	$	17,261	$	22,908
Cumulative net gain (loss)(1)	(608)		12,372		11,764		(352)		11,868		11,516
Carrying value	$	5,156	$	28,529	$	33,685	$	5,295	$	29,129	$	34,424

(1)Non-marketable equity securities cumulative net gain (loss) is comprised of $16.8 billion gains and $4.5 billion losses (including impairments) as of December 31, 2022 and $17.8 billion gains and $5.9 billion losses (including impairments) as of June 30, 2023.

Gains and Losses on Marketable and Non-marketable Equity Securities

Gains and losses (including impairments), net, for marketable and non-marketable equity securities included in other income (expense), net are summarized below (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2023		2022		2023
Realized net gain (loss) on equity securities sold during the period	$	26	$	87	$	(230)	$	292
Unrealized net gain (loss) on marketable equity securities	(1,188)		397		(2,462)		349
Unrealized net gain (loss) on non-marketable equity securities(1)	911		(689)		1,371		(469)
Total gain (loss) on equity securities in other income (expense), net	$	(251)	$	(205)	$	(1,321)	$	172

(1)Unrealized gain (loss) on non-marketable equity securities accounted for under the measurement alternative is comprised of $2.2 billion and $75 million of upward adjustments and $1.3 billion and $789 million of downward adjustments (including impairments) for three months ended June 30, 2022 and 2023, respectively, and $3.0 billion and $989 million of upward adjustments and $1.6 billion and $1.5 billion of downward adjustments (including impairments) for the six months ended June 30, 2022 and 2023, respectively.

In the table above, realized net gain (loss) on equity securities sold during the period reflects the difference between the sale proceeds and the carrying value of the equity securities at the beginning of the period or the purchase date, if later.

Cumulative net gains (losses) on equity securities sold during the period, which is summarized in the following table (in millions), represents the total net gains (losses) recognized after the initial purchase date of the equity security sold during the period. While these net gains (losses) may have been reflected in periods prior to the period of sale, we believe they are important supplemental information as they reflect the economic net gains (losses) on the securities sold during the period. Cumulative net gains (losses) are calculated as the difference between the sale price and the initial purchase price for the equity security sold during the period.


	Equity Securities Sold
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2023		2022		2023
Total sale price	$	645	$	427	$	1,335	$	739
Total initial cost	168		156		428		367
Cumulative net gain (loss)	$	477	$	271	$	907	$	372


Table of Contents			Alphabet Inc.

Equity Securities Accounted for Under the Equity Method

As of December 31, 2022 and June 30, 2023 equity securities accounted for under the equity method had a carrying value of approximately $1.5 billion for both periods. Our share of gains and losses, including impairments, are included as a component of other income (expense), net, in the Consolidated Statements of Income. See Note 6 for further details on other income (expense), net.

Derivative Financial Instruments

We use derivative instruments to manage risks relating to our ongoing business operations. The primary risk managed is foreign exchange risk. We use foreign currency contracts to reduce the risk that our cash flows, earnings, and investment in foreign subsidiaries will be adversely affected by foreign currency exchange rate fluctuations. We also enter into derivative instruments to partially offset our exposure to other risks and enhance investment returns.

We recognize derivative instruments in the Consolidated Balance Sheets at fair value and classify the derivatives primarily within Level 2 in the fair value hierarchy. We present our collar contracts (an option strategy comprised of a combination of purchased and written options) at net fair values and present all other derivatives at gross fair values. The accounting treatment for derivatives is based on the intended use and hedge designation.

Cash Flow Hedges

We designate foreign currency forward and option contracts (including collars) as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the U.S. dollar. These contracts have maturities of 24 months or less.

Cash flow hedge amounts included in the assessment of hedge effectiveness are deferred in AOCI and subsequently reclassified to revenue when the hedged item is recognized in earnings. We exclude forward points and time value from our assessment of hedge effectiveness and amortize them on a straight-line basis over the life of the hedging instrument in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI.

As of June 30, 2023 the net accumulated gain on our foreign currency cash flow hedges before tax effect was $24 million, which is expected to be reclassified from AOCI into revenues within the next 12 months.

Fair Value Hedges

We designate foreign currency forward contracts as fair value hedges to hedge foreign currency risks for our marketable securities denominated in currencies other than the U.S. dollar. Fair value hedge amounts included in the assessment of hedge effectiveness are recognized in other income (expense), net, along with the offsetting gains and losses of the related hedged items. We exclude forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net.

Net Investment Hedges

We designate foreign currency forward contracts as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. Net investment hedge amounts included in the assessment of hedge effectiveness are recognized in AOCI along with the foreign currency translation adjustment. We exclude forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net.

Other Derivatives

We enter into foreign currency forward and option contracts that are not designated as hedging instruments to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary. Gains and losses on these derivatives that are not designated as accounting hedges are primarily recorded in other income (expense), net along with the foreign currency gains and losses on monetary assets and liabilities.

We also use derivatives not designated as hedging instruments to manage risks relating to interest rates, commodity prices, credit exposures, and to enhance investment returns. From time to time, we enter into derivatives to hedge the market price risk on certain of our marketable equity securities. Gains and losses arising from other derivatives are primarily reflected within the “other” component of other income (expense), net. See Note 6 for further details.


Table of Contents			Alphabet Inc.

The gross notional amounts of outstanding derivative instruments were as follows (in millions):


	As of December 31, 2022		As of June 30, 2023
Derivatives designated as hedging instruments:
Foreign exchange contracts
Cash flow hedges	$	15,972	$	15,823
Fair value hedges	$	2,117	$	1,472
Net investment hedges	$	8,751	$	9,371
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	34,979	$	34,185
Other contracts	$	7,932	$	9,133

The fair values of outstanding derivative instruments were as follows (in millions):


	As of December 31, 2022				As of June 30, 2023
	Assets(1)		Liabilities(2)		Assets(1)		Liabilities(2)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	271	$	556	$	228	$	201

Derivatives not designated as hedging instruments:
Foreign exchange contracts	365		207		130		136
Other contracts	40		47		39		67
Total derivatives not designated as hedging instruments	405		254		169		203
Total	$	676	$	810	$	397	$	404

(1) Derivative assets are recorded as other current and non-current assets in the Consolidated Balance Sheets.

(2) Derivative liabilities are recorded as accrued expenses and other liabilities, current and non-current in the Consolidated Balance Sheets.

The gains (losses) on derivatives in cash flow hedging and net investment hedging relationships recognized in other comprehensive income (OCI) are summarized below (in millions):


	Gains (Losses) Recognized in OCI on Derivatives Before Tax Effect
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2023		2022		2023
Derivatives in cash flow hedging relationship:
Foreign exchange contracts
Amount included in the assessment of effectiveness	$	1,131	$	77	$	1,266	$	(61)
Amount excluded from the assessment of effectiveness	(39)		80		(54)		127

Derivatives in net investment hedging relationship:
Foreign exchange contracts
Amount included in the assessment of effectiveness	509		(59)		658		(274)
Total	$	1,601	$	98	$	1,870	$	(208)


Table of Contents			Alphabet Inc.

The table below presents the gains (losses) of our derivatives on the Consolidated Statements of Income: (in millions):


	Gains (Losses) Recognized in Income
	Three Months Ended
	June 30,
	2022				2023
	Revenues		Other income (expense), net		Revenues		Other income (expense), net
Total amounts in the Consolidated Statements of Income	$	69,685	$	(439)	$	74,604	$	65

Effect of cash flow hedges:
Foreign exchange contracts
Amount reclassified from AOCI to income	$	400	$	0	$	(2)	$	0
Amount excluded from the assessment of effectiveness (amortized)	(24)		0		6		0
Effect of fair value hedges:
Foreign exchange contracts
Hedged items	0		(136)