Alphabet Announces Fourth Quarter and Fiscal Year 2021 Results
MOUNTAIN VIEW, Calif. – February 1, 2022 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter and fiscal year ended December 31, 2021.
Sundar Pichai, CEO of Alphabet and Google, said: “Our deep investment in AI technologies continues to drive extraordinary and helpful experiences for people and businesses, across our most important products. Q4 saw ongoing strong growth in our advertising business, which helped millions of businesses thrive and find new customers, a quarterly sales record for our Pixel phones despite supply constraints, and our Cloud business continuing to grow strongly.”
Ruth Porat, CFO of Alphabet and Google, said: “Our fourth quarter revenues of $75 billion, up 32% year over year, reflected broad-based strength in advertiser spend and strong consumer online activity, as well as substantial ongoing revenue growth from Google Cloud. Our investments have helped us drive this growth by delivering the services that people, our partners and businesses need, and we continue to invest in long-term opportunities.”
Q4 2021 financial highlights
The following table summarizes our consolidated financial results for the quarters and years ended December 31, 2020 and 2021 (in millions, except for per share information and percentages).
Quarter Ended December 31,
Year Ended December 31,
2020
2021
2020
2021
(unaudited)
(unaudited)
Revenues
$
56,898
$
75,325
$
182,527
$
257,637
Increase in revenues year over year
23
%
32
%
13
%
41
%
Operating income
$
15,651
$
21,885
$
41,224
$
78,714
Operating margin
28
%
29
%
23
%
31
%
Other income (expense), net
$
3,038
$
2,517
$
6,858
$
12,020
Net income
$
15,227
$
20,642
$
40,269
$
76,033
Diluted EPS
$
22.30
$
30.69
$
58.61
$
112.20
Q4 2021 supplemental information (in millions, except for number of employees; unaudited)
Revenues, Traffic Acquisition Costs (TAC) and number of employees
Quarter Ended December 31,
2020
2021
Google Search & other
$
31,903
$
43,301
YouTube ads
6,885
8,633
Google Network
7,411
9,305
Google advertising
46,199
61,239
Google other
6,674
8,161
Google Services total
52,873
69,400
Google Cloud
3,831
5,541
Other Bets
196
181
Hedging gains (losses)
(2)
203
Total revenues
$
56,898
$
75,325
Total TAC
$
10,466
$
13,427
Number of employees
135,301
156,500
Segment Operating Results
Quarter Ended December 31,
2020
2021
Operating income (loss):
Google Services
$
19,066
$
25,993
Google Cloud
(1,243)
(890)
Other Bets
(1,136)
(1,450)
Corporate costs, unallocated
(1,036)
(1,768)
Total income from operations
$
15,651
$
21,885
Change in the useful lives of our server and network equipment (unaudited)
In January 2021, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years. This change in accounting estimate was effective beginning in fiscal year 2021, and the effect for the three and twelve months ended December 31, 2021, respectively, was a reduction in depreciation expense of $446 million and $2.6 billion and an increase in net income of $347 million and $2.0 billion, or $0.52 and $3.02 per basic share and $0.52 and $2.98 per diluted share.
Stock Split Effected in Form of Stock Dividend (“Stock Split”)
Alphabet today announced that the Board of Directors had approved and declared a 20-for-one stock split (the “Stock Split”) in the form of a one-time special stock dividend on each share of the Company’s Class A, Class B, and Class C stock. The Stock Split is subject to stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Class A, Class B, and Class C stock to accommodate the Stock Split.
If approval is obtained, each of the Company’s stockholders of record at the close of business on July 1, 2022 (the “Record Date”), will receive, after the close of business on July 15, 2022, a dividend of 19 additional shares of the same class of stock for every share held by such stockholder as of the Record Date.
Webcast and conference call information
A live audio webcast of our fourth quarter 2021 earnings release call will be available on YouTube at https://youtu.be/ItLfgdDN5oE. The call begins today at 2:00 PM (PT) / 5:00 PM (ET). This press release, including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, is also available at http://abc.xyz/investor.
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We also provide announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs, on our investor relations website (http://abc.xyz/investor).
We also share Google news and product updates on Google’s Keyword blog at https://www.blog.google/, which may be of interest or material to our investors.
Forward-looking statements
This press release may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 and our most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, which are on file with the SEC and are available on our investor relations website at http://abc.xyz/investor and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2021. All information provided in this release and in the attachments is as of February 1, 2022. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.
About non-GAAP financial measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: free cash flow; constant currency revenues; and percentage change in constant currency revenues. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of our recurring core business operating results, such as our revenues excluding the effect of foreign exchange rate movements and hedging activities. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
There are a number of limitations related to the use of non-GAAP financial measures. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures and evaluating these non-GAAP financial measures together with their relevant financial measures in accordance with GAAP.
For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliation from net cash provided by operating activities to free cash flow” and “Reconciliation from GAAP revenues to non-GAAP constant currency revenues” included at the end of this release.
Contact
Investor relations
Media
investor-relations@abc.xyz
press@abc.xyz
3
Alphabet Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts which are reflected in thousands and par value per share amounts)
As of December 31,
As of December 31,
2020
2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
26,465
$
20,945
Marketable securities
110,229
118,704
Total cash, cash equivalents, and marketable securities
136,694
139,649
Accounts receivable, net
30,930
39,304
Income taxes receivable, net
454
966
Inventory
728
1,170
Other current assets
5,490
7,054
Total current assets
174,296
188,143
Non-marketable securities
20,703
29,549
Deferred income taxes
1,084
1,284
Property and equipment, net
84,749
97,599
Operating lease assets
12,211
12,959
Intangible assets, net
1,445
1,417
Goodwill
21,175
22,956
Other non-current assets
3,953
5,361
Total assets
$
319,616
$
359,268
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
5,589
$
6,037
Accrued compensation and benefits
11,086
13,889
Accrued expenses and other current liabilities
28,631
31,236
Accrued revenue share
7,500
8,996
Deferred revenue
2,543
3,288
Income taxes payable, net
1,485
808
Total current liabilities
56,834
64,254
Long-term debt
13,932
14,817
Deferred revenue, non-current
481
535
Income taxes payable, non-current
8,849
9,176
Deferred income taxes
3,561
5,257
Operating lease liabilities
11,146
11,389
Other long-term liabilities
2,269
2,205
Total liabilities
97,072
107,633
Contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding
0
0
Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000); 675,222 (Class A 300,730, Class B 45,843, Class C 328,649) and 662,121 (Class A 300,737, Class B 44,665, Class C 316,719) shares issued and outstanding
58,510
61,774
Accumulated other comprehensive income (loss)
633
(1,623)
Retained earnings
163,401
191,484
Total stockholders’ equity
222,544
251,635
Total liabilities and stockholders’ equity
$
319,616
$
359,268
4
Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except share amounts which are reflected in thousands and per share amounts)
Quarter Ended December 31,
Year Ended December 31,
2020
2021
2020
2021
(unaudited)
(unaudited)
Revenues
$
56,898
$
75,325
$
182,527
$
257,637
Costs and expenses:
Cost of revenues
26,080
32,988
84,732
110,939
Research and development
7,022
8,708
27,573
31,562
Sales and marketing
5,314
7,604
17,946
22,912
General and administrative
2,831
4,140
11,052
13,510
Total costs and expenses
41,247
53,440
141,303
178,923
Income from operations
15,651
21,885
41,224
78,714
Other income (expense), net
3,038
2,517
6,858
12,020
Income before income taxes
18,689
24,402
48,082
90,734
Provision for income taxes
3,462
3,760
7,813
14,701
Net income
$
15,227
$
20,642
$
40,269
$
76,033
Basic earnings per share of Class A and B common stock and Class C capital stock
$
22.54
$
31.15
$
59.15
$
113.88
Diluted earnings per share of Class A and B common stock and Class C capital stock
$
22.30
$
30.69
$
58.61
$
112.20
Number of shares used in basic earnings per share calculation
675,582
662,663
680,816
667,650
Number of shares used in diluted earnings per share calculation
682,969
672,493
687,028
677,674
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Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Quarter Ended December 31,
Year Ended December 31,
2020
2021
2020
2021
(unaudited)
(unaudited)
Operating activities
Net income
$
15,227
$
20,642
$
40,269
$
76,033
Adjustments:
Depreciation and impairment of property and equipment
3,539
3,215
12,905
11,555
Amortization and impairment of intangible assets
186
224
792
886
Stock-based compensation expense
3,223
3,954
12,991
15,376
Deferred income taxes
1,670
1,616
1,390
1,808
Gain on debt and equity securities, net
(3,262)
(2,478)
(6,317)
(12,270)
Other
392
(14)
1,267
(213)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable
(5,445)
(5,819)
(6,524)
(9,095)
Income taxes, net
740
(3,369)
1,209
(625)
Other assets
(738)
(399)
(1,330)
(1,846)
Accounts payable
963
1,157
694
283
Accrued expenses and other liabilities
4,613
4,541
5,504
7,304
Accrued revenue share
1,362
1,296
1,639
1,682
Deferred revenue
207
368
635
774
Net cash provided by operating activities
22,677
24,934
65,124
91,652
Investing activities
Purchases of property and equipment
(5,479)
(6,383)
(22,281)
(24,640)
Purchases of marketable securities
(31,644)
(40,090)
(136,576)
(135,196)
Maturities and sales of marketable securities
35,155
36,168
132,906
128,294
Purchases of non-marketable securities
(5,311)
(770)
(7,175)
(2,838)
Maturities and sales of non-marketable securities
425
344
1,023
934
Acquisitions, net of cash acquired, and purchases of intangible assets
(370)
(385)
(738)
(2,618)
Other investing activities
(57)
100
68
541
Net cash used in investing activities
(7,281)
(11,016)
(32,773)
(35,523)
Financing activities
Net payments related to stock-based award activities
(1,647)
(2,923)
(5,720)
(10,162)
Repurchases of common and capital stock
(7,904)
(13,473)
(31,149)
(50,274)
Proceeds from issuance of debt, net of costs
0
6,250
11,761
20,199
Repayments of debt
(57)
(6,365)
(2,100)
(21,435)
Proceeds from sale of interest in consolidated entities, net
338
0
2,800
310
Net cash used in financing activities
(9,270)
(16,511)
(24,408)
(61,362)
Effect of exchange rate changes on cash and cash equivalents
210
(181)
24
(287)
Net increase (decrease) in cash and cash equivalents
6,336
(2,774)
7,967
(5,520)
Cash and cash equivalents at beginning of period
20,129
23,719
18,498
26,465
Cash and cash equivalents at end of period
$
26,465
$
20,945
$
26,465
$
20,945
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Reconciliation from net cash provided by operating activities to free cash flow (in millions; unaudited):
We provide free cash flow because it is a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in our business and acquisitions, and to strengthen our balance sheet.
Quarter Ended December 31, 2021
Net cash provided by operating activities
$
24,934
Less: purchases of property and equipment
(6,383)
Free cash flow
$
18,551
Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.
Reconciliation from GAAP revenues to non-GAAP constant currency revenues (in millions, except percentages; unaudited):
We provide non-GAAP constant currency revenues and the non-GAAP percentage change in constant currency revenues because they facilitate the comparison of current results to historic performance by excluding the effect of foreign exchange rate movements and hedging activities, which are not indicative of our core operating results.
Comparison to the Quarter Ended December 31, 2020
Quarter Ended
December 31, 2020
December 31, 2021
% Change from Prior Year
EMEA revenues
$
17,238
$
23,153
34
%
EMEA constant currency revenues
23,211
35
%
APAC revenues
9,909
12,732
28
%
APAC constant currency revenues
12,996
31
%
Other Americas revenues
3,050
4,447
46
%
Other Americas constant currency revenues
4,398
44
%
United States revenues
26,703
34,790
30
%
Hedging gains (losses)
(2)
203
Total revenues
$
56,898
$
75,325
32
%
Revenues, excluding hedging effect
$
56,900
$
75,122
Exchange rate effect
273
Total constant currency revenues
$
75,395
33
%
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Comparison to the Quarter Ended September 30, 2021
Quarter Ended
September 30, 2021
December 31, 2021
% Change from Prior Quarter
EMEA revenues
$
19,839
$
23,153
17
%
EMEA constant currency revenues
23,662
19
%
APAC revenues
11,705
12,732
9
%
APAC constant currency revenues
12,872
10
%
Other Americas revenues
3,688
4,447
21
%
Other Americas constant currency revenues
4,560
24
%
United States revenues
29,824
34,790
17
%
Hedging gains (losses)
62
203
Total revenues
$
65,118
$
75,325
16
%
Revenues, excluding hedging effect
$
65,056
$
75,122
Exchange rate effect
762
Total constant currency revenues
$
75,884
17
%
Comparison to the Year Ended December 31, 2020
Year Ended
December 31, 2020
December 31, 2021
% Change from Prior Year
EMEA revenues
$
55,370
$
79,107
43
%
EMEA constant currency revenues
76,321
38
%
APAC revenues
32,550
46,123
42
%
APAC constant currency revenues
45,666
40
%
Other Americas revenues
9,417
14,404
53
%
Other Americas constant currency revenues
14,317
52
%
United States revenues
85,014
117,854
39
%
Hedging gains (losses)
176
149
Total revenues
$
182,527
$
257,637
41
%
Revenues, excluding hedging effect
$
182,351
$
257,488
Exchange rate effect
(3,330)
Total constant currency revenues
$
254,158
39
%
Non-GAAP constant currency revenues and percentage change: We define non-GAAP constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and we use it to determine the constant currency revenue percentage change on year-on-year and quarter-on-quarter basis. Non-GAAP constant currency revenues are calculated by translating current quarter revenues using prior period exchange rates and excluding any hedging effect recognized in the current quarter. Constant currency revenue percentage change is calculated by determining the increase in current quarter non-GAAP constant currency revenues over prior period revenues, excluding any hedging effect recognized in the prior period.
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Other income (expense), net
The following table presents our other income (expense), net (in millions; unaudited):
Quarter Ended December 31,
2020
2021
Interest income
$
386
$
378
Interest expense
(53)
(117)
Foreign currency exchange gain (loss), net
(87)
(163)
Gain (loss) on debt securities, net
210
(172)
Gain (loss) on equity securities, net(1)
3,052
2,650
Performance fees
(405)
(228)
Income (loss) and impairment from equity method investments, net
355
49
Other
(420)
120
Other income (expense), net
$
3,038
$
2,517
(1)Includes all gains and losses, unrealized and realized, on equity investments. For Q4 2021, the net effect of the gain on equity securities of $2,650 million and the performance fees of $228 million increased the provision for income tax, net income, and diluted EPS by $509 million, $1,913 million, and $2.84, respectively. Fluctuations in the value of our investments may be affected by market dynamics and other factors and could significantly contribute to the volatility of OI&E in future periods.
Segment results
The following table presents our revenues and operating income (loss) (in millions; unaudited):
Quarter Ended December 31,
2020
2021
Revenues:
Google Services
$
52,873
$
69,400
Google Cloud
3,831
5,541
Other Bets
196
181
Hedging gains (losses)
(2)
203
Total revenues
$
56,898
$
75,325
Quarter Ended December 31,
2020
2021
Operating income (loss):
Google Services
$
19,066
$
25,993
Google Cloud
(1,243)
(890)
Other Bets
(1,136)
(1,450)
Corporate costs, unallocated
(1,036)
(1,768)
Total income from operations
$
15,651
$
21,885
We report our segment results as Google Services, Google Cloud, and Other Bets:
•Google Services includes products and services such as ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube. Google Services generates revenues primarily from advertising; sales of apps and in-app purchases, digital content products, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.
•Google Cloud includes Google’s infrastructure and platform services, collaboration tools, and other services for enterprise customers. Google Cloud generates revenues from fees received for Google Cloud Platform services, Google Workspace 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.
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Unallocated corporate costs primarily include corporate initiatives, corporate shared costs, such as finance and legal, including certain fines and settlements, as well as costs associated with certain shared R&D activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs.
