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 September 30, ~~2021~~2022


☐			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 October ~~19, 2021,~~18, 2022, there were ~~300,809,676~~ 5,973 million shares of Alphabet’s Class A ~~common~~ stock outstanding, ~~45,216,540~~884 million shares of Alphabet's Class B ~~common~~ stock outstanding, and ~~317,737,778~~6,086 million shares of Alphabet's Class C ~~capital~~ stock outstanding.


Table of Contents			Alphabet Inc.

Alphabet Inc.

Form 10-Q

For the Quarterly Period Ended September 30, ~~2021~~2022

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, ~~2020~~2021 and September 30, ~~2021~~2022	5
	Consolidated Statements of Income - Threeand Nine Months Ended September 30, 22021~~020~~ and ~~2021~~2022	6
	Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, ~~2020~~ 2021 and ~~2021~~2022	7
	Consolidated Statements of Stockholders' Equity - ~~Thre~~e Three and Nine Months Ended September 30, 2021 ~~2020~~ and ~~2021~~2022	8
	Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2021 ~~, 2020~~ and ~~2021~~2022	10
	Notes to Consolidated Financial Statements	11
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3334
Item 3	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4	Controls and Procedures	47

PART II. OTHER INFORMATION
Item 1	Legal Proceedings	4849
Item 1A	Risk Factors	4849
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	4950


Item 5	Other Information	49
Item 6	Exhibits	5052
~~Signature~~Signatures		5153


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 ~~statements~~ include, among other things, statements regarding:

•the ongoing effect of the novel coronavirus pandemic ("COVID-19"), including its macroeconomic effects on our business, operations, and financial results; ~~and the effect of governmental lockdowns, restrictions and new regulations on our operations and processes;~~

•the growth of our business and revenues and our expectations about the factors that influence our success and trends in our ~~business, including the size and timing of the expected return on our continuing investments in our Google Cloud segment;~~business;

•fluctuations in our revenue growth rate and operating margin 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")~~(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 revenue growth, 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 plans to continue to invest in new businesses, products, services and technologies, systems, land and buildings for data centers and offices, and infrastructure, as well as to continue to invest in ~~acquisitions;~~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")~~(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")~~(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, ~~(including developments and volatility arising from COVID-19),~~ 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;


Table of Contents			Alphabet Inc.

•the sufficiency and timing of our proposed remedies in response to decisions from the European Commission ~~("EC")~~(EC) and other regulators and governmental entities;

•~~our expectations regarding the timing, design and implementation of our new global enterprise resource planning ("ERP") system;~~

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

•our long-term sustainability and diversity goals;

•~~our expectation that~~ the ~~change~~unpredictability of the ongoing broader economic effects resulting from the war in ~~the estimated useful life of servers and certain network equipment will have a favorable, yet declining, effect~~Ukraine on our ~~2021 operating~~future financial 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")~~(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, ~~2020, as updated~~2021, and including material changes reflected in this Quarterly Report on Form 10-Q. 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, ~~2020, as updated~~2021, and including material changes reflected in this Quarterly Report on Form 10-Q, 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. This report contains additional trade names and trademarks of other companies. 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.


Table of Contents			Alphabet Inc.

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Alphabet Inc.

CONSOLIDATED BALANCE SHEETS

(in millions, except ~~share amounts which are reflected in thousands, and~~ par value per share amounts)


		As of December 31, 2020		As of September 30, 2021			As of December 31, 2021		As of September 30, 2022
				(unaudited)					(unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	26,465	$	23,719	Cash and cash equivalents	$	20,945	$	21,984
Marketable securities	Marketable securities	110,229		118,284		Marketable securities	118,704		94,275
Total cash, cash equivalents, and marketable securities	Total cash, cash equivalents, and marketable securities	136,694		142,003		Total cash, cash equivalents, and marketable securities	139,649		116,259
Accounts receivable, net	Accounts receivable, net	30,930		34,047		Accounts receivable, net	39,304		34,697
Income taxes receivable, net	Income taxes receivable, net	454		753		Income taxes receivable, net	966		1,479
Inventory	Inventory	728		1,278		Inventory	1,170		3,156
Other current assets	Other current assets	5,490		6,029		Other current assets	7,054		10,518
Total current assets	Total current assets	174,296		184,110		Total current assets	188,143		166,109
Non-marketable investments		20,703		26,101
Non-marketable securities						Non-marketable securities	29,549		30,419
Deferred income taxes	Deferred income taxes	1,084		1,195		Deferred income taxes	1,284		2,991
Property and equipment, net	Property and equipment, net	84,749		94,631		Property and equipment, net	97,599		108,363
Operating lease assets	Operating lease assets	12,211		12,918		Operating lease assets	12,959		13,677
Intangible assets, net	Intangible assets, net	1,445		1,549		Intangible assets, net	1,417		2,192
Goodwill	Goodwill	21,175		22,623		Goodwill	22,956		28,834
Other non-current assets	Other non-current assets	3,953		4,276		Other non-current assets	5,361		5,670
Total assets	Total assets	$	319,616	$	347,403	Total assets	$	359,268	$	358,255
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	5,589	$	4,616	Accounts payable	$	6,037	$	6,303

Accrued compensation and benefits	Accrued compensation and benefits	11,086		12,170		Accrued compensation and benefits	13,889		12,366
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	28,631		30,113		Accrued expenses and other current liabilities	31,236		35,038
Accrued revenue share	Accrued revenue share	7,500		7,745		Accrued revenue share	8,996		7,662
Deferred revenue	Deferred revenue	2,543		2,968		Deferred revenue	3,288		3,585
Income taxes payable, net	Income taxes payable, net	1,485		4,170		Income taxes payable, net	808		1,025
Total current liabilities	Total current liabilities	56,834		61,782		Total current liabilities	64,254		65,979
Long-term debt	Long-term debt	13,932		14,288		Long-term debt	14,817		14,653
Deferred revenue, non-current	Deferred revenue, non-current	481		510		Deferred revenue, non-current	535		594
Income taxes payable, non-current	Income taxes payable, non-current	8,849		8,984		Income taxes payable, non-current	9,176		8,572
Deferred income taxes	Deferred income taxes	3,561		3,551		Deferred income taxes	5,257		476
Operating lease liabilities	Operating lease liabilities	11,146		11,471		Operating lease liabilities	11,389		11,984
Other long-term liabilities	Other long-term liabilities	2,269		2,250		Other long-term liabilities	2,205		2,371
Total liabilities	Total liabilities	97,072		102,836		Total liabilities	107,633		104,629
Contingencies (Note 9)	Contingencies (Note 9)	0		0		Contingencies (Note 9)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding		0		0
Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000); 675,222 (Class A 300,730, Class B 45,843, Class C 328,649) and 664,682 (Class A 300,801, Class B 45,261, Class C 318,620) shares issued and outstanding		58,510		61,193
Preferred stock, $0.001 par value per share, 100 shares authorized; no shares issued and outstanding						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						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)	Accumulated other comprehensive income (loss)	633		(408)		Accumulated other comprehensive income (loss)	(1,623)		(8,852)
Retained earnings	Retained earnings	163,401		183,782		Retained earnings	191,484		196,220
Total stockholders’ equity	Total stockholders’ equity	222,544		244,567		Total stockholders’ equity	251,635		253,626
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	319,616	$	347,403	Total liabilities and stockholders’ equity	$	359,268	$	358,255

See accompanying notes.


Table of Contents			Alphabet Inc.

Alphabet Inc.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts; unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
Revenues	Revenues	$	46,173	$	65,118	$	125,629	$	182,312	Revenues	$	65,118	$	69,092	$	182,312	$	206,788
Costs and expenses:	Costs and expenses:									Costs and expenses:
Cost of revenues	Cost of revenues	21,117		27,621		58,652		77,951		Cost of revenues	27,621		31,158		77,951		90,861
Research and development	Research and development	6,856		7,694		20,551		22,854		Research and development	7,694		10,273		22,854		29,233
Sales and marketing	Sales and marketing	4,231		5,516		12,632		15,308		Sales and marketing	5,516		6,929		15,308		19,384
General and administrative	General and administrative	2,756		3,256		8,221		9,370		General and administrative	3,256		3,597		9,370		10,628
Total costs and expenses	Total costs and expenses	34,960		44,087		100,056		125,483		Total costs and expenses	44,087		51,957		125,483		150,106
Income from operations	Income from operations	11,213		21,031		25,573		56,829		Income from operations	21,031		17,135		56,829		56,682
Other income (expense), net	Other income (expense), net	2,146		2,033		3,820		9,503		Other income (expense), net	2,033		(902)		9,503		(2,501)
Income before income taxes	Income before income taxes	13,359		23,064		29,393		66,332		Income before income taxes	23,064		16,233		66,332		54,181
Provision for income taxes	Provision for income taxes	2,112		4,128		4,351		10,941		Provision for income taxes	4,128		2,323		10,941		7,833
Net income	Net income	$	11,247	$	18,936	$	25,042	$	55,391	Net income	$	18,936	$	13,910	$	55,391	$	46,348

Basic net income per share of Class A and B common stock and Class C capital stock		$	16.55	$	28.44	$	36.69	$	82.76
Basic net income per share of Class A, Class B, and Class C stock										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 and B common stock and Class C capital stock		$	16.40	$	27.99	$	36.38	$	81.53
Diluted net income per share of Class A, Class B, and Class C stock										Diluted net income per share of Class A, Class B, and Class C stock	$	1.40	$	1.06	$	4.08	$	3.50

See accompanying notes.


Table of Contents			Alphabet Inc.

Alphabet Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions; unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
Net income	Net income	$	11,247	$	18,936	$	25,042	$	55,391	Net income	$	18,936	$	13,910	$	55,391	$	46,348
Other comprehensive income (loss):
Other comprehensive loss:										Other comprehensive loss:
Change in foreign currency translation adjustment	Change in foreign currency translation adjustment	459		(614)		193		(671)		Change in foreign currency translation adjustment	(614)		(2,175)		(671)		(3,801)
Available-for-sale investments:	Available-for-sale investments:									Available-for-sale investments:
Change in net unrealized gains (losses)	Change in net unrealized gains (losses)	(19)		(159)		1,346		(699)		Change in net unrealized gains (losses)	(159)		(1,800)		(699)		(5,204)
Less: reclassification adjustment for net (gains) losses included in net income	Less: reclassification adjustment for net (gains) losses included in net income	(73)		(57)		(391)		(121)		Less: reclassification adjustment for net (gains) losses included in net income	(57)		362		(121)		743
Net change, net of income tax benefit (expense) of $27, $63, $(274) and $235		(92)		(216)		955		(820)
Net change, net of income tax benefit (expense) of $63, $409, $235 and $1,269										Net change, net of income tax benefit (expense) of $63, $409, $235 and $1,269	(216)		(1,438)		(820)		(4,461)
Cash flow hedges:	Cash flow hedges:									Cash flow hedges:
Change in net unrealized gains (losses)	Change in net unrealized gains (losses)	(48)		292		244		429		Change in net unrealized gains (losses)	292		1,136		429		2,165
Less: reclassification adjustment for net (gains) losses included in net income	Less: reclassification adjustment for net (gains) losses included in net income	23		(60)		(114)		21		Less: reclassification adjustment for net (gains) losses included in net income	(60)		(547)		21		(1,132)
Net change, net of income tax benefit (expense) of $8, $(54), $(38) and $(89)		(25)		232		130		450
Other comprehensive income (loss)		342		(598)		1,278		(1,041)
Net change, net of income tax benefit (expense) of $(54), $(159), $(89) and $(228)										Net change, net of income tax benefit (expense) of $(54), $(159), $(89) and $(228)	232		589		450		1,033
Other comprehensive loss										Other comprehensive loss	(598)		(3,024)		(1,041)		(7,229)
Comprehensive income	Comprehensive income	$	11,589	$	18,338	$	26,320	$	54,350	Comprehensive income	$	18,338	$	10,886	$	54,350	$	39,119

See accompanying notes.


Table of Contents			Alphabet Inc.

Alphabet Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In ~~millions, except share amounts which are reflected in thousands;~~millions; unaudited)
Three Months Ended September 30, 2020
Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital Accumulated
Other
Comprehensive
Income (Loss) Retained
Earnings Total
Stockholders’
Equity
Shares Amount
Balance as of June 30, 2020 681,215 $ 55,937 $ (296) $ 151,681 $ 207,322
Common and capital stock issued 1,669 15 0 0 15
Stock-based compensation expense 0 3,230 0 0 3,230
Tax withholding related to vesting of restricted stock units and other 0 (1,339) 0 0 (1,339)
Repurchases of capital stock (5,160) (536) 0 (7,361) (7,897)
Sale of interest in consolidated entities 0 0 0 0 0
Net income 0 0 0 11,247 11,247
Other comprehensive income (loss) 0 0 342 0 342
Balance as of September 30, 2020 677,724 $ 57,307 $ 46 $ 155,567 $ 212,920


	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, 2020
Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital Accumulated
Other
Comprehensive
Income (Loss) Retained
Earnings Total
Stockholders’
Equity
Shares Amount
Balance as of December 31, 2019 688,335 $ 50,552 $ (1,232) $ 152,122 $ 201,442
Common and capital stock issued 6,185 158 0 0 158
Stock-based compensation expense 0 9,865 0 0 9,865
Tax withholding related to vesting of restricted stock units and other 0 (4,076) 0 0 (4,076)
Repurchases of capital stock (16,796) (1,648) 0 (21,597) (23,245)
Sale of interest in consolidated entities 0 2,456 0 0 2,456
Net income 0 0 0 25,042 25,042
Other comprehensive income (loss) 0 0 1,278 0 1,278
Balance as of September 30, 2020 677,724 $ 57,307 $ 46 $ 155,567 $ 212,920


	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


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		Three Months Ended September 30, 2021										Three Months Ended September 30, 2022
		Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity			Class A, Class B, Class C Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
		Shares	Amount									Shares	Amount
Balance as of June 30, 2021		667,637	$	60,436	$	190	$	176,939	$	237,565
Common and capital stock issued		1,626	1		0		0		1
Balance as of June 30, 2022											Balance as of June 30, 2022	13,078	$	64,402	$	(5,828)	$	196,845	$	255,419
Stock issued											Stock issued	31	0		0		0		0
Stock-based compensation expense	Stock-based compensation expense	0	3,914		0		0		3,914		Stock-based compensation expense	0	5,018		0		0		5,018
Tax withholding related to vesting of restricted stock units and other	Tax withholding related to vesting of restricted stock units and other	0	(2,641)		0		0		(2,641)		Tax withholding related to vesting of restricted stock units and other	0	(2,315)		0		0		(2,315)
Repurchases of common and capital stock		(4,581)	(517)		0		(12,093)		(12,610)
Repurchases of stock											Repurchases of stock	(138)	(857)		0		(14,535)		(15,392)
Sale of interest in consolidated entities	Sale of interest in consolidated entities	0	0		0		0		0		Sale of interest in consolidated entities	0	10		0		0		10
Net income	Net income	0	0		0		18,936		18,936		Net income	0	0		0		13,910		13,910
Other comprehensive income (loss)	Other comprehensive income (loss)	0	0		(598)		0		(598)		Other comprehensive income (loss)	0	0		(3,024)		0		(3,024)
Balance as of September 30, 2021		664,682	$	61,193	$	(408)	$	183,782	$	244,567
Balance as of September 30, 2022											Balance as of September 30, 2022	12,971	$	66,258	$	(8,852)	$	196,220	$	253,626

Nine Months Ended September 30, 2021
Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital Accumulated
Other
Comprehensive
Income (Loss) Retained
Earnings Total
Stockholders’
Equity
Shares Amount
Balance as of December 31, 2020 675,222 $ 58,510 $ 633 $ 163,401 $ 222,544
Common and capital stock issued 5,114 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 common and capital stock (15,654) (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 664,682 $ 61,193 $ (408) $ 183,782 $ 244,567


	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

See accompanying notes.


Table of Contents			Alphabet Inc.

Alphabet Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)


		Nine Months Ended					Nine Months Ended
		September 30,					September 30,
		2020		2021			2021		2022
Operating activities	Operating activities					Operating activities
Net income	Net income	$	25,042	$	55,391	Net income	$	55,391	$	46,348
Adjustments:	Adjustments:					Adjustments:
Depreciation and impairment of property and equipment	Depreciation and impairment of property and equipment	9,366		8,340		Depreciation and impairment of property and equipment	8,340		11,222
Amortization and impairment of intangible assets	Amortization and impairment of intangible assets	606		662		Amortization and impairment of intangible assets	662		505
Stock-based compensation expense	Stock-based compensation expense	9,768		11,422		Stock-based compensation expense	11,422		14,262
Deferred income taxes	Deferred income taxes	(280)		192		Deferred income taxes	192		(6,157)
Gain on debt and equity securities, net		(3,055)		(9,792)
(Gain) loss on debt and equity securities, net						(Gain) loss on debt and equity securities, net	(9,792)		3,856
Other	Other	875		(199)		Other	(199)		369
Changes in assets and liabilities, net of effects of acquisitions:	Changes in assets and liabilities, net of effects of acquisitions:					Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	Accounts receivable	(1,079)		(3,276)		Accounts receivable	(3,276)		2,298
Income taxes, net	Income taxes, net	469		2,744		Income taxes, net	2,744		(862)
Other assets	Other assets	(592)		(1,447)		Other assets	(1,447)		(4,268)
Accounts payable	Accounts payable	(269)		(874)		Accounts payable	(874)		735
Accrued expenses and other liabilities	Accrued expenses and other liabilities	891		2,763		Accrued expenses and other liabilities	2,763		491
Accrued revenue share	Accrued revenue share	277		386		Accrued revenue share	386		(1,022)
Deferred revenue	Deferred revenue	428		406		Deferred revenue	406		104
Net cash provided by operating activities	Net cash provided by operating activities	42,447		66,718		Net cash provided by operating activities	66,718		67,881
Investing activities	Investing activities					Investing activities
Purchases of property and equipment	Purchases of property and equipment	(16,802)		(18,257)		Purchases of property and equipment	(18,257)		(23,890)
Purchases of marketable securities	Purchases of marketable securities	(104,932)		(95,106)		Purchases of marketable securities	(95,106)		(67,253)
Maturities and sales of marketable securities	Maturities and sales of marketable securities	97,751		92,126		Maturities and sales of marketable securities	92,126		84,087
Purchases of non-marketable investments		(1,864)		(2,068)
Maturities and sales of non-marketable investments		598		590
Purchases of non-marketable securities						Purchases of non-marketable securities	(2,068)		(1,628)
Maturities and sales of non-marketable securities						Maturities and sales of non-marketable securities	590		131

Acquisitions, net of cash acquired, and purchases of intangible assets	Acquisitions, net of cash acquired, and purchases of intangible assets	(368)		(2,233)		Acquisitions, net of cash acquired, and purchases of intangible assets	(2,233)		(6,885)
Other investing activities	Other investing activities	125		441		Other investing activities	441		1,367

Net cash used in investing activities	Net cash used in investing activities	(25,492)		(24,507)		Net cash used in investing activities	(24,507)		(14,071)
Financing activities	Financing activities					Financing activities
Net payments related to stock-based award activities	Net payments related to stock-based award activities	(4,073)		(7,239)		Net payments related to stock-based award activities	(7,239)		(7,221)

Repurchases of common and capital stock		(23,245)		(36,801)
Repurchases of stock						Repurchases of stock	(36,801)		(43,889)
Proceeds from issuance of debt, net of costs	Proceeds from issuance of debt, net of costs	11,761		13,949		Proceeds from issuance of debt, net of costs	13,949		44,322
Repayments of debt	Repayments of debt	(2,043)		(15,070)		Repayments of debt	(15,070)		(45,350)
Proceeds from sale of interest in consolidated entities, net	Proceeds from sale of interest in consolidated entities, net	2,462		310		Proceeds from sale of interest in consolidated entities, net	310		10
Net cash used in financing activities	Net cash used in financing activities	(15,138)		(44,851)		Net cash used in financing activities	(44,851)		(52,128)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(186)		(106)		Effect of exchange rate changes on cash and cash equivalents	(106)		(643)
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	1,631		(2,746)		Net increase (decrease) in cash and cash equivalents	(2,746)		1,039
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	18,498		26,465		Cash and cash equivalents at beginning of period	26,465		20,945
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	20,129	$	23,719	Cash and cash equivalents at end of period	$	23,719	$	21,984

See accompanying notes.


Table of Contents			Alphabet Inc.

Alphabet Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. ~~Nature of Operations and~~ 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,~~advertising; cloud-based solutions that provide customers with ~~platforms,~~infrastructure and platform services and collaboration ~~tools and services, and~~tools; sales of other products and services, such as apps and in-app purchases, digital content products, and ~~subscriptions~~hardware; and fees received for ~~digital content,~~subscription-based products such as YouTube Premium and ~~hardware.~~YouTube TV.

Basis of Consolidation

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

Unaudited Interim Financial Information

The Consolidated Balance Sheet as of September 30, 2021, the Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2021, the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2021, the Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2020 and 2021 and the Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2021 are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ~~("GAAP"). In~~(GAAP), and in our opinion, ~~the unaudited interim consolidated financial statements~~ include all adjustments of a normal recurring nature necessary for ~~the~~ fair ~~presentation of our~~ financial ~~position as of September 30, 2021, our~~statement presentation. Interim results of operations for the three and nine months ended September 30, 2020 and 2021, and our cash flows for the nine months ended September 30, 2020 and 2021. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2021.~~2022. 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 ~~unaudited interim~~ 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, ~~2020~~2021 filed with the SEC.

~~Use~~Stock Split Effected in the Form of ~~Estimates~~a Stock Dividend (“Stock Split”)

~~Preparation~~On February 1, 2022, the company announced that the Board of Directors had approved and declared a 20-for-one stock split 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. The Stock Split had a record date of July 1, 2022 and an effective date of July 15, 2022. The par value per share of our Class A, Class B, and Class C stock remains unchanged at $0.001 per share after the Stock Split. All prior period references made to share or per share amounts in the accompanying consolidated financial statements ~~in conformity with GAAP requires us~~and applicable disclosures have been retroactively adjusted to ~~make estimates and assumptions that affect~~reflect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses, fair values of financial instruments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, and contingent liabilities, among others. We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

~~The allowance for credit losses on accounts receivable was $789 million and $567 million as of December 31, 2020 and September 30, 2021, respectively.~~

~~Change in Accounting Estimate~~

~~In January 2021, we completed an assessment~~effects of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years. This change in accounting estimate was effective beginning in fiscal year 2021. Based on the carrying value of servers and certain network equipment as of December 31, 2020, and those acquired during the nine months ended September 30, 2021, the effect of this change in estimate was a reduction in depreciation expense of $591 million and $2.1 billion and an increase in net income of $460 million and $1.7 billion, or $0.69 and $2.50 per basic share and $0.68 and $2.46 per diluted share, for the three and nine months ended September 30, 2021, respectively.Stock Split.


Table of Contents			Alphabet Inc.

~~Prior Period Reclassifications~~

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

Note 2. Revenues

~~Revenue Recognition~~Disaggregated Revenues

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
Google Search & other	Google Search & other	$	26,338	$	37,926	$	72,159	$	105,650	Google Search & other	$	37,926	$	39,539	$	105,650	$	119,846
YouTube ads	YouTube ads	5,037		7,205		12,887		20,212		YouTube ads	7,205		7,071		20,212		21,280
Google Network	Google Network	5,720		7,999		15,679		22,396		Google Network	7,999		7,872		22,396		24,305
Google advertising	Google advertising	37,095		53,130		100,725		148,258		Google advertising	53,130		54,482		148,258		165,431
Google other	Google other	5,478		6,754		15,037		19,871		Google other	6,754		6,895		19,871		20,259
Google Services total	Google Services total	42,573		59,884		115,762		168,129		Google Services total	59,884		61,377		168,129		185,690
Google Cloud	Google Cloud	3,444		4,990		9,228		13,665		Google Cloud	4,990		6,868		13,665		18,965
Other Bets	Other Bets	178		182		461		572		Other Bets	182		209		572		842
Hedging gains (losses)	Hedging gains (losses)	(22)		62		178		(54)		Hedging gains (losses)	62		638		(54)		1,291
Total revenues	Total revenues	$	46,173	$	65,118	$	125,629	$	182,312	Total revenues	$	65,118	$	69,092	$	182,312	$	206,788

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


		Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
		September 30,								September 30,									September 30,								September 30,
		2020				2021				2020				2021					2021				2022				2021				2022
United States	United States	$	21,442	47	%	$	29,824	46	%	$	58,311	47	%	$	83,064	46	%	United States	$	29,824	46	%	$	33,372	48	%	$	83,064	46	%	$	97,832	47	%
EMEA(1)	EMEA(1)	13,924		30		19,839		30		38,132		30		55,954		31		EMEA(1)	19,839		30		19,450		28		55,954		31		60,300		29
APAC(1)	APAC(1)	8,458		18		11,705		18		22,641		18		33,391		18		APAC(1)	11,705		18		11,494		17		33,391		18		35,045		17
Other Americas(1)	Other Americas(1)	2,371		5		3,688		6		6,367		5		9,957		5		Other Americas(1)	3,688		6		4,138		6		9,957		5		12,320		6
Hedging gains (losses)	Hedging gains (losses)	(22)		0		62		0		178		0		(54)		0		Hedging gains (losses)	62		0		638		1		(54)		0		1,291		1
Total revenues	Total revenues	$	46,173	100	%	$	65,118	100	%	$	125,629	100	%	$	182,312	100	%	Total revenues	$	65,118	100	%	$	69,092	100	%	$	182,312	100	%	$	206,788	100	%

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

Revenue Backlog and Deferred Revenues

As of September 30, 2022, we had $52.4 billion of remaining performance obligations (“revenue backlog”), primarily related to Google Cloud, and ~~Remaining Performance Obligations~~expect to recognize approximately half of this amount as revenues over the next 24 months with the remaining to be recognized thereafter. Our revenue backlog represents commitments in customer contracts for future services that have not yet been recognized as revenues. The amount and timing of revenue recognition for these commitments is largely driven by when our customers utilize services and our ability to deliver in accordance with relevant contract terms, which could affect our estimate of revenue backlog and when we expect to recognize such as revenues. 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.

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. ~~Our total deferred revenue was $3.0 billion and $3.5 billion as of December 31, 2020 and September 30, 2021, respectively. Of the total~~Total deferred revenue as of December 31, ~~2020, $2.1~~2021 was $3.8 billion, of which $2.4 billion was recognized as revenues during the nine months ended September 30, ~~2021.~~

Additionally, we have performance obligations associated with commitments in customer contracts, primarily related to Google Cloud, for future services that have not yet been recognized as revenues, also referred to as remaining performance obligations. Remaining performance obligations include related deferred revenue currently recorded as well as amounts that will be invoiced in future periods, and excludes (i) contracts with an original expected term of one year or less, (ii) cancellable contracts, and (iii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. As of September 30, 2021, the amount not yet recognized as revenues from these commitments was~~$37.1 billion. We expect to recognize approximately half over the next~~24 months with the remaining thereafter. However, the amount and timing of revenue recognition is largely driven by when the customer utilizes the services and our ability to deliver in accordance with relevant contract terms, which could affect our estimate of the remaining performance obligations and when we expect to recognize such as revenues.

2022.


~~Table of Contents~~			~~Alphabet Inc.~~

Note 3. Financial Instruments

Debt Securities

We classify our marketable debt securities, which are accounted for as available-for-sale, 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.


Table of Contents			Alphabet Inc.

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. Unrealized net ~~gains~~losses related to debt securities still held where we have elected the fair value option were ~~$87~~$35 million and ~~$22~~$779 million as of December 31, ~~2020~~2021 and September 30, ~~2021,~~2022, respectively. As of December 31, ~~2020~~2021 and September 30, ~~2021,~~2022, the fair value of these debt securities was ~~$2.0~~$4.7 billion and ~~$3.0~~$6.6 billion, respectively.

The following tables summarize ~~our~~ debt securities, for which we did not elect the fair value option, by significant investment categories (in millions):


		As of December 31, 2020													As of December 31, 2021
		Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities			Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities
Level 2:	Level 2:													Level 2:
Time deposits(1)	Time deposits(1)	$	3,564	$	0	$	0	$	3,564	$	3,564	$	0	Time deposits(1)	$	5,133	$	0	$	0	$	5,133	$	5,133	$	0
Government bonds	Government bonds	55,156		793		(9)		55,940		2,527		53,413		Government bonds	53,288		258		(238)		53,308		5		53,303
Corporate debt securities	Corporate debt securities	31,521		704		(2)		32,223		8		32,215		Corporate debt securities	35,605		194		(223)		35,576		12		35,564
Mortgage-backed and asset-backed securities	Mortgage-backed and asset-backed securities	16,767		364		(7)		17,124		0		17,124		Mortgage-backed and asset-backed securities	18,829		96		(112)		18,813		0		18,813
Total	Total	$	107,008	$	1,861	$	(18)	$	108,851	$	6,099	$	102,752	Total	$	112,855	$	548	$	(573)	$	112,830	$	5,150	$	107,680


		As of September 30, 2021													As of September 30, 2022
		Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities			Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities
Level 2:	Level 2:													Level 2:
Time deposits(1)	Time deposits(1)	$	5,277	$	0	$	0	$	5,277	$	5,277	$	0	Time deposits(1)	$	4,925	$	0	$	0	$	4,925	$	4,920	$	5
Government bonds	Government bonds	53,793		371		(93)		54,071		3		54,068		Government bonds	42,863		0		(2,523)		40,340		93		40,247
Corporate debt securities	Corporate debt securities	35,156		362		(51)		35,467		0		35,467		Corporate debt securities	29,397		0		(1,833)		27,564		179		27,385
Mortgage-backed and asset-backed securities	Mortgage-backed and asset-backed securities	18,327		172		(44)		18,455		0		18,455		Mortgage-backed and asset-backed securities	16,599		0		(1,376)		15,223		0		15,223
Total	Total	$	112,553	$	905	$	(188)	$	113,270	$	5,280	$	107,990	Total	$	93,784	$	0	$	(5,732)	$	88,052	$	5,192	$	82,860

(1)The majority of our time deposits are domestic deposits.

We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. We recognized gross realized gains of ~~$127~~$109 million and ~~$109~~$14 million for the three months ended September 30, ~~2020~~2021 and ~~2021,~~2022, respectively, and ~~$690~~$360 million and ~~$360~~$83 million for the nine months ended September 30, ~~2020~~2021 and ~~2021,~~2022, respectively. We recognized gross realized losses of $8$29 million and ~~$29~~$551 million for the three months ended September 30, ~~2020~~2021 and ~~2021,~~2022, respectively, and ~~$135~~$180 million and ~~$180 million~~$1.2 billion for the nine months ended September 30, ~~2020~~2021 and ~~2021,~~2022, respectively. We reflect these gains and losses as a component of other income (expense), net.

The following table summarizes the estimated fair value of investments in marketable debt securities by stated contractual maturity dates (in millions):


	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

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


Table of Contents			Alphabet Inc.

~~The following table summarizes the estimated fair value of our investments in marketable debt securities by stated contractual maturity dates (in millions):~~


	As of September 30, 2021
~~Due in 1 year or less~~	$	~~19,074~~
~~Due in 1 year through 5 years~~	~~73,675~~
~~Due in 5 years through 10 years~~	~~4,207~~
~~Due after 10 years~~	~~13,993~~
~~Total~~	$	~~110,949~~

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, 2020
Less than 12 Months 12 Months or Greater Total
Fair Value Unrealized
Loss Fair Value Unrealized
Loss Fair Value Unrealized
Loss
Government bonds $ 5,516 $ (9) $ 3 $ 0 $ 5,519 $ (9)
Corporate debt securities 1,999 (1) 0 0 1,999 (1)
Mortgage-backed and asset-backed securities 929 (5) 242 (2) 1,171 (7)
Total $ 8,444 $ (15) $ 245 $ (2) $ 8,689 $ (17)
As of September 30, 2021
Less than 12 Months 12 Months or Greater Total
Fair Value Unrealized
Loss Fair Value Unrealized
Loss Fair Value Unrealized
Loss
Government bonds $ 28,507 $ (92) $ 54 $ (1) $ 28,561 $ (93)
Corporate debt securities 11,293 (19) 245 (2) 11,538 (21)
Mortgage-backed and asset-backed securities 8,371 (41) 188 (3) 8,559 (44)
Total $ 48,171 $ (152) $ 487 $ (6) $ 48,658 $ (158)


	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)


	As of September 30, 2022
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Government bonds	$	31,685	$	(1,864)	$	8,064	$	(659)	$	39,749	$	(2,523)
Corporate debt securities	19,378		(1,042)		7,431		(697)		26,809		(1,739)
Mortgage-backed and asset-backed securities	11,316		(992)		3,886		(384)		15,202		(1,376)
Total	$	62,379	$	(3,898)	$	19,381	$	(1,740)	$	81,760	$	(5,638)

During the three and nine months ended September 30, ~~2020~~2021 and ~~2021,~~2022, we did not recognize ~~any~~ significant credit losses, and the ending allowance balances for credit losses were immaterial as of December 31, ~~2020~~2021 and September 30, ~~2021.~~2022. See Note 6 for further details on other income (expense), net.

Equity Investments

The following discusses our marketable equity securities, non-marketable equity securities, gains and losses on marketable and non-marketable equity securities, as well as our equity securities accounted for under the equity method.

Our marketable equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 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.

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 (referred to as the measurement alternative). 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.


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Gains and losses on marketable and non-marketable equity securities

Gains and losses (including impairments) reflected in other income (expense), net, for ~~our~~ marketable and non-marketable equity securities are summarized below (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
Net gain (loss) on equity securities sold during the period $ (5) $ (36) $ 426 $ 545
Net unrealized gain (loss) on equity securities held as of the end of the period 1,904 2,157 2,114 9,185
Total gain (loss) recognized in other income (expense), net $ 1,899 $ 2,121 $ 2,540 $ 9,730


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2022		2021		2022
Net gain (loss) on equity securities sold during the period	$	(36)	$	(73)	$	545	$	(355)
Net unrealized gain (loss) on equity securities held as of the end of the period	2,157		(574)		9,185		(1,613)
Total gain (loss) recognized in other income (expense), net	$	2,121	$	(647)	$	9,730	$	(1,968)

In the table above, 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.


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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. 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 ~~realized~~ 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									Equity Securities Sold
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
Total sale price	Total sale price	$	1,389	$	1,199	$	2,888	$	4,553	Total sale price	$	1,199	$	296	$	4,553	$	1,631
Total initial cost	Total initial cost	1,146		188		1,831		955		Total initial cost	188		310		955		738
Cumulative net gains(1)		$	243	$	1,011	$	1,057	$	3,598
Cumulative net gain (loss)(1)										Cumulative net gain (loss)(1)	$	1,011	$	(14)	$	3,598	$	893

(1)Cumulative net gains for the nine months ended September 30, 2021 excludes cumulative losses of $684 million resulting from our equity derivatives, which hedged the changes in fair value of certain marketable equity securities ~~sold during the second quarter of 2021.~~sold. The associated derivative liabilities arising from these losses were settled against our holdings of the underlying equity securities.

Carrying value of marketable and non-marketable equity securities

The carrying value is measured as the total initial cost plus the cumulative net gain (loss). The carrying values for ~~our~~ marketable and non-marketable equity securities are summarized below (in millions):


		As of December 31, 2020							As of December 31, 2021
		Marketable Securities		Non-Marketable Securities		Total			Marketable Securities		Non-Marketable Securities		Total
Total initial cost	Total initial cost	$	2,227	$	14,616	$	16,843	Total initial cost	$	4,211	$	15,135	$	19,346
Cumulative net gain (loss)(1)	Cumulative net gain (loss)(1)	3,631		4,277		7,908		Cumulative net gain (loss)(1)	3,587		12,436		16,023
Carrying value(2)	Carrying value(2)	$	5,858	$	18,893	$	24,751	Carrying value(2)	$	7,798	$	27,571	$	35,369

(1)Non-marketable equity securities cumulative net gain (loss) is comprised of ~~$6.1~~$14.1 billion ~~unrealized~~ gains and ~~$1.9~~$1.7 billion ~~unrealized~~ losses (including ~~impairment)~~impairments).

(2)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of ~~$429 million~~$1.4 billion is included within other non-current assets.


		As of September 30, 2021							As of September 30, 2022
		Marketable Securities(2)		Non-Marketable Securities		Total			Marketable Securities		Non-Marketable Securities		Total
Total initial cost	Total initial cost	$	2,823	$	14,944	$	17,767	Total initial cost	$	5,752	$	15,540	$	21,292
Cumulative net gain (loss)(1)	Cumulative net gain (loss)(1)	4,954		9,194		14,148		Cumulative net gain (loss)(1)	104		13,104		13,208
Carrying value(2)	Carrying value(2)	$	7,777	$	24,138	$	31,915	Carrying value(2)	$	5,856	$	28,644	$	34,500

(1)Non-marketable equity securities cumulative net gain (loss) is comprised of ~~$10.9~~$16.9 billion ~~unrealized~~ gains and ~~$1.7~~$3.8 billion ~~unrealized~~ losses (including ~~impairment)~~impairments).

(2)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of ~~$443~~$841 million is included within other non-current assets.


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Marketable equity securities

The following table summarizes marketable equity securities measured at fair value by significant investment categories (in millions):


		As of December 31, 2020				As of September 30, 2021					As of December 31, 2021				As of September 30, 2022
		Cash and Cash Equivalents		Marketable Securities		Cash and Cash Equivalents		Marketable Securities			Cash and Cash Equivalents		Marketable Securities		Cash and Cash Equivalents		Marketable Securities
Level 1:	Level 1:									Level 1:
Money market funds	Money market funds	$	12,210	$	0	$	10,732	$	0	Money market funds	$	7,499	$	0	$	8,318	$	0
Marketable equity securities(1)(2)	Marketable equity securities(1)(2)	0		5,470		0		7,430		Marketable equity securities(1)(2)	0		7,447		0		5,509
		12,210		5,470		10,732		7,430			7,499		7,447		8,318		5,509
Level 2:	Level 2:									Level 2:
Mutual funds	Mutual funds	0		388		0		347		Mutual funds	0		351		0		347
Total	Total	$	12,210	$	5,858	$	10,732	$	7,777	Total	$	7,499	$	7,798	$	8,318	$	5,856

(1)The balance as of December 31, ~~2020~~2021 and September 30, ~~2021~~2022 includes investments that were reclassified from non-marketable equity securities following the commencement of public market trading of the issuers or acquisition by public entities (certain ~~of which~~investments are subject to short-term lock-up restrictions).

(2)As of December 31, ~~2020~~2021 and September 30, ~~2021~~2022 the long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of ~~$429 million~~$1.4 billion and ~~$443~~$841 million, respectively, is included within other non-current assets.

Non-marketable equity securities

The following is a summary of unrealized gains and losses (including impairments) recorded in other income (expense), net, ~~and~~which are included as adjustments to the carrying value of non-marketable equity securities held as of the end of the period (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
Unrealized gains $ 1,225 $ 1,260 $ 1,770 $ 6,245
Unrealized losses (including impairment) (27) (37) (1,413) (98)
Total unrealized gain (loss) for non-marketable equity securities $ 1,198 $ 1,223 $ 357 $ 6,147


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2022		2021		2022
Unrealized gains on non-marketable equity securities	$	1,260	$	219	$	6,245	$	3,234
Unrealized losses on non-marketable equity securities (including impairments)	(37)		(707)		(98)		(2,353)
Total unrealized gain (loss) recognized on non-marketable equity securities	$	1,223	$	(488)	$	6,147	$	881

During the three months ended September 30, ~~2021,~~2022, included in the ~~$24.1~~$28.6 billion of non-marketable equity securities ~~$2.5~~held as of the end of the period, $1.7 billion were measured at fair value resulting in a net unrealized ~~gain~~loss of ~~$1.2 billion.~~$488 million.

Equity securities accounted for under the Equity Method

As of December 31, ~~2020~~2021 and September 30, ~~2021,~~2022, equity securities accounted for under the equity method had a carrying value of approximately ~~$1.4~~$1.5 billion and ~~$1.5~~$1.3 billion, respectively. Our share of gains and losses, including ~~impairment~~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 enter into derivative instruments to manage risks relating to our ongoing business operations. The primary risk managed with derivative instruments 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 as either assets or liabilities 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 where both the purchased and written options are with the same counterparty. For other derivative contracts, we present at gross


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fair values. We primarily record changes in the fair value in the Consolidated Statements of Income as either other income (expense), net, or revenues, or in the Consolidated Balance Sheets in AOCI, as discussed below.

We enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. Further, we enter into collateral security arrangements that provide for collateral to be received or pledged when the net fair value of certain financial instruments fluctuates from


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contractually established thresholds. Cash collateral received related to derivative instruments under our collateral security arrangements are included in other current assets with a corresponding liability. Cash and non-cash collateral pledged related to derivative instruments under our collateral security arrangements are included in other current assets.

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.~~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 the change in forward points and time value from our assessment of hedge effectiveness. The initial value of the excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI. If the hedged transactions become probable of not occurring, the corresponding amounts in AOCI are reclassified to other income (expense), net in the period of de-designation.

As of September 30, ~~2021,~~2022, the net accumulated gain on our foreign currency cash flow hedges before tax effect was ~~$357 million,~~$1.9 billion, which is expected to be reclassified from AOCI into earnings 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 investments 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 changes in 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 changes in forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net.

Other Derivatives

Other derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use 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 contracts, as well as the related costs, are recognized 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. Additionally, from time to time, we enter into derivatives to hedge the market price risk on certain of our marketable equity securities. Gains (losses) arising from these derivatives are reflected within the "other" component of other income (expense), net and the offsetting recognized gains (losses) on the marketable equity securities are reflected within the gain (loss) on equity securities, net component of other income (expense), net. See Note 6 for further details on other income (expense), net.


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


		As of December 31, 2020		As of September 30, 2021			As of December 31, 2021		As of September 30, 2022
Derivatives Designated as Hedging Instruments:	Derivatives Designated as Hedging Instruments:					Derivatives Designated as Hedging Instruments:
Foreign exchange contracts	Foreign exchange contracts					Foreign exchange contracts
Cash flow hedges	Cash flow hedges	$	10,187	$	16,058	Cash flow hedges	$	16,362	$	17,513
Fair value hedges	Fair value hedges	$	1,569	$	2,502	Fair value hedges	$	2,556	$	2,435
Net investment hedges	Net investment hedges	$	9,965	$	9,934	Net investment hedges	$	10,159	$	8,993
Derivatives Not Designated as Hedging Instruments:	Derivatives Not Designated as Hedging Instruments:					Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Foreign exchange contracts	$	39,861	$	36,763	Foreign exchange contracts	$	41,031	$	36,988
Other contracts	Other contracts	$	2,399	$	4,107	Other contracts	$	4,275	$	6,728

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


			As of December 31, 2020								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			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:	Derivative Assets:								Derivative Assets:
Level 2:	Level 2:								Level 2:
Foreign exchange contracts	Foreign exchange contracts	Other current and non-current assets	$	33	$	316	$	349	Foreign exchange contracts	Other current and non-current assets	$	867	$	42	$	909
Other contracts	Other contracts	Other current and non-current assets	0		16		16		Other contracts	Other current and non-current assets	0		52		52
Total	Total		$	33	$	332	$	365	Total		$	867	$	94	$	961
Derivative Liabilities:	Derivative Liabilities:								Derivative Liabilities:
Level 2:	Level 2:								Level 2:
Foreign exchange contracts	Foreign exchange contracts	Accrued expenses and other liabilities, current and non-current	$	395	$	185	$	580	Foreign exchange contracts	Accrued expenses and other liabilities, current and non-current	$	8	$	452	$	460
Other contracts	Other contracts	Accrued expenses and other liabilities, current and non-current	0		942		942		Other contracts	Accrued expenses and other liabilities, current and non-current	0		121		121
Total	Total		$	395	$	1,127	$	1,522	Total		$	8	$	573	$	581


			As of September 30, 2021								As of September 30, 2022
		Balance Sheet Location	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value			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:	Derivative Assets:								Derivative Assets:
Level 2:	Level 2:								Level 2:
Foreign exchange contracts	Foreign exchange contracts	Other current and non-current assets	$	505	$	63	$	568	Foreign exchange contracts	Other current and non-current assets	$	2,317	$	226	$	2,543
Other contracts	Other contracts	Other current and non-current assets	0		65		65		Other contracts	Other current and non-current assets	0		46		46
Total	Total		$	505	$	128	$	633	Total		$	2,317	$	272	$	2,589
Derivative Liabilities:	Derivative Liabilities:								Derivative Liabilities:
Level 2:	Level 2:								Level 2:
Foreign exchange contracts	Foreign exchange contracts	Accrued expenses and other liabilities, current and non-current	$	1	$	141	$	142	Foreign exchange contracts	Accrued expenses and other liabilities, current and non-current	$	13	$	820	$	833
Other contracts	Other contracts	Accrued expenses and other liabilities, current and non-current	0		179		179		Other contracts	Accrued expenses and other liabilities, current and non-current	0		45		45
Total	Total		$	1	$	320	$	321	Total		$	13	$	865	$	878


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


		Gains (Losses) Recognized in OCI on Derivatives Before Tax Effect									Gains (Losses) Recognized in OCI on Derivatives Before Tax Effect
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
Derivatives in Cash Flow Hedging Relationship:	Derivatives in Cash Flow Hedging Relationship:									Derivatives in Cash Flow Hedging Relationship:
Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Amount included in the assessment of effectiveness	Amount included in the assessment of effectiveness	$	(37)	$	336	$	331	$	438	Amount included in the assessment of effectiveness	$	336	$	1,486	$	438	$	2,752
Amount excluded from the assessment of effectiveness	Amount excluded from the assessment of effectiveness	(23)		18		(20)		63		Amount excluded from the assessment of effectiveness	18		(77)		63		(131)

Derivatives in Net Investment Hedging Relationship:	Derivatives in Net Investment Hedging Relationship:									Derivatives in Net Investment Hedging Relationship:
Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Amount included in the assessment of effectiveness	Amount included in the assessment of effectiveness	(371)		212		(412)		411		Amount included in the assessment of effectiveness	212		760		411		1,418
Total	Total	$	(431)	$	566	$	(101)	$	912	Total	$	566	$	2,169	$	912	$	4,039

The effect of derivative instruments on income is summarized below (in millions):


		Gains (Losses) Recognized in Income									Gains (Losses) Recognized in Income
		Three Months Ended									Three Months Ended
		September 30,									September 30,
		2020				2021					2021				2022
		Revenues		Other income (expense), net		Revenues		Other income (expense), net			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	Total amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded	$	46,173	$	2,146	$	65,118	$	2,033	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:	Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:									Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:
Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Amount of gains (losses) reclassified from AOCI to income	Amount of gains (losses) reclassified from AOCI to income	$	(28)	$	0	$	65	$	0	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	Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	6		0		(3)		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:	Gains (Losses) on Derivatives in Fair Value Hedging Relationship:									Gains (Losses) on Derivatives in Fair Value Hedging Relationship:
Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Hedged items	Hedged items	0		14		0		(69)		Hedged items	0		(69)		0		(226)
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments	0		(14)		0		69		Derivatives designated as hedging instruments	0		69		0		226
Amount excluded from the assessment of effectiveness	Amount excluded from the assessment of effectiveness	0		0		0		2		Amount excluded from the assessment of effectiveness	0		2		0		6
Gains (Losses) on Derivatives in Net Investment Hedging Relationship:	Gains (Losses) on Derivatives in Net Investment Hedging Relationship:									Gains (Losses) on Derivatives in Net Investment Hedging Relationship:
Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Amount excluded from the assessment of effectiveness	Amount excluded from the assessment of effectiveness	0		20		0		19		Amount excluded from the assessment of effectiveness	0		19		0		59
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:	Gains (Losses) on Derivatives Not Designated as Hedging Instruments:									Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Foreign exchange contracts	0		382		0		(148)		Foreign exchange contracts	0		(148)		0		(495)
Other Contracts	Other Contracts	0		(181)		0		(88)		Other Contracts	0		(88)		0		34
Total gains (losses)	Total gains (losses)	$	(22)	$	221	$	62	$	(215)	Total gains (losses)	$	62	$	(215)	$	638	$	(396)


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		Gains (Losses) Recognized in Income									Gains (Losses) Recognized in Income
		Nine Months Ended									Nine Months Ended
		September 30,									September 30,
		2020				2021					2021				2022
		Revenues		Other income (expense), net		Revenues		Other income (expense), net			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	Total amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded	$	125,629	$	3,820	$	182,312	$	9,503	Total amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded	$	182,312	$	9,503	$	206,788	$	(2,501)

Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:	Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:									Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:
Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Amount of gains (losses) reclassified from AOCI to income	Amount of gains (losses) reclassified from AOCI to income	$	138	$	0	$	(43)	$	0	Amount of gains (losses) reclassified from AOCI to income	$	(43)	$	0	$	1,355	$	0
Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	40		0		(11)		0		Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	(11)		0		(63)		0
Gains (Losses) on Derivatives in Fair Value Hedging Relationship:	Gains (Losses) on Derivatives in Fair Value Hedging Relationship:									Gains (Losses) on Derivatives in Fair Value Hedging Relationship:
Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Hedged items	Hedged items	0		6		0		(41)		Hedged items	0		(41)		0		(349)
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments	0		(6)		0		41		Derivatives designated as hedging instruments	0		41		0		350
Amount excluded from the assessment of effectiveness	Amount excluded from the assessment of effectiveness	0		2		0		6		Amount excluded from the assessment of effectiveness	0		6		0		9
Gains (Losses) on Derivatives in Net Investment Hedging Relationship:	Gains (Losses) on Derivatives in Net Investment Hedging Relationship:									Gains (Losses) on Derivatives in Net Investment Hedging Relationship:
Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Amount excluded from the assessment of effectiveness	Amount excluded from the assessment of effectiveness	0		131		0		60		Amount excluded from the assessment of effectiveness	0		60		0		99
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:	Gains (Losses) on Derivatives Not Designated as Hedging Instruments:									Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Foreign exchange contracts	0		542		0		(552)		Foreign exchange contracts	0		(552)		0		(891)
Other Contracts	Other Contracts	0		(420)		0		93		Other Contracts	0		93		0		158
Total gains (losses)	Total gains (losses)	$	178	$	255	$	(54)	$	(393)	Total gains (losses)	$	(54)	$	(393)	$	1,292	$	(624)


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Offsetting of Derivatives

The gross amounts of ~~our~~ derivative instruments subject to master netting arrangements with various counterparties, and cash and non-cash collateral received and pledged under such agreements were as follows (in millions):

Offsetting of Assets


		As of December 31, 2020																As of December 31, 2021
								Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset																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			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	Derivatives	$	397	$	(32)	$	365	$	(295)	(1)	$	(16)	$	0	$	54	Derivatives	$	999	$	(38)	$	961	$	(434)	(1)	$	(394)	$	(12)	$	121

		As of September 30, 2021																As of September 30, 2022
								Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset																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			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	Derivatives	$	667	$	(34)	$	633	$	(129)	(1)	$	(426)	$	(13)	$	65	Derivatives	$	2,639	$	(50)	$	2,589	$	(755)	(1)	$	(1,609)	$	(32)	$	193

(1)The balances as of December 31, ~~2020~~2021 and September 30, ~~2021~~2022 were related to derivative liabilities which are allowed to be net settled against derivative assets in accordance with our master netting agreements.

Offsetting of Liabilities


		As of December 31, 2020																As of December 31, 2021
								Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset																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			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	Derivatives	$	1,554	$	(32)	$	1,522	$	(295)	(2)	$	(1)	$	(943)	$	283	Derivatives	$	619	$	(38)	$	581	$	(434)	(2)	$	(4)	$	(110)	$	33

		As of September 30, 2021																As of September 30, 2022
								Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset																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			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	Derivatives	$	355	$	(34)	$	321	$	(129)	(2)	$	(1)	$	(173)	$	18	Derivatives	$	928	$	(50)	$	878	$	(755)	(2)	$	(15)	$	(2)	$	106

(2) The balances as of December 31, ~~2020~~2021 and September 30, ~~2021~~2022 were related to derivative assets which are allowed to be net settled against derivative liabilities in accordance with our master netting agreements.


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Note 4. Variable Interest Entities (VIE)

Consolidated VIEs

We consolidate VIEs in which we hold a variable interest and are the primary beneficiary. The results of operations and financial position of these VIEs are included in our consolidated financial statements.

For certain consolidated VIEs, their assets are not available to us and their creditors do not have recourse to us. As of December 31, ~~2020~~2021 and September 30, ~~2021,~~2022, assets that can only be used to settle obligations of these VIEs were ~~$5.7~~$6.0 billion and ~~$6.8~~$4.8 billion, respectively, and the liabilities for which creditors only have recourse to the VIEs were ~~$2.3~~$2.5 billion and ~~$2.5~~$2.7 billion, respectively.

~~Total~~As of December 31, 2021 and September 30, 2022, total noncontrolling interests ~~("NCI")~~(NCI), including redeemable noncontrolling interests ~~("RNCI")~~(RNCI), in our consolidated subsidiaries ~~was~~were $4.3 billion and $3.9 billion, ~~and $4.4 billion as of December 31, 2020 and September 30, 2021,~~


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respectively. NCI and RNCI are included within additional paid-in capital. Net loss attributable to noncontrolling ~~interests~~interests was not material for any period presented and is included within the "other" component of other income (expense), net. See Note 6 for further details on other income (expense), net.

~~Waymo~~

In June 2021, Waymo, a consolidated VIE, completed an investment round with additional funding of $2.5 billion, the majority of which represented investment from Alphabet. The investments from external parties were accounted for as equity transactions and resulted in recognition of noncontrolling interests. Waymo is a self-driving technology development company with a mission to make it safe and easy for people and things to get where they're going.

Unconsolidated VIEs

We have investments in ~~some~~ VIEs in which we are not the primary beneficiary. These VIEs include private companies that are primarily early stage companies and certain renewable energy entities in which activities involve power generation using renewable sources.

We have determined that the governance structures of these entities do not allow us to direct the activities that would significantly affect their economic performance. Therefore, we are not the primary beneficiary, and the results of operations and financial position of these VIEs are not included in our consolidated financial statements. We account for these investments as non-marketable equity ~~investments~~securities or equity method investments.

The maximum exposure of these unconsolidated VIEs ~~are~~is generally based on the current carrying value of the investments and any future funding commitments. We have determined that the single source of our exposure to these VIEs is our capital investments in them. The carrying value and maximum exposure of these unconsolidated VIEs were ~~not material~~$2.7 billion and $2.9 billion, respectively, as of December 31, ~~2020~~2021 and$2.6 billion and $2.6 billion, respectively, as of September 30, ~~2021.~~2022.

Note 5. Debt

Short-Term Debt

We have a debt financing program of up to $10.0 billion through the issuance of commercial ~~paper, which increased from $5.0 billion in September 2021.~~paper. Net proceeds from this program are used for general corporate purposes. We hadno ~~commercial~~commercial paper outstanding as of December 31, ~~2020~~2021 and September 30, ~~2021.~~2022.

Our short-term debt balance also includes the current portion of certain long-term debt.

Long-Term Debt

~~The total~~Total outstanding debt is summarized below (in millions, except percentages):


		Maturity	Coupon Rate	Effective Interest Rate	As of December 31, 2020		As of September 30, 2021			Maturity	Coupon Rate	Effective Interest Rate	As of December 31, 2021		As of September 30, 2022
Debt	Debt								Debt
2011-2020 Notes Issuances		2024 - 2060	0.45% - 3.38%	0.57% - 3.38%	$	14,000	$	13,000
Future finance lease payments, net(1)					1,201		1,696
2014-2020 Notes Issuances									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)									Future finance lease payments, net and other (1)				2,086		2,213
Total debt	Total debt				15,201		14,696		Total debt				15,086		15,213
Unamortized discount and debt issuance costs	Unamortized discount and debt issuance costs				(169)		(159)		Unamortized discount and debt issuance costs				(156)		(146)
Less: Current portion of Notes(2)					(999)		0
Less: Current portion future finance lease payments, net(1)(2)					(101)		(249)
Less: Current portion future finance lease payments, net and other current debt(1)(2)									Less: Current portion future finance lease payments, net and other current debt(1)(2)				(113)		(414)
Total long-term debt	Total long-term debt				$	13,932	$	14,288	Total long-term debt				$	14,817	$	14,653

(1)~~Net~~Future finance lease payments are net of imputed interest.

(2)Total current portion of long-term debt is included within other accrued expenses and current liabilities. See Note 6.6 for further details.


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The notes in the table above are ~~comprised of~~ fixed-rate senior unsecured obligations and generally rank equally with each other. We may redeem the notes at any time in whole or in part at specified redemption prices. The effective interest rates are based on proceeds received with interest payable semi-annually.

The total estimated fair value of the outstanding notes ~~including the current portion,~~ was approximately ~~$14.0~~$12.4 billion and ~~$12.3~~$9.7 billion as of December 31, ~~2020~~2021 and September 30, ~~2021,~~2022, respectively. The fair value was


~~Table of Contents~~			~~Alphabet Inc.~~

determined based on observable market prices of identical instruments in less active markets and is categorized accordingly as Level 2 in the fair value hierarchy.

Credit Facility

As of September 30, ~~2021,~~2022, we ~~have~~had $10.0 billion of revolving credit ~~facilities. No amounts were outstanding under the credit~~ facilities, ~~as of December 31, 2020 and September 30, 2021.~~

~~In April 2021, we terminated the existing~~ $4.0 billion ~~revolving credit facilities, which were scheduled to expire~~expiring in ~~July~~April 2023 ~~and entered into 2 new revolving credit facilities in the amounts of $4.0 billion~~ and $6.0 billion ~~which will expire~~expiring in April ~~2022 and April 2026, respectively.~~2026. The interest rates for ~~the new~~all credit facilities are determined based on a formula using certain market rates, as well as our progress toward the achievement of certain sustainability goals.No ~~amounts~~ ~~have been borrowed~~ amounts were outstanding under the ~~new~~ credit ~~facilities.~~facilities as of December 31, 2021 and September 30, 2022.

Note 6. Supplemental Financial Statement Information

Accounts Receivable

The allowance for credit losses on accounts receivable was $550 million and $731 million as of December 31, 2021 and September 30, 2022, respectively.

Property and Equipment, Net

Property and equipment, net, consisted of the following (in millions):


		As of December 31, 2020		As of September 30, 2021			As of December 31, 2021		As of September 30, 2022
Land and buildings	Land and buildings	$	49,732	$	57,268	Land and buildings	$	58,881	$	64,679
Information technology assets	Information technology assets	45,906		53,549		Information technology assets	55,606		61,938
Construction in progress	Construction in progress	23,111		22,494		Construction in progress	23,172		26,899
Leasehold improvements	Leasehold improvements	7,516		8,391		Leasehold improvements	9,146		10,062
Furniture and fixtures	Furniture and fixtures	197		202		Furniture and fixtures	208		297
Property and equipment, gross	Property and equipment, gross	126,462		141,904		Property and equipment, gross	147,013		163,875
Less: accumulated depreciation	Less: accumulated depreciation	(41,713)		(47,273)		Less: accumulated depreciation	(49,414)		(55,512)
Property and equipment, net	Property and equipment, net	$	84,749	$	94,631	Property and equipment, net	$	97,599	$	108,363

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in millions):


		As of December 31, 2020		As of September 30, 2021			As of December 31, 2021		As of September 30, 2022
European Commission fines(1)	European Commission fines(1)	$	10,409	$	10,073	European Commission fines(1)	$	9,799	$	8,264
Payables to brokers for unsettled investment trades		754		1,510
Accrued customer liabilities	Accrued customer liabilities	3,118		3,039		Accrued customer liabilities	3,505		2,943
Accrued purchases of property and equipment	Accrued purchases of property and equipment	2,197		2,309		Accrued purchases of property and equipment	2,415		3,255
Current operating lease liabilities	Current operating lease liabilities	1,694		2,101		Current operating lease liabilities	2,189		2,285
Other accrued expenses and current liabilities	Other accrued expenses and current liabilities	10,459		11,081		Other accrued expenses and current liabilities	13,328		18,291
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	28,631	$	30,113	Accrued expenses and other current liabilities	$	31,236	$	35,038

(1) Includes the effects of foreign exchange and interest. See Note 9 for further details.


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Accumulated Other Comprehensive Income (Loss)

~~The components~~Components of AOCI, net of income tax, were as follows (in millions):


		Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Available-for-Sale Investments		Unrealized Gains (Losses) on Cash Flow Hedges		Total			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, 2019		$	(2,003)	$	812	$	(41)	$	(1,232)
Balance as of December 31, 2020										Balance as of December 31, 2020	$	(864)	$	1,612	$	(115)	$	633
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	193		1,346		264		1,803		Other comprehensive income (loss) before reclassifications	(671)		(699)		366		(1,004)
Amounts excluded from the assessment of hedge effectiveness recorded in AOCI	Amounts excluded from the assessment of hedge effectiveness recorded in AOCI	0		0		(20)		(20)		Amounts excluded from the assessment of hedge effectiveness recorded in AOCI	0		0		63		63
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		(391)		(114)		(505)		Amounts reclassified from AOCI	0		(121)		21		(100)
Other comprehensive income (loss)	Other comprehensive income (loss)	193		955		130		1,278		Other comprehensive income (loss)	(671)		(820)		450		(1,041)
Balance as of September 30, 2020		$	(1,810)	$	1,767	$	89	$	46
Balance as of September 30, 2021										Balance as of September 30, 2021	$	(1,535)	$	792	$	335	$	(408)


		Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Available-for-Sale Investments		Unrealized Gains (Losses) on Cash Flow Hedges		Total			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
Balance as of December 31, 2021										Balance as of December 31, 2021	$	(2,306)	$	236	$	447	$	(1,623)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(671)		(699)		366		(1,004)		Other comprehensive income (loss) before reclassifications	(3,801)		(5,204)		2,296		(6,709)
Amounts excluded from the assessment of hedge effectiveness recorded in AOCI	Amounts excluded from the assessment of hedge effectiveness recorded in AOCI	0		0		63		63		Amounts excluded from the assessment of hedge effectiveness recorded in AOCI	0		0		(131)		(131)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		(121)		21		(100)		Amounts reclassified from AOCI	0		743		(1,132)		(389)
Other comprehensive income (loss)	Other comprehensive income (loss)	(671)		(820)		450		(1,041)		Other comprehensive income (loss)	(3,801)		(4,461)		1,033		(7,229)
Balance as of September 30, 2021		$	(1,535)	$	792	$	335	$	(408)
Balance as of September 30, 2022										Balance as of September 30, 2022	$	(6,107)	$	(4,225)	$	1,480	$	(8,852)

The effects on net income of amounts reclassified from AOCI were as follows (in millions):


			Gains (Losses) Reclassified from AOCI to the Consolidated Statements of Income										Gains (Losses) Reclassified from AOCI to the Consolidated Statements of Income
			Three Months Ended				Nine Months Ended						Three Months Ended				Nine Months Ended
			September 30,				September 30,						September 30,				September 30,
AOCI Components	AOCI Components	Location	2020		2021		2020		2021		AOCI Components	Location	2021		2022		2021		2022
Unrealized gains (losses) on available-for-sale investments	Unrealized gains (losses) on available-for-sale investments										Unrealized gains (losses) on available-for-sale investments
		Other income (expense), net	$	93	$	73	$	496	$	155		Other income (expense), net	$	73	$	(464)	$	155	$	(953)
		Benefit (provision) for income taxes	(20)		(16)		(105)		(34)			Benefit (provision) for income taxes	(16)		102		(34)		210
		Net of income tax	73		57		391		121			Net of income tax	57		(362)		121		(743)
Unrealized gains (losses) on cash flow hedges	Unrealized gains (losses) on cash flow hedges										Unrealized gains (losses) on cash flow hedges
Foreign exchange contracts	Foreign exchange contracts	Revenue	(28)		65		138		(43)		Foreign exchange contracts	Revenue	65		658		(43)		1,355
Interest rate contracts	Interest rate contracts	Other income (expense), net	1		1		4		4		Interest rate contracts	Other income (expense), net	1		2		4		5
		Benefit (provision) for income taxes	4		(6)		(28)		18			Benefit (provision) for income taxes	(6)		(113)		18		(228)
		Net of income tax	(23)		60		114		(21)			Net of income tax	60		547		(21)		1,132
Total amount reclassified, net of income tax	Total amount reclassified, net of income tax		$	50	$	117	$	505	$	100	Total amount reclassified, net of income tax		$	117	$	185	$	100	$	389


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Other Income (Expense), Net

~~The components~~Components of other income (expense), net, were as follows (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
Interest income	Interest income	$	460	$	387	$	1,479	$	1,121	Interest income	$	387	$	615	$	1,121	$	1,515
Interest expense(1)	Interest expense(1)	(48)		(77)		(82)		(229)		Interest expense(1)	(77)		(101)		(229)		(267)
Foreign currency exchange gain (loss), net	Foreign currency exchange gain (loss), net	(84)		(139)		(257)		(77)		Foreign currency exchange gain (loss), net	(139)		(136)		(77)		(469)
Gain (loss) on debt securities, net	Gain (loss) on debt securities, net	116		37		515		62		Gain (loss) on debt securities, net	37		(731)		62		(1,888)
Gain (loss) on equity securities, net	Gain (loss) on equity securities, net	1,899		2,121		2,540		9,730		Gain (loss) on equity securities, net	2,121		(647)		9,730		(1,968)
Performance fees	Performance fees	(135)		(492)		(204)		(1,680)		Performance fees	(492)		54		(1,680)		605
Income (loss) and impairment from equity method investments, net	Income (loss) and impairment from equity method investments, net	26		188		46		285		Income (loss) and impairment from equity method investments, net	188		(99)		285		(306)
Other	Other	(88)		8		(217)		291		Other	8		143		291		277
Other income (expense), net	Other income (expense), net	$	2,146	$	2,033	$	3,820	$	9,503	Other income (expense), net	$	2,033	$	(902)	$	9,503	$	(2,501)

(1)Interest expense is net of interest capitalized of ~~$53~~$40 million and ~~$40~~$28 million for the three months ended September 30, ~~2020~~2021 and ~~2021,~~2022, respectively, and ~~$162~~$132 million and ~~$132~~$99 million for the nine months ended September 30, ~~2020~~2021 and ~~2021,~~2022, respectively.

Note 7. Acquisitions

~~Fitbit~~Mandiant Acquisition

~~In January 2021,~~On September 12, 2022 we closed the acquisition of ~~Fitbit, Inc.~~Mandiant for ~~$2.1 billion. The addition~~a total purchase price of ~~Fitbit to Google Services is expected to help spur innovation in wearable devices. The assets acquired~~$6.1 billion, including cash and ~~liabilities assumed were recorded at fair value.~~debt. The purchase price excludes post acquisition compensation arrangements. Mandiant's dynamic cyber defense, threat intelligence and incident response services are expected to enhance Google Cloud's security offerings. The financial results of Mandiant have been included within the Google Cloud segment as of the close of the acquisition.

The purchase price was ~~attributed to $440 million cash acquired, $590 million of intangible assets, $1.2 billion of goodwill and $92 million of net liabilities assumed.~~ allocated as follows (in millions):


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

(1)Goodwill was recorded in the Google ~~Services~~Cloud segment and primarily attributable to synergies expected to arise after the ~~acquisition.~~acquisition. Goodwill is not ~~expected to be~~ deductible for tax purposes.

(2)Includes $706 million of acquired cash.

Intangible assets acquired as of the acquisition date were as follows:


	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


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Note 8. Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of goodwill for the nine months ended September 30, ~~2021~~2022 were as follows (in millions):


		Google Services		Google Cloud		Other Bets		Total			Google Services		Google Cloud		Other Bets		Total
Balance as of December 31, 2020		$	18,517	$	1,957	$	701	$	21,175
Balance as of December 31, 2021										Balance as of December 31, 2021	$	19,826	$	2,337	$	793	$	22,956
Acquisitions	Acquisitions	1,306		47		102		1,455		Acquisitions	1,146		4,875		113		6,134
Foreign currency translation and other adjustments	Foreign currency translation and other adjustments	4		0		(11)		(7)		Foreign currency translation and other adjustments	(227)		(23)		(6)		(256)
Balance as of September 30, 2021		$	19,827	$	2,004	$	792	$	22,623
Balance as of September 30, 2022										Balance as of September 30, 2022	$	20,745	$	7,189	$	900	$	28,834

Other Intangible Assets

Information regarding purchased intangible assets ~~were~~was as follows (in millions):


		As of December 31, 2020							As of December 31, 2021
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Patents and developed technology	Patents and developed technology	$	4,639	$	3,649	$	990	Patents and developed technology	$	4,786	$	4,112	$	674
Customer relationships	Customer relationships	266		49		217		Customer relationships	506		140		366
Trade names and other	Trade names and other	699		461		238		Trade names and other	534		295		239
Total		$	5,604	$	4,159	$	1,445
Total definite-lived intangible assets								Total definite-lived intangible assets	5,826		4,547		1,279
Indefinite-lived intangible assets								Indefinite-lived intangible assets	138		0		138
Total intangible assets								Total intangible assets	$	5,964	$	4,547	$	1,417


	As of September 30, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Patents and developed technology	$	1,364	$	491	$	873
Customer relationships	891		224		667
Trade names and other	528		110		418
Total definite-lived intangible assets	2,783		825		1,958
Indefinite-lived intangible assets	234		0		234
Total intangible assets	$	3,017	$	825	$	2,192

For the nine months ended September 30, 2022, $4.2 billion of intangible assets that were fully amortized have been removed from gross intangible assets and accumulated amortization.

Amortization expense relating to purchased intangible assets was $219 million and $113 million for the three months ended September 30, 2021 and 2022, respectively, and $651 million and $505 million for the nine months ended September 30, 2021 and 2022, respectively.

Expected amortization expense related to purchased intangible assets held as of September 30, 2022 was as follows (in millions):


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

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As of September 30, 2021
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Patents and developed technology $ 4,818 $ 4,045 $ 773
Customer relationships 483 118 365
Trade names and other 946 535 411
Total $ 6,247 $ 4,698 $ 1,549

~~For all intangible assets acquired and purchased during the nine months ended September 30, 2021, patents and developed technology have a weighted-average useful life of 4.0 years, customer relationships have a weighted-average useful life of 4.3 years, and trade names and other have a weighted-average useful life of 9.9 years.~~

Amortization expense relating to purchased intangible assets was $189 million and $219 million for the three months ended September 30, 2020 and 2021, respectively, and $587 million and $651 million for the nine months ended September 30, 2020 and 2021, respectively.

~~As of September 30, 2021, expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter was as follows (in millions):~~
Remainder of 2021 $ 214
2022 512
2023 241
2024 215
2025 81
Thereafter 286
Total $ 1,549

Note 9. Contingencies

Indemnifications

In the normal course of business, including to facilitate transactions in our services and products and corporate activities, we indemnify certain parties, including advertisers, Google Network partners, customers of Google Cloud offerings, lessors, and service providers with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents.

It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period.

As of September 30, ~~2021,~~2022, we did not have any material indemnification claims that were probable or reasonably possible.

Legal Matters

Antitrust Investigations

On November 30, 2010, the EC's Directorate General for Competition opened an investigation into various antitrust-related complaints against us.

On June 27, 2017, the EC announced its decision that certain actions taken by Google regarding its display and ranking of shopping search results and ads infringed European competition law. The EC decision imposed a €2.4 billion ($2.7 billion as of June 27, 2017) fine. On September 11, 2017, we appealed the EC decision to the General Court, and on September 27, 2017, we implemented product changes to bring shopping ads into compliance with the EC's decision. We recognized a charge of $2.7 billion for the fine in the second quarter of 2017.


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On November 10, 2021, the General Court rejected our appeal, and we subsequently filed an appeal with the European Court of Justice on January 20, 2022.

On July 18, 2018, the EC announced its decision that certain provisions in Google’s Android-related distribution agreements infringed European competition law. The EC decision imposed a €4.3 billion ($5.1 billion as of June 30, 2018) fine and directed the termination of the conduct at issue. On October 9, 2018, we appealed the EC ~~decision. On~~decision, and on October 29, 2018, we implemented changes to certain of our Android distribution practices. On September 14, 2022, the General Court rejected our appeal on three claims, accepted our appeal on one claim, and reduced the fine to €4.1 billion. We are preparing to appeal to the European Court of Justice. In the second quarter of 2018, we recognized a charge of $5.1 billion for the fine, which we reduced by $217 million in the ~~second~~third quarter of ~~2018.~~2022.

On March 20, 2019, the EC announced its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law. The EC decision imposed a fine of €1.5 billion ($1.7 billion as of March 20, 2019) and directed actions related to AdSense for Search partners' agreements, which we implemented prior to the decision. On June 4, 2019, we appealed the EC ~~decision.~~decision, which remains pending. We recognized a charge of $1.7 billion for the fine in the first quarter of 2019.

While each EC decision is under appeal, we included the fines in accrued expenses and other current liabilities on our Consolidated Balance Sheets as we provided bank guarantees (in lieu of a cash payment) for the fines.

From time to time we are subject to formal and informal inquiries and investigations on various competition matters by regulatory authorities in the United States (U.S.), Europe, and other ~~jurisdictions.~~ jurisdictions globally. For example:

•In August 2019, we began receiving civil investigative demands from the U.S. Department of Justice ~~("DOJ")~~(DOJ) requesting information and documents relating to our prior antitrust investigations and certain aspects of our business. The DOJ and a number of state Attorneys General filed a lawsuit on October 20, 2020 alleging that Google violated U.S. antitrust laws relating to Search and Search advertising. ~~Separately, on~~Further, in June2022, the Australian Competition and Consumer Commission (ACCC) and the United Kingdom's Competition and Markets Authority (CMA) each opened an investigation into Search distribution practices.

•On December 16, 2020, a number of state Attorneys General filed an antitrust complaint ~~against Google~~ in the ~~United States~~U.S. District Court for the Eastern District of Texas, alleging that Google violated U.S. antitrust laws as well as state


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deceptive trade laws relating to its advertising technology. ~~On June 22, 2021,~~The DOJ's investigation of similar issues remains ongoing. The EC, the ECCMA, and the ACCC each opened a formal investigation into Google's advertising technology business ~~practices.~~ practices on June 22, 2021, May 25, 2022, and June 29, 2022, respectively.

•On July 7, 2021, a number of state Attorneys General filed an antitrust complaint ~~against us~~ in the ~~United States~~U.S. District Court for the Northern District of California, alleging that Google’s operation of Android and Google Play violated U.S. antitrust laws and state antitrust and consumer protection laws. In May 2022, the EC and the CMA each opened a formal investigation into Google Play’s business practices. Korean regulators are investigating Google Play's billing practices, most recently opening a formal review in May 2022 of Google's compliance with the new app store billing regulations.

We believe these complaints are without merit and will defend ourselves vigorously. ~~The DOJ and state Attorneys General continue their investigations into certain aspects of our business.~~ We continue to cooperate with federal and state regulators in the ~~United States,~~U.S., the EC, and other regulators around the world.

Patent and Intellectual Property Claims

We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe others' intellectual property rights. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, functionalities, products, or services. As a result, we may have to change our business practices and develop non-infringing products or technologies, which could result in a loss of revenues for us and otherwise harm our business. In addition, the U.S. International Trade Commission ~~("ITC")~~(ITC) has increasingly become an important forum to litigate intellectual property disputes because an ultimate loss in an ITC action can result in a prohibition on importing infringing products into the U.S. Because the U.S. is an important market, a prohibition on importation could have an adverse effect on us, including preventing us from importing many important products into the U.S. or necessitating workarounds that may limit certain features of our products.

Furthermore, many of our agreements with our customers and partners require us to indemnify them against certain intellectual property infringement claims, which would increase our costs as a result of defending such claims, and may require that we pay significant damages if there were an adverse ruling in any such claims. In addition, our customers and partners may discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business.

In 2010, Oracle America, Inc. ("Oracle") brought a copyright lawsuit against Google in the Northern District of California, alleging that Google's Android operating system infringes Oracle's copyrights related to certain Java application programming interfaces (“Java APIs”). After trial, final judgment was entered by the district court in favor of Google on June 8, 2016, and the court decided post-trial motions in favor of Google. Oracle appealed and on March 27, 2018, the Federal Circuit Court of Appeals reversed and remanded the case for a trial on damages. On May 29, 2018, we filed a petition for a rehearing at the Federal Circuit, and on August 28, 2018, the Federal Circuit denied the petition. On January 24, 2019, we filed a petition to the Supreme Court of the United States to review the case. On April 29, 2019, the Supreme Court requested the views of the Solicitor General regarding our petition. On September 27, 2019, the Solicitor General recommended denying our petition, and we provided our response on October 16, 2019. On November 15, 2019, the Supreme Court granted our petition and made a decision to review the case. The Supreme Court heard oral arguments in our case on October 7, 2020. On April 5, 2021, the Supreme Court reversed the Federal Circuit's ruling and found that Google’s use of the Java APIs was a fair use as a matter


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of law. The Supreme Court remanded the case to the Federal Circuit for further proceedings in conformity with the Supreme Court opinion. On May 14, 2021, the Federal Circuit entered an order affirming the district court’s final judgment in favor of Google. On June 21, 2021, the Federal Circuit issued a mandate returning the case to the district court, and the case is now concluded.

Other

We are also regularly subject to claims, suits, regulatory and government investigations, other proceedings, and consent decrees involving competition, intellectual property, privacy and cybersecurity, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury, consumer protection, and other matters. For example, we currently have a number of privacy investigations and suits ongoing in multiple jurisdictions. Such claims, suits, regulatory and government investigations, other proceedings, and consent decrees could result in substantial fines and penalties, injunctive relief, ongoing auditing and monitoring obligations, changes to our products and services, alterations to our business models and operations, and collateral related civil litigation or other adverse consequences, all of which could harm our business, reputation, financial condition, and operating results.

~~Certain~~We have ongoing legal matters relating to Russia. For example, civil judgments that include compounding penalties have been imposed upon us in connection with disputes regarding the termination of accounts, including those of sanctioned parties. We do not believe these ongoing legal matters will have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

Certain outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable that a loss has been incurred, and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is required to determine both the likelihood of there being and the estimated amount of a loss related to such matters.

With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.


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We expense legal fees in the period in which they are incurred.

Non-Income Taxes

We are under audit by various domestic and foreign tax authorities with regards to non-income tax matters. The subject matter of non-income tax audits primarily arises from disputes on the tax treatment and tax rate applied to the sale of our products and services in these jurisdictions and the tax treatment of certain employee benefits. We accrue non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from our expectations.

For information regarding income tax contingencies, see Note 13.

Note 10. Stockholders' Equity

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 prior period references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the Stock Split. See Note 1 for further details.

Share Repurchases

In April ~~2021,~~2022, the Board of Directors of Alphabet authorized the company to repurchase up to ~~$50.0~~$70.0 billion of its ~~Class C stock. In July 2021, the Alphabet board approved an amendment to the April 2021 authorization, permitting the company to repurchase both~~ Class A and Class C shares. As of September 30, 2022, $43.5 billion remains available for Class A and Class C share repurchases. Class A and Class C shares are repurchased in a manner deemed in the best interest of the company and its stockholders, taking into account the economic cost and prevailing market conditions, including the relative trading prices and volumes of the Class A and Class C shares. As

In accordance with the authorization of the Board of Directors of Alphabet, during the three and nine months ended September 30, ~~2021, $30.8~~2022, we repurchased and subsequently retired 138 million and 369 million aggregate shares for $15.4 billion ~~remains available for repurchase of~~and $43.9 billion, respectively. Of the aggregate amount repurchased and subsequently retired during the three months ended September 30, 2022, 25 million shares were Class A stock for $2.7 billion and 113 million shares were Class C stock for $12.7 billion. Of the aggregate amount repurchased and subsequently retired during the nine months ended September 30, 2022, 46 million shares ~~under the amended authorization. The repurchases~~were Class A stock for $5.2 billion and 323 million shares were Class C stock for $38.7 billion.

Repurchases are ~~being~~ executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date.

In accordance with the authorization of the Board of Directors of Alphabet, during the three and nine months ended September 30, 2021, we repurchased and subsequently retired 4.6 million and 15.7 million aggregate shares for $12.6 billion and $36.8 billion, respectively. Of the aggregate amount repurchased and subsequently retired during the three months ended September 30, 2021, 0.5 million shares were Class A stock for $1.5 billion.

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Note 11. Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share of Class A, ~~and~~ Class B, ~~common stock~~ and Class C ~~capital~~ stock (in millions, except ~~share amounts which are reflected in thousands, and~~ per share amounts):


		Three Months Ended September 30,													Three Months Ended September 30,
		2020						2021							2021						2022
		Class A		Class B		Class C		Class A		Class B		Class C			Class A		Class B		Class C		Class A		Class B		Class C
Basic net income per share:	Basic net income per share:													Basic net income per share:
Numerator	Numerator													Numerator
Allocation of undistributed earnings	Allocation of undistributed earnings	$	4,973	$	763	$	5,511	$	8,548	$	1,291	$	9,097	Allocation of undistributed earnings	$	8,548	$	1,291	$	9,097	$	6,393	$	946	$	6,571

Denominator	Denominator													Denominator
Number of shares used in per share computation	Number of shares used in per share computation	300,411		46,108		332,930		300,519		45,404		319,835		Number of shares used in per share computation	6,010		908		6,397		5,983		885		6,150

Basic net income per share	Basic net income per share	$	16.55	$	16.55	$	16.55	$	28.44	$	28.44	$	28.44	Basic net income per share	$	1.42	$	1.42	$	1.42	$	1.07	$	1.07	$	1.07
Diluted net income per share:	Diluted net income per share:													Diluted net income per share:
Numerator	Numerator													Numerator

Allocation of undistributed earnings for basic computation	Allocation of undistributed earnings for basic computation	$	4,973	$	763	$	5,511	$	8,548	$	1,291	$	9,097	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	Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares	763		0		0		1,291		0		0		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	Reallocation of undistributed earnings	(53)		(7)		53		(156)		(20)		156		Reallocation of undistributed earnings	(156)		(20)		156		(45)		(6)		45
Allocation of undistributed earnings	Allocation of undistributed earnings	$	5,683	$	756	$	5,564	$	9,683	$	1,271	$	9,253	Allocation of undistributed earnings	$	9,683	$	1,271	$	9,253	$	7,294	$	940	$	6,616

Denominator	Denominator													Denominator
Number of shares used in basic computation	Number of shares used in basic computation	300,411		46,108		332,930		300,519		45,404		319,835		Number of shares used in basic computation	6,010		908		6,397		5,983		885		6,150
Weighted-average effect of dilutive securities	Weighted-average effect of dilutive securities													Weighted-average effect of dilutive securities
Add:	Add:													Add:
Conversion of Class B to Class A common shares outstanding		46,108		0		0		45,404		0		0
Conversion of Class B to Class A shares outstanding														Conversion of Class B to Class A shares outstanding	908		0		0		885		0		0

Restricted stock units and other contingently issuable shares	Restricted stock units and other contingently issuable shares	47		0		6,355		14		0		10,747		Restricted stock units and other contingently issuable shares	0		0		215		0		0		79
Number of shares used in per share computation	Number of shares used in per share computation	346,566		46,108		339,285		345,937		45,404		330,582		Number of shares used in per share computation	6,918		908		6,612		6,868		885		6,229

Diluted net income per share	Diluted net income per share	$	16.40	$	16.40	$	16.40	$	27.99	$	27.99	$	27.99	Diluted net income per share	$	1.40	$	1.40	$	1.40	$	1.06	$	1.06	$	1.06

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		Nine Months Ended September 30,													Nine Months Ended September 30,
		2020						2021							2021						2022
		Class A		Class B		Class C		Class A		Class B		Class C			Class A		Class B		Class C		Class A		Class B		Class C
Basic net income per share:	Basic net income per share:													Basic net income per share:
Numerator	Numerator													Numerator
Allocation of undistributed earnings	Allocation of undistributed earnings	$	11,004	$	1,697	$	12,341	$	24,867	$	3,776	$	26,748	Allocation of undistributed earnings	$	24,867	$	3,776	$	26,748	$	21,213	$	3,137	$	21,998

Denominator	Denominator													Denominator
Number of shares used in per share computation	Number of shares used in per share computation	299,934		46,266		336,361		300,482		45,622		323,208		Number of shares used in per share computation	6,010		912		6,464		6,004		888		6,226

Basic net income per share	Basic net income per share	$	36.69	$	36.69	$	36.69	$	82.76	$	82.76	$	82.76	Basic net income per share	$	4.14	$	4.14	$	4.14	$	3.53	$	3.53	$	3.53
Diluted net income per share:	Diluted net income per share:													Diluted net income per share:
Numerator	Numerator													Numerator

Allocation of undistributed earnings for basic computation	Allocation of undistributed earnings for basic computation	$	11,004	$	1,697	$	12,341	$	24,867	$	3,776	$	26,748	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	Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares	1,697		0		0		3,776		0		0		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	Reallocation of undistributed earnings	(103)		(14)		103		(424)		(56)		424		Reallocation of undistributed earnings	(424)		(56)		424		(204)		(26)		204
Allocation of undistributed earnings	Allocation of undistributed earnings	$	12,598	$	1,683	$	12,444	$	28,219	$	3,720	$	27,172	Allocation of undistributed earnings	$	28,219	$	3,720	$	27,172	$	24,146	$	3,111	$	22,202

Denominator	Denominator													Denominator
Number of shares used in basic computation	Number of shares used in basic computation	299,934		46,266		336,361		300,482		45,622		323,208		Number of shares used in basic computation	6,010		912		6,464		6,004		888		6,226
Weighted-average effect of dilutive securities	Weighted-average effect of dilutive securities													Weighted-average effect of dilutive securities
Add:	Add:													Add:
Conversion of Class B to Class A common shares outstanding		46,266		0		0		45,622		0		0
Conversion of Class B to Class A shares outstanding														Conversion of Class B to Class A shares outstanding	912		0		0		888		0		0

Restricted stock units and other contingently issuable shares	Restricted stock units and other contingently issuable shares	105		0		5,715		16		0		10,073		Restricted stock units and other contingently issuable shares	0		0		202		0		0		111
Number of shares used in per share computation	Number of shares used in per share computation	346,305		46,266		342,076		346,120		45,622		333,281		Number of shares used in per share computation	6,922		912		6,666		6,892		888		6,337

Diluted net income per share	Diluted net income per share	$	36.38	$	36.38	$	36.38	$	81.53	$	81.53	$	81.53	Diluted net income per share	$	4.08	$	4.08	$	4.08	$	3.50	$	3.50	$	3.50

For the periods presented above, the net income per share amounts are the same for Class A, ~~and~~ Class B, ~~common stock~~ and Class C ~~capital~~ stock because the holders of each class are entitled to equal per share dividends or distributions in liquidation in accordance with the Amended and Restated Certificate of Incorporation of Alphabet Inc.

Note 12. Compensation Plans

Stock-Based Compensation

For the three months ended September 30, ~~2020~~2021 and ~~2021,~~2022, total stock-based compensation ~~("SBC")~~(SBC) expense was ~~$3.3~~$3.9 billion and ~~$3.9~~$5.0 billion, including amounts associated with awards we expect to settle in Alphabet stock of $3.8 billion and $4.8 billion, respectively. For the nine months ended September 30, 2021 and 2022, total SBC expense was $11.7 billion and $14.4 billion, including amounts associated with awards we expect to settle in Alphabet stock ~~of $3.1 billion an~~o~~d $3.8 billion, respectively.~~ ~~For the nine months ended September 30, 2020 and 2021, total SBC expense was $10.1~~f $11.2 billion and ~~$11.7 billion, including amounts associated with awards we expect to settle in Alphabet stock of $9.6 billion and $11.2~~$13.8 billion, respectively.

Stock-Based Award Activities

The following table summarizes the activities for ~~our~~ unvested Alphabet restricted stock units ~~("RSUs") in Alphabet stock~~(RSUs) for the nine months ended September 30, ~~2021:~~2022 (in millions, except per share amounts):


		Unvested Restricted Stock Units				Unvested Restricted Stock Units
		Number of Shares	Weighted- Average Grant-Date Fair Value			Number of Shares	Weighted- Average Grant-Date Fair Value
Unvested as of December 31, 2020		19,288,793	$	1,262.13
Unvested as of December 31, 2021					Unvested as of December 31, 2021	338	$	81.31
Granted	Granted	9,849,733	$	1,883.76	Granted	199	$	131.77
Vested	Vested	(7,984,196)	$	1,334.16	Vested	(152)	$	87.13
Forfeited/canceled	Forfeited/canceled	(1,471,948)	$	1,411.50	Forfeited/canceled	(25)	$	96.04
Unvested as of September 30, 2021		19,682,382	$	1,538.30

Unvested as of September 30, 2022					Unvested as of September 30, 2022	360	$	105.70

As of September 30, ~~2021,~~2022, there was ~~$28.2~~$35.7 billion of unrecognized compensation cost related to unvested ~~employee~~ RSUs. This amount is expected to be recognized over a weighted-average period of ~~2.6~~2.7 years.

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Note 13. Income Taxes

The following table presents ~~our~~ provision for income taxes (in millions, except for effective tax rate):


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30,						September 30,							September 30,						September 30,
		2020			2021			2020			2021				2021			2022			2021			2022
Income before provision for income taxes														Income before provision for income taxes	$	23,064		$	16,233		$	66,332		$	54,181
Provision for income taxes	Provision for income taxes	$	2,112		$	4,128		$	4,351		$	10,941		Provision for income taxes	$	4,128		$	2,323		$	10,941		$	7,833
Effective tax rate	Effective tax rate	15.8		%	17.9		%	14.8		%	16.5		%	Effective tax rate	17.9		%	14.3		%	16.5		%	14.5		%

We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. ~~Our total~~Total gross unrecognized tax benefits were ~~$3.8~~$5.2 billion and ~~$5.3~~$6.3 billion as of December 31, ~~2020~~2021 and September 30, ~~2021,~~2022, respectively. ~~Our total~~Total unrecognized tax benefits that, if recognized, would affect our effective tax rate were ~~$2.6~~$3.7 billion and ~~$3.7~~$4.6 billion as of December 31, ~~2020~~2021 and September 30, ~~2021,~~2022, respectively. Although the timing of the resolution, settlement, and closure of audits is not certain, we do not believe it is reasonably possible that our unrecognized tax benefits will materially change in the next 12 months.

For information regarding non-income taxes, see Note 9.

Note 14. Information about Segments and Geographic Areas

~~Beginning in the fourth quarter of 2020, we~~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 ~~data analytics platforms,~~platform services, collaboration tools, and other services for enterprise customers. Google Cloud generates revenues ~~primarily~~ from fees received for Google Cloud Platform services, ~~and~~ Google Workspace collaboration ~~tools.~~tools, and other enterprise services.

•Other Bets is a combination of multiple operating segments that are not individually material. Revenues from ~~the~~ Other Bets are ~~derived~~generated primarily ~~through~~from the sale of ~~internet services as well as licensing~~health technology and ~~R&D~~internet services.

Revenues, ~~and~~ certain costs, such as costs associated with content and traffic acquisition, certain engineering activities, and hardware, ~~costs and other~~as well as certain operating expenses are directly attributable to our segments. Due to the integrated nature of Alphabet, other costs and expenses, such as technical infrastructure and office facilities, are managed centrally at a consolidated level. The associated costs, including depreciation and impairment, are allocated to operating segments as a service cost generally based on usage or headcount.

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 ~~research and development~~R&D activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs.

Our ~~Chief Operating Decision Maker does~~operating segments are not ~~evaluate operating segments~~evaluated using asset information.

~~Information~~The following table presents information about our segments ~~during the periods presented were as follows~~ (in millions)~~. For comparative purposes, amounts in prior periods have been recast:~~:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
Revenues:	Revenues:									Revenues:
Google Services	Google Services	$	42,573	$	59,884	$	115,762	$	168,129	Google Services	$	59,884	$	61,377	$	168,129	$	185,690
Google Cloud	Google Cloud	3,444		4,990		9,228		13,665		Google Cloud	4,990		6,868		13,665		18,965
Other Bets	Other Bets	178		182		461		572		Other Bets	182		209		572		842
Hedging gains (losses)	Hedging gains (losses)	(22)		62		178		(54)		Hedging gains (losses)	62		638		(54)		1,291
Total revenues	Total revenues	$	46,173	$	65,118	$	125,629	$	182,312	Total revenues	$	65,118	$	69,092	$	182,312	$	206,788

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		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
Operating income (loss):	Operating income (loss):									Operating income (loss):
Google Services	Google Services	$	14,453	$	23,973	$	35,540	$	65,862	Google Services	$	23,973	$	19,781	$	65,862	$	65,471
Google Cloud	Google Cloud	(1,208)		(644)		(4,364)		(2,209)		Google Cloud	(644)		(699)		(2,209)		(2,488)
Other Bets	Other Bets	(1,103)		(1,288)		(3,340)		(3,831)		Other Bets	(1,288)		(1,611)		(3,831)		(4,452)
Corporate costs, unallocated	Corporate costs, unallocated	(929)		(1,010)		(2,263)		(2,993)		Corporate costs, unallocated	(1,010)		(336)		(2,993)		(1,849)
Total income from operations	Total income from operations	$	11,213	$	21,031	$	25,573	$	56,829	Total income from operations	$	21,031	$	17,135	$	56,829	$	56,682

For revenues by geography, see Note 2.

The following table presents ~~our~~ long-lived assets by geographic area, which includes property and equipment, net and operating lease assets (in millions):


		As of December 31, 2020		As of September 30, 2021			As of December 31, 2021		As of September 30, 2022
Long-lived assets:	Long-lived assets:					Long-lived assets:
United States	United States	$	69,315	$	77,281	United States	$	80,207	$	91,632
International	International	27,645		30,268		International	30,351		30,408
Total long-lived assets	Total long-lived assets	$	96,960	$	107,549	Total long-lived assets	$	110,558	$	122,040

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Please read the following discussion and analysis of our financial condition and results of operations together with "Note About Forward-Looking Statements" and our consolidated financial statements and related notes included under Item 1 of this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, including Part I, Item 1A "Risk Factors."

Understanding Alphabet’s Financial Results

Alphabet is a collection of businesses — the largest of which is Google. We report Google in two segments, Google Services and Google Cloud; we also report all non-Google businesses collectively as Other Bets. Other Bets include earlier stage technologies that are further afield from our core Google business. For further details on our segments, see Note 14 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

~~The Impact of COVID-19 on our Results~~Seasonality and ~~Operations~~other

~~We began to observe the impact of COVID-19 on our financial results in March 2020 when, despite an increase in users' search activity, our~~Our advertising revenues ~~declined compared to the prior year due to a shift of user search activity to less commercial topics~~are affected by seasonal fluctuations in internet usage, advertising expenditures, and ~~reduced spending~~underlying business trends, such as traditional retail seasonality. Additionally, our non-advertising revenues, including those generated from Google Cloud, Google Play, hardware, and YouTube, may be affected by our advertisers. For the quarter ended June 30, 2020, our advertising revenues declined due to the continued impacts of COVID-19 and the related reductions in global economic activity. During the course of the quarter ended June 30, 2020, we observed a gradual return in user search activity to more commercial topics, followedfluctuations driven by increased spending by our advertisers that continued throughout the second half of 2020. Additionally, over the course of 2020, we experienced variability in our margins as many of our expenses are less variable in nature and/or may not correlate to changes in revenues. Market volatility contributed to fluctuations in the valuation of our equity investments. Further, our assessment of the credit deterioration of our customers due to changes in the macroeconomic environment during the period was reflected in our allowance for credit losses for accounts receivable.

Through the third quarter of 2021, we continued to benefit from elevated consumer activity online and broad-based increases in advertiser spending. We remained focused on innovating and investing in the services we offer to consumers and businesses to support our long-term growth. For example, we continued to invest in our technical infrastructure and data centers. Additionally, our margins benefited from revenue growth while many of our expenses remained less variable in nature and/or may not correlate to changes in revenues. These factors, combined with the impact of COVID-19 in the prior year, affected year-over-year growth trends. Further, year-over-year trends benefited from a reduction in depreciation expense due to the change in the estimated useful life of our servers and certain network equipment beginning in the first quarter of 2021; we expect the effect of this change in estimate to decline through the remainder of the year (for further details see Note 1 of the Notes to Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q). The COVID-19 pandemic continues to evolve, be unpredictable and affect our business and financial results. Our past results may not be indicative of our future performance, and historical trends in our financial results may differ materially.

~~See Part II Item 7, "Impact of COVID-19" in our Annual Report on Form 10-K for the year ended December 31, 2020 for more information.~~

~~Executive Overview~~

~~The following table summarizes our consolidated financial results (in millions, except for per share information and percentages).~~
Three Months Ended
September 30,
2020 2021
Revenues $ 46,173 $ 65,118
Change in revenues year over year 14 % 41 %
Change in constant currency revenues year over year 15 % 39 %
Operating income $ 11,213 $ 21,031
Operating margin 24 % 32 %
Other income (expense), net $ 2,146 $ 2,033
Net Income $ 11,247 $ 18,936
Diluted EPS $ 16.40 $ 27.99

•Total revenues were $65.1 billion, an increase of 41% year over year, primarily driven by an increase in Google Services segment revenues of $17.3 billion or 41% and an increase in Google Cloud segment revenues of $1.5 billion or 45%. The adverse effect of COVID-19 on the prior year comparable period's


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advertising revenues contributed to the year-over-year increase. Revenues from the United States, EMEA, APAC, and Other Americas were $29.8 billion, $19.8 billion, $11.7 billion, and $3.7 billion, respectively.

•Total cost of revenues was $27.6 billion, an increase of 31% year over year. TAC was $11.5 billion, an increase of 41% year over year, primarily driven by an increase in revenues subject to TAC. Other cost of revenues were $16.1 billion, an increase of 24% year over year, affected by a reduction in depreciation expense due to the change in the estimated useful life of our servers and certain network equipment.

•~~Operating expenses (excluding cost of revenues) were $16.5 billion, an increase of 19% year over year, primarily driven by headcount growth and increases in advertising and promotional expenses.~~

~~Other information~~

•~~Operating cash flow was $25.5 billion for the three months ended September 30, 2021.~~

•~~Capital expenditures, which primarily included investments in technical infrastructure, were $6.8 billion for the three months ended September 30, 2021.~~

•~~Number of employees was 150,028 as of September 30, 2021.~~

~~Our Segments~~

~~Beginning in the fourth quarter of 2020, 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, in-app purchases,pricing, digital content ~~products,~~releases, fee structures, new product and ~~hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.~~

•~~Google Cloud includes Google’s infrastructure and data analytics platforms, collaboration tools,~~service launches, and other ~~services for enterprise customers. Google Cloud generates revenues primarily from fees received for Google Cloud Platform ("GCP") services and Google Workspace collaboration tools.~~

•~~Other Bets is a combination of multiple operating segments that are not individually material. Revenues from the Other Bets are derived primarily through the sale of internet services~~market dynamics, as well as ~~licensing and R&D 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 research and development activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs.seasonality.

~~Financial Results~~

Revenues

and Monetization Metrics~~The following table presents our revenues by type (in millions).~~
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
Google Search & other $ 26,338 $ 37,926 $ 72,159 $ 105,650
YouTube ads 5,037 7,205 12,887 20,212
Google Network 5,720 7,999 15,679 22,396
Google advertising 37,095 53,130 100,725 148,258
Google other 5,478 6,754 15,037 19,871
Google Services total 42,573 59,884 115,762 168,129
Google Cloud 3,444 4,990 9,228 13,665
Other Bets 178 182 461 572
Hedging gains (losses) (22) 62 178 (54)
Total revenues $ 46,173 $ 65,118 $ 125,629 $ 182,312


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Google Services

Google Services revenues consist of revenues generated from advertising ~~revenues~~

~~Our advertising revenue growth,~~(“Google advertising”) as well as ~~the change in paid clicks and cost-per-click on~~ revenues from other sources (“Google ~~Search &~~ other ~~properties and the change in impressions and cost-per-impression on~~ revenues”).

Google ~~Network partners' properties ("Google Network properties") and the correlation between these items, have been affected and may continue to be affected by various factors, including:~~

•~~advertiser competition for keywords;~~

•~~changes in advertising quality, formats, delivery or policy;~~

•~~changes in device mix;~~

•~~changes in foreign currency exchange rates;~~

•~~fees advertisers are willing to pay based on how they manage their advertising costs;~~

•~~general economic conditions including the impact of COVID-19;~~

•~~seasonality; and~~

•~~traffic growth in emerging markets compared to more mature markets and across various advertising verticals and channels.~~

Our advertising revenue growth rate has been affected over time as a result of a number of factors, including challenges in maintaining our growth rate as revenues increase to higher levels; changes in our product mix; changes in advertising quality or formats and delivery; the evolution of the online advertising market; increasing competition; our investments in new business strategies; query growth rates; and shifts in the geographic mix of our revenues. We also expect that our revenue growth rate will continue to be affected by evolving user preferences, the acceptance by users of our products and services as they are delivered on diverse devices and modalities, our ability to create a seamless experience for both users and advertisers, and movements in foreign currency exchange rates.Advertising

Google advertising revenues ~~consist primarily~~are comprised of the following:

•Google Search & other, ~~consists of~~which includes revenues generated on Google search properties (including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.), and other Google owned and operated properties like Gmail, Google Maps, and Google Play;

•YouTube ads, ~~consists of~~which includes revenues generated on YouTube properties; and

•Google Network, ~~consists of~~which includes revenues generated on Google Network properties participating in AdMob, AdSense, and Google Ad Manager.

~~Google Search & other~~

~~Google Search & other revenues increased $11.6 billion~~We use certain metrics to track how well traffic across various properties is monetized as it relates to our advertising revenues: paid clicks and ~~$33.5 billion from the three and nine months ended September 30, 2020~~cost-per-click pertain to the three and nine months ended September 30, 2021, respectively. The overall growth was primarily driven by interrelated factors including increases in search queries resulting from growth in user adoption and usage, primarilytraffic on mobile devices, growth in advertiser spending, and improvements we have made in ad formats and delivery. The adverse effect of COVID-19 on prior year comparable period revenues also contributed to the year-over-year increase.

~~YouTube ads~~

YouTube ads revenues increased $2.2 billion and $7.3 billion from the three and nine months ended September 30, 2020 to the three and nine months ended September 30, 2021, respectively. Growth was driven by our direct response and brand advertising products. Growth for our direct response advertising products was primarily driven by increased advertiser spending as well as improvements to ad formats and delivery. Growth for our brand advertising products for the three months ended September 30, 2021 was primarily driven by increased spending by our advertisers. For the nine months ended September 30, 2021, the adverse effect of COVID-19 on prior year comparable period brand advertising revenues also contributed to the year-over-year increase.

~~Google Network~~

Google Network revenues increased $2.3 billion from the three months ended September 30, 2020 to the three months ended September 30, 2021. The increase was primarily driven by strength in AdMob, AdSense and Google Ad Manager.

Google Network revenues increased $6.7 billion from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The increase was primarily driven by strength in AdMob, Google Ad Manager


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~~and AdSense. The adverse effect of COVID-19 on prior year comparable period revenues also contributed to the year-over-year increase.~~

~~Use of Monetization Metrics~~

~~Paid clicks for our~~ Google Search & other properties, while impressions and cost-per-impressions pertain to traffic on our Network partners’ properties.

Paid clicks represent engagement by users and include clicks on advertisements by end-users on Google search properties and other Google owned and operated properties including Gmail, Google Maps, and Google Play. Historically, we included certain viewed YouTube engagement ads and the related revenues in our paid clicks and cost-per-click monetization metrics. Over time, advertising on YouTube has expanded to multiple advertising formats and the type of viewed engagement ads historically included in paid clicks and cost-per-click metrics have increasingly covered a smaller portion of YouTube advertising revenues. As a result, beginning in the fourth quarter of 2020, we removed these ads and the related revenues from the paid clicks and cost-per-click metrics. The revised metrics presented below provide a better understanding of monetization trends on the properties included within Google Search & other, as they now more closely correlate with the related changes in revenues.

~~Impressions for Google Network properties include impressions displayed to users served on Google Network properties participating primarily in AdMob, AdSense and Google Ad Manager.~~

Cost-per-click is defined as click-driven revenues divided by our total number of paid clicks and represents the average amount we charge advertisers for each engagement by users.

Impressions include impressions displayed to users on Google Network properties participating primarily in AdMob, AdSense, and Google Ad Manager. Cost-per-impression is defined as impression-based and click-based revenues divided by our total number of impressions, and represents the average amount we charge advertisers for each impression displayed to users.

As our business evolves, we periodically review, refine, and update our methodologies for monitoring, gathering, and counting the number of paid clicks and the number of impressions, and for identifying the revenues generated by the corresponding click and impression activity.

Our advertising revenue growth, as well as the change in paid clicks and cost-per-click on ~~our~~ Google Search & other properties and the ~~number of~~change in impressions and cost-per-impression on Google Network properties and the correlation between these items, have been affected and may continue to be affected by various factors, including:

•advertiser competition for ~~identifying~~keywords;


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•changes in advertising quality, formats, delivery or policy;

•changes in device mix;

•changes in foreign currency exchange rates;

•fees advertisers are willing to pay based on how they manage their advertising costs;

•general economic conditions and various external dynamics, including the effect of COVID-19, geopolitical events, regulations and other measures;

•seasonality; and

•traffic growth in emerging markets compared to more mature markets and across various advertising verticals and channels.

Google Other

Google other revenues are comprised of the following:

•Google Play, which includes sales of apps and in-app purchases and digital content sold in the Google Play store;

•Devices and Services, which includes sales of hardware, including Fitbit wearable devices, Google Nest home products, and Pixel phones;

•YouTube non-advertising, which includes YouTube Premium and YouTube TV subscriptions; and

•other products and services.

Google Cloud

Google Cloud revenues are comprised of the following:

•Google Cloud Platform, which includes fees for infrastructure, platform, and other services;

•Google Workspace, which includes fees for cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar and Meet; and

•other enterprise services.

Other Bets

Revenues from Other Bets are generated primarily from the sale of health technology and internet services.

For further details on how we recognize revenue, see Note 1 of the Notes to Consolidated Financial Statements included in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Costs and Expenses

Our cost structure has two components: cost of revenues and operating expenses. Our operating expenses include costs related to R&D, sales and marketing, and general and administrative functions. Certain of these expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to the changes in revenue.

Cost of Revenues

Cost of revenues is comprised of TAC and other costs of revenues.

•TAC includes:

◦Amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers.

◦Amounts paid to Google Network partners primarily for ads displayed on their properties.

•Other cost of revenues includes:

◦Content acquisition costs, which are payments to content providers from whom we license video and other content for distribution on YouTube and Google Play (we pay fees to these content providers based on revenues generated ~~by click activity~~or a flat fee).


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◦Expenses associated with our data centers (including bandwidth, compensation expenses, depreciation, energy, and other equipment costs) as well as other operations costs (such as content review as well as customer and product support costs).

◦Inventory and other costs related to the hardware we sell ("hardware costs").

The cost of revenues as a percentage of revenues generated from ads placed on ~~our~~Google Network properties are significantly higher than the cost of revenues as a percentage of revenues generated from ads placed on Google Search & other properties, ~~and~~because most of the advertiser revenues ~~generated by impression activity~~from ads served on Google Network ~~properties.~~properties are paid as TAC to our Google Network partners.

Operating Expenses

Operating expenses are generally incurred during our normal course of business, which we categorize as either R&D, sales and marketing, or general and administrative.

The main components of our R&D expenses are:

•compensation expenses for engineering and technical employees responsible for R&D related to our existing and new products and services;

•depreciation; and

•professional services fees primarily related to consulting and outsourcing services.

The main components of our sales and marketing expenses are:

•compensation expenses for employees engaged in sales and marketing, sales support, and certain customer service functions; and

•spending relating to our advertising and promotional activities in support of our products and services.

The main components of our general and administrative expenses are:

•compensation expenses for employees in finance, human resources, information technology, legal, and other administrative support functions;

•expenses related to legal matters, including fines and settlements; and

•professional services fees, including audit, consulting, outside legal, and outsourcing services.

Other Income (Expense), Net

Other income (expense), net primarily consists of interest income (expense), the effect of foreign currency exchange gains (losses), net gains (losses) and impairment on our marketable and non-marketable securities, performance fees, and income (loss) and impairment from our equity method investments.

For additional details, including how we account for our investments and factors that can drive fluctuations in the value of our investments, see Note 1 of the Notes to Consolidated Financial Statements included in Part II, Item 8 and Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as well as Note 3 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Provision for Income Taxes

Provision for income taxes represents the estimated amount of federal, state, and foreign income taxes incurred in the U.S. and the many jurisdictions in which we operate. The provision includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties.

For additional details, see Note 1 of the Notes to Consolidated Financial Statements included in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as well as Note 13 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.


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Executive Overview

The following table summarizes consolidated financial results (in millions, except per share information, percentages, and number of employees):


		Three Months Ended
	September 30,
		2021			2022			$ Change		% Change
Consolidated revenues		$	65,118		$	69,092		$	3,974	6	%
Change in consolidated constant currency revenues										11	%

Cost of revenues		$	27,621		$	31,158		$	3,537	13	%
Operating expenses		$	16,466		$	20,799		$	4,333	26	%

Operating income		$	21,031		$	17,135		$	(3,896)	(19)	%
Operating margin		32		%	25		%			(7)	%

Other income (expense), net		$	2,033		$	(902)		$	(2,935)	(144)	%

Net Income		$	18,936		$	13,910		$	(5,026)	(27)	%
Diluted EPS		$	1.40		$	1.06		$	(0.34)	(24)	%

Number of Employees		150,028			186,779			36,751		24	%

•Revenues were $69.1 billion, an increase of 6% year over year, primarily driven by an increase in Google Cloud segment revenues of $1.9 billion, or 38%, and an increase in Google Services segment revenues of $1.5 billion, or 2%. Hedging gains contributed approximately one percentage point to consolidated revenue growth.

•Total constant currency revenues, which exclude the effect of hedging, increased 11% year over year reflecting the strengthening of the U.S. dollar.

•Cost of revenues was $31.2 billion, an increase of 13% year over year, primarily driven by an increase in other costs of revenues.

•Operating expenses were $20.8 billion, an increase of 26% year over year, primarily driven by increases in compensation expenses due to headcount growth and advertising and promotional expenses.

Other information

•On September 12, 2022 we closed the acquisition of Mandiant for a total purchase price of $6.1 billion and added over 2,600 employees. Mandiant's financial results are reported within Google Cloud as of the acquisition date. See Note 7 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information.

•Beginning in the first quarter of 2022, we suspended the vast majority of our commercial activities in Russia and effectively ceased business activities of our Russian entity. The ongoing effect of these direct actions on our financial results was not material. The broader economic effects resulting from the war in Ukraine on our future financial results may be unpredictable.

•Repurchases of Class A and Class C shares were $15.4 billion for the three months ended September 30, 2022. See Note 10 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information.

•Operating cash flow was $23.4 billion for the three months ended September 30, 2022.

•Capital expenditures of $7.3 billion for the three months ended September 30, 2022 primarily relate to investments in technical infrastructure.


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Financial Results

Revenues

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2022		2021		2022
Google Search & other	$	37,926	$	39,539	$	105,650	$	119,846
YouTube ads	7,205		7,071		20,212		21,280
Google Network	7,999		7,872		22,396		24,305
Google advertising	53,130		54,482		148,258		165,431
Google other	6,754		6,895		19,871		20,259
Google Services total	59,884		61,377		168,129		185,690
Google Cloud	4,990		6,868		13,665		18,965
Other Bets	182		209		572		842
Hedging gains (losses)	62		638		(54)		1,291
Total revenues	$	65,118	$	69,092	$	182,312	$	206,788

Google Services

Google advertising revenues

Google Search & other

Google Search & other revenues increased $1.6 billion and $14.2 billion from the three and nine months ended September 30, 2021 to the three and nine months ended September 30, 2022, respectively. The overall growth was driven by interrelated factors including increases in search queries resulting from growth in user adoption and usage, primarily on mobile devices, growth in advertiser spending, and improvements we have made in ad formats and delivery. Growth was partially offset by the unfavorable effect of foreign currency exchange rates.

YouTube ads

YouTube ads revenues decreased $134 million from the three months ended September 30, 2021 to the three months ended September 30, 2022, as the unfavorable effect of foreign currency exchange rates more than offset growth in our brand and direct response advertising products.

YouTube ads revenues increased $1.1 billion from the nine months ended September 30, 2021 to the nine months ended September 30, 2022. The growth was driven by our brand and direct response advertising products, both of which benefited from increased spending by our advertisers as well as improvements to ad formats and delivery. Growth was partially offset by the unfavorable effect of foreign currency exchange rates.

Google Network

Google Network revenues decreased $127 million from the three months ended September 30, 2021 to the three months ended September 30, 2022, as the unfavorable effect of foreign currency exchange rates more than offset strength in AdSense.

Google Network revenues increased $1.9 billion from the nine months ended September 30, 2021 to the nine months ended September 30, 2022. The growth was primarily driven by strength in AdSense and AdMob, partially offset by the unfavorable effect of foreign currency exchange rates.


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Monetization Metrics

Paid clicks and cost-per-click

The following table presents year-over-year changes in ~~our~~ paid clicks and cost-per-click (expressed as a percentage):


		Three Months Ended September 30,	Nine Months Ended September 30,		Three Months Ended September 30,	Nine Months Ended September 30,

		2021	2021		2022	2022

Paid clicks change	Paid clicks change	22%	24%	Paid clicks change	8%	12%
Cost-per-click change	Cost-per-click change	18%	17%	Cost-per-click change	(5)%	1%

Paid clicks increased from the three and nine months ended September 30, ~~2020~~2021 to the three and nine months ended September 30, ~~2021, primarily~~2022 driven by a number of interrelated factors, including an increase in search queries resulting from growth in user adoption and usage, primarily on mobile devices; ~~an increase in clicks relating to ads on Google Play; continued~~ growth in advertiser ~~activity;~~spending; and improvements we have made in ad formats and delivery. ~~For~~The increase in clicks for the three months ended September 30, 2022 was partially offset by a decrease in clicks relating to ads on Google Play.

Cost-per-click decreased from the three months ended September 30, 2021 to the three months ended September 30, 2022 and increased from the nine months ended September 30, 2021 ~~the adverse effect of COVID-19 on the prior year comparable period also contributed~~ to the ~~increase in paid clicks.~~

~~The increase in cost-per-click from the three and~~ nine months ended September 30, ~~2020~~2022 due to ~~the three and nine months ended September 30, 2021 was driven by~~ a ~~combination~~number of interrelated factors including changes in device mix, geographic mix, ~~changes in~~ advertiser spending, ongoing product changes, ~~product mix,~~and property mix, ~~and fluctuations of the U.S. dollar compared to certain foreign currencies,~~ as well as the ~~adverse~~unfavorable effect of ~~COVID-19 on the prior year comparable period.~~foreign currency exchange rates.

Impressions and cost-per-impression

The following table presents year-over-year changes in ~~our~~ impressions and cost-per-impression (expressed as a percentage):


		Three Months Ended September 30,	Nine Months Ended September 30,			Three Months Ended September 30,	Nine Months Ended September 30,
		2021	2021			2022	2022
Impressions change	Impressions change	2%	3	%	Impressions change	3%	5%
Cost-per-impression change	Cost-per-impression change	39%	39%		Cost-per-impression change	(5)%	4%

Impressions increased from the three months ended September 30, 2021 to the three months ended September 30, 2022 primarily driven by growth in Google Ad Manager and AdSense, partially offset by a decline in impressions related to AdMob. The decrease in cost-per-impression from the three months ended September 30, 2021 to the three months ended September 30, 2022 was primarily driven by the unfavorable effect of foreign currency exchange rates.

Impressions increased from the nine months ended September 30, 2021 to the nine months ended September 30, 2022, driven by growth across Google Ad Manager, AdMob, and AdSense. The increase in cost-per-impression from the nine months ended September 30, 2021 to the nine months ended September 30, 2022 was driven by a number of interrelated factors including ongoing product and policy changes, improvements we have made in ad formats and delivery, changes in device mix, geographic mix, product mix, and property mix, partially offset by the unfavorable effect of foreign currency exchange rates.

Google other revenues

Google other revenues increased $141 million from the three months ended September 30, 2021 to the three months ended September 30, 2022 primarily driven by growth in YouTube non-advertising followed by growth in hardware revenues, partially offset by a decrease in Google Play revenues. The growth in YouTube non-advertising was largely due to an increase in paid subscribers. The growth in hardware was primarily driven by an increase in phone sales. The decrease in Google Play revenues was primarily driven by a decrease in buyer spending. Additionally, the overall increase was partially offset by the unfavorable effect of foreign currency exchange rates.

Google other revenues increased $388 million from the nine months ended September 30, 2021 to the nine months ended September 30, 2022 primarily driven by growth in YouTube non-advertising, partially offset by a decrease in Google Play revenues. The growth in YouTube non-advertising was largely due to an increase in paid subscribers. The decrease in Google Play revenues was primarily driven by the fee structure changes we

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~~Impressions increased from~~announced in 2021 as well as a decrease in buyer spending. Additionally, the ~~three and nine months ended September 30, 2020 to the three and nine months ended September 30, 2021, primarily driven by growth in AdMob,~~overall increase was partially offset by ~~a decline in impressions related to AdSense. The increase in cost-per-impression from~~ the ~~three and nine months ended September 30, 2020 to the three and nine months ended September 30, 2021 was primarily driven by the adverse~~unfavorable effect of COVID-19 on the prior year comparable period as well as the effect of a combination of factors including ongoing product and policy changes and improvements we have made in ad formats and delivery, changes in device mix, geographic mix, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign ~~currencies.~~

~~Google other revenues~~

~~Google other revenues consist primarily of revenues from:~~

•~~Google Play, which includes revenues from sales of apps and in-app purchases (which we recognize net of payout to developers) and digital content sold in the Google Play store;~~

•~~Devices and Services, which includes hardware, such as Fitbit wearable devices, Google Nest home products, Pixelbooks, Pixel phones and other devices;~~

•~~YouTube non-advertising, including YouTube Premium and YouTube TV subscriptions and other services; and~~

•~~other products and services.~~

Google other revenues increased $1.3 billion from the three months ended September 30, 2020 to the three months ended September 30, 2021. The growth was primarily driven by YouTube non-advertising, largely due to an increase in paid subscribers, as well as Devices and Services, reflecting the inclusion of Fitbit revenues as the acquisition closed in January 2021.

Google other revenues increased $4.8 billion from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The growth was primarily driven by YouTube non-advertising and Devices and Services, followed by Google Play. Growth for YouTube non-advertising was largely due to an increase in paid subscribers. Growth for Devices and Services reflects the inclusion of Fitbit revenues. Growth for Google Play was primarily driven by sales of apps and in-app purchases.

~~Over time, our growth rate for Google other revenues may be affected by seasonality, new product and service launches, changes in pricing, as well as market dynamics.~~currency exchange rates.

Google Cloud

~~Our~~ Google Cloud revenues increased ~~$1.5~~$1.9 billion and ~~$4.4~~$5.3 billion from the three and nine months ended September 30, ~~2020~~2021 to the three and nine months ended September 30, ~~2021,~~2022, respectively. The growth was primarily driven by GCP followed by Google Workspace offerings. Google Cloud's infrastructure and platform services were the largest drivers of growth in GCP.

~~Over time, our growth rate for Google Cloud revenues may be affected by customer usage, market dynamics, as well as new product and service launches.~~

Revenues by Geography

The following table presents ~~our~~ revenues by geography as a percentage of revenues, determined based on the addresses of our customers:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022
United States	United States	47	%	46	%	47	%	46	%	United States	46	%	48	%	46	%	47	%
EMEA	EMEA	30	%	30	%	30	%	31	%	EMEA	30	%	28	%	31	%	29	%
APAC	APAC	18	%	18	%	18	%	18	%	APAC	18	%	17	%	18	%	17	%
Other Americas	Other Americas	5	%	6	%	5	%	5	%	Other Americas	6	%	6	%	5	%	6	%
Hedging gains (losses)										Hedging gains (losses)	0	%	1	%	0	%	1	%

For further details on revenues by geography, see Note 2 of the Notes to Consolidated Financial Statements included in ~~Part I,~~ Item 1 of this Quarterly Report on Form 10-Q.


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Use of Constant Currency Revenues and Constant Currency Revenue Percentage Change

The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. Our international revenues are favorably affected as the U.S. dollar weakens relative to other foreign currencies, and unfavorably affected as the U.S. dollar strengthens relative to other foreign currencies. Our revenues are also favorably affected by net hedging gains and unfavorably affected by net hedging losses.

We use non-GAAP constant currency revenues and non-GAAP percentage change in constant currency revenues for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of results on a constant currency basis in addition to GAAP results helps improve the ability to understand our performance because ~~they exclude~~it excludes the effects of foreign currency volatility that are not indicative of our core operating results.

Constant currency information compares results between periods as if exchange rates had remained constant period over period. We define constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and use it to determine the constant currency revenue percentage change on a ~~year-over-year~~year-on-year basis. Constant currency revenues are calculated by translating current period revenues using prior year comparable period exchange rates, as well as excluding any hedging effects realized in the current period.

Constant currency revenue percentage change is calculated by determining the change in current period revenues over prior year comparable period revenues where current period foreign currency revenues are translated using prior year comparable period exchange rates and hedging effects are excluded from revenues of both periods.

These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP.

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The following table presents the foreign exchange effect on ~~our~~ international revenues and total revenues (in millions, except percentages):
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
EMEA revenues $ 13,924 $ 19,839 $ 38,132 $ 55,954
Exclude foreign exchange effect on current period revenues using prior year rates (250) (490) 346 (2,844)
EMEA constant currency revenues $ 13,674 $ 19,349 $ 38,478 $ 53,110
Prior period EMEA revenues $ 12,565 $ 13,924 $ 36,546 $ 38,132
EMEA revenue percentage change 11 % 42 % 4 % 47 %
EMEA constant currency revenue percentage change 9 % 39 % 5 % 39 %
APAC revenues $ 8,458 $ 11,705 $ 22,641 $ 33,391
Exclude foreign exchange effect on current period revenues using prior year rates 1 (8) 167 (721)
APAC constant currency revenues $ 8,459 $ 11,697 $ 22,808 $ 32,670
Prior period APAC revenues $ 6,814 $ 8,458 $ 19,446 $ 22,641
APAC revenue percentage change 24 % 38 % 16 % 47 %
APAC constant currency revenue percentage change 24 % 38 % 17 % 44 %
Other Americas revenues $ 2,371 $ 3,688 $ 6,367 $ 9,957
Exclude foreign exchange effect on current period revenues using prior year rates 304 (117) 640 (38)
Other Americas constant currency revenues $ 2,675 $ 3,571 $ 7,007 $ 9,919
Prior period Other Americas revenues $ 2,290 $ 2,371 $ 6,320 $ 6,367
Other Americas revenue percentage change 4 % 56 % 1 % 56 %
Other Americas constant currency revenue percentage change 17 % 51 % 11 % 56 %
United States revenues $ 21,442 $ 29,824�� $ 58,311 $ 83,064
United States revenue percentage change 15 % 39 % 10 % 42 %
Hedging gains (losses) $ (22) $ 62 $ 178 $ (54)
Total revenues $ 46,173 $ 65,118 $ 125,629 $ 182,312
Total constant currency revenues $ 46,250 $ 64,441 $ 126,604 $ 178,763
Prior period revenues, excluding hedging effect(1)
$ 40,380 $ 46,195 $ 115,418 $ 125,451
Total revenue percentage change 14 % 41 % 9 % 45 %
Total constant currency revenue percentage change 15 % 39 % 10 % 42 %


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021		2022		% Change from Prior Year		2021		2022		% Change from Prior Year
EMEA revenues	$	19,839	$	19,450	(2)	%	$	55,954	$	60,300	8	%
EMEA constant currency revenues			22,093		11	%			$	66,210	18	%

APAC revenues	11,705		11,494		(2)	%	$	33,391	$	35,045	5	%
APAC constant currency revenues			12,604		8	%			$	37,510	12	%

Other Americas revenues	3,688		4,138		12	%	$	9,957	$	12,320	24	%
Other Americas constant currency revenues			4,303		17	%			$	12,536	26	%

United States revenues	29,824		33,372		12	%	$	83,064	$	97,832	18	%

Hedging gains (losses)	62		638				$	(54)	$	1,291
Total revenues	$	65,118	$	69,092	6	%	$	182,312	$	206,788	13	%
Revenues, excluding hedging effect	$	65,056	$	68,454			$	182,366	$	205,497
Exchange rate effect			3,918						8,591
Total constant currency revenues			$	72,372	11	%			$	214,088	17	%

~~(1)~~ EMEA re~~Total revenues and hedging gains (losses) were $40,499 million and $119 million, respectively, for~~venue growth from the three ~~months ended September 30, 2019~~ and ~~$115,782 million and $364 million, respectively, for the~~ nine months ended September 30, ~~2019.~~

~~EMEA revenue percentage change from~~2021 to the three and nine months ended September 30, ~~2020 to the three months ended September 30, 2021~~2022 was ~~favorably~~unfavorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar ~~weakening~~strengthening relative to the Euro and British ~~pound and Euro. EMEA~~pound.

APAC revenue ~~percentage change~~growth from the ~~nine months ended September 30, 2020 to the~~three and nine months ended September 30, 2021 to the three and nine months ended September 30, 2022 was ~~favorably~~unfavorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar ~~weakening~~strengthening relative to the ~~Euro~~Japanese yen.

Other Americas revenue growth from the three and ~~British pound.~~nine months ended September 30, 2021 to the three and nine months ended September 30, 2022 was unfavorably affected by the general strengthening of the U.S. dollar.

~~APAC revenue percentage change~~

Costs and Expenses

Cost of Revenues

The following table presents cost of revenues, including TAC (in millions, except percentages):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2022			2021			2022
TAC	$	11,498		$	11,826		$	32,139		$	36,030
Other cost of revenues	16,123			19,332			45,812			54,831
Total cost of revenues	$	27,621		$	31,158		$	77,951		$	90,861
Total cost of revenues as a percentage of revenues	42.4		%	45.1		%	42.8		%	43.9		%

Cost of revenues increased $3.5 billion from the three months ended September 30, ~~2020~~2021 to the three months ended September 30, ~~2021 was not materially affected by foreign currency exchange rates. APAC revenue percentage change~~2022 due to an increase in other cost of revenues and TAC of $3.2 billion and $328 million, respectively. Cost of revenues increased $12.9 billion from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, 2022 due to increases in other cost of revenues and TAC of $9.0 billion and $3.9 billion, respectively.

The increase in TAC from the three months ended September 30, 2021 to the three months ended September 30, 2022 was primarily due to increases in TAC paid to distribution partners primarily driven by growth in revenues

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~~2021 was favorably affected by foreign currency exchange rates, primarily due~~subject to ~~the U.S. dollar weakening relative to the Australian dollar.~~

~~Other Americas revenue percentage change from the three months ended September 30, 2020 to the three months ended September 30, 2021 was favorably affected by changes~~TAC. The increase in ~~foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Canadian dollar. Other Americas revenue percentage change~~ TAC from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, 2021 was not materially affected by changes in foreign currency exchange rates, as the effect of the U.S. dollar weakening relative to the Canadian dollar was largely offset by the U.S. dollar strengthening relative to the Brazilian real.

~~Costs and Operating Expenses~~

~~Cost of Revenues~~

Cost of revenues includes TAC which are paid to our distribution partners, who make available our search access points and services, and amounts paid to Google Network partners primarily for ads displayed on their properties. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers.

The cost of revenues as a percentage of revenues generated from ads placed on Google Network properties are significantly higher than the cost of revenues as a percentage of revenues generated from ads placed on Google properties (which includes Google Search & other and YouTube ads), because most of the advertiser revenues from ads served on Google Network properties are paid as TAC to our Google Network partners.

~~Additionally, other cost of revenues (which is the cost of revenues excluding TAC) includes the following:~~

•Content acquisition costs primarily related to payments to content providers from whom we license video and other content for distribution on YouTube advertising and subscription services and Google Play (we pay fees to these content providers based on revenues generated or a flat fee);

•Expenses associated with our data centers (including bandwidth, compensation expenses including SBC, depreciation, energy, and other equipment costs) as well as other operations costs (such as content review and customer support costs). These costs are generally less variable in nature and may not correlate with related changes in revenues; and

•~~Inventory related costs for hardware we sell.~~

~~The following tables present our cost of revenues, including TAC (in millions, except percentages):~~
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
TAC $ 8,166 $ 11,498 $ 22,312 $ 32,139
Other cost of revenues 12,951 16,123 36,340 45,812
Total cost of revenues $ 21,117 $ 27,621 $ 58,652 $ 77,951
Total cost of revenues as a percentage of revenues 45.7 % 42.4 % 46.7 % 42.8 %

Cost of revenues increased $6.5 billion from the three months ended September 30, 2020 to the three months ended September 30, 2021. The increase was due to increases in TAC and other cost of revenues of $3.3 billion and $3.2 billion, respectively. Cost of revenues increased $19.3 billion from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The increase was due to increases in TAC and other cost of revenues of $9.8 billion and $9.5 billion, respectively.

The increase in other cost of revenues from the three and nine months ended September 30, 2020 to the three and nine months ended September 30, 2021 was primarily due to increases in content acquisition costs primarily for YouTube as well as data center and other operations costs. The increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in the estimated useful life of our servers and certain network equipment beginning in the first quarter of 2021.

~~The increase in TAC from the three and nine months ended September 30, 2020 to the three and nine months ended September 30, 2021~~2022 was due to increases in TAC paid to distribution partners and to Google Network partners, primarily driven by growth in revenues subject to TAC.

The TAC rate ~~decreased~~increased from ~~22.0%~~21.6% to ~~21.6%~~21.7% from the three months ended September 30, ~~2020~~2021 to the three months ended September 30, ~~2021~~2022 and ~~decreased~~increased from ~~22.2%~~21.7% to ~~21.7%~~21.8% from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021 primarily~~2022 due to a ~~revenue mix shift from Google Network~~


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~~properties to Google properties.~~combination of factors, none of which were individually significant. The TAC rate on Google ~~properties~~Search & other revenues and the TAC rate on Google Network ~~properties~~ revenues were both substantially consistent from ~~the~~ three and nine months ended September 30, ~~2020~~2021 to the three and nine months ended September 30, ~~2021.~~2022.

~~Over time,~~The increase in other cost of revenues ~~as a percentage of total revenues may be affected by a number of factors, including~~from the ~~following:~~

•~~The amount of TAC paid~~three months ended September 30, 2021 to ~~distribution partners, which is affected by changes~~the three months ended September 30, 2022 was primarily due to increases in ~~device mix, geographic mix, partner mix, partner agreement terms such as revenue share arrangements, and the percentage of queries channeled through paid access points;~~

•~~The amount of TAC paid to Google Network partners, which is affected by a combination of factors such as geographic mix, product mix, and revenue share terms;~~

•~~Relative revenue growth rates of Google properties and Google Network properties;~~

•~~Certain costs that are less variable in nature and may not correlate with the related revenues;~~

•~~Costs associated with our~~ data ~~centers~~center and other operations costs as well as hardware costs. The increase in other cost of revenues from the nine months ended September 30, 2021 to ~~support ads, Google Cloud, Search, YouTube~~the nine months ended September 30, 2022 was primarily due to the increases in data center and other ~~products;~~

•~~Content~~operations costs followed by hardware costs and content acquisition ~~costs, which are primarily affected by the relative growth rates in our YouTube advertising and subscription revenues;~~

•~~Costs related to hardware sales; and~~

•~~Increased proportion of non-advertising revenues, which generally have higher costs of revenues, relative to our advertising revenues.~~costs.

Research and Development

The following table presents ~~our~~ R&D expenses (in millions, except percentages):
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
Research and development expenses $ 6,856 $ 7,694 $ 20,551 $ 22,854
Research and development expenses as a percentage of revenues 14.8 % 11.8 % 16.4 % 12.5 %

~~R&D expenses consist primarily of:~~

•~~Compensation expenses (including SBC) for engineering and technical employees responsible for R&D of our existing and new products and services;~~

•~~Depreciation;~~

•~~Equipment-related expenses; and~~

•~~Professional services fees primarily related to consulting and outsourcing services.~~


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2022			2021			2022
Research and development expenses	$	7,694		$	10,273		$	22,854		$	29,233
Research and development expenses as a percentage of revenues	11.8		%	14.9		%	12.5		%	14.1		%

R&D expenses increased ~~$838 million~~$2.6 billion from the three months ended September 30, ~~2020~~2021 to the three months ended September 30, ~~2021.~~2022. The increase was primarily ~~due to~~driven by an increase in compensation expenses of ~~$725 million,~~$1.8 billion, largely resulting from a ~~12%~~24% increase in headcount.

R&D expenses increased ~~$2.3~~$6.4 billion from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021.~~2022. The increase was primarily ~~due to~~driven by an increase in compensation expenses of ~~$2.4~~$4.2 billion, largely resulting from an ~~11%~~19% increase in ~~headcount. This~~headcount, and an increase in professional services fees of $619 million.

Sales and Marketing

The following table presents sales and marketing expenses (in millions, except percentages):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2022			2021			2022
Sales and marketing expenses	$	5,516		$	6,929		$	15,308		$	19,384
Sales and marketing expenses as a percentage of revenues	8.5		%	10.0		%	8.4		%	9.4		%

Sales and marketing expenses increased $1.4 billion from the three months ended September 30, 2021 to the three months ended September 30, 2022. The increase was ~~partially offset~~primarily driven by an increase in advertising and promotional activities of $708 million and an increase in compensation expenses of $515 million, largely resulting from a ~~reduction~~19% increase in ~~depreciation expense of $430 million including~~headcount.

Sales and marketing expenses increased $4.1 billion from the ~~effect of our change in the estimated useful life of our servers and certain network equipment.~~

~~Over time, R&D expenses as a percentage of revenues may fluctuate due to certain expenses that are generally less variable in nature and may not correlate~~nine months ended September 30, 2021 to the ~~changes~~nine months ended September 30, 2022 primarily driven by an increase in ~~revenues. In addition, R&D~~advertising and promotional activities of $1.8 billion and an increase in compensation expenses ~~may be affected by~~of $1.7 billion, largely resulting from a ~~number of factors including continued investment~~20% increase in ~~ads, Android, Chrome, Google Cloud, Google Maps, Google Play, hardware, machine learning, Other Bets, Search and YouTube.~~headcount.

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~~Sales~~General and ~~Marketing~~Administrative

The following table presents ~~our sales~~general and ~~marketing~~administrative expenses (in millions, except percentages):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2022			2021			2022
General and administrative expenses	$	3,256		$	3,597		$	9,370		$	10,628
General and administrative expenses as a percentage of revenues	5.0		%	5.2		%	5.1		%	5.1		%

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
Sales and marketing expenses $ 4,231 $ 5,516 $ 12,632 $ 15,308
Sales and marketing expenses as a percentage of revenues 9.2 % 8.5 % 10.1 % 8.4 %

~~Sales~~General and ~~marketing expenses consist primarily of:~~

•~~Advertising and promotional expenditures related to our products and services; and~~

•~~Compensation expenses (including SBC) for employees engaged in sales and marketing, sales support, and certain customer service functions.~~

~~Sales and marketing~~administrative expenses increased ~~$1.3 billion~~$341 million from the three months ended September 30, ~~2020~~2021 to the three months ended September 30, ~~2021,~~2022. The increase was primarily driven by an increase in compensation expenses of ~~$612~~$385 million, largely resulting from a 23% increase in headcount, and an increase in ~~advertising and promotional activities~~professional services fees of ~~$558~~$214 million. The overall increase was partially offset by a decrease in ~~compensation expenses was largely due~~charges related to ~~a 16% increase~~legal matters of $228 million, including the $217 million reduction of the EC fine imposed in ~~headcount. The increase~~2018. For further details on the EC fine imposed in ~~advertising~~2018, see Note 9 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

General and ~~promotional activities was driven by both increased spending in the current period and a reduction in spending in the prior year comparable period due to COVID-19.~~

~~Sales and marketing~~administrative expenses increased ~~$2.7~~$1.3 billion from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021,~~2022. The increase was primarily driven by an increase in compensation expenses of ~~$1.5 billion and advertising and promotional activities of $1.2 billion. The~~$985 million, largely resulting from a 21% increase in ~~compensation expenses was largely due to a 12%~~headcount, and an increase in ~~headcount.~~professional services fees of $811 million. The overall increase ~~in advertising and promotional activities~~ was ~~driven by both increased spending in the current period and a reduction in spending in the prior year comparable period due to COVID-19.~~

Over time, sales and marketing expenses as a percentage of revenues may fluctuate due to certain expenses that are generally less variable in nature and may not correlate to the changes in revenues. In addition, sales and marketing expenses may be affectedpartially offset by a ~~number of factors including the seasonality associated with new product and service launches and strategic decisions regarding the timing and extent of our spending.~~

~~General and Administrative~~

~~The following table presents our general and administrative expenses (in millions, except percentages):~~
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
General and administrative expenses $ 2,756 $ 3,256 $ 8,221 $ 9,370
General and administrative expenses as a percentage of revenues 6.0 % 5.0 % 6.5 % 5.1 %

~~General and administrative expenses consist primarily of:~~

•~~Compensation expenses (including SBC) for employees in our finance, human resources, information technology, and legal organizations;~~

•~~Depreciation;~~

•~~Equipment-related expenses;~~

•~~Legal-related expenses; and~~

•~~Professional services fees primarily related to audit, information technology consulting, outside legal, and outsourcing services.~~

General and administrative expenses increased $500 million from the three months ended September 30, 2020 to the three months ended September 30, 2021. The increase was primarily driven by a $314 million increasedecrease in charges related to legal matters ~~and a $179 million increase in compensation expenses, largely resulting from a 13% increase in headcount.~~

General and administrative expenses increased $1.1 billion from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The increase was primarily driven by a $1.3 billion increase in charges relating to legal matters and a $409 million increase in compensation expenses, largely resulting from a 13% increase in headcount. These increases were partially offset by a $844 million decline in allowance for credit


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~~losses for accounts receivable, as the prior year comparable period reflected a higher allowance related to the economic impact~~ of ~~COVID-19.~~

Over time, general and administrative expenses as a percentage of revenues may fluctuate due to certain expenses that are generally less variable in nature and may not correlate to the changes in revenues, the effect of discrete items such as legal settlements, or allowances for credit losses for accounts receivable.$1.0 billion.

Segment Profitability

The following table presents ~~our~~ segment operating income (loss) (in millions).


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2021		2020		2021			2021		2022		2021		2022

Operating income (loss):	Operating income (loss):									Operating income (loss):
Google Services	Google Services	$	14,453	$	23,973	$	35,540	$	65,862	Google Services	$	23,973	$	19,781	$	65,862	$	65,471
Google Cloud	Google Cloud	(1,208)		(644)		(4,364)		(2,209)		Google Cloud	(644)		(699)		(2,209)		(2,488)
Other Bets	Other Bets	(1,103)		(1,288)		(3,340)		(3,831)		Other Bets	(1,288)		(1,611)		(3,831)		(4,452)
Corporate costs, unallocated(1)	Corporate costs, unallocated(1)	(929)		(1,010)		(2,263)		(2,993)		Corporate costs, unallocated(1)	(1,010)		(336)		(2,993)		(1,849)
Total income from operations	Total income from operations	$	11,213	$	21,031	$	25,573	$	56,829	Total income from operations	$	21,031	$	17,135	$	56,829	$	56,682

(1)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.

Google Services

Google Services operating income ~~increased $9.5~~decreased $4.2 billion from the three months ended September 30, ~~2020~~2021 to the three months ended September 30, ~~2021.~~2022. The ~~increase~~decrease in operating income was ~~due to growth in revenues partially offset~~primarily driven by increases in ~~TAC, content acquisition costs,~~ compensation expenses, hardware costs, and advertising and promotional ~~expenses. The increase in expenses was~~activities, partially offset by ~~a reduction~~growth in costs driven by the change in the estimated useful life of our servers and certain network equipment. The effect of COVID-19 on the prior year comparable period results affected the year-over-year increase in operating income.revenues.

Google Services operating income ~~increased $30.3 billion~~decreased $391 million from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021.~~2022. The ~~increase~~decrease in operating income was ~~due to growth~~primarily driven by increases in ~~revenues~~compensation expenses and TAC, partially offset by ~~increases~~growth in TAC, content acquisition costs, compensation expenses, charges related to certain legal matters and advertising and promotional expenses. The increase in expenses was partially offset by a reduction in costs driven by the change in the estimated useful life of our servers and certain network equipment. The effect of COVID-19 on prior year comparable period results affected the year-over-year increase in operating income.revenues.

Google Cloud

Google Cloud operating loss ~~decreased $564~~increased $55 million and $2.2 billion from the three and nine months ended September 30, 2020 to the three and nine months ended September 30, 2021, respectively. The decrease in operating loss was primarily driven by growth in revenues, partially offset by an increase in expenses, primarily driven by compensation expenses. The increase in expenses was partially offset by a reduction in costs driven by the change in the estimated useful life of our servers and certain network equipment.

~~Other Bets~~

~~Other Bets operating loss increased $185 million and $491~~$279 million from the three and nine months ended September 30, ~~2020~~2021 to the three and nine months ended September 30, ~~2021,~~2022, respectively. The increase in operating loss for the three and nine months ended September 30, 2021 was primarily driven by increases in compensation expenses, including an increase in valuation-based compensation charges during the second quarter of 2021.

~~Other Income (Expense), Net~~

~~The following table presents other income (expense), net (in millions):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
Other income (expense), net $ 2,146 $ 2,033 $ 3,820 $ 9,503

~~Other income (expense), net, decreased $113 million from the three months ended September 30, 2020 to the three months ended September 30, 2021. The change~~ was primarily driven by an increase in ~~accrued performance~~expenses, primarily driven by compensation expenses, partially offset by growth in revenues.


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~~fees related to certain investments of $357~~Other Bets

Other Bets operating loss increased $323 million ~~during~~from the three months ended September 30, 2021 ~~offset~~to the three months ended September 30, 2022. The increase in operating loss was primarily driven by an increase in compensation expenses.

Other Bets operating loss increased $621 million from the nine months ended September 30, 2021 to the nine months ended September 30, 2022. The increase in operating loss was primarily driven by increases in compensation expenses, partially offset by growth in revenues.

Other Income (Expense), Net

The following table presents other income (expense), net (in millions):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2022		2021		2022
Other income (expense), net	$	2,033	$	(902)	$	9,503	$	(2,501)

Other income (expense), net, decreased $2.9 billion from the three months ended September 30, 2021 to the three months ended September 30, 2022 primarily due to changes in gains and losses on equity and debt securities. In the three months ended September 30, 2022, $731 million of net losses were recognized on debt securities, and $492 million of net unrealized losses were recognized on non-marketable equity securities. These losses were partially offset by interest income recognized of $615 million. In the three months ended September 30, 2021, $2.2 billion of net unrealized gains were recognized ~~for our~~on marketable and non-marketable equity securities, partially offset by $492 million of ~~$222 million and income from equity method investments of $162 million.~~accrued performance fees related to certain investments.

Other income (expense), net, ~~increased $5.7~~decreased $12.0 billion from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021. The change was~~2022 primarily ~~driven~~due changes in gains and losses on equity securities and performance fees. In the nine months ended September 30, 2022, $2.5 billion of net unrealized losses were recognized on marketable equity securities and $1.9 billion of net losses were recognized on debt securities. These losses were partially offset by ~~increases in~~interest income recognized of $1.5 billion and $879 million of net unrealized gains ~~recognized for our marketable and~~on non-marketable equity ~~securities of $1.4 billion and $5.8 billion, respectively, during~~securities. In the nine months ended September 30, 2021, $9.2 billion of net unrealized gains were recognized on marketable and non-marketable equity securities, partially offset by ~~an increase in~~$1.7 billion of accrued performance fees related to certain ~~investments of $1.5 billion.~~investments.

Over time, other income (expense), net, may be affected by market dynamics and other factors. Equity values generally change daily for marketable equity securities and upon the occurrence of observable price changes or upon impairment of non-marketable equity securities. Changes in our share of gains and losses in equity method investments may fluctuate. In addition, volatility in the global economic climate and financial markets could result in a significant change in the value of our investments. Fluctuations in the value of these investments has, and we expect will continue to, contribute to volatility of OI&E in future periods. For additional information about our investments, seeSee Note 3 of the Notes to Consolidated Financial Statements included in ~~Part I,~~ Item 1 of this Quarterly Report on Form ~~10-Q.~~10-Q for further information.

Provision for Income Taxes

The following table presents ~~our~~ provision for income taxes (in millions, except ~~for~~ effective tax rate):


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30,						September 30,							September 30,						September 30,
		2020			2021			2020			2021				2021			2022			2021			2022
Income before provision for income taxes														Income before provision for income taxes	$	23,064		$	16,233		$	66,332		$	54,181
Provision for income taxes	Provision for income taxes	$	2,112		$	4,128		$	4,351		$	10,941		Provision for income taxes	$	4,128		$	2,323		$	10,941		$	7,833
Effective tax rate	Effective tax rate	15.8		%	17.9		%	14.8		%	16.5		%	Effective tax rate	17.9		%	14.3		%	16.5		%	14.5		%

~~Our provision for income taxes and our~~The effective tax rate ~~increased~~decreased by 3.6 percentage points from the three months ended September 30, ~~2020~~2021 to the three months ended September 30, ~~2021. The~~2022.The decrease was primarily driven by a change in unrecognized tax benefits and the effects of capitalization and amortization of R&D expenses starting in 2022 as required by the 2017 Tax Cuts and Jobs Act generating an increase in the ~~provision for income taxes was primarily due to an increase~~U.S. federal Foreign-Derived Intangible Income tax deduction. These decreases were partially offset by a decrease in pre-tax earnings, including in countries that have ~~higher~~lower statutory rates and ~~an increase in unrecognized tax benefits, partially offset by an increase~~a decrease in the stock-based ~~compensation related~~compensation-related tax benefit.

~~Our provision for income taxes and our~~The effective tax rate ~~increased~~decreased by 2.0 percentage points from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021.~~2022. The decrease was primarily driven by the effects of capitalization and amortization of R&D expenses starting in 2022 as required by the 2017 Tax Cuts and Jobs Act generating an increase in the ~~provision for income taxes~~U.S. federal Foreign-Derived Intangible Income tax deduction and ~~our effective~~a change in unrecognized tax ~~rate was primarily due to an increase~~benefits. These decreases were partially offset by a decrease in pre-tax earnings, including in countries that have ~~higher~~lower statutory rates ~~partially offset by an increase~~and a decrease in the stock-based ~~compensation related~~compensation-related tax ~~benefit, and the U.S. federal Foreign-Derived Intangible Income tax deduction~~ benefit.

We expect our future effective tax rate to be affected by changes in pre-tax earnings, including the effect of countries with different statutory rates. Additionally, our future effective tax rate may be affected by changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws or regulations, as well as certain discrete items.


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Financial Condition

Cash, Cash Equivalents, and Marketable Securities

As of September 30, ~~2021,~~2022, we had ~~$142.0~~$116.3 billion in cash, cash equivalents, and short-term marketable securities. Cash equivalents and marketable securities are comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities and marketable equity securities.

Sources, Uses of Cash and Related Trends

Our principal sources of liquidity are our cash, cash equivalents, and marketable securities, as well as the cash flow that we generate from ~~our~~ operations. The primary use of capital continues to be to invest for the long-term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace and form of capital return to stockholders.


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The following table presents our cash flows (in millions):


		Nine Months Ended					Nine Months Ended
		September 30,					September 30,
		2020		2021			2021		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	42,447	$	66,718	Net cash provided by operating activities	$	66,718	$	67,881
Net cash used in investing activities	Net cash used in investing activities	$	(25,492)	$	(24,507)	Net cash used in investing activities	$	(24,507)	$	(14,071)
Net cash used in financing activities	Net cash used in financing activities	$	(15,138)	$	(44,851)	Net cash used in financing activities	$	(44,851)	$	(52,128)

Cash Provided by Operating Activities

Our largest source of cash provided by ~~our~~ operations are advertising revenues generated by Google Search & other properties, Google Network properties and YouTube ads. Additionally, we generate cash through sales of apps and in-app purchases, digital content products, and hardware; and licensing and service fees including fees received for Google Cloud offerings and subscription-based products.

Our primary uses of cash from our operating activities include payments to ~~our~~ distribution and Google Network partners, for compensation and related costs, and for content acquisition costs. In addition, uses of cash from operating activities include hardware ~~inventory~~ costs, income taxes, and other general corporate expenditures.

Net cash provided by operating activities increased from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021~~2022 primarily due to ~~the net effect of~~ increases in cash received from revenues, ~~and~~partially offset by increases in cash paid for cost of revenues and operating expenses, and ~~changes~~an increase in ~~operating assets~~tax payments driven by the effects of capitalization and ~~liabilities, including~~amortization of R&D expenses beginning in 2022 as required by the ~~timing of income tax payments.~~2017 Tax Cuts and Jobs Act, and other working capital.

Cash Used in Investing Activities

Cash provided by investing activities consists primarily of maturities and sales of ~~our~~ investments in marketable and non-marketable securities. Cash used in investing activities consists primarily of purchases of marketable and non-marketable securities, purchases of property and equipment, and payments for acquisitions.

Net cash used in investing activities decreased from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021~~2022 primarily due to ~~decreases~~a net decrease in cash used for purchases, sales and maturities of marketable securities, partially offset by ~~a decrease in maturities and sales of marketable securities and~~ an increase inof purchases of property and equipment.

Cash Used in Financing Activities

Cash provided by financing activities consists primarily of proceeds from issuance of debt and proceeds from the sale of interest in consolidated entities. Cash used in financing activities consists primarily of repurchases of ~~common and capital~~ stock, net payments related to stock-based award activities, and repayments of debt.

Net cash used in financing activities increased from the nine months ended September 30, ~~2020~~2021 to the nine months ended September 30, ~~2021~~2022 primarily due to ~~increases~~an increase in ~~cash payments for~~ repurchases of ~~common and capital stock, net payments related to stock-based award activities, and repayment of debt.~~stock.

Liquidity and Material Cash Requirements

We expect existing cash, cash equivalents, short-term marketable securities, cash flows from operations and financing activities to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future.


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Capital Expenditures and Leases

Capital Expenditures

Our capital investments in property and equipment consist primarily of the following major categories:

•technical infrastructure, which consists of investments in servers and network equipment for computing, storage and networking requirements for ongoing business activities, including machine learning (collectively referred to as information technology assets) and data center land and building construction; and

•office facilities, ground up development projects, and related building improvements.

Construction in progress consists primarily of technical infrastructure and office facilities which have not yet been placed in service for our intended use. The time frame from date of purchase to placement in service of these assets may extend from months to years. For example, our data center construction projects are generally multi-year projects with multiple phases, where we acquire qualified land and buildings, construct buildings, and secure and install information technology assets.

During the nine months ended September 30, 2021 and 2022, capital expenditures were $18.3 billion and $23.9 billion, respectively. Depreciation of our property and equipment commences when the deployment of such assets are completed and are ready for our intended use. Land is not depreciated. For the nine months ended September 30, 2021 and 2022, depreciation and impairment expenses on property and equipment were $8.3 billion and $11.2 billion, respectively.

Leases

For the nine months ended September 30, 2021 and 2022, we recognized total operating lease assets of $2.2 billion and $3.4 billion, respectively. As of September 30, 2022, the amount of total future lease payments under operating leases, which had a weighted average remaining lease term of 9 years, was $16.8 billion. As of September 30, 2022, we have entered into leases that have not yet commenced with future lease payments of $4.1 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2022 and 2026 with non-cancelable lease terms of 1 to 25 years.

For the nine months ended September 30, 2021 and 2022, our operating lease expenses (including variable lease costs) were $2.5 billion and $2.7 billion, respectively. Finance lease costs were not material for the nine months ended September 30, 2021 and 2022.

Financing

We have a short-term debt financing program of up to $10.0 billion through the issuance of commercial paper. Net proceeds from this program are used for general corporate purposes. As of September 30, 2022, we had ~~long-term taxes payable~~no commercial paper outstanding.

As of ~~$5.6~~September 30, 2022, we had $10.0 billion ~~related to~~of revolving credit facilities, $4.0 billion expiring in April 2023 and $6.0 billion expiring in April 2026. The interest rates for all credit facilities are determined based on a ~~one-time transition tax payable incurred~~formula using certain market rates, as well as our progress toward the achievement of certain sustainability goals. No amounts have been borrowed under the credit facilities.

As of September 30, 2022, we had senior unsecured notes outstanding with a ~~result~~total carrying value of $12.9 billion. See Note 5 of the ~~U.S. Tax Cuts~~Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for further information on our debt.

Share Repurchase Program

In April 2022, the Board of Directors of Alphabet authorized the company to repurchase up to $70.0 billion of its Class A and ~~Jobs Act ("Tax Act").~~Class C shares. As ~~permitted by~~of September 30, 2022, $43.5 billion remains available for Class A and Class C share repurchases. In accordance with the ~~Tax Act,~~authorization of the Board of Directors of Alphabet, during the three and nine months ended September 30, 2022, we ~~will pay~~repurchased and subsequently retired 138 million and 369 million aggregate shares for $15.4 billion and $43.9 billion, respectively. Of the ~~transition tax in annual interest-free installments through 2025.~~aggregate amount repurchased and subsequently retired during the three months ended September 30, 2022, 25 million shares were Class A stock for $2.7 billion and 113 million shares were Class C stock for $12.7 billion. Of the aggregate amount repurchased and


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subsequently retired during the nine months ended September 30, 2022, 46 million shares were Class A stock for $5.2 billion and 323 million shares were Class C stock for $38.7 billion.

European Commission Fines

In 2017, 2018 and 2019, the EC announced decisions that certain actions taken by Google infringed European competition law and imposed fines of €2.4 billion ($2.7 billion as of June 27, 2017), €4.3 billion ($5.1 billion as of June 30, 2018), and €1.5 billion ($1.7 billion as of March 20, 2019), respectively. On September 14, 2022, the General Court rejected our appeal on three claims, accepted our appeal on one claim, and reduced the fine to €4.1 billion. We are preparing to appeal to the European Court of Justice. In the second quarter of 2018 we recognized a charge of $5.1 billion for the fine, which we reduced by $217 million in the third quarter of 2022.

We have a short-term debt financing program of up to $10.0 billion through the issuance of commercial paper, which increased from $5.0 billion in September 2021. Net proceeds from this program are used for general corporate purposes. As of September 30, 2021, we had no commercial paper outstanding. As of September 30, 2021, we had $10.0 billion of revolving credit facilities with no amounts outstanding. ~~In April 2021, we terminated the~~


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existing revolving credit facilities, which were scheduled to expire in July 2023, and entered into two new revolving credit facilities in the amounts of $4.0 billion and $6.0 billion, which will expire in April 2022 and April 2026, respectively. The interest rates for the new credit facilities are determined based on a formula using certain market ~~rates, as well as our progress toward the achievement of certain sustainability goals.~~ ~~No amounts have been borrowed under the new credit facilities.~~

~~As of September 30, 2021, we have senior unsecured notes outstanding due from 2024 through 2060 with a total carrying value of $12.8 billion. Refer to~~ For further details, see Note 59 of the Notes to Consolidated Financial Statements included in ~~Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the notes.~~

In April 2021, the Board of Directors of Alphabet authorized the company to repurchase up to $50.0 billion of its Class C stock. In July 2021, the Alphabet board approved an amendment to the April 2021 authorization, permitting the company to repurchase both Class A and Class C shares in a manner deemed in the best interest of the company and its stockholders, taking into account the economic cost and prevailing market conditions, including the relative trading prices and volumes of the Class A and Class C shares. In accordance with the authorization of the Board of Directors of Alphabet, during the three and nine months ended September 30, 2021, we repurchased and subsequently retired 4.6 million and 15.7 million aggregate shares for $12.6 billion and $36.8 billion, respectively. Of the aggregate amount repurchased and subsequently retired during the three months ended September 30, 2021, 0.5 million shares were Class A stock for $1.5 billion. As of September 30, 2021, $30.8 billion remains available for repurchase of Class A and Class C shares under the amended authorization. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. Refer to Note 10 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~Capital Expenditures and Leases~~Taxes

We make investments in land and buildings for data centers and offices and information technology assets through purchases of property and equipment and lease arrangements to provide capacity for the growth of our services and products. In September 2021 we exercised our option to purchase St. John's Terminal in New York City for approximately $2.1 billion, which is expected to close in the first quarter of 2022.

During the nine months ended September 30, 2020 and 2021, we spent $16.8 billion and $18.3 billion on capital expenditures and recognized total operating lease assets of $2.2 billion and $2.2 billion, respectively. As of September 30, ~~2021,~~2022, we had short-term and long-term income taxes payable of $1.6 billion and $4.2 billion related to a one-time transition tax payable incurred as a result of the ~~amount~~U.S. Tax Cuts and Jobs Act ("Tax Act").As permitted by the Tax Act, we will pay the transition tax in annual interest-free installments through 2025. We also have taxes payable of ~~total future lease payments under operating leases, which had a weighted average remaining lease term of 8 years, was $15.5 billion. As~~$4.4 billion primarily related to uncertain tax positions as of September 30, 2021, we have entered into leases that have not yet commenced with future lease payments of $6.3 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2021 and 2026 with non-cancelable lease terms of 1 to 25 years.

For the nine months ended September 30, 2020 and 2021, our depreciation and impairment expenses on property and equipment were $9.4 billion and $8.3 billion, respectively. The change in estimated useful life of our servers and certain network equipment was effective beginning in fiscal year 2021. The effect of this change in accounting estimate was a reduction in depreciation expense of $2.1 billion for the nine months ended September 30, 2021. For the nine months ended September 30, 2020 and 2021, our operating lease expenses (including variable lease costs), were $2.1 billion and $2.5 billion, respectively. Finance leases were not material for the nine months ended September 30, 2020 and 2021.2022.

Critical Accounting ~~Policies and~~ Estimates

See Part II, Item 7, "Critical Accounting ~~Policies and~~ Estimates" in our Annual Report on Form 10-K for the year ended December 31, ~~2020. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2020.~~2021.

Available Information

Our website is located at www.abc.xyz, and our investor relations website is located at www.abc.xyz/investor. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, are available through our investor relations website, free of charge, after we file them with the SEC. We also provide a link to the section of the SEC's website at www.sec.gov that has all of the reports that we file or furnish with the SEC.

We webcast via our investor relations website our earnings calls and certain events we participate in or host with members of the investment community. Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items of interest to our investors, including SEC


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filings, investor events, press and earnings releases, and blogs. 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. Further, corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading "Other." The content of our websites are not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial market risks, including changes in foreign currency exchange rates, interest rates and equity investment risks. Our exposure to market risk has not changed materially since December 31, 2020. For quantitative and qualitative disclosures about market risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, ~~2021,~~2022, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management,


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including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

We rely extensively on information systems to manage our business and summarize and report operating results. In 2019, we began a multi-year implementation of a new global enterprise resource planning ~~("ERP")~~(ERP) system, which ~~will replace~~replaced much of our existing core financial systems. The ERP system is designed to accurately maintain our financial records, enhance the flow of financial information, improve data management and provide timely information to our management team. ~~The~~We have now completed implementation ~~is expected~~of the most significant modules planned to ~~continue in phases over the next few years.~~date. There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as the phased implementation of the new ERP system continues, we will change our processes and procedures, which in turn, could result in changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.

As a result of COVID-19, our global workforce continued to operate primarily in a work from home environment for the quarter ended September 30, 2021. While we continue to evolve our work model in response to the uneven effects of the ongoing pandemic around the world, we believe that our internal controls over financial reporting continue to be effective. We have continued to re-evaluate and refine our financial reporting process to provide reasonable assurance that we could report our financial results accurately and timely.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, see Note 9 “Contingencies - Legal Matters” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

ITEM 1A.RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our ~~common and capital~~ stock. Below are material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

A variety of new and existing laws and/or interpretations could harm our business.

We are subject to numerous U.S. and foreign laws and regulations covering a wide variety of subject matters. New laws and regulations, or new interpretations or applications of existing laws and regulations in a manner inconsistent with our practices, have made, and may continue to make, our products and services less useful, limit our ability to pursue certain business models or offer certain products and services in certain jurisdictions, require us to incur substantial costs, expose us to civil or criminal liability, or cause us to change our business practices. These laws and regulations are evolving and involve matters central to our business, including, among others:

~~We cannot guarantee that any share repurchase program will be fully consummated or will enhance long-term stockholder value,~~•Laws and ~~share repurchases could increase~~regulations around the ~~volatility~~world focused on large technology platforms, including the Digital Markets Act in the European Union and proposed antitrust legislation on self-preferencing and mergers and acquisitions in the U.S., which may limit certain business practices, and in some cases, create the risk of ~~our stock prices~~significant penalties.

•Privacy laws, such as the GDPR, CCPA, CPRA, Virginia CDPA, and ~~could diminish our cash reserves~~ColoPA (as defined and discussed further below).

~~We engage~~•Data protection laws passed by many states within the U.S. and by certain countries regarding notification to data subjects and/or regulators when there is a security breach of personal data.

•Consumer protection laws, including EU’s New Deal for Consumers, which could result in ~~share repurchases~~monetary penalties and create a range of ~~our Class A~~new compliance obligations.

•New laws further restricting the collection, processing and/or sharing of advertising-related data. Copyright or similar laws around the world, including the EU Directive on Copyright in the Digital Single Market (EUCD) and ~~Class C stock from time to time in accordance with authorizations from the Board of Directors of Alphabet. Our repurchase program does not~~EU member state transpositions. These and similar laws that have ~~an expiration date and does not obligate Alphabet to repurchase any specific dollar amount~~been adopted or ~~to acquire any specific number of shares. Further, our share repurchases~~proposed introduce new licensing regimes that could affect our ~~share trading prices,~~ability to operate. The EUCD and similar laws could also increase the liability of some content-sharing services with respect to content uploaded by their ~~volatility, reduce our cash reserves~~users. Some of these laws, as well as follow-on administrative or judicial actions, have also created or may create a new property right in news publications that limits the ability of some online services to link to, interact with, or present such content. They may also require individual or collective compensation negotiations with news agencies and ~~may be suspended or terminated at any time,~~publishers for the use of such content, which may result in payment obligations that significantly exceed the value that such content provides to Google and its users, potentially harming our services, commercial operations, and business results.

•Data localization laws, which generally mandate that certain types of data collected in a ~~decrease in~~particular country be stored and/or processed within that country.

•Various U.S. and international laws that govern the ~~trading prices~~distribution of ~~our stock.~~

~~The concentration~~certain materials to children and regulate the ability of ~~our stock ownership limits our stockholders’ ability~~online services to ~~influence corporate matters.~~

Our Class B common stock has 10 votes per share, our Class A common stock has one vote per share, and our Class C capital stock has no voting rights. As of September 30, 2021, Larry Page and Sergey Brin beneficially owned approximately 85.5% of our outstanding Class B common stock, which represented approximately 51.3% of the voting power of our outstanding common stock. Through their stock ownership, Larry and Sergey have significant influence over all matters requiring stockholder approval,collect information from minors, including the ~~election~~Children’s Online Privacy Protection Act of ~~directors~~1998 and ~~significant corporate transactions,~~the United Kingdom’s Age-Appropriate Design Code.

•Various laws with regard to content moderation and removal, and related disclosure obligations, such as Germany's Network Enforcement Act, the European Union's Digital Services Act, Florida's Senate Bill 7072 and Texas' House Bill 20, which may affect our businesses and operations and may subject us to significant litigation, damage claims, and fines if they are interpreted and applied in a ~~merger~~manner inconsistent with our practices and policies, or ~~other sale~~if we remove or promote (or fail to remove or promote) content in ways inconsistent with those laws. Other countries, including Singapore, Australia, and the United Kingdom, have implemented or are considering similar legislation imposing penalties for failure to remove certain types of our company or our assets, for the foreseeable future. In addition, because our Class C capital stock carries no voting rights (except as required by applicable law), the issuance of the Class C capital stock, including in future stock-based acquisition transactions and to fund employee equity incentive programs, could continue Larry and Sergey’s current relative voting power and their ability to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders. The share repurchases made pursuant to our repurchase program may also affect Larry and Sergey’s relative voting power. This concentrated control limits or severely restricts other stockholders’ ability to influence corporate matters and we may take actions that some of our stockholders do not view as beneficial, which could reduce the market price of our Class A common stock and our Class C capital stock.content.

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•Various legislative, litigation, and regulatory activity regarding our Google Play billing policies and business model, which could result in monetary penalties, damages and/or prohibition.

•Various legislative and regulatory activity requiring disclosure of information about the operation of our services and algorithms, which may make it easier for websites to artificially promote low-quality, deceptive, or harmful content on services like Google Search and YouTube, potentially harming the quality of our services.

In addition, the applicability and scope of these and other laws, as interpreted by the courts, remain uncertain and could be interpreted in ways that harm our business. For example:

•We rely on statutory safe harbors, like those set forth in the Digital Millennium Copyright Act and Section 230 of the Communications Decency Act in the U.S. and the E-Commerce Directive in Europe, against liability for various linking, caching, ranking, recommending, and hosting activities. Any legislation or court rulings affecting these safe harbors may adversely affect us and may impose significant operational challenges. There are legislative proposals and pending litigation in both the U.S. (such as Gonzalez v. Google) and EU that could diminish or eliminate safe harbor protection for websites and online platforms.

•Court decisions such as the judgment of the Court of Justice of the European Union (CJEU) on May 13, 2014 on the ‘right to be forgotten,’ which allows individuals to demand that Google remove search results about them in certain instances, may limit the content we can show to our users and impose significant operational burdens.

The introduction of new businesses, products, services, and technologies, our activities in certain jurisdictions, or other actions we take have subjected us, and will likely continue to subject us, to additional laws and regulations. Our investment in a variety of new fields, such as healthcare and payment services, has expanded, and will continue to expand, the scope of regulations that apply to our business. The costs of compliance with these laws and regulations are high and are likely to increase in the future. Any failure on our part to comply with laws and regulations can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table presents information with respect to Alphabet's repurchases of Class A ~~common stock~~ and Class C ~~capital~~ stock during the quarter ended September 30, ~~2021.~~2022.


Period	Period	Total Number of Class A Shares Purchased (in thousands) (1)	Total Number of Class C Shares Purchased (in thousands) (1)	Average Price Paid per Class A Share (2)		Average Price Paid per Class C Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Programs (in thousands) (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)		Period	Total Number of Class A Shares Purchased (in thousands) (1)	Total Number of Class C Shares Purchased (in thousands) (1)	Average Price Paid per Class A Share (2)		Average Price Paid per Class C Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Programs (in thousands) (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)
July 1 - 31	July 1 - 31	0	1,513	$	0.00	$	2,632.22	1,513	$	39,471	July 1 - 31	8,479	37,461	$	112.62	$	113.29	45,940	$	53,675
August 1 - 31	August 1 - 31	270	1,378	$	2,772.38	$	2,779.47	1,648	$	34,895	August 1 - 31	8,477	39,176	$	115.95	$	117.10	47,653	$	48,104
September 1 - 30	September 1 - 30	255	1,165	$	2,842.50	$	2,854.69	1,420	$	30,844	September 1 - 30	7,583	36,588	$	104.57	$	104.66	44,171	$	43,482
Total	Total	525	4,056					4,581			Total	24,539	113,225					137,764

(1) ~~The repurchases~~Repurchases are ~~being~~ executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. See Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to share repurchases.

(2) Average price paid per share includes costs associated with the repurchases.

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ITEM 5.OTHER INFORMATION

Under Section 13(r) of the Exchange Act, we are required to disclose if we or any of our affiliates knowingly conducted a transaction or dealing with entities or individuals designated pursuant to certain Executive Orders. The U.S. government has designated the Russian Federal Security Service (the “FSB”) pursuant to one of those Executive Orders, and the U.S. Department of the Treasury’s Office of Foreign Assets Control has accordingly updated General License No. 1B (the “OFAC General License”), which generally permits U.S. persons to engage in transactions and activities prohibited by the relevant Executive Order involving the FSB that are necessary and ordinarily incident to requesting, receiving, utilizing, paying for or dealing in licenses, permits, certifications, or notifications issued or registered by the FSB for the importation, distribution, or use of information technology products in Russia.

In the past year and during the quarter ended September 30, 2022, Google LLC, a subsidiary of Alphabet, filed notifications with the FSB as required pursuant to Russian encryption product import controls for the purpose of enabling the import of certain software in Russia. Neither we nor our subsidiaries generated any gross revenues or net profits directly from such approval activity and neither we nor our subsidiaries sell to the FSB. Alphabet expects that Google LLC will continue to file these notifications as required under Russia law.


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ITEM 6.EXHIBITS

Exhibit

Number

Description

Incorporated by reference herein

Form

Date

31.01

Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02

Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01

‡

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

__________________________




*			Filed herewith.
‡			Furnished herewith.

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~~SIGNATURE~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		ALPHABET INC.
October ~~26, 2021~~25, 2022	By:	/s/ RUTH M. PORAT
		Ruth M. Porat
		Senior Vice President and Chief Financial Officer


		ALPHABET INC.
October ~~26, 2021~~25, 2022	By:	/s/ AMIE THUENER O'TOOLE
		Amie Thuener O'Toole
		Vice President and Chief Accounting Officer

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	Three Months Ended September 30, 2020
	Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance as of June 30, 2020	681,215	$	55,937	$	(296)	$	151,681	$	207,322
Common and capital stock issued	1,669	15		0		0		15
Stock-based compensation expense	0	3,230		0		0		3,230
Tax withholding related to vesting of restricted stock units and other	0	(1,339)		0		0		(1,339)
Repurchases of capital stock	(5,160)	(536)		0		(7,361)		(7,897)
Sale of interest in consolidated entities	0	0		0		0		0
Net income	0	0		0		11,247		11,247
Other comprehensive income (loss)	0	0		342		0		342
Balance as of September 30, 2020	677,724	$	57,307	$	46	$	155,567	$	212,920


	Nine Months Ended September 30, 2020
	Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2019	688,335	$	50,552	$	(1,232)	$	152,122	$	201,442
Common and capital stock issued	6,185	158		0		0		158
Stock-based compensation expense	0	9,865		0		0		9,865
Tax withholding related to vesting of restricted stock units and other	0	(4,076)		0		0		(4,076)
Repurchases of capital stock	(16,796)	(1,648)		0		(21,597)		(23,245)
Sale of interest in consolidated entities	0	2,456		0		0		2,456
Net income	0	0		0		25,042		25,042
Other comprehensive income (loss)	0	0		1,278		0		1,278
Balance as of September 30, 2020	677,724	$	57,307	$	46	$	155,567	$	212,920


Remainder of 2021	$	214
2022	512
2023	241
2024	215
2025	81
Thereafter	286
Total	$	1,549