Alphabet Announces Fourth Quarter and Fiscal Year 2023 Results
MOUNTAIN VIEW, Calif. – January 30, 2024 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter and fiscal year ended December 31, 2023.
Sundar Pichai, CEO, said: “We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come.”
Ruth Porat, President and Chief Investment Officer; CFO said: “We ended 2023 with very strong fourth quarter financial results, with Q4 consolidated revenues of $86 billion, up 13% year over year. We remain committed to our work to durably re-engineer our cost base as we invest to support our growth opportunities.”
Q4 2023 Financial Highlights
The following table summarizes our consolidated financial results for the quarters and years ended December 31, 2022 and 2023 (in millions, except for per share information and percentages).
Quarter Ended December 31,
Year Ended December 31,
2022
2023
2022
2023
(unaudited)
(unaudited)
Revenues
$
76,048
$
86,310
$
282,836
$
307,394
Change in revenues year over year
1
%
13
%
10
%
9
%
Change in constant currency revenues year over year(1)
7
%
13
%
14
%
10
%
Operating income
$
18,160
$
23,697
$
74,842
$
84,293
Operating margin
24
%
27
%
26
%
27
%
Other income (expense), net
$
(1,013)
$
715
$
(3,514)
$
1,424
Net income
$
13,624
$
20,687
$
59,972
$
73,795
Diluted EPS
$
1.05
$
1.64
$
4.56
$
5.80
(1) Non-GAAP measure. See the table captioned “Reconciliation from GAAP revenues to non-GAAP constant currency revenues and GAAP percentage change in revenues to non-GAAP percentage change in constant currency revenues” for more details.
Q4 2023 Supplemental Information (in millions, except for number of employees; unaudited)
Revenues, Traffic Acquisition Costs (TAC), and Number of Employees
Quarter Ended December 31,
2022
2023
Google Search & other
$
42,604
$
48,020
YouTube ads
7,963
9,200
Google Network
8,475
8,297
Google advertising
59,042
65,517
Google subscriptions, platforms, and devices(1)
8,796
10,794
Google Services total
67,838
76,311
Google Cloud
7,315
9,192
Other Bets
226
657
Hedging gains (losses)
669
150
Total revenues
$
76,048
$
86,310
Total TAC
$
12,925
$
13,986
Number of employees
190,234
182,502
(1) Formerly “Google other.”
Segment Operating Results
Quarter Ended December 31,
2022
2023
Operating income (loss):
Google Services
$
20,222
$
26,730
Google Cloud
(186)
864
Other Bets
(1,237)
(863)
Alphabet-level activities(1)
(639)
(3,034)
Total income from operations
$
18,160
$
23,697
(1)Formerly “corporate costs, unallocated.” In addition to the costs included in Alphabet-level activities, hedging gains (losses) related to revenue were $669 million and $150 million for the three months ended December 31, 2022 and 2023, respectively. For the quarter ended December 31, 2023, Alphabet-level activities included charges related to the reduction in force and our office space optimization efforts totaling $1.2 billion and $62 million in accelerated rent and accelerated depreciation.
Additional Information Relating to the Quarter Ended December 31, 2023 (unaudited)
Reductions in Our Workforce and Office Space
In January 2023, we announced a reduction of our workforce, and as a result we recorded employee severance and related charges of $2.1 billion for the twelve months ended December 31, 2023. In addition, we are taking actions to optimize our global office space. As a result, exit charges recorded during the three and twelve months ended December 31, 2023, were $1.2 billion and $1.8 billion, respectively. In addition to these exit charges, for the three and twelve months ended December 31, 2023, we incurred $62 million and $269 million, respectively, in accelerated rent and accelerated depreciation.
2
Severance and office space exit charges are included within our consolidated statements of income as follows (in millions):
Quarter Ended December 31, 2023
Year Ended December 31, 2023
Severance and Related
Office Space
Total
Severance and Related
Office Space
Total
Cost of revenues
$
2
$
235
$
237
$
479
$
481
$
960
Research and development
1
602
603
848
870
1,718
Sales and marketing
3
198
201
497
257
754
General and administrative
1
161
162
264
237
501
Total charges
$
7
$
1,196
$
1,203
$
2,088
$
1,845
$
3,933
For segment reporting, the substantial majority of these charges are included within Alphabet-level activities in our segment results.
Change in Useful Lives of Our Server and Network Equipment
In January 2023, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from four years to six years and the estimated useful life of certain network equipment from five years to six years. This change in accounting estimate was effective beginning in fiscal year 2023, and the effect was a reduction in depreciation expense of $983 million and $3.9 billion and an increase in net income of $765 million and $3.0 billion, or $0.06 and $0.24 per basic and $0.06 and $0.24 per diluted share for the three and twelve months ended December 31, 2023, respectively.
Webcast and Conference Call Information
A live audio webcast of our fourth quarter 2023 earnings release call will be available on YouTube at https://www.youtube.com/watch?v=b4alwdVvn4Q. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, is also available at http://abc.xyz/investor.
We also provide announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs, on our investor relations website (http://abc.xyz/investor).
We also share Google news and product updates on Google’s Keyword blog at https://www.blog.google/, which may be of interest or material to our investors.
Forward-Looking Statements
This press release may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 and our most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, which are on file with the SEC and are available on our investor relations website at http://abc.xyz/investor and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, and may be set forth in other reports and filings we make with the SEC. All information provided in this release and in the attachments is as of January 30, 2024. 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
3
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, which are recognized at the consolidated level. 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 GAAP net cash provided by operating activities to non-GAAP free cash flow” and “Reconciliation from GAAP revenues to non-GAAP constant currency revenues and GAAP percentage change in revenues to non-GAAP percentage change in constant currency revenues” included at the end of this release.
Contact
Investor relations
Media
investor-relations@abc.xyz
press@abc.xyz
4
Alphabet Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value per share amounts)
As of December 31,
2022
2023
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
21,879
$
24,048
Marketable securities
91,883
86,868
Total cash, cash equivalents, and marketable securities
113,762
110,916
Accounts receivable, net
40,258
47,964
Other current assets
10,775
12,650
Total current assets
164,795
171,530
Non-marketable securities
30,492
31,008
Deferred income taxes
5,261
12,169
Property and equipment, net
112,668
134,345
Operating lease assets
14,381
14,091
Goodwill
28,960
29,198
Other non-current assets
8,707
10,051
Total assets
$
365,264
$
402,392
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
5,128
$
7,493
Accrued compensation and benefits
14,028
15,140
Accrued expenses and other current liabilities
37,866
46,168
Accrued revenue share
8,370
8,876
Deferred revenue
3,908
4,137
Total current liabilities
69,300
81,814
Long-term debt
14,701
13,253
Deferred revenue, non-current
599
911
Income taxes payable, non-current
9,258
8,474
Deferred income taxes
514
485
Operating lease liabilities
12,501
12,460
Other long-term liabilities
2,247
1,616
Total liabilities
109,120
119,013
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share, 100 shares authorized; no shares issued and outstanding
0
0
Class A, Class B, and Class C stock and additional paid-in capital, $0.001 par value per share: 300,000 shares authorized (Class A 180,000, Class B 60,000, Class C 60,000); 12,849 (Class A 5,964, Class B 883, Class C 6,002) and 12,460 (Class A 5,899, Class B 870, Class C 5,691) shares issued and outstanding
68,184
76,534
Accumulated other comprehensive income (loss)
(7,603)
(4,402)
Retained earnings
195,563
211,247
Total stockholders’ equity
256,144
283,379
Total liabilities and stockholders’ equity
$
365,264
$
402,392
5
Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Quarter Ended December 31,
Year Ended December 31,
2022
2023
2022
2023
(unaudited)
(unaudited)
Revenues
$
76,048
$
86,310
$
282,836
$
307,394
Costs and expenses:
Cost of revenues
35,342
37,575
126,203
133,332
Research and development
10,267
12,113
39,500
45,427
Sales and marketing
7,183
7,719
26,567
27,917
General and administrative
5,096
5,206
15,724
16,425
Total costs and expenses
57,888
62,613
207,994
223,101
Income from operations
18,160
23,697
74,842
84,293
Other income (expense), net
(1,013)
715
(3,514)
1,424
Income before income taxes
17,147
24,412
71,328
85,717
Provision for income taxes
3,523
3,725
11,356
11,922
Net income
$
13,624
$
20,687
$
59,972
$
73,795
Basic earnings per share of Class A, Class B, and Class C stock
$
1.06
$
1.66
$
4.59
$
5.84
Diluted earnings per share of Class A, Class B, and Class C stock
$
1.05
$
1.64
$
4.56
$
5.80
Number of shares used in basic earnings per share calculation
12,897
12,488
13,063
12,630
Number of shares used in diluted earnings per share calculation
12,947
12,602
13,159
12,722
6
Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Quarter Ended December 31,
Year Ended December 31,
2022
2023
2022
2023
(unaudited)
(unaudited)
Operating activities
Net income
$
13,624
$
20,687
$
59,972
$
73,795
Adjustments:
Depreciation of property and equipment
3,602
3,316
13,475
11,946
Stock-based compensation expense
5,100
5,659
19,362
22,460
Deferred income taxes
(1,924)
(1,670)
(8,081)
(7,763)
(Gain) loss on debt and equity securities, net
1,663
(471)
5,519
823
Other
1,260
1,665
3,483
4,330
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net
(4,615)
(6,518)
(2,317)
(7,833)
Income taxes, net
1,446
(9,869)
584
523
Other assets
(778)
740
(5,046)
(2,143)
Accounts payable
(28)
427
707
664
Accrued expenses and other liabilities
3,424
4,317
3,915
3,937
Accrued revenue share
577
797
(445)
482
Deferred revenue
263
(165)
367
525
Net cash provided by operating activities
23,614
18,915
91,495
101,746
Investing activities
Purchases of property and equipment
(7,595)
(11,019)
(31,485)
(32,251)
Purchases of marketable securities
(11,621)
(28,436)
(78,874)
(77,858)
Maturities and sales of marketable securities
13,735
34,030
97,822
86,672
Purchases of non-marketable securities
(903)
(851)
(2,531)
(3,027)
Maturities and sales of non-marketable securities
19
204
150
947
Acquisitions, net of cash acquired, and purchases of intangible assets
(84)
(29)
(6,969)
(495)
Other investing activities
222
(66)
1,589
(1,051)
Net cash used in investing activities
(6,227)
(6,167)
(20,298)
(27,063)
Financing activities
Net payments related to stock-based award activities
(2,079)
(2,680)
(9,300)
(9,837)
Repurchases of stock
(15,407)
(16,191)
(59,296)
(61,504)
Proceeds from issuance of debt, net of costs
8,550
1,492
52,872
10,790
Repayments of debt
(8,718)
(1,929)
(54,068)
(11,550)
Proceeds from sale of interest in consolidated entities, net
25
0
35
8
Net cash used in financing activities
(17,629)
(19,308)
(69,757)
(72,093)
Effect of exchange rate changes on cash and cash equivalents
137
(94)
(506)
(421)
Net increase (decrease) in cash and cash equivalents
(105)
(6,654)
934
2,169
Cash and cash equivalents at beginning of period
21,984
30,702
20,945
21,879
Cash and cash equivalents at end of period
$
21,879
$
24,048
$
21,879
$
24,048
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Segment Results
The following table presents our segment revenues and operating income (loss) (in millions; unaudited):
Quarter Ended December 31,
2022
2023
Revenues:
Google Services
$
67,838
$
76,311
Google Cloud
7,315
9,192
Other Bets
226
657
Hedging gains (losses)
669
150
Total revenues
$
76,048
$
86,310
Operating income (loss):
Google Services
$
20,222
$
26,730
Google Cloud
(186)
864
Other Bets
(1,237)
(863)
Alphabet-level activities
(639)
(3,034)
Total income from operations
$
18,160
$
23,697
We report our segment results as Google Services, Google Cloud, and Other Bets:
•Google Services includes products and services such as ads, Android, Chrome, devices, Google Maps, Google Play, Search, and YouTube. Google Services generates revenues primarily from advertising; fees received for consumer subscription-based products such as YouTube TV, YouTube Music and Premium, and NFL Sunday Ticket; the sale of apps and in-app purchases and devices.
•Google Cloud includes infrastructure and platform services, collaboration tools, and other services for enterprise customers. Google Cloud generates revenues primarily from consumption-based fees and subscriptions received for Google Cloud Platform services, Google Workspace communication and collaboration tools, and other enterprise services.
•Other Bets is a combination of multiple operating segments that are not individually material. Revenues from Other Bets are generated primarily from the sale of healthcare-related services and internet services.
Certain costs are not allocated to our segments because they represent Alphabet-level activities. These costs primarily include AI-focused shared R&D activities, including development costs of our general AI models; corporate initiatives such as our philanthropic activities; corporate shared costs such as certain finance, human resource, and legal costs, including certain fines and settlements. Charges associated with reductions in our workforce and office space during 2023 were not allocated to our segments. Additionally, hedging gains (losses) related to revenue are not allocated to our segments.
Other Income (Expense), Net
The following table presents our other income (expense), net (in millions; unaudited):
Quarter Ended December 31,
2022
2023
Interest income
$
659
$
1,110
Interest expense
(90)
(69)
Foreign currency exchange gain (loss), net
(185)
(449)
Gain (loss) on debt securities, net
(176)
(115)
Gain (loss) on equity securities, net(1)
(1,487)
586
Performance fees
193
(45)
Income (loss) and impairment from equity method investments, net
(31)
(256)
Other
104
(47)
Other income (expense), net
$
(1,013)
$
715
(1)Includes all gains and losses, unrealized and realized, on equity securities. For Q4 2023, the net effect of the gain on equity securities of $586 million and the $45 million of performance fees related to certain investments increased the provision for
8
income tax, net income, and diluted EPS by $114 million, $427 million, and $0.03, 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.
Reconciliation from GAAP Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow (in millions; unaudited):
We provide non-GAAP 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, 2023
Net cash provided by operating activities
$
18,915
Less: purchases of property and equipment
(11,019)
Free cash flow
$
7,896
Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.
9
Reconciliation from GAAP Revenues to Non-GAAP Constant Currency Revenues and GAAP Percentage Change in Revenues to Non-GAAP Percentage Change in Constant Currency Revenues (in millions, except percentages; unaudited):
We provide non-GAAP constant currency revenues (“constant currency revenues”) and non-GAAP percentage change in constant currency revenues (“percentage change in constant currency revenues”), because they facilitate the comparison of current results to historic performance by excluding the effect of foreign exchange rate movements (“FX Effect”) as well as hedging activities, which are recognized at the consolidated level, as they are not indicative of our core operating results.
Non-GAAP constant currency revenues is defined as revenues excluding the effect of foreign exchange rate movements and hedging activities and is calculated by translating current period revenues using prior period exchange rates and excluding any hedging effect recognized in the current period. We calculate the percentage change in constant currency revenues by comparing constant currency revenues to the prior year comparable period revenues, excluding any hedging effect recognized in the prior period.
Revenues by Geography
Comparison from the Quarter Ended December 31, 2022 to the Quarter Ended December 31, 2023
Quarter Ended December 31, 2023
% Change from Prior Period
Quarter Ended December 31,
Less FX Effect
Constant Currency Revenues
As Reported
Less Hedging Effect
Less FX Effect
Constant Currency Revenues
2022
2023
United States
$
36,982
$
41,995
$
0
$
41,995
14
%
0
%
14
%
EMEA
21,762
25,010
1,105
23,905
15
%
5
%
10
%
APAC
11,979
13,979
(90)
14,069
17
%
0
%
17
%
Other Americas
4,656
5,176
(75)
5,251
11
%
(2)
%
13
%
Revenues, excluding hedging effect
75,379
86,160
940
85,220
14
%
1
%
13
%
Hedging gains (losses)
669
150
Total revenues(1)
$
76,048
$
86,310
$
85,220
13
%
(1)
%
1
%
13
%
(1)Total constant currency revenues of $85.2 billion for the quarter ended December 31, 2023 increased $9.8 billion compared to $75.4 billion in revenues, excluding hedging effect for the quarter ended December 31, 2022.
Comparison from the Quarter Ended September 30, 2023 to the Quarter Ended December 31, 2023
Quarter Ended December 31, 2023
% Change from Prior Period
Quarter Ended
Less FX Effect
Constant Currency Revenues
As Reported
Less Hedging Effect
Less FX Effect
Constant Currency Revenues
September 30, 2023
December 31, 2023
United States
$
36,354
$
41,995
$
0
$
41,995
16
%
0
%
16
%
EMEA
22,661
25,010
(508)
25,518
10
%
(3)
%
13
%
APAC
13,126
13,979
(196)
14,175
6
%
(2)
%
8
%
Other Americas
4,553
5,176
(151)
5,327
14
%
(3)
%
17
%
Revenues, excluding hedging effect
76,694
86,160
(855)
87,015
12
%
(1)
%
13
%
Hedging gains (losses)
(1)
150
Total revenues(1)
$
76,693
$
86,310
$
87,015
13
%
1
%
(1)
%
13
%
(1)Total constant currency revenues of $87.0 billion for the quarter ended December 31, 2023 increased $10.3 billion compared to $76.7 billion in revenues, excluding hedging effect for the quarter ended September 30, 2023.
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Comparison from the Year Ended December 31, 2022 to the Year Ended December 31, 2023
Year Ended December 31, 2023
% Change from Prior Period
Year Ended December 31,
Less FX Effect
Constant Currency Revenues
As Reported
Less Hedging Effect
Less FX Effect
Constant Currency Revenues
2022
2023
United States
$
134,814
$
146,286
$
0
$
146,286
9
%
0
%
9
%
EMEA
82,062
91,038
460
90,578
11
%
1
%
10
%
APAC
47,024
51,514
(1,759)
53,273
10
%
(3)
%
13
%
Other Americas
16,976
18,320
(654)
18,974
8
%
(4)
%
12
%
Revenues, excluding hedging effect
280,876
307,158
(1,953)
309,111
9
%
(1)
%
10
%
Hedging gains (losses)
1,960
236
Total revenues(1)
$
282,836
$
307,394
$
309,111
9
%
0
%
(1)
%
10
%
(1)Total constant currency revenues of $309.1 billion for the year ended December 31, 2023 increased $28.2 billion compared to $280.9 billion in revenues, excluding hedging effect for the year ended December 31, 2022.
Total Revenues — Prior Year Comparative Periods
Comparison from the Quarter Ended December 31, 2021 to the Quarter Ended December 31, 2022
Quarter Ended December 31, 2022
Quarter Ended December 31,
% Change from Prior Period
Less FX Effect
Constant Currency Revenues
As Reported
Less Hedging Effect
Less FX Effect
Constant Currency Revenues
2021
2022
Revenues excluding hedging effect
$
75,122
$
75,379
$
(4,733)
$
80,112
0
%
(7)
%
7
%
Hedging gains (losses)
203
669
Total revenues
$
75,325
$
76,048
$
80,112
1
%
1
%
(7)
%
7
%
Comparison from the Year Ended December 31, 2021 to the Year Ended December 31, 2022
