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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-Q _(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
2、 OF 1934For the transition period from _ to _Commission file number:001-37580 _Alphabet Inc.(Exact name of registrant as specified in its charter)_Delaware61-1767919(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification Number)1600 Amphitheatre ParkwayMountain V
3、iew,CA 94043(Address of principal executive offices,including zip code)(650)253-0000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredClass A Common Stock,$0.001 par
4、 valueGOOGLNasdaq Stock Market LLC(Nasdaq Global Select Market)Class C Capital Stock,$0.001 par valueGOOGNasdaq 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 A
5、ct 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
6、 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 accelera
7、ted 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 filerNon-accel
8、erated filer Smaller reporting companyEmerging growth companyIf 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 Exch
9、ange 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 April 18,2023,there were 5,941 million shares of Alphabets Class A stock outstanding,882 million shares of Alphabets Class B stock outstanding,and 5,874 million shares
10、 of Alphabets Class C stock outstanding.Alphabet Inc.Form 10-QFor the Quarterly Period Ended March 31,2023 TABLE OF CONTENTS Page No.Note About Forward-Looking Statements3PART I.FINANCIAL INFORMATIONItem 1Financial Statements5Consolidated Balance Sheets-December 31,2022 and March 31,20235Consolidate
11、d Statements of Income-Three Months Ended March 31,2022 and 20236Consolidated Statements of Comprehensive Income-Three Months Ended March 31,2022 and 20237Consolidated Statements of Stockholders Equity-Three Months Ended March 31,2022 and 20238Consolidated Statements of Cash Flows-Three Months Ended
12、 March 31,2022 and 20239Notes to Consolidated Financial Statements10Item 2Managements Discussion and Analysis of Financial Condition and Results of Operations30Item 3Quantitative and Qualitative Disclosures About Market Risk43Item 4Controls and Procedures43PART II.OTHER INFORMATIONItem 1Legal Procee
13、dings44Item 1A Risk Factors44Item 2Unregistered Sales of Equity Securities and Use of Proceeds44Item 5Other Information49Item 6Exhibits45Signatures46Table of ContentsAlphabet Inc.2Note About Forward-Looking StatementsThis Quarterly Report on Form 10-Q contains forward-looking statements within the m
14、eaning of the Private Securities Litigation Reform Act of 1995.These include,among other things,statements regarding:the growth of our business and revenues and our expectations about the factors that influence our success and trends in our business;fluctuations in our revenues and margins and vario
15、us 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 marg
16、ins;our expectation that our traffic acquisition costs(TAC)and the associated TAC rate will fluctuate,which could affect our overall margins;our expectation that our monetization trends will fluctuate,which could affect our revenues and margins;fluctuations in our revenues,as well as the change in p
17、aid 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 a
18、nd 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 c
19、urrency 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 remaini
20、ng 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 infrastructure,as well as to continue to invest in acquisitio
21、ns and strategic investments;our pace of hiring and our plans to provide competitive compensation programs;our expectation that our cost of revenues,research and development(R&D)expenses,sales and marketing expenses,and general and administrative expenses may increase in amount and/or may increase a
22、s a percentage of revenues and may be affected by a number of factors;estimates of our future compensation expenses;our expectation that our other income(expense),net(OI&E),will fluctuate in the future,as it is largely driven by market dynamics;fluctuations in our effective tax rate;seasonal fluctua
23、tions in internet usage and advertiser expenditures,underlying business trends such as traditional retail seasonality,which are likely to cause fluctuations in our quarterly results;the sufficiency of our sources of funding;our potential exposure in connection with new and pending investigations,pro
24、ceedings,and other contingencies,including the possibility that certain legal proceedings to which we are a party could harm our business,financial condition,and operating results;our expectation that we will continue to face heightened regulatory scrutiny,and the sufficiency and timing of our propo
25、sed remedies in response to decisions from the European Commission(EC)and other regulators and governmental entities;Table of ContentsAlphabet Inc.3the expected timing,amount,and effect of Alphabet Inc.s share repurchases;our long-term sustainability and diversity goals;the unpredictability of the o
26、ngoing broader economic effects resulting from the war in Ukraine on our future financial results;the expected financial effect of our announced workforce reduction and office space optimization;our expectation that the change in estimated useful life of servers and certain network equipment will ha
27、ve a favorable effect on our 2023 operating results;as well as other statements regarding our future operations,financial condition and prospects,and business strategies.Forward-looking statements may appear throughout this report and other documents we file with the Securities and Exchange Commissi
28、on(SEC),including without limitation,the following sections:Part I,Item 2,Managements 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 3
29、1,2022.Forward-looking statements generally can be identified by words such as anticipates,believes,estimates,expects,intends,plans,predicts,projects,will be,will continue,may,could,will likely result,and similar expressions.These forward-looking statements are based on current expectations and assu
30、mptions 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 F
31、orm 10-Q,and in particular,the risks discussed in Part I,Item 1A,Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31,2022,and those discussed in other documents we file with the SEC.We undertake no obligation to revise or publicly release the results of any revision
32、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
33、context indicates otherwise.Alphabet,Google,and other trademarks of ours appearing in this report are our property.We do not intend our use or display of other companies trade names or trademarks to imply an endorsement or sponsorship of us by such companies,or any relationship with any of these com
34、panies.Table of ContentsAlphabet Inc.4PART I.FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSAlphabet Inc.CONSOLIDATED BALANCE SHEETS(in millions,except par value per share amounts)As of December 31,2022As ofMarch 31,2023(unaudited)AssetsCurrent assets:Cash and cash equivalents$21,879$25,924 Marketa
35、ble securities 91,883 89,178 Total cash,cash equivalents,and marketable securities 113,762 115,102 Accounts receivable,net 40,258 36,036 Inventory 2,670 2,315 Other current assets 8,105 8,532 Total current assets 164,795 161,985 Non-marketable securities 30,492 31,213 Deferred income taxes 5,261 6,8
36、85 Property and equipment,net 112,668 117,560 Operating lease assets 14,381 14,447 Intangible assets,net 2,084 1,968 Goodwill 28,960 28,994 Other non-current assets 6,623 6,439 Total assets$365,264$369,491 Liabilities and Stockholders EquityCurrent liabilities:Accounts payable$5,128$4,184 Accrued co
37、mpensation and benefits 14,028 9,954 Accrued expenses and other current liabilities 37,866 43,185 Accrued revenue share 8,370 7,816 Deferred revenue 3,908 3,715 Total current liabilities 69,300 68,854 Long-term debt 14,701 13,697 Deferred revenue,non-current 599 610 Income taxes payable,non-current
38、9,258 9,722 Deferred income taxes 514 542 Operating lease liabilities 12,501 12,799 Other long-term liabilities 2,247 2,373 Total liabilities 109,120 108,597 Commitments and contingencies(Note 9)Stockholders equity:Preferred stock,$0.001 par value per share,100 shares authorized;no shares issued and
39、 outstanding 0 0 Class A,Class B,and Class C stock and additional paid-in capital,$0.001 par value per share:300,000 shares authorized(Class A 180,000,Class B 60,000,Class C 60,000);12,849(Class A 5,964,Class B 883,Class C 6,002)and 12,722(Class A 5,943,Class B 883,Class C 5,896)shares issued and ou
40、tstanding 68,184 70,269 Accumulated other comprehensive income(loss)(7,603)(6,000)Retained earnings 195,563 196,625 Total stockholders equity 256,144 260,894 Total liabilities and stockholders equity$365,264$369,491 See accompanying notes.Table of ContentsAlphabet Inc.5Alphabet Inc.CONSOLIDATED STAT
41、EMENTS OF INCOME(in millions,except per share amounts;unaudited)Three Months EndedMarch 31,20222023Revenues$68,011$69,787 Costs and expenses:Cost of revenues 29,599 30,612 Research and development 9,119 11,468 Sales and marketing 5,825 6,533 General and administrative 3,374 3,759 Total costs and exp
42、enses 47,917 52,372 Income from operations 20,094 17,415 Other income(expense),net(1,160)790 Income before income taxes 18,934 18,205 Provision for income taxes 2,498 3,154 Net income$16,436$15,051 Basic net income per share of Class A,Class B,and Class C stock$1.24$1.18 Diluted net income per share
43、 of Class A,Class B,and Class C stock$1.23$1.17 See accompanying notes.Table of ContentsAlphabet Inc.6Alphabet Inc.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in millions;unaudited)Three Months Ended March 31,20222023Net income$16,436$15,051 Other comprehensive income(loss):Change in foreign cur
44、rency translation adjustment 39 596 Available-for-sale investments:Change in net unrealized gains(losses)(2,478)866 Less:reclassification adjustment for net(gains)losses included in net income 148 292 Net change,net of income tax benefit(expense)of$633 and$(330)(2,330)1,158 Cash flow hedges:Change i
45、n net unrealized gains(losses)114 (74)Less:reclassification adjustment for net(gains)losses included in net income(249)(77)Net change,net of income tax benefit(expense)of$44 and$30(135)(151)Other comprehensive income(loss)(2,426)1,603 Comprehensive income$14,010$16,654 See accompanying notes.Table o
46、f ContentsAlphabet Inc.7Alphabet Inc.CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(in millions;unaudited)Three Months Ended March 31,2022 Class A,Class B,Class C Stock and Additional Paid-In CapitalAccumulatedOtherComprehensiveIncome(Loss)RetainedEarningsTotalStockholdersEquity SharesAmountBalance
47、as of December 31,2021 13,242$61,774$(1,623)$191,484$251,635 Stock issued 31 7 0 0 7 Stock-based compensation expense 0 4,547 0 0 4,547 Tax withholding related to vesting of restricted stock units and other 0 (2,895)0 0 (2,895)Repurchases of stock(98)(601)0 (12,699)(13,300)Net income 0 0 0 16,436 16
48、,436 Other comprehensive income(loss)0 0 (2,426)0 (2,426)Balance as of March 31,2022 13,175$62,832$(4,049)$195,221$254,004 Three Months Ended March 31,2023 Class A,Class B,Class C Stock and Additional Paid-In CapitalAccumulatedOtherComprehensiveIncome(Loss)RetainedEarningsTotalStockholdersEquity Sha
49、resAmountBalance as of December 31,2022 12,849$68,184$(7,603)$195,563$256,144 Stock issued 30 0 0 0 0 Stock-based compensation expense 0 5,313 0 0 5,313 Tax withholding related to vesting of restricted stock units and other 0 (2,093)0 0 (2,093)Repurchases of stock(157)(1,135)0 (13,989)(15,124)Net in
50、come 0 0 0 15,051 15,051 Other comprehensive income(loss)0 0 1,603 0 1,603 Balance as of March 31,2023 12,722$70,269$(6,000)$196,625$260,894 See accompanying notes.Table of ContentsAlphabet Inc.8Alphabet Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS(in millions;unaudited)Three Months EndedMarch 31,20222
51、023Operating activitiesNet income$16,436$15,051 Adjustments:Depreciation and impairment of property and equipment 3,591 3,060 Amortization and impairment of intangible assets 191 126 Stock-based compensation expense 4,504 5,284 Deferred income taxes(2,090)(1,854)Loss(gain)on debt and equity securiti
52、es,net 1,437 (84)Other 140 553 Changes in assets and liabilities,net of effects of acquisitions:Accounts receivable,net 4,364 4,454 Income taxes,net 3,820 4,069 Other assets(776)(746)Accounts payable(2,373)(1,105)Accrued expenses and other liabilities(3,216)(4,496)Accrued revenue share(828)(602)Defe
53、rred revenue(94)(201)Net cash provided by operating activities 25,106 23,509 Investing activitiesPurchases of property and equipment(9,786)(6,289)Purchases of marketable securities(28,462)(14,227)Maturities and sales of marketable securities 29,779 18,327 Purchases of non-marketable securities(776)(
54、626)Maturities and sales of non-marketable securities 12 36 Acquisitions,net of cash acquired,and purchases of intangible assets(173)(42)Other investing activities 355 (125)Net cash used in investing activities(9,051)(2,946)Financing activitiesNet payments related to stock-based award activities(2,9
55、16)(1,989)Repurchases of stock(13,300)(14,557)Proceeds from issuance of debt,net of costs 16,422 6,927 Repayments of debt(16,420)(6,952)Proceeds from sale of interest in consolidated entities,net 0 3 Net cash used in financing activities(16,214)(16,568)Effect of exchange rate changes on cash and cas
56、h equivalents 100 50 Net increase(decrease)in cash and cash equivalents(59)4,045 Cash and cash equivalents at beginning of period 20,945 21,879 Cash and cash equivalents at end of period$20,886$25,924 See accompanying notes.Table of ContentsAlphabet Inc.9Alphabet Inc.NOTES TO CONSOLIDATED FINANCIAL
57、STATEMENTS(Unaudited)Note 1.Summary of Significant Accounting Policies Nature of OperationsGoogle 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.(Alphabe
58、t)became the successor issuer to Google.We generate revenues by delivering relevant,cost-effective online advertising;cloud-based solutions that provide enterprise customers with infrastructure and platform services as well as communication and collaboration tools;sales of other products and service
59、s,such as apps and in-app purchases,and hardware;and fees received for subscription-based products.Basis of ConsolidationThe consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models.Intercompany balances an
60、d transactions have been eliminated.Unaudited Interim Financial InformationThese unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States(GAAP),and in our opinion,include all adjustments of a normal recurr
61、ing nature necessary for fair financial statement presentation.Interim results are not necessarily indicative of the results to be expected for the full year ending December 31,2023.We have made estimates and assumptions that affect the amounts reported and disclosed in the financial statements and
62、the accompanying notes.Actual results could differ materially from these estimates.These consolidated financial statements and other information presented in this Form 10-Q should be read in conjunction with the consolidated financial statements and the related notes included in our Annual Report on
63、 Form 10-K for the fiscal year ended December 31,2022 filed with the SEC.Change in Accounting EstimateIn January 2023,we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from four years to six years and the estimat
64、ed useful life of certain network equipment from five years to six years.This change in accounting estimate was effective beginning in fiscal year 2023.Based on the carrying value of servers and certain network equipment as of December 31,2022,and those placed in service during the quarter ended Mar
65、ch 31,2023,the effect of this change in estimate was a reduction in depreciation expense of$988 million and an increase in net income of$770 million,or$0.06 per basic and$0.06 per diluted share,for the three months ended March 31,2023.Stock Split Effected in the Form of a Stock Dividend(“Stock Split
66、”)On July 15,2022,we executed a 20-for-one stock split of our 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 prior to the effective date have been retroactively adjusted
67、 to reflect the effects of the Stock Split.Prior Period ReclassificationsCertain amounts in prior periods have been reclassified to conform with current period presentation.Table of ContentsAlphabet Inc.10Note 2.Revenues Disaggregated RevenuesThe following table presents revenues disaggregated by ty
68、pe(in millions):Three Months EndedMarch 31,20222023Google Search&other$39,618$40,359 YouTube ads 6,869 6,693 Google Network 8,174 7,496 Google advertising 54,661 54,548 Google other 6,811 7,413 Google Services total 61,472 61,961 Google Cloud 5,821 7,454 Other Bets 440 288 Hedging gains(losses)278 8
69、4 Total revenues$68,011$69,787 The following table presents revenues disaggregated by geography,based on the addresses of our customers(in millions):Three Months EndedMarch 31,20222023United States$31,733 47%$32,864 47%EMEA(1)20,317 30 21,078 30 APAC(1)11,841 17 11,681 17 Other Americas(1)3,842 6 4,
70、080 6 Hedging gains(losses)278 0 84 0 Total revenues$68,011 100%$69,787 100%(1)Regions represent Europe,the Middle East,and Africa(EMEA);Asia-Pacific(APAC);and Canada and Latin America(Other Americas).Revenue BacklogAs of March 31,2023,we had$61.7 billion of remaining performance obligations(“revenu
71、e backlog”),primarily related to Google Cloud.Our revenue backlog represents commitments in customer contracts for future services that have not yet been recognized as revenue.The amount and timing of revenue recognition for these commitments is largely driven by our ability to deliver in accordance
72、 with relevant contract terms and when our customers utilize services,which could affect our estimate of revenue backlog and when we expect to recognize such as revenue.We expect to recognize approximately half of the revenue backlog as revenues over the next 24 months with the remaining to be recog
73、nized thereafter.Revenue backlog includes related deferred revenue currently recorded as well as amounts that will be invoiced in future periods,and excludes contracts with an original expected term of one year or less and cancellable contracts.Deferred RevenuesWe record deferred revenues when cash
74、payments are received or due in advance of our performance,including amounts which are refundable.Deferred revenues primarily relate to Google Cloud and Google other.Total deferred revenue as of December 31,2022 was$4.5 billion,of which$1.6 billion was recognized as revenues during the three months
75、ended March 31,2023.Table of ContentsAlphabet Inc.11Note 3.Financial InstrumentsFair Value MeasurementsInvestments Measured at Fair Value on a Recurring BasisCash,cash equivalents,and marketable equity securities are measured at fair value and classified within Level 1 and Level 2 in the fair value
76、hierarchy,because we use quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets.Debt securities are measured at fair value and classified within Level 2 in the fair value hierarchy,because we use quoted market prices
77、 to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.For certain marketable debt securities,we have elected the fair value option for which changes in fair value are recorded in other income(expense),net.The fair value option w
78、as elected for these securities to align with the unrealized gains and losses from related derivative contracts.The following tables summarize our cash,cash equivalents,and marketable securities measured at fair value on a recurring basis(in millions):As of December 31,2022Fair Value HierarchyAdjust
79、ed CostGross Unrealized GainsGross Unrealized LossesFair ValueCash and Cash EquivalentsMarketable SecuritiesFair value changes recorded in other comprehensive incomeTime deposits(1)Level 2$5,297$0$0$5,297$5,293$4 Government bondsLevel 241,036 64 (2,045)39,055 283 38,772 Corporate debt securitiesLeve
80、l 228,578 8 (1,569)27,017 1 27,016 Mortgage-backed and asset-backed securitiesLevel 216,176 5 (1,242)14,939 0 14,939 Total investments with fair value change reflected in other comprehensive income(2)$91,087$77$(4,856)$86,308$5,577$80,731 Fair value adjustments recorded in net incomeMoney market fun
81、dsLevel 1$7,234$7,234$0 Current marketable equity securities(3)Level 1 4,013 0 4,013 Mutual fundsLevel 2 339 0 339 Government bondsLevel 2 1,877 440 1,437 Corporate debt securitiesLevel 2 3,744 65 3,679 Mortgage-backed and asset-backed securitiesLevel 2 1,686 2 1,684 Total investments with fair valu
82、e change recorded in net income$18,893$7,741$11,152 Cash 0 8,561 0 Total$91,087$77$(4,856)$105,201$21,879$91,883(1)The majority of our time deposits are domestic deposits.(2)Represents gross unrealized gains and losses for debt securities recorded to accumulated other comprehensive income(AOCI).Tabl
83、e of ContentsAlphabet Inc.12(3)The long-term portion of marketable equity securities(subject to long-term lock-up restrictions)of$803 million as of December 31,2022 is included within other non-current assets.As of March 31,2023Fair Value HierarchyAdjusted CostGross Unrealized GainsGross Unrealized
84、LossesFair ValueCash and Cash EquivalentsMarketable SecuritiesFair value changes recorded in other comprehensive incomeTime depositsLevel 2$2,880$0$0$2,880$2,880$0 Government bondsLevel 2 40,970 179 (1,230)39,919 2,045 37,874 Corporate debt securitiesLevel 2 26,301 28 (1,244)25,085 1 25,084 Mortgage
85、-backed and asset-backed securitiesLevel 2 16,371 15 (1,039)15,347 0 15,347 Total investments with fair value change reflected in other comprehensive income(1)$86,522$222$(3,513)$83,231$4,926$78,305 Fair value adjustments recorded in net incomeMoney market fundsLevel 1$10,604$10,604$0 Current market
86、able equity securities(2)Level 1 3,907 0 3,907 Mutual fundsLevel 2315 0 315Government bondsLevel 22,006 672 1,334Corporate debt securitiesLevel 23,660 31 3,629Mortgage-backed and asset-backed securitiesLevel 21,688 0 1,688Total investments with fair value change recorded in net income$22,180$11,307$
87、10,873 Cash 0 9,691 0 Total$86,522$222$(3,513)$105,411$25,924$89,178(1)Represents gross unrealized gains and losses for debt securities recorded to AOCI.(2)The long-term portion of marketable equity securities(subject to long-term lock-up restrictions)of$920 million as of March 31,2023 is included w
88、ithin other non-current assets Investments Measured at Fair Value on a Nonrecurring Basis Our non-marketable equity securities are investments in privately held companies without readily determinable market values.The carrying value of our non-marketable equity securities is adjusted to fair value u
89、pon observable transactions for identical or similar investments of the same issuer or impairment.Non-marketable equity securities that have been remeasured during the period based on observable transactions are classified within Level 2 or Level 3 in the fair value hierarchy because we estimate the
90、 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 remeasur
91、ed due to impairment are classified within Level 3.As of March 31,2023 the carrying value of our non-marketable equity securities was$29.1 billion,of which$10.7 billion were re-measured at fair value during the three months ended March 31,2023 and primarily classified as Level 2 investments.Table of
92、 ContentsAlphabet Inc.13Debt SecuritiesThe following table summarizes the estimated fair value of investments in available-for-sale marketable debt securities by effective contractual maturity dates(in millions):As ofMarch 31,2023Due in 1 year or less$11,712 Due in 1 year through 5 years 46,052 Due
93、in 5 years through 10 years 15,228 Due after 10 years 11,964 Total$84,956 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
94、of December 31,2022 Less than 12 Months12 Months or GreaterTotal Fair ValueUnrealizedLossFair ValueUnrealizedLossFair ValueUnrealizedLossGovernment bonds$21,039$(1,004)$13,438$(1,041)$34,477$(2,045)Corporate debt securities 11,228 (440)15,125 (1,052)26,353 (1,492)Mortgage-backed and asset-backed sec
95、urities 7,725 (585)6,964 (657)14,689 (1,242)Total$39,992$(2,029)$35,527$(2,750)$75,519$(4,779)As of March 31,2023 Less than 12 Months12 Months or GreaterTotal Fair ValueUnrealizedLossFair ValueUnrealizedLossFair ValueUnrealizedLossGovernment bonds$12,234$(312)$14,159$(918)$26,393$(1,230)Corporate de
96、bt securities 4,427 (93)19,011 (1,072)23,438 (1,165)Mortgage-backed and asset-backed securities 2,597 (94)11,212 (944)13,809 (1,038)Total$19,258$(499)$44,382$(2,934)$63,640$(3,433)We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification meth
97、od.The following table summarizes gains and losses for debt securities,reflected as a component of other income(expense),net(in millions):Three Months EndedMarch 31,20222023Unrealized gain(loss)on fair value option debt securities$(202)$145 Gross realized gain on debt securities 40 57 Gross realized
98、 loss on debt securities(271)(492)(Increase)/decrease in allowance for credit losses 66 (3)Total gain(loss)on debt securities recognized in other income(expense),net$(367)$(293)Table of ContentsAlphabet Inc.14Equity InvestmentsThe carrying value of equity securities is measured as the total initial
99、cost plus the cumulative net gain(loss).Our share of gains and losses,including impairments,are included as a component of other income(expense),net,in the Consolidated Statements of Income.See Note 6 for further details on other income(expense),net.The carrying values for marketable and non-marketa
100、ble equity securities are summarized below(in millions):As of December 31,2022As of March 31,2023Marketable Equity SecuritiesNon-Marketable Equity SecuritiesTotalMarketable Equity SecuritiesNon-Marketable Equity SecuritiesTotalTotal initial cost$5,764$16,157$21,921$5,720$16,509$22,229 Cumulative net
101、 gain(loss)(1)(608)12,372 11,764 (578)12,613 12,035 Carrying value$5,156$28,529$33,685$5,142$29,122$34,264(1)Non-marketable equity securities cumulative net gain(loss)is comprised of$16.8 billion gains and$4.5 billion losses(including impairments)as of December 31,2022 and$17.8 billion gains and$5.1
102、 billion losses(including impairments)as of March 31,2023.Gains and Losses on Marketable and Non-marketable Equity SecuritiesGains and losses(including impairments),net,for marketable and non-marketable equity securities included in other income(expense),net are summarized below(in millions):Three M
103、onths EndedMarch 31,20222023Realized net gain(loss)on equity securities sold during the period$(74)$105 Unrealized net gain(loss)on marketable equity securities(1,456)51 Unrealized net gain(loss)on non-marketable equity securities(1)460 221 Total gain(loss)on equity securities in other income(expens
104、e),net$(1,070)$377(1)Unrealized gain(loss)on non-marketable equity securities accounted for under the measurement alternative is comprised of$838 million and$915 million of upward adjustments for three months ended March 31,2022 and 2023,respectively,and$378 million and$694 million of downward adjus
105、tments(including impairments)for three months ended March 31,2022 and 2023,respectively.In the table above,realized net gain(loss)on equity securities sold during the period reflects the difference between the sale proceeds and the carrying value of the equity securities at the beginning of the peri
106、od or the purchase date,if later.Cumulative net gains(losses)on equity securities sold during the period,which is summarized in the following table(in millions),represents the total net gains(losses)recognized after the initial purchase date of the equity security sold during the period.While these
107、net gains(losses)may have been reflected in periods prior to the period of sale,we believe they are important supplemental information as they reflect the economic net gains(losses)on the securities sold during the period.Cumulative net gains(losses)are calculated as the difference between the sale
108、price and the initial purchase price for the equity security sold during the period.Equity Securities SoldThree Months EndedMarch 31,20222023Total sale price$364$312 Total initial cost 260 211 Cumulative net gain(loss)$104$101 Equity Securities Accounted for Under the Equity MethodAs of December 31,
109、2022 and March 31,2023 equity securities accounted for under the equity method had a carrying value of approximately$1.5 billion and$1.6 billion,respectively.Our share of gains and losses,including impairments,are included as a component of other income(expense),net,in the Consolidated Statements of
110、 Income.See Note 6 for further details on other income(expense),net.Table of ContentsAlphabet Inc.15Derivative Financial InstrumentsWe use derivative instruments to manage risks relating to our ongoing business operations.The primary risk managed is foreign exchange risk.We use foreign currency cont
111、racts 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
112、 derivative instruments in the Consolidated Balance Sheets at fair value and classify the derivatives primarily within Level 2 in the fair value hierarchy.We present our collar contracts(an option strategy comprised of a combination of purchased and written options)at net fair values and present all
113、 other derivatives at gross fair values.The accounting treatment for derivatives is based on the intended use and hedge designation.Cash Flow HedgesWe designate foreign currency forward and option contracts(including collars)as cash flow hedges to hedge certain forecasted revenue transactions denomi
114、nated in currencies other than the U.S.dollar.These contracts have maturities of 24 months or less.Cash flow hedge amounts included in the assessment of hedge effectiveness are deferred in AOCI and subsequently reclassified to revenue when the hedged item is recognized in earnings.We exclude forward
115、 points and time value from our assessment of hedge effectiveness and amortize them on a straight-line basis over the life of the hedging instrument in revenues.The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI.As of March 31
116、,2023 the net accumulated loss on our foreign currency cash flow hedges before tax effect was$55 million,which is expected to be reclassified from AOCI into revenues within the next 12 months.Fair Value HedgesWe designate foreign currency forward contracts as fair value hedges to hedge foreign curre
117、ncy risks for our marketable securities denominated in currencies other than the U.S.dollar.Fair value hedge amounts included in the assessment of hedge effectiveness are recognized in other income(expense),net,along with the offsetting gains and losses of the related hedged items.We exclude forward
118、 points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income(expense),net.Net Investment HedgesWe designate foreign currency forward contracts as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsi
119、diaries.Net investment hedge amounts included in the assessment of hedge effectiveness are recognized in AOCI along with the foreign currency translation adjustment.We exclude forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income(ex
120、pense),net.Other DerivativesWe enter into foreign currency forward and option contracts that are not designated as hedging instruments to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary.Gains and lo
121、sses on these derivatives that are not designated as accounting hedges are primarily recorded in other income(expense),net along with the foreign currency gains and losses on monetary assets and liabilities.We also use derivatives not designated as hedging instruments to manage risks relating to int
122、erest rates,commodity prices,credit exposures,and to enhance investment returns.From time to time,we enter into derivatives to hedge the market price risk on certain of our marketable equity securities.Gains and losses arising from other derivatives are primarily reflected within the“other”component
123、 of other income(expense),net.See Note 6 for further details.Table of ContentsAlphabet Inc.16The gross notional amounts of outstanding derivative instruments were as follows(in millions):As of December 31,2022As of March 31,2023Derivatives designated as hedging instruments:Foreign exchange contracts
124、Cash flow hedges$15,972$17,140 Fair value hedges$2,117$1,439 Net investment hedges$8,751$9,036 Derivatives not designated as hedging instruments:Foreign exchange contracts$34,979$33,715 Other contracts$7,932$8,423 The fair values of outstanding derivative instruments were as follows(in millions):As
125、of December 31,2022As of March 31,2023 Assets(1)Liabilities(2)Assets(1)Liabilities(2)Derivatives designated as hedging instruments:Foreign exchange contracts$271$556$111$510 Derivatives not designated as hedging instruments:Foreign exchange contracts365207284201Other contracts40474865Total derivativ
126、es not designated as hedging instruments 405 254 332 266 Total$676$810$443$776(1)Derivative assets are recorded as other current and non-current assets in the Consolidated Balance Sheets.(2)Derivative liabilities are recorded as accrued expenses and other liabilities,current and non-current in the C
127、onsolidated Balance Sheets.The gains(losses)on derivatives in cash flow hedging and net investment hedging relationships recognized in other comprehensive income(OCI)are summarized below(in millions):Gains(Losses)Recognized in OCI on Derivatives Before Tax EffectThree Months Ended March 31,20222023D
128、erivatives in cash flow hedging relationship:Foreign exchange contractsAmount included in the assessment of effectiveness$135$(138)Amount excluded from the assessment of effectiveness(15)47 Derivatives in net investment hedging relationship:Foreign exchange contractsAmount included in the assessment
129、 of effectiveness 149 (215)Total$269$(306)Table of ContentsAlphabet Inc.17 The table below presents the gains(losses)of our derivatives on the Consolidated Statements of Income:(in millions):Gains(Losses)Recognized in IncomeThree Months Ended March 31,20222023RevenuesOther income(expense),netRevenue
130、sOther income(expense),netTotal amounts in the Consolidated Statements of Income$68,011$(1,160)$69,787$790 Effect of cash flow hedges:Foreign exchange contractsAmount reclassified from AOCI to income$297$0$88$0 Amount excluded from the assessment of effectiveness(amortized)(19)0 (4)0 Effect of fair
131、value hedges:Foreign exchange contractsHedged items 0 13 0 32 Derivatives designated as hedging instruments 0 (12)0 (32)Amount excluded from the assessment of effectiveness 0 1 0 5 Effect of net investment hedges:Foreign exchange contractsAmount excluded from the assessment of effectiveness 0 12 0 5
132、1 Effect of non designated hedges:Foreign exchange contracts 0 (247)0 30 Other contracts 0 38 0 3 Total gains(losses)$278$(195)$84$89 Offsetting of DerivativesWe enter into master netting arrangements and collateral security arrangements to reduce credit risk.Cash collateral received related to deri
133、vative 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.The gross amounts o
134、f 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):As of December 31,2022Gross Amounts Not Offset in the Consolidated Balance Sheets,but Have Legal Rights
135、 to OffsetGross Amounts RecognizedGross Amounts Offset in the Consolidated Balance SheetsNet Amounts Presented in the Consolidated Balance SheetsFinancial Instruments(1)Cash and Non-Cash Collateral Received or PledgedNet AmountsDerivatives assets$760$(84)$676$(463)$(132)$81 Derivatives liabilities$8
136、94$(84)$810$(463)$(28)$319 Table of ContentsAlphabet Inc.18As of March 31,2023Gross Amounts Not Offset in the Consolidated Balance Sheets,but Have Legal Rights to OffsetGross Amounts RecognizedGross Amounts Offset in the Consolidated Balance SheetsNet Amounts Presented in the Consolidated Balance Sh
137、eetsFinancial Instruments(1)Cash and Non-Cash Collateral Received or PledgedNet AmountsDerivatives assets$525$(82)$443$(368)$(34)$41 Derivatives liabilities$858$(82)$776$(368)$(24)$384(1)The balances as of December 31,2022 and March 31,2023 were related to derivative allowed to be net settled in acc
138、ordance with our master netting agreements.Note 4.Variable Interest Entities(VIE)Consolidated VIEsWe 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 stateme
139、nts.For certain consolidated VIEs,their assets are not available to us and their creditors do not have recourse to us.As of December 31,2022 and March 31,2023,assets that can only be used to settle obligations of these VIEs were$4.1 billion and$3.2 billion,respectively,and the liabilities for which
140、creditors only have recourse to the VIEs were$2.6 billion and$2.5 billion,respectively.We may continue to fund ongoing operations of certain VIEs that are included within Other Bets.Total noncontrolling interests(NCI)in our consolidated subsidiaries were$3.8 billion and$3.7 billion as of December 31
141、,2022 and March 31,2023,respectively,of which$1.1 billion is redeemable noncontrolling interest(RNCI)for both periods.NCI and RNCI are included within additional paid-in capital.Net loss attributable to noncontrolling interests was not material for any period presented and is included within the oth
142、er component of OI&E.See Note 6 for further details on OI&E.Unconsolidated VIEsWe have investments in 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
143、 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 positio
144、n of these VIEs are not included in our consolidated financial statements.We account for these investments as non-marketable equity securities or equity method investments.The maximum exposure of these unconsolidated VIEs is generally based on the current carrying value of the investments and any fu
145、ture 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$2.7 billion and$2.8 billion,respectively,as of December 31,2022 and$2.6 billion and$2.7 billio
146、n,respectively,as of March 31,2023.Note 5.DebtShort-Term DebtWe have a 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.We had no commercial paper outstanding as of December 31,2022 and March
147、31,2023.Our short-term debt balance also includes the current portion of certain long-term debt.Table of ContentsAlphabet Inc.19Long-Term Debt Total outstanding debt is summarized below(in millions,except percentages):MaturityCoupon RateEffective Interest RateAs of December 31,2022As ofMarch 31,2023
148、Debt2014-2020 Notes issuances2024-20600.45%-3.38%0.57%-3.38%$13,000$13,000 Future finance lease payments,net and other(1)2,142 2,208 Total debt 15,142 15,208 Unamortized discount and debt issuance costs(143)(140)Less:Current portion of long-term notes(2)0 (999)Less:Current portion future finance lea
149、se payments,net and other current debt(1)(2)(298)(372)Total long-term debt$14,701$13,697(1)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 for further details.The notes i
150、n the table above are 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 es
151、timated fair value of the outstanding notes was approximately$9.9 billion and$10.2 billion as of December 31,2022 and March 31,2023,respectively.The fair value was determined based on observable market prices of identical instruments in less active markets and is categorized accordingly as Level 2 i
152、n the fair value hierarchy.Credit FacilityAs of March 31,2023,we had$10.0 billion of revolving credit facilities,$4.0 billion expiring in April 2023 and$6.0 billion expiring in April 2026.In April 2023,we entered into a new$4.0 billion revolving credit facility expiring in April 2024.We also termina
153、ted the existing$6.0 billion revolving credit facility expiring in April 2026 and entered into a new$6.0 billion revolving credit facility expiring in April 2028.The interest rates for all credit facilities are determined based on a formula using certain market rates,as well as our progress toward t
154、he achievement of certain sustainability goals.No amounts were outstanding under the credit facilities as of December 31,2022 and March 31,2023.Note 6.Supplemental Financial Statement Information Accounts ReceivableThe allowance for credit losses on accounts receivable was$754 million and$743 millio
155、n as of December 31,2022 and March 31,2023,respectively.Table of ContentsAlphabet Inc.20Property and Equipment,NetProperty and equipment,net,consisted of the following(in millions):As of December 31,2022As ofMarch 31,2023Land and buildings$66,897$67,948 Information technology assets 66,267 68,577 Co
156、nstruction in progress 27,657 30,573 Leasehold improvements 10,575 11,011 Furniture and fixtures 314 326 Property and equipment,gross 171,710 178,435 Less:accumulated depreciation(59,042)(60,875)Property and equipment,net$112,668$117,560 Accrued Expenses and Other Current LiabilitiesAccrued expenses
157、 and other current liabilities consisted of the following(in millions):As of December 31,2022As ofMarch 31,2023European Commission fines(1)$9,106$9,354 Income taxes payable,net 1,632 5,217 Accrued customer liabilities 3,619 3,486 Accrued purchases of property and equipment 3,019 3,807 Current operat
158、ing lease liabilities 2,477 2,625 Other accrued expenses and current liabilities 18,013 18,696 Accrued expenses and other current liabilities$37,866$43,185(1)While each EC decision is under appeal,the fines are included in accrued expenses and other current liabilities on our Consolidated Balance Sh
159、eets,as we provided bank guarantees(in lieu of a cash payment)for the fines.Amounts include the effects of foreign exchange and interest.See Note 9 for further details.Accumulated Other Comprehensive Income(Loss)Components of AOCI,net of income tax,were as follows(in millions):Foreign Currency Trans
160、lation AdjustmentsUnrealized Gains(Losses)on Available-for-Sale InvestmentsUnrealized Gains(Losses)on Cash Flow HedgesTotalBalance as of December 31,2021$(2,306)$236$447$(1,623)Other comprehensive income(loss)before reclassifications 39 (2,478)129 (2,310)Amounts excluded from the assessment of hedge
161、 effectiveness recorded in AOCI 0 0 (15)(15)Amounts reclassified from AOCI 0 148 (249)(101)Other comprehensive income(loss)39 (2,330)(135)(2,426)Balance as of March 31,2022$(2,267)$(2,094)$312$(4,049)Table of ContentsAlphabet Inc.21 Foreign Currency Translation AdjustmentsUnrealized Gains(Losses)on
162、Available-for-Sale InvestmentsUnrealized Gains(Losses)on Cash Flow HedgesTotalBalance as of December 31,2022$(4,142)$(3,477)$16$(7,603)Other comprehensive income(loss)before reclassifications 596 866 (121)1,341 Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0 0 47 47 Am
163、ounts reclassified from AOCI 0 292 (77)215 Other comprehensive income(loss)596 1,158 (151)1,603 Balance as of March 31,2023$(3,546)$(2,319)$(135)$(6,000)The effects on net income of amounts reclassified from AOCI were as follows(in millions):Gains(Losses)Reclassified from AOCI to the Consolidated St
164、atements of IncomeThree Months Ended March 31,AOCI ComponentsLocation20222023Unrealized gains(losses)on available-for-sale investmentsOther income(expense),net$(190)$(374)Benefit(provision)for income taxes 42 82 Net of income tax(148)(292)Unrealized gains(losses)on cash flow hedgesForeign exchange c
165、ontractsRevenue 297 88 Interest rate contractsOther income(expense),net 2 2 Benefit(provision)for income taxes(50)(13)Net of income tax 249 77 Total amount reclassified,net of income tax$101$(215)Other Income(Expense),NetComponents of OI&E were as follows(in millions):Three Months EndedMarch 31,2022
166、2023Interest income$414$797 Interest expense(1)(83)(80)Foreign currency exchange gain(loss),net(73)(210)Gain(loss)on debt securities,net(367)(293)Gain(loss)on equity securities,net(1,070)377 Performance fees 233 118 Income(loss)and impairment from equity method investments,net(89)(51)Other(125)132 O
167、ther income(expense),net$(1,160)$790(1)Interest expense is net of interest capitalized of$34 million and$40 million for the three months ended March 31,2022 and 2023,respectively.Table of ContentsAlphabet Inc.22Note 7.Workforce Reduction and Other InitiativesWe have a company-wide effort underway to
168、 re-engineer our cost base.As part of this program,in January 2023 we announced a reduction of our workforce,and as a result in the first quarter of 2023 we recorded employee severance and related charges of$2.0 billion,representing the majority of expected costs associated with this action.In addit
169、ion,we are taking actions to optimize our global office space,and as a result,we recorded charges related to office space reductions of$564 million in the first quarter of 2023.We may incur additional charges in the future as we further evaluate our real estate needs.These severance and office space
170、 charges are included within our consolidated statements of income for the three months ended March 31,2023 as follows(in millions):Severance and Related(1)Office SpaceTotalCost of revenues$461$220$681 Research and development 835 247 1,082 Sales and marketing 445 35 480 General and administrative 2
171、53 62 315 Total charges$1,994$564$2,558(1)Severance includes amounts to be settled in cash,accounted for as one-time involuntary employee termination benefits,and stock based compensationFor segment reporting,the substantial majority of these charges are included within unallocated corporate costs i
172、n our segment results.For the three months ended March 31,2023,changes in liabilities resulting from the severance charges and related accruals were as follows(in millions):Severance and RelatedBalance as of December 31,2022$0 Charges(1)1,582 Cash payments(396)Balance as of March 31,2023(2)$1,186(1)
173、Excludes non-cash stock-based compensation of$412 million.(2)Included in Accrued compensation and benefits on the consolidated balance sheets.Note 8.Goodwill and Other Intangible AssetsGoodwillChanges in the carrying amount of goodwill for the three months ended March 31,2023 were as follows(in mill
174、ions):Google ServicesGoogle CloudOther BetsTotalBalance as of December 31,2022$20,847$7,205$908$28,960 Acquisitions 11 0 0 11 Foreign currency translation and other adjustments 50 2 (29)23 Balance as of March 31,2023$20,908$7,207$879$28,994 Table of ContentsAlphabet Inc.23Other Intangible AssetsInfo
175、rmation regarding intangible assets was as follows(in millions):As of December 31,2022As of March 31,2023 GrossCarryingAmountAccumulatedAmortizationNetCarryingAmountGrossCarryingAmountAccumulatedAmortizationNetCarryingAmountPatents and developed technology$1,164$354$810$1,110$366$744 Customer relati
176、onships 862 235 627 862 270 592 Trade names and other 527 120 407 528 138 390 Total definite-lived intangible assets 2,553 709 1,844 2,500 774 1,726 Indefinite-lived intangible assets 240 0 240 242 0 242 Total intangible assets$2,793$709$2,084$2,742$774$1,968 Amortization expense relating to intangi
177、ble assets was$191 million and$126 million for the three months ended March 31,2022 and 2023,respectively.Expected amortization expense of definite-lived intangible assets held as of March 31,2023 was as follows(in millions):Remainder of 2023$343 2024 443 2025 314 2026 236 2027 153 Thereafter 237 To
178、tal$1,726 Note 9.Commitments and ContingenciesCommitmentsWe have content licensing agreements with future fixed or minimum guaranteed commitments of$11.9 billion as of March 31,2023,of which the majority is paid over seven years beginning in the first quarter of 2023.IndemnificationsIn the normal co
179、urse of business,including to facilitate transactions in our services and products and corporate activities,we indemnify certain parties,including advertisers,Google Network partners,distribution partners,customers of Google Cloud offerings,lessors,and service providers with respect to certain matte
180、rs.We have agreed to defend and/or 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 c
181、laim 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 the
182、se indemnification agreements due to the unique facts and circumstances involved in each particular agreement.Additionally,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 v
183、alid 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 March 31,2023,we did not have any material indemnification claims that were probable or reasonab
184、ly possible.Table of ContentsAlphabet Inc.24Legal MattersWe 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 th
185、e 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.Certain outstanding matters include speculative,sub
186、stantial or indeterminate monetary amounts.Significant judgment is required to determine both the likelihood of there being a loss and the estimated amount of a loss related to such matters,and we may be unable to estimate the reasonably possible loss or range of losses.The outcomes of outstanding l
187、egal matters are inherently unpredictable and subject to significant uncertainties,and could,either individually or in aggregate,have a material adverse effect.We expense legal fees in the period in which they are incurred.Antitrust InvestigationsOn November 30,2010,the ECs Directorate General for C
188、ompetition 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
189、 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 ECs decision.We recognized a charge of$2.7 billion for the fine in the second
190、 quarter of 2017.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 Googles Android-related distribution agreements infringed Euro
191、pean 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,and on October 29,2018,we implemented changes to certain of our Android distribution practices.On Septemb
192、er 14,2022,the General Court reduced the fine from 4.3 billion to 4.1 billion.We subsequently filed an appeal with the European Court of Justice.In 2018,we recognized a charge of$5.1 billion for the fine,which we reduced by$217 million in 2022.On March 20,2019,the EC announced its decision that cert
193、ain 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 prio
194、r to the decision.On June 4,2019,we appealed the EC decision,which remains pending.We recognized a charge of$1.7 billion for the fine in the first quarter of 2019.From time to time we are subject to formal and informal inquiries and investigations on various competition matters by regulatory authori
195、ties in the U.S.,Europe,and other jurisdictions globally.For example:In August 2019,we began receiving civil investigative demands from the U.S.Department of Justice(DOJ)requesting information and documents relating to our prior antitrust investigations and certain aspects of our business.The DOJ an
196、d 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.Further,in June 2022,the Australian Competition and Consumer Commission(ACCC)and the United Kingdoms Competition and Markets Authority(C
197、MA)each opened an investigation into Search distribution practices.On December 16,2020,a number of state Attorneys General filed an antitrust complaint in the U.S.District Court for the Eastern District of Texas,alleging that Google violated U.S.antitrust laws as well as state deceptive trade laws r
198、elating to its advertising technology.Additionally,on January 24,2023,the DOJ,along with a number of state Attorneys General,filed an antitrust complaint alleging that Googles digital advertising technology products violate U.S.antitrust laws,and on April 17,2023,a number of additional state Attorne
199、ys General joined the complaint.The EC,the CMA,and the ACCC each opened a formal investigation into Googles advertising technology business practices on June 22,2021,May 25,2022,and June 29,2022,respectively.Table of ContentsAlphabet Inc.25On July 7,2021,a number of state Attorneys General filed an
200、antitrust complaint in the U.S.District Court for the Northern District of California,alleging that Googles 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 investigations into Google Plays bu
201、siness practices.Korean regulators are investigating Google Plays billing practices,most recently opening a formal review in May 2022 of Googles compliance with the new app store billing regulations.We believe these complaints are without merit and will defend ourselves vigorously.We continue to coo
202、perate with federal and state regulators in the U.S.,the EC,and other regulators around the world.Patent and Intellectual Property ClaimsWe have had patent,copyright,trade secret,and trademark infringement lawsuits filed against us claiming that certain of our products,services,and technologies infr
203、inge 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 busin
204、ess 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)has increasingly become an important forum to litigate intellectual property disputes because an ul
205、timate 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 w
206、orkarounds 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 tha
207、t 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.Ot
208、herWe are subject to claims,lawsuits,regulatory and government investigations,other proceedings,and consent orders involving competition,intellectual property,data privacy and security,tax and related compliance,labor and employment,commercial disputes,content generated by our users,goods and servic
209、es 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 lawsuits ongoing in multiple jurisdictions.We also periodically have data incidents that we report to relevant regula
210、tors as required by law.Such claims,lawsuits,regulatory and government investigations,other proceedings,and consent orders could result in substantial fines and penalties,injunctive relief,ongoing monitoring and auditing obligations,changes to our products and services,alterations to our business mo
211、dels and operations,and collateral related civil litigation or other adverse consequences,all of which could harm our business,reputation,financial condition,and operating results.We have ongoing legal matters relating to Russia.For example,civil judgments that include compounding penalties have bee
212、n 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.Non-Income TaxesWe are under audit by various domestic and foreign tax authorities with regards
213、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
214、 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
215、 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.Table of ContentsAlphabet Inc.26Note 10.Stockholders Equity Share RepurchasesIn April 2022,th
216、e Board of Directors of Alphabet authorized the company to repurchase up to$70.0 billion of its Class A and Class C shares.As of March 31,2023,$13.1 billion remains available for Class A and Class C share repurchases.In April 2023,the Board of Directors of Alphabet authorized the company to repurcha
217、se up to an additional$70.0 billion of its Class A and Class C shares.The following table presents Class A and Class C shares repurchased and subsequently retired(in millions):Three Months Ended March 31,2023SharesAmountClass A share repurchases 21$2,011 Class C share repurchases 136 13,113 Total sh
218、are repurchases(1)157$15,124(1)Shares repurchased include unsettled repurchases as of March 31,2023.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
219、the relative trading prices and volumes of the Class A and Class C shares.Repurchases are 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 p
220、lans.The repurchase program does not have an expiration date.Note 11.Net Income Per ShareThe following table sets forth the computation of basic and diluted net income per share of Class A,Class B,and Class C stock(in millions,except per share amounts):Three Months Ended March 31,20222023 Class ACla
221、ss BClass CClass AClass BClass CBasic net income per share:NumeratorAllocation of undistributed earnings$7,481$1,109$7,846$7,006$1,040$7,005 DenominatorNumber of shares used in per share computation 6,009 891 6,303 5,949 883 5,949 Basic net income per share$1.24$1.24$1.24$1.18$1.18$1.18 Diluted net
222、income per share:NumeratorAllocation of undistributed earnings for basic computation$7,481$1,109$7,846$7,006$1,040$7,005 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 1,109 0 0 1,040 0 0 Reallocation of undistributed earnings(95)(12)95 (27)(4)27 Alloca
223、tion of undistributed earnings$8,495$1,097$7,941$8,019$1,036$7,032 DenominatorNumber of shares used in basic computation 6,009 891 6,303 5,949 883 5,949 Weighted-average effect of dilutive securitiesAdd:Conversion of Class B to Class A shares outstanding 891 0 0 883 0 0 Restricted stock units and ot
224、her contingently issuable shares 0 0 148 0 0 42 Number of shares used in per share computation 6,900 891 6,451 6,832 883 5,991 Diluted net income per share$1.23$1.23$1.23$1.17$1.17$1.17 For the periods presented above,the net income per share amounts are the same for Class A,Class B,and Class C stoc
225、k 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.Table of ContentsAlphabet Inc.27Note 12.Compensation PlansStock-Based CompensationFor the three month
226、s ended March 31,2022 and 2023,total stock-based compensation(SBC)expense was$4.5 billion and$5.3 billion,including amounts associated with awards we expect to settle in Alphabet stock of$4.4 billion and$5.1 billion,respectively.For the three months ended March 31,2023 total SBC expense includes$412
227、 million associated with workforce reduction costs.See Note 7 for further information.Stock-Based Award ActivitiesThe following table summarizes the activities for unvested Alphabet restricted stock units(RSUs)for the three months ended March 31,2023(in millions,except per share amounts):Unvested Re
228、stricted Stock Units Number ofShares Weighted-AverageGrant-DateFair ValueUnvested as of December 31,2022 324$107.98 Granted 234$94.51 Vested(48)$100.25 Forfeited/canceled(10)$110.60 Unvested as of March 31,2023 500$102.36 As of March 31,2023,there was$48.6 billion of unrecognized compensation cost r
229、elated to unvested RSUs.This amount is expected to be recognized over a weighted-average period of 2.9 years.Note 13.Income Taxes The following table presents provision for income taxes(in millions,except for effective tax rate):Three Months EndedMarch 31,20222023Income before provision for income t
230、axes$18,934$18,205 Provision for income taxes$2,498$3,154 Effective tax rate 13.2%17.3%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.The total amount of gro
231、ss unrecognized tax benefits was$7.1 billion and$7.5 billion as of December 31,2022 and March 31,2023,respectively,of which$5.3 billion and$5.7 billion,if recognized,would affect our effective tax rate,respectively.Note 14.Information about Segments and Geographic Areas We report our segment results
232、 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,and hardware;and fees receive
233、d for subscription-based products such as YouTube Premium and YouTube TV.Google Cloud includes infrastructure and platform services,collaboration tools,and other services for enterprise customers.Google Cloud generates revenues from fees received for Google Cloud Platform services,Google Workspace c
234、ommunication and collaboration tools,and other enterprise services.Other Bets is a combination of multiple operating segments that are not individually material.Revenues from Other Bets are generated primarily from the sale of health technology and internet services.Revenues,certain costs,such as co
235、sts associated with content and traffic acquisition,certain engineering activities,and hardware,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
236、 managed centrally at a consolidated level.These costs,including the associated depreciation and impairment,are allocated to operating segments as a service cost generally based on usage,headcount,or revenue.Table of ContentsAlphabet Inc.28Reflecting DeepMinds increasing collaboration with Google Se
237、rvices,Google Cloud,and Other Bets,beginning in the first quarter of 2023 DeepMind is reported as part of Alphabets unallocated corporate costs instead of within Other Bets.Additionally,beginning in the first quarter of 2023,we updated and simplified our cost allocation methodologies to provide our
238、business leaders with increased transparency for decision-making.After the segment reporting changes discussed above,unallocated corporate costs primarily include AI-focused shared R&D activities;corporate initiatives such as our philanthropic activities;and corporate shared costs such as finance,ce
239、rtain human resource costs,and legal,including certain fines and settlements.In the first quarter of 2023,unallocated corporate costs also include charges associated with reductions in our workforce and office space.Additionally,hedging gains(losses)related to revenue are included in unallocated cor
240、porate costs.Prior periods have been recast to conform to the current presentation.Our operating segments are not evaluated using asset information.The following table presents information about our segments(in millions):Three Months EndedMarch 31,20222023Revenues:Google Services$61,472$61,961 Googl
241、e Cloud 5,821 7,454 Other Bets 440 288 Hedging gains(losses)278 84 Total revenues$68,011$69,787 Three Months EndedMarch 31,20222023Operating income(loss):Google Services$21,973$21,737 Google Cloud(706)191 Other Bets(835)(1,225)Corporate costs,unallocated(338)(3,288)Total income from operations$20,09
242、4$17,415 For revenues by geography,see Note 2.The following table presents long-lived assets by geographic area,which includes property and equipment,net and operating lease assets(in millions):As of December 31,2022As ofMarch 31,2023Long-lived assets:United States$93,565$96,519 International 33,484
243、 35,488 Total long-lived assets$127,049$132,007 Table of ContentsAlphabet Inc.29ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSPlease read the following discussion and analysis of our financial condition and results of operations together with Note About F
244、orward-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 31,2022,including Part I,Item 1A Risk Factors.Understanding Alphabets Financi
245、al ResultsAlphabet 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.For further details on our segments,see Note 14 of the Notes to Consolidated Financial
246、 Statements included in Item 1 of this Quarterly Report on Form 10-Q.Revenues and Monetization Metrics We generate revenues by delivering relevant,cost-effective online advertising;cloud-based solutions that provide enterprise customers of all sizes with infrastructure and platform services as well
247、as communication and collaboration tools;sales of other products and services,such as apps and in-app purchases,and hardware;and fees received for subscription-based products.For details on how we recognize revenue,see Note 1 of the Notes to Consolidated Financial Statements included in Part II,Item
248、 8 in our Annual Report on Form 10-K for the fiscal year ended December 31,2022.In addition to the long-term trends and their financial effect on our business noted in Trends in Our Business and Financial Effect in Part II,Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 3
249、1,2022,fluctuations in our revenues have been and may continue to be affected by a combination of factors,including:changes in foreign currency exchange rates;changes in pricing,such as those resulting from changes in fee structures,discounts,and customer incentives;general economic conditions and v
250、arious external dynamics,including geopolitical events,regulations,and other measures and their effect on advertiser,consumer,and enterprise spending;new product and service launches;andseasonality.Additionally,fluctuations in our revenues generated from advertising(Google advertising),revenues from
251、 other sources(Google other revenues),Google Cloud,and Other Bets revenues have been and may continue to be affected by other factors unique to each set of revenues,as described below.Google ServicesGoogle Services revenues consist of Google advertising as well as Google other revenues.Google Advert
252、isingGoogle advertising revenues are comprised of the following:Google Search&other,which includes revenues generated on Google search properties(including revenues from traffic generated by search distribution partners who use G as their default search in browsers,toolbars,etc.),and other Google ow
253、ned and operated properties like Gmail,Google Maps,and Google Play;YouTube ads,which includes revenues generated on YouTube properties;andGoogle Network,which includes revenues generated on Google Network properties participating in AdMob,AdSense,and Google Ad Manager.We use certain metrics to track
254、 how well traffic across various properties is monetized as it relates to our advertising revenues:paid clicks and cost-per-click pertain to traffic on Google Search&other properties,while impressions and cost-per-impression pertain to traffic on our Google Network properties.Paid clicks represent e
255、ngagement 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 Table of ContentsAlphabet Inc.30Play.Cost-per-click is defined as click-driven revenues divided by our total number o
256、f 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 cli
257、ck-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 clic
258、ks and the number of impressions,and for identifying the revenues generated by the corresponding click and impression activity.Fluctuations in our advertising revenues,as well as the change in paid clicks and cost-per-click on Google Search&other properties and the change in impressions and cost-per
259、-impression on Google Network properties and the correlation between these items have been and may continue to be affected by additional factors,such as:advertiser competition for keywords;changes in advertising quality,formats,delivery or policy;changes in device mix;seasonal fluctuations in intern
260、et usage,advertising expenditures,and underlying business trends,such as traditional retail seasonality;andtraffic growth in emerging markets compared to more mature markets and across various verticals and channels.Google OtherGoogle other revenues are comprised of the following:Google Play,which i
261、ncludes sales of apps and in-app purchases;hardware,which includes sales of Fitbit wearable devices,Google Nest home products,and Pixel devices;YouTube non-advertising,which includes subscription revenues from services such as YouTube Premium and YouTube TV;andother products and services.Fluctuation
262、s in our Google other revenues have been and may continue to be affected by additional factors,such as changes in customer usage and demand,number of subscribers,and fluctuations in the timing of product launches.Google CloudGoogle Cloud revenues are comprised of the following:Google Cloud Platform,
263、which includes fees for infrastructure,platform,and other services;Google Workspace,which includes fees for cloud-based communication and collaboration tools for enterprises,such as Gmail,Docs,Drive,Calendar and Meet;and other enterprise services.Fluctuations in our Google Cloud revenues have been a
264、nd may continue to be affected by additional factors,such as customer usage.Other BetsRevenues from Other Bets are generated primarily from the sale of health technology and internet services.Costs and ExpensesOur cost structure has two components:cost of revenues and operating expenses.Our operatin
265、g expenses include costs related to R&D,sales and marketing,and general and administrative functions.Certain of our costs and 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 a
266、nd may not correlate to changes in revenue.Table of ContentsAlphabet Inc.31Cost of RevenuesCost 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 includ
267、e 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
268、video and other content for distribution on YouTube 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,depreciation,energy,and other equipment costs)as well as other ope
269、rations costs(such as content review as well as customer and product support costs).Inventory and other costs related to the hardware we sell.TAC as a percentage of revenues generated from ads placed on Google Network properties are significantly higher than TAC as a percentage of revenues generated
270、 from ads placed on Google Search&other properties,because most of the advertiser revenues from ads served on Google Network properties are paid as TAC to our Google Network partners.Operating ExpensesOperating expenses are generally incurred during our normal course of business,which we categorize
271、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;andthird-party services fees primarily rela
272、ting to consulting and outsourced services in support of our engineering and product development efforts.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;andspending rel
273、ating 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;expens
274、es relating to legal matters,including fines and settlements;and third-party services fees,including audit,consulting,outside legal,and other outsourced administrative services.Other Income(Expense),Net Other income(expense),net primarily consists of interest income(expense),the effect of foreign cu
275、rrency 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
276、 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 Table of ContentsAlphabet Inc.32the fiscal year ended December 31,202
277、2 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 jurisdiction
278、s 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 ou
279、r Annual Report on Form 10-K for the fiscal year ended December 31,2022 as well as Note 13 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.Executive OverviewThe following table summarizes our consolidated financial results(in millions,except
280、 per share information and percentages):Three Months EndedMarch 31,20222023$Change%ChangeConsolidated revenues$68,011$69,787$1,776 3%Change in consolidated constant currency revenues(1)6%Cost of revenues$29,599$30,612$1,013 3%Operating expenses$18,318$21,760$3,442 19%Operating income$20,094$17,415$(
281、2,679)(13)%Operating margin 30%25%(5)%Other income(expense),net$(1,160)$790$1,950 NMNet Income$16,436$15,051$(1,385)(8)%Diluted EPS$1.23$1.17$(0.06)(5)%NM=Not Meaningful(1)See Use of Non-GAAP Constant Currency Measures below for details relating to our use of constant currency information.Revenues w
282、ere$69.8 billion,an increase of 3%year over year,primarily driven by an increase in Google Cloud revenues of$1.6 billion,or 28%.Total constant currency revenues,which exclude the effect of hedging,increased 6%year over year.Cost of revenues was$30.6 billion,an increase of 3%year over year,affected b
283、y compensation costs related to employee severance charges associated with the reduction in our workforce,charges related to our office space optimization efforts,and a reduction in depreciation expense due to the change in estimated useful life of our servers and certain network equipment.Operating
284、 expenses were$21.8 billion,an increase of 19%year over year,affected by compensation costs related to employee severance charges associated with the reduction in our workforce as well as the effect of a shift in timing of our annual employee stock-based compensation awards.Other InformationIn Janua
285、ry 2023,we announced a reduction of our workforce,and as a result in the first quarter of 2023 we recorded employee severance and related charges of$2.0 billion,representing the majority of expected costs associated with this action.In addition,we are taking actions to optimize our global office spa
286、ce,and as a result we recorded charges related to office space reductions of$564 million in the first quarter of 2023.We may incur additional charges in the future as we further evaluate our real estate needs.For Table of ContentsAlphabet Inc.33additional information,see Note 7 of the Notes to Conso
287、lidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.In January 2023,we completed an assessment of the useful lives of our servers and network equipment,resulting in a change in the estimated useful life of our servers and certain network equipment to six years.The e
288、ffect of this change was a reduction in depreciation expense of$988 million for the first quarter of 2023,recognized primarily in cost of revenues and R&D expenses.For additional information,see Note 1 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on F
289、orm 10-Q.Beginning in the first quarter of 2023,our segment reporting reflects two changes:(i)DeepMind,previously reported within Other Bets,is reported as part of Alphabets unallocated corporate costs,and(ii)we updated and simplified our cost allocation methodologies to provide our business leaders
290、 with increased transparency for decision-making.Prior periods have been recast to conform to the current presentation.For additional information,see Note 14 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.Beginning in 2023,the timing of our
291、 annual employee stock-based compensation awards shifted from January to March.While the shift in timing itself will not affect the amount of stock-based compensation expense over the full fiscal year 2023,it results in relatively less expense recognized in the first quarter compared to the remainin
292、g quarters of the year.Repurchases of Class A and Class C shares were$15.1 billion for the three months ended March 31,2023.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$23.5 b
293、illion for the three months ended March 31,2023.Capital expenditures,which primarily reflected investments in technical infrastructure,were$6.3 billion for the three months ended March 31,2023.As of March 31,2023,we had 190,711 employees,which includes almost all of the employees affected by the red
294、uction of our workforce.We expect most of those affected will no longer be reflected in our headcount by the end of the second quarter of 2023,subject to local law and consultation requirements.Table of ContentsAlphabet Inc.34Financial ResultsRevenuesThe following table presents revenues by type(in
295、millions):Three Months EndedMarch 31,20222023Google Search&other$39,618$40,359 YouTube ads 6,869 6,693 Google Network 8,174 7,496 Google advertising 54,661 54,548 Google other 6,811 7,413 Google Services total 61,472 61,961 Google Cloud 5,821 7,454 Other Bets 440 288 Hedging gains(losses)278 84 Tota
296、l revenues$68,011$69,787 Google ServicesGoogle advertising revenuesGoogle Search&otherGoogle Search&other revenues increased$741 million from the three months ended March 31,2022 to the three months ended March 31,2023.The overall growth was driven by interrelated factors including increases in sear
297、ch queries resulting from growth in user adoption and usage on mobile devices;growth in advertiser spending;and improvements we have made in ad formats and delivery.Growth was adversely affected by changes in foreign currency exchange rates.YouTube adsYouTube ads revenues decreased$176 million from
298、the three months ended March 31,2022 to the three months ended March 31,2023 primarily driven by the adverse effect of changes in foreign currency exchange rates.Google NetworkGoogle Network revenues decreased$678 million from the three months ended March 31,2022 to the three months ended March 31,2
299、023 primarily driven by a decrease in AdMob and Google Ad Manager revenues as well as the adverse effect of changes in foreign currency exchange rates.Monetization MetricsPaid clicks and cost-per-clickThe following table presents changes in paid clicks and cost-per-click(expressed as a percentage)fr
300、om the three months ended March 31,2022 to the three months ended March 31,2023:Paid clicks change8%Cost-per-click change(7)%Paid clicks increased from the three months ended March 31,2022 to the three months ended March 31,2023 driven by a number of interrelated factors,including an increase in sea
301、rch queries resulting from growth in user adoption and usage on mobile devices;growth in advertiser spending;and ongoing product and policy changes.Cost-per-click decreased from the three months ended March 31,2022 to the three months ended March 31,2023 driven by a number of interrelated factors in
302、cluding changes in device mix,geographic mix,advertiser spending,ongoing product and policy changes,and property mix,as well as the adverse effect of changes in foreign currency exchange rates.Table of ContentsAlphabet Inc.35Impressions and cost-per-impressionThe following table presents changes in
303、impressions and cost-per-impression(expressed as a percentage)from the three months ended March 31,2022 to the three months ended March 31,2023:Impressions change(5)%Cost-per-impression change(5)%Impressions decreased from the three months ended March 31,2022 to the three months ended March 31,2023
304、driven by Google Ad Manager and AdSense.The decrease in cost-per-impression from the three months ended March 31,2022 to the three months ended March 31,2023 was driven by a number of interrelated factors including ongoing product and policy changes,changes in device mix,geographic mix,product mix,a
305、nd property mix,as well as the adverse effect of changes in foreign currency exchange rates.Google other revenuesGoogle other revenues increased$602 million from the three months ended March 31,2022 to the three months ended March 31,2023 primarily driven by growth in YouTube non-advertising,largely
306、 due to an increase in paid subscribers.Growth was adversely affected by changes in foreign currency exchange rates.Google CloudGoogle Cloud revenues increased$1.6 billion from the three months ended March 31,2022 to the three months ended March 31,2023.Growth was primarily driven by Google Cloud Pl
307、atform followed by Google Workspace offerings.Google Clouds infrastructure and platform services were the largest drivers of growth in Google Cloud Platform.Revenues by GeographyThe following table presents revenues by geography as a percentage of revenues,determined based on the addresses of our cu
308、stomers:Three Months Ended March 31,20222023United States 47%47%EMEA 30%30%APAC 17%17%Other Americas 6%6%For further details on revenues by geography,see Note 2 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.Use of Non-GAAP Constant Currenc
309、y InformationInternational revenues,which represent a significant portion of our revenues,are generally transacted in multiple currencies and therefore are affected by fluctuations in foreign currency exchange rates.The effect of currency exchange rates on our business is an important factor in unde
310、rstanding period-to-period comparisons.We use non-GAAP constant currency revenues(constant currency revenues)and non-GAAP percentage change in constant currency revenues(percentage change in constant currency revenues)for financial and operational decision-making and as a means to evaluate period-to
311、-period comparisons.We believe the presentation of results on a constant currency basis in addition to U.S.Generally Accepted Accounting Principles(GAAP)results helps improve the ability to understand our performance,because it excludes the effects of foreign currency volatility that are not indicat
312、ive 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 revenues excluding the effect of foreign exchange rate movements(FX Effect)as well as hedging activit
313、ies,which are recognized at the consolidated level.We use constant currency revenues to determine the constant currency revenue percentage change on a year-on-year basis.Constant currency revenues are calculated by translating current period revenues using prior year comparable period exchange rates
314、,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 Table of ContentsAlpha
315、bet Inc.36translated 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
316、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.The following table presents the foreign exchange effect on international revenues and total revenues(in millions,except percentages):Three Months En
317、ded March 31,2023%Change from Prior PeriodThree Months Ended March 31,Less FX EffectConstant Currency RevenuesAs ReportedLess Hedging EffectLess FX EffectConstant Currency Revenues20222023United States$31,733$32,864$0$32,864 4%0%4%EMEA 20,317 21,078 (1,173)22,251 4%(6)%10%APAC 11,841 11,681 (834)12,
318、515 (1)%(7)%6%Other Americas 3,842 4,080 (167)4,247 6%(5)%11%Revenues,excluding hedging effect 67,733 69,703 (2,174)71,877 3%(3)%6%Hedging gains(losses)278 84 Total revenues(1)$68,011$69,787$71,877 3%0%(3)%6%(1)Total constant currency revenues of$71.9 billion for the three months ended March 31,2023
319、 increased$4.1 billion compared to$67.7 billion in revenues,excluding hedging effect,for the three months ended March 31,2022.EMEA revenue growth was unfavorably affected by changes in foreign currency exchange rates,primarily due to the U.S.dollar strengthening relative to the Euro and the British
320、pound.APAC revenue growth was unfavorably affected by changes in foreign currency exchange rates,primarily due to the U.S.dollar strengthening relative to the Japanese yen.Other Americas revenue growth was unfavorably affected by changes in foreign currency exchange rates,primarily due to the U.S.do
321、llar strengthening relative to the Argentine peso.Costs and ExpensesCost of RevenuesThe following table presents cost of revenues,including TAC(in millions,except percentages):Three Months Ended March 31,20222023TAC$11,990$11,721 Other cost of revenues 17,609 18,891 Total cost of revenues$29,599$30,
322、612 Total cost of revenues as a percentage of revenues 44%44%Cost of revenues increased$1.0 billion from the three months ended March 31,2022 to the three months ended March 31,2023 due to an increase in other cost of revenues of$1.3 billion,partially offset by a decrease in TAC of$269 million.The d
323、ecrease in TAC from the three months ended March 31,2022 to the three months ended March 31,2023 was largely due to a decrease in TAC paid to Google Network partners,primarily driven by a decrease in revenues subject to TAC.The TAC rate decreased from 21.9%to 21.5%from the three months ended March 3
324、1,2022 to the three months ended March 31,2023 primarily due to a revenue mix shift from Google Network properties to Google Search&other properties.The TAC rate on Google Search&other revenues and the TAC rate on Google Network revenues were both substantially consistent from three months ended Mar
325、ch 31,2022 to the three months ended March 31,2023.Table of ContentsAlphabet Inc.37The increase in other cost of revenues from the three months ended March 31,2022 to the three months ended March 31,2023 was primarily due to increases in data center and other operations costs which includes$681 mill
326、ion of charges related to employee severance associated with the reduction of our workforce and our office space optimization efforts,partially offset by a reduction in depreciation expense due to the change in the estimated useful life of our servers and certain network equipment.Research and Devel
327、opmentThe following table presents R&D expenses(in millions,except percentages):Three Months Ended March 31,20222023Research and development expenses$9,119$11,468 Research and development expenses as a percentage of revenues 13%16%R&D expenses increased$2.3 billion from the three months ended March
328、31,2022 to the three months ended March 31,2023 primarily driven by an increase in compensation expenses of$1.7 billion and an increase in facilities costs due to the$247 million in charges related to our office space optimization efforts.The$1.7 billion increase in compensation expenses was largely
329、 the result of a 14%increase in average headcount,after adjusting for roles affected by the reduction in workforce for the quarter ended March 31,2023,and$835 million in employee severance charges associated with the reduction of our workforce,partially offset by the effect of the shift in timing of
330、 our annual employee stock-based compensation awards.Additionally,an increase in depreciation of$126 million includes the effect of the change in the estimated useful lives of our servers and network equipment.Sales and MarketingThe following table presents sales and marketing expenses(in millions,e
331、xcept percentages):Three Months Ended March 31,20222023Sales and marketing expenses$5,825$6,533 Sales and marketing expenses as a percentage of revenues 9%9%Sales and marketing expenses increased$708 million from the three months ended March 31,2022 to the three months ended March 31,2023 primarily
332、driven by an increase in compensation expenses of$734 million,largely resulting from$445 million in employee severance charges associated with the reduction in our workforce and a 7%increase in average headcount,after adjusting for roles affected by the reduction in workforce for the quarter ended M
333、arch 31,2023,partially offset by the effect of the shift in timing of our annual employee stock-based compensation awards.General and AdministrativeThe following table presents general and administrative expenses(in millions,except percentages):Three Months Ended March 31,20222023General and administrative expenses$3,374$3,759 General and administrative expenses as a percentage of revenues 5%5%Gen