Alphabet Announces Third Quarter 2023 Results
MOUNTAIN VIEW, Calif. – October 24, 2023 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced
financial results for the quarter ended September 30, 2023.
Sundar Pichai, CEO, said: “I’m pleased with our financial results and our product momentum this quarter, with AIdriven innovations across Search, YouTube, Cloud, our Pixel devices and more. We’re continuing to focus on
making AI more helpful for everyone; there’s exciting progress and lots more to come.”
Ruth Porat, President and Chief Investment Officer; CFO said: “The fundamental strength of our business wasapparent again in Q3, with $77 billion in revenue, up 11% year over year, driven by meaningful growth in Search
and YouTube, and momentum in Cloud. We continue to focus on judicious capital allocation to deliver sustainablefinancial value.”Q3 2023 Financial Highlights (unaudited)
The following table summarizes our consolidated financial results for the quarters ended September 30, 2022 and2023 (in millions, except for per share information and percentages).
Quarter Ended September 30,
2022
2023
Revenues
Change in revenues year over year
Change in constant currency revenues year over year(1)$69,092$
6%
11 %76,69311 %11 %Operating income
Operating margin$

17,135$25 %

21,34328 %Other income (expense), net

$

(902)

$

(146)

Net income
Diluted EPS$$

13,9101.06$$

19,6891.55(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” formore details.

Q3 2023 Supplemental Information (in millions, except for number of employees; unaudited)
Revenues, Traffic Acquisition Costs (TAC), and Number of Employees

Google Search & other
YouTube ads
Google Network
Google advertising
Google other
Google Services total
Google Cloud
Other Bets
Hedging gains (losses)
Total revenues

Quarter Ended September 30,
2022
2023
$
39,539 $44,026
7,071
7,952
7,872
7,669
54,48259,647
6,895
8,339
61,377
67,986
6,868
8,411
209
297
638
(1)
$
69,092 $76,693

Total TAC$

Number of employees(1)(1)

11,826$

186,779

12,642
182,381

Substantially all of the employees affected by the reduction of our workforce were no longer included in our headcount asof September 30, 2023.

Segment Operating Results
As announced on April 20, 2023, we brought together part of Google Research (the Brain team) and DeepMind to
significantly accelerate our progress in artificial intelligence (AI). The group, called Google DeepMind, is reported
within Alphabet's unallocated corporate costs prospectively beginning in the second quarter of 2023. Previously, theBrain team was included within Google Services.
Quarter Ended September 30,
2022
2023
(recast)Operating income (loss):
Google Services
Google Cloud
Other Bets
Corporate costs, unallocated(1)Total income from operations(1)$

18,883 $(440)(1,225)(83)

23,937266(1,194)(1,666)$

17,135 $21,343

In addition to the Alphabet-level costs included in unallocated corporate costs, hedging gains (losses) related to revenue
were $638 million and $(1) million for the three months ended September 30, 2022 and 2023, respectively.

2

Additional Information Relating to the Quarter Ended September 30, 2023 (unaudited)
Reductions in Our Workforce and Office SpaceIn January 2023, we announced a reduction of our workforce, and as a result we recorded employee severance andrelated charges of $86 million and $2.1 billion for the three and nine months ended September 30, 2023,
respectively. In addition, we are taking actions to optimize our global office space. As a result, exit charges recorded
during the three and nine months ended September 30, 2023 were $16 million and $649 million, respectively. In
addition to these exit charges, for the three and nine months ended September 30, 2023, we incurred $207 million
in accelerated rent and accelerated depreciation. We may incur additional charges in the future as we further
evaluate our real estate needs.
For segment reporting, the substantial majority of these charges are included within unallocated corporate costs inour segment results.
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 andadjusted 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, and the effect was a reduction in depreciation expense of $977 million and $2.9 billion and an increasein net income of $761 million and $2.3 billion, or $0.06 and $0.18 per basic and $0.06 and $0.18 per diluted sharefor the three and nine months ended September 30, 2023, respectively.
Webcast and Conference Call Information
A live audio webcast of our third quarter 2023 earnings release call will be available on YouTube at https://www.youtube.com/watch?v=oXQInS9SV2Q. 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 forthe year ended December 31, 2022 and our most recent Quarterly Report on Form 10-Q for the quarter ended June30, 2023, 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 September 30, 2023, and may be set forth in other reports and filings we makewith the SEC. All information provided in this release and in the attachments is as of October 24, 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 bylaw.
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 percentagechange in constant currency revenues. The presentation of this financial information is not intended to beconsidered in isolation or as a substitute for, or superior to, the financial information prepared and presented inaccordance with GAAP.
We use these non-GAAP financial measures for financial and operational decision-making and as a means toevaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningfulsupplemental 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 foreign3exchange rate movements and hedging activities, which are recognized at the consolidated level. We believe thatboth 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 bothbecause (1) they allow for greater transparency with respect to key metrics used by management in its financial andoperational 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 theselimitations 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 inaccordance with GAAP.
For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliation fromnet 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 inconstant currency revenues” included at the end of this release.
Contact
Investor relations
Media
investor-relations@abc.xyz press@abc.xyz

4Alphabet Inc.
CONSOLIDATED BALANCE SHEETS(In millions, except par value per share amounts)
As of December 31,
2022

As of September 30,
2023(unaudited)

AssetsCurrent assets:
Cash and cash equivalents$

21,879$30,702Marketable securities

91,88389,233

Total cash, cash equivalents, and marketable securities

113,762

119,935

Accounts receivable, net

40,25841,020Inventory

2,670

2,957

Other current assets

8,105

12,398

Total current assets

164,795

176,310Non-marketable securities

30,49230,907

Deferred income taxes

5,261

10,983

Property and equipment, net

112,668

125,705

Operating lease assets

14,381

14,199Intangible assets, net

2,084

1,833

Goodwill

28,96029,146

Other non-current assets

6,623

Total assets

7,628

$

365,264$

396,711

$

5,128

$

5,803

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued compensation and benefits

14,02812,562

Accrued expenses and other current liabilities

37,86655,602

Accrued revenue share

8,370

8,025

Deferred revenue

3,908

4,303

69,30086,295

14,701

13,781

599

884

Total current liabilities
Long-term debt
Deferred revenue, non-current
Income taxes payable, non-current

9,258

8,038

Deferred income taxes

514

528

Operating lease liabilities

12,501

12,550

Other long-term liabilities

2,247

1,433

Total liabilities

109,120

123,509

Preferred stock, $0.001 par value per share, 100 shares authorized; no sharesissued and outstanding

0

0

Class A, Class B, and Class C stock and additional paid-in capital, $0.001 parvalue 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 12,541(Class A 5,922, Class B 874, Class C 5,745) shares issued and outstanding

68,18474,591

Commitments and contingencies
Stockholders’ equity:

Accumulated other comprehensive income (loss)
Retained earnings
Total stockholders’ equity(7,603)(7,036)

195,563

205,647

256,144

Total liabilities and stockholders’ equity$

5

365,264

273,202$396,711Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME(In millions, except per share amounts, unaudited)
Quarter Ended September 30,
2022
Revenues$

Year to Date September 30,

2023

69,092$

2022

76,693$2023

206,788$

221,084

Costs and expenses:
Cost of revenues

31,15833,22990,861

95,757

Research and development

10,273

11,25829,23333,314

Sales and marketing

6,929

6,884

19,384

20,198General and administrative

3,597

3,979

10,628

11,219Total costs and expenses

51,95755,350150,106

160,488

Income from operations

17,135

21,34356,68260,596

Other income (expense), net

(902)

(146)

(2,501)

709

Income before income taxes

16,233

21,19754,181

61,305

Provision for income taxes
Net income

2,323

1,508

7,833

8,197

$

13,910$19,689$46,348$53,108

Basic earnings per share of Class A, Class B, and Class C
stock
$

1.07

$

1.56

$

3.53

$

4.19

Diluted earnings per share of Class A, Class B, and Class
C stock
$

1.06

$

1.55

$

3.50

$

4.16

Number of shares used in basic earnings per sharecalculation

13,018

12,581

13,11812,677

Number of shares used in diluted earnings per sharecalculation

13,097

12,696

13,22912,761

6

Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions, unaudited)
Quarter Ended September 30,
2022

Year to Date September 30,

2023

2022

2023

Operating activities
Net income$

13,910$19,689$46,348$53,108Adjustments:
Depreciation and impairment of property andequipment
Amortization and impairment of intangible assets

3,933

3,671

11,222

10,010

113

129

505

373

Stock-based compensation expense

4,976

5,743

14,262

16,801

Deferred income taxes(1,920)(1,824)(6,157)(6,093)

Loss on debt and equity securities, net

1,378

869

3,856

1,294

167

262

369

912

Accounts receivable, net(97)(2,821)

2,298(1,315)

Income taxes, net(1)

(609)

1,872

(862)

10,392Other assets(2,647)(1,624)(4,268)(2,883)

Accounts payable

1,907

223

735

237

Accrued expenses and other liabilities

Other
Changes in assets and liabilities, net of effects ofacquisitions:

2,210

3,657

491

(380)

Accrued revenue share

(80)

103

(1,022)(315)

Deferred revenue

112

707

104

690

23,35330,65667,881

82,831

Net cash provided by operating activities
Investing activities
Purchases of property and equipment(7,276)(8,055)(23,890)(21,232)

Purchases of marketable securities(17,054)(13,833)(67,253)(49,422)

Maturities and sales of marketable securities

28,713

15,59384,08752,642

(364)

(663)

(1,628)(2,176)

6

562

131

743

(5,649)(126)(6,885)

(466)

791

(628)

1,367

(985)

(833)

(7,150)(14,071)(20,896)

Net payments related to stock-based award activities(2,041)(2,432)(7,221)(7,157)

Repurchases of stock(15,392)(15,787)(43,889)(45,313)

Proceeds from issuance of debt, net of costs

15,094

1,248

44,322

9,298

Repayments of debt

(15,768)(1,414)(45,350)(9,621)

Purchases of non-marketable securities
Maturities and sales of non-marketable securities
Acquisitions, net of cash acquired, and purchases ofintangible assets
Other investing activities
Net cash used in investing activities
Financing activities

Proceeds from sale of interest in consolidated entities,
net
Net cash used in financing activities

3

10

8

(18,382)(52,128)(52,785)

Effect of exchange rate changes on cash and cash
equivalents

(375)

(351)

(643)

(327)

Net increase in cash and cash equivalents

4,048

4,773

1,039

8,823

Cash and cash equivalents at beginning of period

17,93625,92920,94521,879Cash and cash equivalents at end of period(1)10(18,097)$

21,984$30,702$

21,984$30,702The three and nine month period ended September 30, 2023 include the effect of the IRS payment deferral relief madeavailable to taxpayers headquartered in designated counties in California. On October 16, 2023, we made an estimated tax
payment to the IRS of $10.5 billion that will be reflected in our fourth quarter operating cash flow.

7

Segment Results
The following table presents our segment revenues and operating income (loss) (in millions; unaudited):
Quarter Ended September 30,
2022
2023
(recast)Revenues:
Google Services
Google Cloud
Other Bets
Hedging gains (losses)
Total revenues
Operating income (loss):
Google Services
Google Cloud
Other Bets
Corporate costs, unallocatedTotal income from operations

$

$
$

$

61,377 $
6,868
209
638
69,092 $67,986
8,411
297
(1)
76,693

18,883 $(440)(1,225)(83)
17,135 $23,937266(1,194)(1,666)
21,343We 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; salesof 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 forenterprise 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.

Certain costs are not allocated to our segments because they represent Alphabet-level activities. These costs
primarily include AI-focused shared R&D activities; corporate initiatives such as our philanthropic activities;
corporate shared costs such as certain finance, human resource, and legal costs, including certain fines andsettlements. Charges associated with reductions in our workforce and office space announced in January 2023 are
not allocated to our segments. Additionally, hedging gains (losses) related to revenue are not allocated to oursegments.

8Other Income (Expense), Net
The following table presents our other income (expense), net (in millions; unaudited):

Interest income
Interest expense
Foreign currency exchange gain (loss), net
Gain (loss) on debt securities, net
Gain (loss) on equity securities, net(1)Performance fees
Income (loss) and impairment from equity method investments, net
Other
Other income (expense), net(1)

Quarter Ended September 30,
2022
2023
$
615 $
1,066
(101)
(116)
(136)
(311)
(731)
(503)
(647)
(366)
54
179
(99)
(215)
143
120
$
(902) $
(146)

Includes all gains and losses, unrealized and realized, on equity securities. For Q3 2023, the net effect of the loss on equity
securities of $366 million and the $179 million of performance fees related to certain investments decreased the provision
for income tax, net income, and diluted EPS by $39 million, $148 million, and $0.01, respectively. Fluctuations in the valueof our investments may be affected by market dynamics and other factors and could significantly contribute to the volatilityof OI&E in future periods.

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 andinvestors 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
September 30,
2023$
30,656(8,055)$22,601

Net cash provided by operating activities
Less: purchases of property and equipment
Free cash flow

Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.

9

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 thecomparison 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 ourcore 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 inconstant 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 September 30, 2022 to the Quarter Ended September 30, 2023
Quarter Ended September 30, 2023
% Change from Prior Period
Quarter Ended
September 30,
2022
United States

$

2023

33,372$

Constant
Currency
Revenues

Less FX
Effect36,354

$

0

$

Less
Hedging
EffectAs
Reported

Less FX
EffectConstant
Currency
Revenues

36,354

9%

0%

9%

EMEA

19,45022,661803

21,858

17 %

5%

12 %

APAC

11,494

13,126(270)

13,396

14 %

(3)%

17 %

Other Americas

4,138

4,553

(106)

4,659

10 %

(3)%

13 %

Revenues, excluding hedging effect68,454

76,694427

76,267

12 %

1%

11 %

76,267

11 %

1%

11 %

Hedging gains (losses)
Total revenues(1)
(1)

638
$

69,092(1)$

76,693$(1)%

Total constant currency revenues of $76.3 billion for the quarter ended September 30, 2023 increased $7.8 billion compared to $68.5 billion inrevenues, excluding hedging effect for the quarter ended September 30, 2022.

Comparison from the Quarter Ended June 30, 2023 to the Quarter Ended September 30, 2023
Quarter Ended September 30, 2023
% Change from Prior Period
Quarter Ended
June 30,
2023
United States$

September
30, 2023

35,073$36,354

EMEA

22,28922,661APAC

12,72813,126

Less FX
Effect$0Constant
Currency
Revenues$As
Reported

36,354

4%

46

22,615(219)

13,345Less
Hedging
EffectLess FX
EffectConstant
Currency
Revenues

0%

4%

2%

1%

1%

3%

(2)%

5%

Other Americas

4,511

4,553

59

4,494

1%

1%

0%

Revenues, excluding hedging effect74,601

76,694(114)

76,8083%

0%

3%76,8083%

0%

3%

Hedging gains (losses)
Total revenues(1)
(1)

3
$

74,604(1)$

76,693$0%Total constant currency revenues of $76.8 billion for the quarter ended September 30, 2023 increased $2.2 billion compared to $74.6 billion inrevenues, excluding hedging effect for the quarter ended June 30, 2023.

10

Total Revenues — Prior Year Comparative Periods
Comparison from the Quarter Ended September 30, 2021 to the Quarter Ended September 30, 2022
Quarter Ended September 30, 2022
% Change from Prior Period

Quarter Ended
September 30,
2021
Revenues excluding hedging effect$Hedging gains (losses)
Total revenues

2022

65,056$62$

Less FX
Effect65,11868,454$

Constant
Currency
RevenuesAs
Reported(3,918) $72,372

5%$

72,372

6%

Less
Hedging
EffectLess FX
EffectConstant
Currency
Revenues

(6)%

11 %

(6)%

11 %

638
$

69,09211

1%