Alphabet Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Alphabet Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 49 Financial Statements: Consolidated Balance Sheets 52 Consolidated Statements of Income 53 Consolidated Statements of Comprehensive Income 54 Consolidated Statements of Stockholders’ Equity 55 Consolidated Statements of Cash Flows 56 Notes to Consolidated Financial Statements 57 48. Table of Contents Alphabet Inc. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alphabet Inc. (the Company) as of December 31, 2023 and 2024, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 , in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 4, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. 49. Table of Contents Alphabet Inc. Loss Contingencies Description of the Matter The Company is subject to claims, lawsuits, regulatory and government inquiries and investigations, other proceedings, and orders involving competition, intellectual property, data privacy and security, tax and related compliance, labor and employment, commercial disputes, content generated by its users, goods and services offered by advertisers or publishers using their platforms, personal injury, and other matters. As described in Note 10 to the consolidated financial statements “Commitments and Contingencies” such claims, lawsuits, regulatory and government inquiries and investigations, other proceedings, and orders could result in adverse consequences. Significant judgment is required to determine both the likelihood and the estimated amount of a loss related to such matters. Auditing management’s accounting for and disclosure of loss contingencies from these matters involved challenging and subjective auditor judgment in assessing the Company’s evaluation of the probability of a loss, and the estimated amount or range of loss. How We Addressed the Matter in Our Audit We tested relevant controls over the identified risks associated with management’s accounting for and disclosure of these matters. This included controls over management’s assessment of the probability of incurrence of a loss and whether the loss or range of loss was reasonably estimable and the development of related disclosures. Our audit procedures included gaining an understanding of previous rulings and the status of ongoing lawsuits, reviewing letters from internal and external legal counsel addressing the matters, meeting with internal legal counsel to discuss the allegations, and obtaining a representation letter from management on these matters. We also evaluated the Company’s disclosures in relation to these matters. /s/ Ernst & Young LLP We have served as the Company's auditor since 1999. San Jose, California February 4, 2025 50. Table of Contents Alphabet Inc. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on Internal Control Over Financial Reporting We have audited Alphabet Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Alphabet Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2024 consolidated financial statements of the Company and our report dated February 4, 2025 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Jose, California February 4, 2025 51. Table of Contents Alphabet Inc. Alphabet Inc. CONSOLIDATED BALANCE SHEETS (in millions, except par value per share amounts) As of December 31, 2023 2024 Assets Current assets: Cash and cash equivalents $ 24,048 $ 23,466 Marketable securities 86,868 72,191 Total cash, cash equivalents, and marketable securities 110,916 95,657 Accounts receivable, net 47,964 52,340 Other current assets 12,650 15,714 Total current assets 171,530 163,711 Non-marketable securities 31,008 37,982 Deferred income taxes 12,169 17,180 Property and equipment, net 134,345 171,036 Operating lease assets 14,091 13,588 Goodwill 29,198 31,885 Other non-current assets 10,051 14,874 Total assets $ 402,392 $ 450,256 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 7,493 $ 7,987 Accrued compensation and benefits 15,140 15,069 Accrued expenses and other current liabilities 46,168 51,228 Accrued revenue share 8,876 9,802 Deferred revenue 4,137 5,036 Total current liabilities 81,814 89,122 Long-term debt 11,870 10,883 Income taxes payable, non-current 8,474 8,782 Operating lease liabilities 12,460 11,691 Other long-term liabilities 4,395 4,694 Total liabilities 119,013 125,172 Commitments and Contingencies (Note 10) 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 ); 12,460 (Class A 5,899 , Class B 870 , Class C 5,691 ) and 12,211 (Class A 5,835 , Class B 861 , Class C 5,515 ) shares issued and outstanding 76,534 84,800 Accumulated other comprehensive income (loss) ( 4,402 ) ( 4,800 ) Retained earnings 211,247 245,084 Total stockholders’ equity 283,379 325,084 Total liabilities and stockholders’ equity $ 402,392 $ 450,256 See accompanying notes. 52. Table of Contents Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) Year Ended December 31, 2022 2023 2024 Revenues $ 282,836 $ 307,394 $ 350,018 Costs and expenses: Cost of revenues 126,203 133,332 146,306 Research and development 39,500 45,427 49,326 Sales and marketing 26,567 27,917 27,808 General and administrative 15,724 16,425 14,188 Total costs and expenses 207,994 223,101 237,628 Income from operations 74,842 84,293 112,390 Other income (expense), net ( 3,514 ) 1,424 7,425 Income before income taxes 71,328 85,717 119,815 Provision for income taxes 11,356 11,922 19,697 Net income $ 59,972 $ 73,795 $ 100,118 Basic net income per share (Note 12) $ 4.59 $ 5.84 $ 8.13 Diluted net income per share (Note 12) $ 4.56 $ 5.80 $ 8.04 See accompanying notes. 53. Table of Contents Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year Ended December 31, 2022 2023 2024 Net income $ 59,972 $ 73,795 $ 100,118 Other comprehensive income (loss): Change in foreign currency translation adjustment, net of income tax benefit (expense) of $( 134 ), $ 63 and $( 49 ) ( 1,836 ) 735 ( 1,673 ) Available-for-sale investments: Change in net unrealized gains (losses) ( 4,720 ) 1,344 ( 116 ) Less: reclassification adjustment for net (gains) losses included in net income 1,007 1,168 782 Net change, net of income tax benefit (expense) of $ 1,056 , $( 698 ), and $( 190 ) ( 3,713 ) 2,512 666 Cash flow hedges: Change in net unrealized gains (losses) 1,275 168 775 Less: reclassification adjustment for net (gains) losses included in net income ( 1,706 ) ( 214 ) ( 166 ) Net change, net of income tax benefit (expense) of $ 110 , $ 2 , and $( 151 ) ( 431 ) ( 46 ) 609 Other comprehensive income (loss) ( 5,980 ) 3,201 ( 398 ) Comprehensive income $ 53,992 $ 76,996 $ 99,720 See accompanying notes. 54. 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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions) Class A, Class B, Class C Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Stockholders’ Equity Shares Amount Balance as of December 31, 2021 13,242 $ 61,774 $ ( 1,623 ) $ 191,484 $ 251,635 Stock issued 137 8 0 0 8 Stock-based compensation 0 19,525 0 0 19,525 Tax withholding related to vesting of restricted stock units and other 0 ( 9,754 ) 0 ( 1 ) ( 9,755 ) Repurchases of stock ( 530 ) ( 3,404 ) 0 ( 55,892 ) ( 59,296 ) Sale of interest in consolidated entities 0 35 0 0 35 Net income 0 0 0 59,972 59,972 Other comprehensive income (loss) 0 0 ( 5,980 ) 0 ( 5,980 ) Balance as of December 31, 2022 12,849 68,184 ( 7,603 ) 195,563 256,144 Stock issued 139 0 0 0 0 Stock-based compensation 0 22,578 0 0 22,578 Tax withholding related to vesting of restricted stock units and other 0 ( 10,164 ) 0 9 ( 10,155 ) Repurchases of stock ( 528 ) ( 4,064 ) 0 ( 58,120 ) ( 62,184 ) Net income 0 0 0 73,795 73,795 Other comprehensive income (loss) 0 0 3,201 0 3,201 Balance as of December 31, 2023 12,460 76,534 ( 4,402 ) 211,247 283,379 Stock issued 130 0 0 0 0 Stock-based compensation 0 22,937 0 0 22,937 Tax withholding related to vesting of restricted stock units and other 0 ( 12,507 ) 0 ( 16 ) ( 12,523 ) Repurchases of stock ( 379 ) ( 3,359 ) 0 ( 58,688 ) ( 62,047 ) Dividends and dividend equivalents declared ($ 0.60 per share) 0 41 0 ( 7,577 ) ( 7,536 ) Sale of interest in consolidated entities 0 1,154 0 0 1,154 Net income 0 0 0 100,118 100,118 Other comprehensive income (loss) 0 0 ( 398 ) 0 ( 398 ) Balance as of December 31, 2024 12,211 $ 84,800 $ ( 4,800 ) $ 245,084 $ 325,084 See accompanying notes. 55. 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CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2022 2023 2024 Operating activities Net income $ 59,972 $ 73,795 $ 100,118 Adjustments: Depreciation of property and equipment 13,475 11,946 15,311 Stock-based compensation expense 19,362 22,460 22,785 Deferred income taxes ( 8,081 ) ( 7,763 ) ( 5,257 ) Loss (gain) on debt and equity securities, net 5,519 823 ( 2,671 ) Other 3,483 4,330 3,419 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable, net ( 2,317 ) ( 7,833 ) ( 5,891 ) Income taxes, net 584 523 ( 2,418 ) Other assets ( 5,046 ) ( 2,143 ) ( 1,397 ) Accounts payable 707 664 359 Accrued expenses and other liabilities 3,915 3,937 ( 1,161 ) Accrued revenue share ( 445 ) 482 1,059 Deferred revenue 367 525 1,043 Net cash provided by operating activities 91,495 101,746 125,299 Investing activities Purchases of property and equipment ( 31,485 ) ( 32,251 ) ( 52,535 ) Purchases of marketable securities ( 78,874 ) ( 77,858 ) ( 86,679 ) Maturities and sales of marketable securities 97,822 86,672 103,428 Purchases of non-marketable securities ( 2,531 ) ( 3,027 ) ( 5,034 ) Maturities and sales of non-marketable securities 150 947 882 Acquisitions, net of cash acquired, and purchases of intangible assets ( 6,969 ) ( 495 ) ( 2,931 ) Other investing activities 1,589 ( 1,051 ) ( 2,667 ) Net cash used in investing activities ( 20,298 ) ( 27,063 ) ( 45,536 ) Financing activities Net payments related to stock-based award activities ( 9,300 ) ( 9,837 ) ( 12,190 ) Repurchases of stock ( 59,296 ) ( 61,504 ) ( 62,222 ) Dividend payments 0 0 ( 7,363 ) Proceeds from issuance of debt, net of costs 52,872 10,790 13,589 Repayments of debt ( 54,068 ) ( 11,550 ) ( 12,701 ) Proceeds from sale of interest in consolidated entities, net 35 8 1,154 Net cash used in financing activities ( 69,757 ) ( 72,093 ) ( 79,733 ) Effect of exchange rate changes on cash and cash equivalents ( 506 ) ( 421 ) ( 612 ) Net increase (decrease) in cash and cash equivalents 934 2,169 ( 582 ) Cash and cash equivalents at beginning of period 20,945 21,879 24,048 Cash and cash equivalents at end of period $ 21,879 $ 24,048 $ 23,466 See accompanying notes. 56. Table of Contents Alphabet Inc. Alphabet Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies Nature of Operations Google was incorporated in California in September 1998 and re-incorporated in the State of Delaware in August 2003. In 2015, we implemented a holding company reorganization, and as a result, Alphabet Inc. ("Alphabet") became the successor issuer to Google. We generate revenues by delivering relevant, cost-effective online advertising; cloud-based solutions that provide enterprise customers of all sizes with infrastructure, platform services, and applications; sales of other products and services, such as fees received for subscription-based products, apps and in-app purchases, and devices. Basis of Consolidation The consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models. Intercompany balances and transactions have been eliminated. Use of Estimates Preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates due to uncertainties. On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses; contingent liabilities; fair values of financial instruments and goodwill; income taxes; inventory; and useful lives of property and equipment, among others. We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, and the results of which form the basis for making judgments about the carrying values of assets and liabilities. Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to our customers, and the collectibility of an amount that we expect in exchange for those goods or services is probable. Sales and other similar taxes are excluded from revenues. Advertising Revenues We generate advertising revenues primarily by delivering advertising on: • Google Search and other properties, including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc. and other Google owned and operated properties like Gmail, Google Maps, and Google Play; • YouTube properties; and • Google Network properties, including revenues from Google Network properties participating in AdMob, AdSense, and Google Ad Manager. Our customers generally purchase advertising inventory through Google Ads, Google Ad Manager, Google Display & Video 360, and Google Marketing Platform, among others. We offer advertising by delivering both performance and brand advertising. We recognize revenues for performance advertising when a user engages with the advertisement. For brand advertising, we recognize revenues when the ad is displayed, or a user views the ad. For ads placed on Google Network properties, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, we report advertising revenues for ads placed on Google Network properties on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to Google Network partners are recorded as cost of revenues. Where we are the principal, we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers and is further supported by us being primarily responsible to our customers and having a level of discretion in establishing pricing. Google Subscriptions, Platforms, and Devices Google subscriptions, platforms, and devices revenues consist of revenues from: 57. Table of Contents Alphabet Inc. • consumer subscriptions, which primarily include revenues from YouTube services, such as YouTube TV, YouTube Music and Premium, and NFL Sunday Ticket, as well as Google One; • platforms, which primarily include revenues from Google Play sales of apps and in-app purchases; • devices, which primarily include sales of the Pixel family of devices; and • other products and services. Subscription revenues are recognized ratably over the period of the subscription, primarily monthly. We report revenues from Google Play sales of apps and in-app purchases on a net basis because our performance obligation is to facilitate a transaction between app developers and end users for which we earn a service fee. Google Cloud Revenues Google Cloud revenues consist of revenues from: • Google Cloud Platform, which generates consumption-based fees and subscriptions for infrastructure, platform, and other services. These services provide access to solutions such as AI offerings including our AI infrastructure, Vertex AI platform, and Gemini for Google Cloud; cybersecurity; and data and analytics; • Google Workspace, which includes subscriptions for cloud-based communication and collaboration tools for enterprises, such as Calendar, Gmail, Docs, Drive, and Meet, with integrated features like Gemini for Google Workspace; and • other enterprise services. Our cloud services are generally provided on either a consumption or subscription basis and may have contract terms longer than a year. Revenues related to cloud services provided on a consumption basis are recognized when the customer utilizes the services, based on the quantity of services consumed. Revenues related to cloud services provided on a subscription basis are recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services. Arrangements with Multiple Performance Obligations Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers. Customer Incentives and Credits Certain customers receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues. We believe that there will not be significant changes to our estimates of variable consideration related to customer incentives and credits. Sales Commissions We expense sales commissions when incurred when the period of the expected benefit is one year or less. We recognize an asset for certain sales commissions and amortize if the expected benefit period is greater than one year. These costs are recorded within sales and marketing expenses. Cost of Revenues Cost of revenues consists of TAC and other costs of revenues. • TAC includes: ◦ amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers; and ◦ amounts paid to Google Network partners primarily for ads displayed on their properties. • Other cost of revenues includes: ◦ content acquisition costs, which are payments to content providers from whom we license video and other content for distribution, primarily related to YouTube (we pay fees to these content providers based on revenues generated, subscriber counts, or a flat fee); ◦ depreciation expense related to our technical infrastructure; 58. Table of Contents Alphabet Inc. ◦ employee compensation expenses related to our technical infrastructure and other operations such as content review and customer and product support; ◦ inventory and other costs related to the devices we sell; and ◦ other technical infrastructure operations costs, including network capacity, energy, and equipment costs. Software Development Costs We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products. As a result, development costs that meet the criteria for capitalization were not material for the periods presented. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud-based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented. Stock-based Compensation Stock-based compensation (SBC) primarily consists of Alphabet restricted stock units (RSUs). RSUs are equity classified and measured at the fair market value of the underlying stock at the grant date. We recognize RSU expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur. RSUs are awarded dividend equivalents, which are subject to the same vesting conditions as the underlying award, and settled in Class C shares. For RSUs, shares are issued on the vesting dates net of the applicable statutory income tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued than the number of RSUs outstanding, and the income tax withholding is recorded as a reduction to additional paid-in capital. Additionally, SBC includes other stock-based awards, such as performance stock units (PSUs) that include market conditions and awards that may be settled in cash or the stock of certain Other Bet companies. PSUs and certain awards granted by Other Bet companies are equity classified and expense is recognized over the requisite service period. Certain awards granted by Other Bet companies are liability classified and remeasured at fair value through settlement. The fair value of awards granted by Other Bet companies is based on the equity valuation of the respective Other Bet company. Advertising and Promotional Expenses We expense advertising and promotional costs in the period in which they are incurred. For the years ended December 31, 2022 , 2023, and 2024, advertising and promotional expenses totaled approximately $ 9.2 billion, $ 8.7 billion, and $ 8.7 billion, respectively. Performance Fees Performance fees refer to compensation arrangements with payouts based on realized returns from certain investments. We record compensation expense based on the estimated payouts on an ongoing basis, which may result in expense recognized before investment returns are realized and compensation is paid and may require the use of unobservable inputs. Performance fees are recorded as a component of OI&E. Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, 59. Table of Contents Alphabet Inc. these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings. Level 3 - Unobservable inputs that are supported by little or no market activities. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The determination of fair value involves the use of appropriate valuation methods and relevant inputs into valuation models. Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative financial instruments, and certain non-marketable debt securities. Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities. Other financial assets and liabilities are carried at cost with fair value disclosed, if required. We measure certain other instruments, and certain assets and liabilities acquired in a business combination, also at fair value on a nonrecurring basis. Financial Instruments Our financial instruments include cash, cash equivalents, marketable and non-marketable securities, derivative financial instruments, accounts receivable, and convertible notes. Credit Risks We are subject to credit risk primarily from cash equivalents, marketable debt securities, derivative financial instruments, including foreign exchange contracts, accounts receivable, and convertible notes. We manage our credit risk exposure through timely assessment of our counterparty creditworthiness, credit limits, and use of collateral management. Foreign exchange contracts are transacted with various financial institutions with high credit standing. Accounts receivable are typically unsecured and are derived from revenues earned from customers located around the world. We manage our credit risk exposure by performing ongoing evaluations to determine customer credit and we limit the amount of credit we extend. We generally do not require collateral from our customers. Cash Equivalents We invest excess cash primarily in asset-backed and mortgage-backed securities, corporate debt securities, government bonds, money market funds, and time deposits. Marketable Securities We classify all marketable debt securities that have effective maturities of three months or less from the date of purchase as cash equivalents and those with effective maturities of greater than three months as marketable securities on our Consolidated Balance Sheets. We determine the appropriate classification of our investments in marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt securities as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their effective maturities. As we view these securities as available to support current operations, we classify highly liquid securities with maturities beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders’ equity, except for the changes in allowance for expected credit losses, which are recorded in OI&E. For certain marketable debt securities we have elected the fair value option, for which changes in fair value are recorded in OI&E. We determine any realized gains and losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of OI&E. Our investments in marketable equity securities are measured at fair value with the related gains and losses, including unrealized, recognized in OI&E. We classify our marketable equity securities subject to long-term lock-up restrictions beyond 12 months as other non-current assets on the Consolidated Balance Sheets. Non-Marketable Securities Non-marketable securities primarily consist of equity securities. We account for non-marketable equity securities through which we exercise significant influence but do not have control over the investee under the equity method. Other non-marketable equity securities that we hold are primarily accounted for under the measurement alternative. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined primarily based on a market approach as of the transaction date and are recorded as a component of OI&E. 60. Table of Contents Alphabet Inc. Non-marketable securities that do not have effective contractual maturity dates are classified as other non-current assets on the Consolidated Balance Sheets. Derivative Financial Instruments See Note 3 for the accounting policy pertaining to derivative financial instruments. Accounts Receivable Our payment terms for accounts receivable vary by the types and locations of our customers and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customers, we require payment before the products or services are delivered to the customer. Additionally, accounts receivable includes amounts for services performed in advance of the right to invoice the customer. We maintain an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as general and administrative expense in the Consolidated Statements of Income. We assess collectibility by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectibility issues. In determining the amount of the allowance for credit losses, we consider historical collectibility based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions. Convertible Notes Our investments in convertible notes are primarily recorded at amortized cost which includes unpaid principal balances, deferred origination costs, and any related discount or premium, net of allowances for credit losses, and are included within other non-current assets on our Consolidated Balance Sheets. Other Our financial instruments also include debt and equity investments in companies with which we also entered into commercial arrangements at or near the same time. For these transactions, judgment is required in assessing the substance of the arrangements, including assessing whether the components of the arrangements should be accounted for as separate transactions under the applicable GAAP, and determining the value of the components of the arrangements, including the fair value of the investments. Additionally, if our investment in such companies becomes impaired, we may need to re-evaluate the accounting for the commercial arrangement, including reducing any remaining performance obligations. Impairment of Investments We periodically review our debt and non-marketable equity securities for impairment. For debt securities in an unrealized loss position, we determine whether a credit loss exists. The credit loss is estimated by considering available information relevant to the collectibility of the security and information about past events, current conditions, and reasonable and supportable forecasts. Any credit loss is recorded as a charge to OI&E, not to exceed the amount of the unrealized loss. Unrealized losses other than the credit loss are recognized in AOCI. If we have an intent to sell, or if it is more likely than not that we will be required to sell a debt security in an unrealized loss position before recovery of its amortized cost basis, we will write down the security to its fair value and record the corresponding charge as a component of OI&E. For non-marketable equity securities, including equity method investments, we consider whether impairment indicators exist by evaluating the companies' financial and liquidity position and access to capital resources, among other indicators. If the assessment indicates that the investment is impaired, we write down the investment to its fair value by recording the corresponding charge as a component of OI&E. We prepare quantitative measurements of the fair value of our equity investments using a market approach or an income approach. Inventory Inventory consists primarily of finished goods and is stated at the lower of cost and net realizable value. Cost is computed using the first-in, first-out method. Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a variable interest entity (VIE). We consolidate VIEs when we are 61. Table of Contents Alphabet Inc. the primary beneficiary. We are the primary beneficiary of a VIE when we have the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP. Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether we are the primary beneficiary. Property and Equipment Property and equipment is comprised of technical infrastructure, office space, corporate and other assets currently in service, and assets not yet in service. Technical infrastructure includes data center land, buildings and leasehold improvements, and servers and network equipment. Office space includes office land, buildings and leasehold improvements. Assets not yet in service are those that are not ready for our intended use, including data center buildings and servers in the process of construction or assembly. Property and equipment are stated at cost less accumulated depreciation. Depreciation commences once assets are ready for our intended use and is recorded using the straight-line method over the estimated useful lives of the assets, which we regularly evaluate for factors such as technological obsolescence and our planned use and utilization. We depreciate data center and office buildings over periods of seven to 40 years. We depreciate servers and network equipment generally over a period of six years . We depreciate corporate and other assets over periods of two to 25 years. We depreciate leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. Land is not depreciated. Goodwill We allocate goodwill to reporting units based on the expected benefit from the business combination. We evaluate our reporting units periodically, as well as when changes in our operating segments occur. For changes in reporting units, we reassign goodwill using a relative fair value allocation approach. We test our goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill impairments were no t material for the periods presented. Leases We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts primarily include payments affected by the Consumer Price Index, and payments for maintenance and utilities. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments and lease incentives. Lease assets and liabilities are included on our Consolidated Balance Sheets. The current portion of our operating lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion is included in operating lease liabilities. Finance lease assets are included in property and equipment, net. Finance lease liabilities are included in accrued expenses and other current liabilities or other long-term liabilities. Operating lease expense (excluding variable lease costs) is recognized on a straight-line basis over the lease term. Finance lease expense is recognized on a straight-line basis over the shorter of the lease term or the useful life of the asset, and interest expense is recognized based on the incremental borrowing rate. Impairment of Long-Lived Assets We review leases, property and equipment, and intangible assets, excluding goodwill, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. The evaluation is performed 62. Table of Contents Alphabet Inc. at the lowest level of identifiable cash flows independent of other assets. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets or asset group is not recoverable, the impairment recognized is measured as the amount by which the carrying value exceeds its fair value. Income Taxes We account for income taxes using the asset and liability method, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the likelihood of future realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized or release a valuation allowance to increase deferred tax assets when it is more likely than not that they will be realized. We have elected to account for the tax effects of the global intangible low tax income provision as a current period expense. We recognize the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority. In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision. Business Combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values, except for revenue contracts acquired, which are recognized in accordance with our revenue recognition policy. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Foreign Currency We translate the financial statements of our international subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities, and average rates for the period derived from month-end exchange rates for revenues, costs, and expenses. We record translation gains and losses in AOCI as a component of stockholders’ equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gain (loss) in OI&E. Recently Issued Accounting Pronouncements Not Yet Adopted In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes. Upon adoption we will be required to disclose additional specified categories in the rate reconciliation in both percentage and dollar amounts. We will also be required to disclose the amount of income taxes paid disaggregated by jurisdiction, among other disclosure requirements. The standard can be applied either prospectively or retrospectively. We will adopt the standard in our 2025 annual period and are currently assessing the effect that the updated standard will have on our financial statement disclosures. In November 2024, the FASB issued ASU 2024-03 "Income Statement: Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40)" to improve the disclosures about an entity’s expenses. Upon adoption, we will be required to disclose in the notes to the financial statements a disaggregation of certain expense categories included within the expense captions on the face of the income statement. The standard is effective for our 2027 annual period, and our interim periods beginning in 2028, with early adoption permitted. The standard can be applied either prospectively or retrospectively. We are currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. We adopted this ASU for our 2024 annual period with the comparative periods updated to reflect additional disclosures. See Note 15 for further details. Prior Period Reclassifications Certain amounts in prior periods have been reclassified to conform with current period presentation. 63. Table of Contents Alphabet Inc. Note 2. Revenues Disaggregated Revenues The following table presents revenues disaggregated by type (in millions): Year Ended December 31, 2022 2023 2024 Google Search & other $ 162,450 $ 175,033 $ 198,084 YouTube ads 29,243 31,510 36,147 Google Network 32,780 31,312 30,359 Google advertising 224,473 237,855 264,590 Google subscriptions, platforms, and devices 29,055 34,688 40,340 Google Services total 253,528 272,543 304,930 Google Cloud 26,280 33,088 43,229 Other Bets 1,068 1,527 1,648 Hedging gains (losses) 1,960 236 211 Total revenues $ 282,836 $ 307,394 $ 350,018 No in dividual customer or groups of affiliated customers represented more than 10% of our revenues in 2022, 2023, or 2024. The following table presents revenues disaggregated by geography, based on the addresses of our customers (in millions): Year Ended December 31, 2022 2023 2024 United States $ 134,814 48 % $ 146,286 47 % $ 170,447 49 % EMEA (1) 82,062 29 91,038 30 102,127 29 APAC (1) 47,024 16 51,514 17 56,815 16 Other Americas (1) 16,976 6 18,320 6 20,418 6 Hedging gains (losses) 1,960 1 236 0 211 0 Total revenues $ 282,836 100 % $ 307,394 100 % $ 350,018 100 % (1) Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific (APAC); and Canada and Latin America ("Other Americas"). Revenue Backlog As of December 31, 2024, we had $ 93.2 billion of remaining performance obligations (“revenue backlog”), primarily related to Google Cloud. Revenue backlog represents commitments in customer contracts for future services that have not yet been recognized as revenue. We expect to recognize approximately half of the revenue backlog as revenues over the next 24 months with the remainder to be recognized thereafter. The estimated revenue backlog and timing of revenue recognition for these commitments is largely driven by our ability to deliver in accordance with relevant contract terms and when our customers utilize services. 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 Revenues We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. Deferred revenues primarily relate to Google Cloud and Google subscriptions, platforms, and devices. Total deferred revenue as of December 31, 2023 was $ 5.0 billion, of which $ 3.9 billion was recognized as revenues for the year ended December 31, 2024. Total deferred revenue as of December 31, 2024 was $ 6.0 billion. Note 3. Financial Instruments 64. Table of Contents Alphabet Inc. Fair Value Measurements Investments Measured at Fair Value on a Recurring Basis Cash, cash equivalents, and marketable equity securities are measured at fair value and classified within Level 1 and Level 2 in the fair value hierarchy, because we use quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets. Debt securities are measured at fair value and classified within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. For certain marketable debt securities, we have elected the fair value option for which changes in fair value are recorded in OI&E. The fair value option was 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, 2023 Fair Value Hierarchy Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities Fair value changes recorded in other comprehensive income Time deposits Level 2 $ 2,628 $ 0 $ 0 $ 2,628 $ 2,628 $ 0 Government bonds Level 2 38,106 233 ( 679 ) 37,660 1,993 35,667 Corporate debt securities Level 2 22,457 112 ( 637 ) 21,932 0 21,932 Mortgage-backed and asset-backed securities Level 2 17,243 88 ( 634 ) 16,697 0 16,697 Total investments with fair value change reflected in other comprehensive income (1) 80,434 433 ( 1,950 ) 78,917 4,621 74,296 Fair value adjustments recorded in net income Money market funds Level 1 6,480 6,480 0 Current marketable equity securities (2) Level 1 4,282 0 4,282 Mutual funds Level 2 311 0 311 Government bonds Level 2 1,952 347 1,605 Corporate debt securities Level 2 3,782 91 3,691 Mortgage-backed and asset-backed securities Level 2 2,683 0 2,683 Total investments with fair value change recorded in net income 19,490 6,918 12,572 Cash 0 12,509 0 Total $ 80,434 $ 433 $ ( 1,950 ) $ 98,407 $ 24,048 $ 86,868 (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 $ 1.4 billion as of December 31, 2023 is included within other non-current assets. 65. Table of Contents Alphabet Inc. As of December 31, 2024 Fair Value Hierarchy Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities Fair value changes recorded in other comprehensive income Time deposits Level 2 $ 2,217 $ 0 $ 0 $ 2,217 $ 2,081 $ 136 Government bonds Level 2 27,551 83 ( 214 ) 27,420 50 27,370 Corporate debt securities Level 2 18,300 79 ( 222 ) 18,157 0 18,157 Mortgage-backed and asset-backed securities Level 2 14,437 63 ( 385 ) 14,115 0 14,115 Total investments with fair value change reflected in other comprehensive income (1) 62,505 225 ( 821 ) 61,909 2,131 59,778 Fair value adjustments recorded in net income Money market funds Level 1 $ 8,154 $ 8,154 $ 0 Current marketable equity securities (2) Level 1 4,708 0 4,708 Mutual funds Level 2 105 0 105 Government bonds Level 2 2,035 696 1,339 Corporate debt securities Level 2 3,037 78 2,959 Mortgage-backed and asset-backed securities Level 2 3,302 0 3,302 Total investments with fair value change recorded in net income 21,341 8,928 12,413 Cash 0 12,407 0 Total $ 62,505 $ 225 $ ( 821 ) $ 83,250 $ 23,466 $ 72,191 (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 $ 266 million as of December 31, 2024 is included within 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 upon 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. Non-marketable equity securities that have been remeasured due to impairment are classified within Level 3. Our valuation methods include option pricing models, market comparable approach, and common stock equivalent method, which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, expected time to exit, risk free rate, and the rights and obligations of the securities we hold. These inputs vary significantly based on investment type. As of December 31, 2024, the carrying value of our non-marketable equity securities was $ 35.5 billion, of which $ 19.9 billion were remeasured at fair value during the year ended December 31, 2024, and were primarily classified within Level 2 of the fair value hierarchy at the time of measurement. Debt Securities The following table summarizes the estimated fair value of investments in available-for-sale marketable debt securities by effective contractual maturity dates (in millions): 66. Table of Contents Alphabet Inc. As of December 31, 2024 Due in 1 year or less $ 6,341 Due in 1 year through 5 years 37,221 Due in 5 years through 10 years 10,920 Due after 10 years 12,896 Total $ 67,378 The following tables present fair values and gross unrealized losses recorded to AOCI, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions): As of December 31, 2023 Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Government bonds $ 1,456 $ ( 22 ) $ 13,897 $ ( 657 ) $ 15,353 $ ( 679 ) Corporate debt securities 827 ( 5 ) 15,367 ( 592 ) 16,194 ( 597 ) Mortgage-backed and asset-backed securities 2,945 ( 26 ) 7,916 ( 608 ) 10,861 ( 634 ) Total $ 5,228 $ ( 53 ) $ 37,180 $ ( 1,857 ) $ 42,408 $ ( 1,910 ) As of December 31, 2024 Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Government bonds $ 11,119 $ ( 126 ) $ 2,576 $ ( 88 ) $ 13,695 $ ( 214 ) Corporate debt securities 4,228 ( 17 ) 6,838 ( 168 ) 11,066 ( 185 ) Mortgage-backed and asset-backed securities 5,222 ( 106 ) 3,813 ( 279 ) 9,035 ( 385 ) Total $ 20,569 $ ( 249 ) $ 13,227 $ ( 535 ) $ 33,796 $ ( 784 ) We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. The following table summarizes gains and losses for debt securities, reflected as a component of OI&E (in millions): Year Ended December 31, 2022 2023 2024 Unrealized gain (loss) on fair value option debt securities $ ( 557 ) $ 386 $ 30 Gross realized gain on debt securities 103 182 482 Gross realized loss on debt securities ( 1,588 ) ( 1,833 ) ( 1,553 ) (Increase) decrease in allowance for credit losses ( 22 ) 50 ( 2 ) Total gain (loss) on debt securities recognized in other income (expense), net $ ( 2,064 ) $ ( 1,215 ) $ ( 1,043 ) Equity Investments The carrying value of equity securities is measured as the total initial cost plus the cumulative net gain (loss). Gains and losses, including impairments, are included as a component of OI&E in the Consolidated Statements of Income. See Note 7 for further details on OI&E. Certain of our non-marketable equity securities include our investments in VIE where we are not the primary beneficiary. See Note 5 for further details on VIE. The carrying values for marketable and non-marketable equity securities are summarized below (in millions): 67. Table of Contents Alphabet Inc. As of December 31, 2023 As of December 31, 2024 Marketable Equity Securities Non-Marketable Equity Securities Total Marketable Equity Securities Non-Marketable Equity Securities Total Total initial cost $ 5,418 $ 17,616 $ 23,034 $ 4,767 $ 21,240 $ 26,007 Cumulative net gain (loss) (1) 555 11,150 11,705 312 14,291 14,603 Carrying value $ 5,973 $ 28,766 $ 34,739 $ 5,079 $ 35,531 $ 40,610 (1) Non-marketable equity securities cumulative net gain (loss) is comprised of $ 18.1 billion and $ 22.7 billion of gains and $ 6.9 billion and $ 8.4 billion of losses (including impairments) as of December 31, 2023 and 2024, respectively. Gains and Losses on Marketable and Non-marketable Equity Securities Gains and losses (including impairments), net, for marketable and non-marketable equity securities included in OI&E are summarized below (in millions): Year Ended December 31, 2022 2023 2024 Realized net gain (loss) on equity securities sold during the period $ ( 442 ) $ 690 $ 186 Unrealized net gain (loss) on marketable equity securities ( 3,242 ) 790 156 Unrealized net gain (loss) on non-marketable equity securities (1) 229 ( 1,088 ) 3,372 Total gain (loss) on equity securities in other income (expense), net $ ( 3,455 ) $ 392 $ 3,714 (1) Unrealized gain (loss) on non-marketable equity securities accounted for under the measurement alternative is comprised of $ 3.3 billion, $ 1.8 billion, and $ 5.6 billion of upward adjustments and $ 3.0 billion, $ 2.9 billion, and $ 2.2 billion of downward adjustments (including impairments) for the years ended December 31, 2022, 2023, and 2024, 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 period 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 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 price and the initial purchase price for the equity security sold during the period. 2023 2024 Total sale price $ 1,981 $ 2,827 Total initial cost 1,512 2,079 Cumulative net gains (losses) $ 469 $ 748 Equity Securities Accounted for Under the Equity Method As of December 31, 2023 and 2024, equity securities accounted for under the equity method had a carrying value of approximately $ 1.7 billion and $ 2.0 billion, respectively. Our share of gains and losses, including impairments, are included as a component of OI&E, in the Consolidated Statements of Income. See Note 7 for further details on OI&E. Certain of our equity method securities include our investments in VIEs where we are not the primary beneficiary. See Note 4 for further details on VIEs. Convertible Notes As of December 31, 2023 and December 31, 2024 , we had investments in convertible notes of $ 921 million and $ 2.9 billion, respectively, the majority of which are convertible notes held for investment. Our convertible notes held for investment are recorded at amortized cost which includes unpaid principal balances, deferred origination costs, and any related discount or premium, net of allowances for credit losses, and are included within other non-current assets on our Consolidated Balance Sheets. 68. Table of Contents Alphabet Inc. Derivative Financial Instruments We use derivative instruments to manage risks relating to our ongoing business operations. The primary risk managed is foreign exchange risk. We use foreign currency contracts to reduce the risk that our cash flows, earnings, and investment in foreign subsidiaries will be adversely affected by foreign currency exchange rate fluctuations. We also enter into derivative instruments to partially offset our exposure to other risks and enhance investment returns. We recognize derivative instruments 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 other derivatives at gross fair values. The accounting treatment for derivatives is based on the intended use and hedge designation. Cash Flow Hedges We designate foreign currency forward and option contracts (including collars) as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the U.S. dollar. These contracts have maturities of 24 months or less. 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 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 December 31, 2024 , the net accumulated gain on our foreign currency cash flow hedges before tax effect was $ 731 million, which is expected to be reclassified from AOCI into revenues within the next 12 months. Fair Value Hedges We designate foreign currency forward contracts as fair value hedges to hedge foreign currency risks for our 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 OI&E, along with the offsetting gains and losses of the related hedged items. We exclude forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in OI&E. Net Investment Hedges We designate foreign currency forward contracts as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. Net investment hedge amounts included in the assessment of hedge effectiveness are recognized in AOCI along with the foreign currency translation adjustment. We exclude forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in OI&E. Other Derivatives We 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 losses on these derivatives that are not designated as accounting hedges are primarily recorded in OI&E along with the foreign currency gains and losses on monetary assets and liabilities. We also use derivatives not designated as hedging instruments to manage risks relating to interest rates, commodity prices, and 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 of OI&E. See Note 7 for further details. 69. Table of Contents Alphabet Inc. The gross notional amounts of outstanding derivative instruments were as follows (in millions): As of December 31, 2023 2024 Derivatives designated as hedging instruments: Foreign exchange contracts Cash flow hedges $ 18,039 $ 20,315 Fair value hedges $ 2,065 $ 1,562 Net investment hedges $ 9,472 $ 6,986 Derivatives not designated as hedging instruments: Foreign exchange contracts $ 39,722 $ 44,227 Other contracts $ 10,818 $ 15,082 The fair values of outstanding derivative instruments were as follows (in millions): As of December 31, 2023 As of December 31, 2024 Assets (1) Liabilities (2) Assets (1) Liabilities (2) Derivatives designated as hedging instruments: Foreign exchange contracts $ 205 $ 242 $ 1,054 $ 0 Derivatives not designated as hedging instruments: Foreign exchange contracts 134 156 200 593 Other contracts 114 47 474 19 Total derivatives not designated as hedging instruments 248 203 674 612 Total $ 453 $ 445 $ 1,728 $ 612 (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 Consolidated 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): Year Ended December 31, 2022 2023 2024 Derivatives in cash flow hedging relationship: Foreign exchange contracts Amount included in the assessment of effectiveness $ 1,699 $ 90 $ 857 Amount excluded from the assessment of effectiveness ( 188 ) 84 77 Derivatives in net investment hedging relationship: Foreign exchange contracts Amount included in the assessment of effectiveness 608 ( 287 ) 223 Total $ 2,119 $ ( 113 ) $ 1,157 70. Table of Contents Alphabet Inc. The table below presents the gains (losses) of our derivatives included in the Consolidated Statements of Income: (in millions): Year Ended December 31, 2022 2023 2024 Revenues Other income (expense), net Revenues Other income (expense), net Revenues Other income (expense), net Total amounts included in the Consolidated Statements of Income $ 282,836 $ ( 3,514 ) $ 307,394 $ 1,424 $ 350,018 $ 7,425 Effect of cash flow hedges: Foreign exchange contracts Amount reclassified from AOCI to income $ 2,046 $ 0 $ 213 $ 0 $ 174 $ 0 Amount excluded from the assessment of effectiveness (amortized) ( 85 ) 0 24 0 37 0 Effect of fair value hedges: Foreign exchange contracts Hedged items 0 ( 162 ) 0 59 0 ( 59 ) Derivatives designated as hedging instruments 0 163 0 ( 59 ) 0 58 Amount excluded from the assessment of effectiveness 0 16 0 15 0 13 Effect of net investment hedges: Foreign exchange contracts Amount excluded from the assessment of effectiveness 0 171 0 187 0 137 Effect of non designated hedges: Foreign exchange contracts 0 ( 395 ) 0 7 0 335 Other contracts 0 144 0 53 0 174 Total gains (losses) $ 1,961 $ ( 63 ) $ 237 $ 262 $ 211 $ 658 Offsetting of Derivatives We enter into master netting arrangements and collateral security arrangements to reduce credit risk. Cash collateral received related to derivative instruments under our collateral security arrangements are included in other current assets with a corresponding liability . Cash and non-cash collateral pledged related to derivative instruments under our collateral security arrangements are included in other current assets. 71. Table of Contents Alphabet Inc. The gross amounts of 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, 2023 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts Recognized Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts Presented in the Consolidated Balance Sheets Financial Instruments (1) Cash and Non-Cash Collateral Received or Pledged Net Amounts Derivatives assets $ 535 $ ( 82 ) $ 453 $ ( 213 ) $ ( 75 ) $ 165 Derivatives liabilities $ 527 $ ( 82 ) $ 445 $ ( 213 ) $ ( 16 ) $ 216 As of December 31, 2024 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts Recognized Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts Presented in the Consolidated Balance Sheets Financial Instruments (1) Cash and Non-Cash Collateral Received or Pledged Net Amounts Derivatives assets $ 1,776 $ ( 48 ) $ 1,728 $ ( 516 ) $ ( 721 ) $ 491 Derivatives liabilities $ 660 $ ( 48 ) $ 612 $ ( 516 ) $ ( 9 ) $ 87 (1) The balances as of December 31, 2023 and 2024 were related to derivatives allowed to be net settled in accordance with our master netting agreements. Note 4. Leases We have entered into operating and finance lease agreements primarily for data centers, land, and offices throughout the world with varying lease terms. Components of lease costs were as follows (in millions): Year Ended December 31, 2022 2023 2024 Operating lease cost $ 2,900 $ 3,362 $ 3,304 Finance lease cost: Amortization of lease assets 474 469 413 Interest on lease liabilities 34 35 31 Finance lease cost 508 504 444 Variable lease cost 838 1,182 1,425 Total lease cost $ 4,246 $ 5,048 $ 5,173 Supplemental balance sheet information related to leases was as follows (in millions): December 31, 2023 2024 Weighted average remaining lease term Operating leases 8.1 years 7.8 years Finance leases 10.7 years 10.4 years Weighted average discount rate Operating leases 3.1 % 3.4 % Finance leases 2.0 % 2.8 % 72. Table of Contents Alphabet Inc. December 31, 2023 2024 Operating leases: Operating lease assets $ 14,091 $ 13,588 Accrued expenses and other liabilities $ 2,791 $ 2,887 Operating lease liabilities 12,460 11,691 Total operating lease liabilities $ 15,251 $ 14,578 Finance Leases: Property and equipment, at cost $ 4,403 $ 4,622 Accumulated depreciation ( 1,652 ) ( 2,037 ) Property and equipment, net $ 2,751 $ 2,585 Accrued expenses and other liabilities $ 283 $ 235 Other long-term liabilities 1,383 1,442 Total finance lease liabilities $ 1,666 $ 1,677 Supplemental cash flow information related to leases was as follows (in millions): Year Ended December 31, 2022 2023 2024 Cash payments for lease liabilities: Operating cash flows used for operating leases $ 2,722 $ 3,173 $ 3,425 Operating cash flows used for finance leases $ 34 $ 35 $ 31 Financing cash flows used for finance leases (1) $ 586 $ 705 $ 405 Assets obtained in exchange for lease liabilities: Operating leases $ 4,383 $ 2,877 $ 2,510 Finance leases $ 577 $ 564 $ 313 (1) Financing cash flows used for financing leases are included within financing activities of the Consolidated Statements of Cash Flows as repayments of debt. Future lease payments as of December 31, 2024 were as follows (in millions): Operating Leases Finance Leases 2025 $ 3,162 $ 257 2026 2,824 208 2027 2,311 208 2028 1,838 197 2029 1,448 166 Thereafter 5,455 852 Total future lease payments 17,038 1,888 Less imputed interest ( 2,460 ) ( 211 ) Total lease liability balance $ 14,578 $ 1,677 As of December 31, 2024 , we have entered into leases that have not yet commenced with short-term and long-term future lease payments of $ 773 million and $ 6.5 billion, respectively, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2025 and 2028 with non-cancelable lease terms between one and 25 years. Note 5. Variable Interest Entities Consolidated VIEs 73. Table of Contents Alphabet Inc. We consolidate VIEs in which we hold a variable interest and are the primary beneficiary. The results of operations and financial position of these VIEs are included in our consolidated financial statements. For certain consolidated VIEs, their assets are not available to us, and their creditors do not have recourse to us. As of December 31, 2023 and 2024, assets that can only be used to settle obligations of these VIEs were $ 4.9 billion and $ 8.7 billion, respectively and are primarily included in cash and cash equivalents on our Consolidated Balance Sheets. As of December 31, 2023 and 2024, liabilities for which creditors only have recourse to the VIEs were $ 2.5 billion and $ 2.3 billion, respectively. We may continue to fund ongoing operations of certain VIEs that are included within Other Bets. Waymo, a fully autonomous driving technology company and a consolidated VIE, received $ 5.6 billion in funding during the year ended December 31, 2024, the majority of which was funded by Alphabet. Investments from external parties were accounted for as equity transactions and resulted in recognition of noncontrolling interests. As of December 31, 2023 and 2024, total noncontrolling interests (NCI) in our consolidated subsidiaries were $ 3.4 billion and $ 4.2 billion, respectively, of which $ 1.1 billion was redeemable noncontrolling interests (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 "other" component of OI&E. See Note 7 for further details on OI&E. Unconsolidated VIEs We 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 generation using renewable sources. We have determined that the governance structures of these entities do not allow us to direct the activities that would significantly affect their economic performance. Therefore, we are not the primary beneficiary, and the results of operations and financial position of these VIEs are not included in our consolidated financial statements. We account for these investments primarily as non-marketable equity securities or equity method investments, which are included within non-marketable securities on our Consolidated Balance Sheets. The maximum exposure of these unconsolidated VIEs is generally based on the current carrying value of the investments and any future funding commitments. As of December 31, 2023 and 2024, our future funding commitments related to unconsolidated VIE investments were $ 1.7 billion and $ 1.5 billion, respectively. Note 6. Debt Short-Term Debt We 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 c ommercial paper outstanding as of December 31, 2023 and $ 2.3 billion of commercial paper outstanding with a weighted-average effective interest rate of 4.4 % as of December 31, 2024 .The estimated fair value of the commercial paper approximated its carrying value as of December 31, 2024 Our short-term debt balance also includes the current portion of certain long-term debt. Long-Term Debt Total outstanding long-term debt is summarized below (in millions, except percentages): Effective Interest Rate As of December 31, Maturity Coupon Rate 2023 2024 Debt 2014 Notes issuance 2024 3.38 % 3.38 % $ 1,000 $ 0 2016 Notes issuance 2026 2.00 % 2.23 % 2,000 2,000 2020 Notes issuance 2025 - 2060 0.45 % - 2.25 % 0.57 % - 2.33 % 10,000 10,000 Total face value of long-term debt 13,000 12,000 Unamortized discount and debt issuance costs ( 130 ) ( 118 ) Less: Current portion of long-term notes (1) ( 1,000 ) ( 999 ) Total long-term debt $ 11,870 $ 10,883 74. Table of Contents Alphabet Inc. (1) Total current portion of long-term debt is included within accrued expenses and other current liabilities. See Note 7 for further details. The notes in the table above are fixed-rate senior unsecured obligations and rank equally with each other. We may redeem the notes at any time in whole or in part at specified redemption prices. The effective interest rates are based on proceeds received with interest payable semi-annually. The total estimated fair value of the outstanding notes was approximately $ 10.3 billion and $ 9.0 billion as of December 31, 2023 and December 31, 2024, 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 in the fair value hierarchy. As of December 31, 2024, the future principal payments for long-term debt were as follows (in millions): 2025 $ 1,000 2026 2,000 2027 1,000 2028 0 2029 0 Thereafter 8,000 Total $ 12,000 Credit Facility As of December 31, 2024, we had $ 10.0 billion of revolving credit facilities, of which $ 4.0 billion expires in April 2025 and $ 6.0 billion expires 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 the achievement of certain sustainability goa ls. No amounts were outstanding under the credit facilities as of December 31, 2023 and 2024. Note 7. Supplemental Financial Statement Information Accounts Receivable The allowance for credit losses on accounts receivable was $ 771 million and $ 879 million as of December 31, 2023 and 2024, respectively. Property and Equipment, Net Property and equipment, net, consisted of the following (in millions): As of December 31, 2023 2024 Technical infrastructure $ 112,504 $ 139,596 Office space 40,435 43,714 Corporate and other assets 13,728 16,519 Property and equipment, in service 166,667 199,829 Less: accumulated depreciation ( 67,458 ) ( 79,390 ) Add: assets not yet in service 35,136 50,597 Property and equipment, net $ 134,345 $ 171,036 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in millions): 75. Table of Contents Alphabet Inc. As of December 31, 2023 2024 European Commission fines (1) $ 9,525 $ 6,322 Accrued purchases of property and equipment (2) 4,679 7,104 Accrued customer liabilities 4,140 4,304 Current operating lease liabilities 2,791 2,887 Income taxes payable, net 2,748 2,905 Other accrued expenses and current liabilities 22,285 27,706 Accrued expenses and other current liabilities $ 46,168 $ 51,228 (1) The amounts related to the EC fines, including any under appeal, are included in accrued expenses and other current liabilities on our Consolidated Balance Sheets. Amounts include the effects of foreign exchange and interest. In the third quarter of 2024 we made a cash payment of $ 3.0 billion for the 2017 EC shopping fine. See Note 10 for further details. (2) Additional property and equipment purchases of $ 2.8 billion and $ 3.2 billion as of December 31, 2023 and 2024, respectively, were included in accounts payable. Accumulated Other Comprehensive Income (Loss) Components of AOCI, net of income tax, were as follows (in millions): Foreign Currency Translation Adjustments Unrealized Gains (Losses) on Available-for-Sale Investments Unrealized Gains (Losses) on Cash Flow Hedges Total Balance as of December 31, 2021 $ ( 2,306 ) $ 236 $ 447 $ ( 1,623 ) Other comprehensive income (loss) before reclassifications ( 1,836 ) ( 4,720 ) 1,463 ( 5,093 ) Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0 0 ( 188 ) ( 188 ) Amounts reclassified from AOCI 0 1,007 ( 1,706 ) ( 699 ) Other comprehensive income (loss) ( 1,836 ) ( 3,713 ) ( 431 ) ( 5,980 ) Balance as of December 31, 2022 ( 4,142 ) ( 3,477 ) 16 ( 7,603 ) Other comprehensive income (loss) before reclassifications 735 1,344 84 2,163 Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0 0 84 84 Amounts reclassified from AOCI 0 1,168 ( 214 ) 954 Other comprehensive income (loss) 735 2,512 ( 46 ) 3,201 Balance as of December 31, 2023 ( 3,407 ) ( 965 ) ( 30 ) ( 4,402 ) Other comprehensive income (loss) before reclassifications ( 1,673 ) ( 116 ) 698 ( 1,091 ) Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0 0 77 77 Amounts reclassified from AOCI 0 782 ( 166 ) 616 Other comprehensive income (loss) ( 1,673 ) 666 609 ( 398 ) Balance as of December 31, 2024 $ ( 5,080 ) $ ( 299 ) $ 579 $ ( 4,800 ) The effects on net income of amounts reclassified from AOCI were as follows (in millions): 76. 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Year Ended December 31, AOCI Components Location 2022 2023 2024 Unrealized gains (losses) on available-for-sale investments Other income (expense), net $ ( 1,291 ) $ ( 1,497 ) $ ( 1,008 ) Benefit (provision) for income taxes 284 329 226 Net of income tax ( 1,007 ) ( 1,168 ) ( 782 ) Unrealized gains (losses) on cash flow hedges Foreign exchange contracts Revenue 2,046 213 174 Interest rate contracts Other income (expense), net 6 6 1 Benefit (provision) for income taxes ( 346 ) ( 5 ) ( 9 ) Net of income tax 1,706 214 166 Total amount reclassified, net of income tax $ 699 $ ( 954 ) $ ( 616 ) Other Income (Expense), Net Components of OI&E were as follows (in millions): Year Ended December 31, 2022 2023 2024 Interest income $ 2,174 $ 3,865 $ 4,482 Interest expense (1) ( 357 ) ( 308 ) ( 268 ) Foreign currency exchange gain (loss), net ( 654 ) ( 1,238 ) ( 409 ) Gain (loss) on debt securities, net ( 2,064 ) ( 1,215 ) ( 1,043 ) Gain (loss) on equity securities, net ( 3,455 ) 392 3,714 Performance fees 798 257 218 Income (loss) and impairment from equity method investments, net ( 337 ) ( 628 ) ( 188 ) Other 381 299 919 Other income (expense), net $ ( 3,514 ) $ 1,424 $ 7,425 (1) Interest expense is net of interest capitalized of $ 128 million, $ 181 million, and $ 194 million for the years ended December 31, 2022, 2023, and 2024, respectively. Note 8. Business Combinations character.ai In accordance with the accounting requirements under Accounting Standards Codification Topic 805, for the year ended December 31, 2024, we recorded $ 2.7 billion of goodwill and $ 413 million of intangible assets resulting from a transaction with character.ai (“Character”). In August 2024, we entered into a license agreement with Character pursuant to which we obtained a non-exclusive license to its then current large language model technology. We paid Character $ 2.7 billion in cash and canceled our convertible instruments. We also hired certain employees of Character. Goodwill was recorded in Google Services and Google Cloud and is deductible for tax purposes. Note 9. Goodwill Changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2024 were as follows (in millions): 77. Table of Contents Alphabet Inc. Google Services Google Cloud Other Bets Total Balance as of December 31, 2022 $ 20,847 $ 7,205 $ 908 $ 28,960 Additions 240 3 0 243 Foreign currency translation and other adjustments 31 ( 9 ) ( 27 ) ( 5 ) Balance as of December 31, 2023 21,118 7,199 881 29,198 Additions 2,441 295 0 2,736 Foreign currency translation and other adjustments ( 38 ) ( 4 ) ( 7 ) ( 49 ) Balance as of December 31, 2024 $ 23,521 $ 7,490 $ 874 $ 31,885 Note 10. Commitments and Contingencies Commitments We have content licensing agreements with future fixed or minimum guaranteed commitments of $ 8.8 billion as of December 31, 2024, of which the majority is paid quarterly through the first quarter of 2030. Indemnifications In the normal course of business, including to facilitate transactions in our services and products and corporate activities, we indemnify certain parties, including advertisers, Google Network partners, distribution partners, customers of Google Cloud offerings, lessors, and service providers with respect to certain matters. 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 claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents. It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of December 31, 2024, we did not have any material indemnification claims that were probable or reasonably possible. Legal Matters We record a liability when we believe that it is probable that a loss has been incurred, and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Certain outstanding matters seek speculative, substantial or indeterminate monetary amounts, substantial changes to our business practices and products, or structural remedies. 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 legal 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 Matters We are subject to formal and informal inquiries and investigations as well as litigation on various competition matters by regulatory authorities and private parties in the U.S., Europe, and other jurisdictions globally, including the following: • Shopping: In June 2017, the EC announced its decision that certain actions taken by Google relating to its display and ranking of shopping search results and ads infringed European antitrust laws and imposed a € 2.4 billion fine. We appealed the EC decision and implemented product changes to bring shopping ads into 78. Table of Contents Alphabet Inc. compliance with the EC's decision. In September 2024, the European Court of Justice rejected our appeal and upheld the € 2.4 billion fine. In the third quarter of 2024, we made a cash payment of $ 3.0 billion for the fine. • Android: In July 2018, the EC announced its decision that certain provisions in Google’s Android-related distribution agreements infringed European antitrust laws, imposed a € 4.3 billion fine, and directed the termination of the conduct at issue. We appealed the EC decision and implemented changes to certain of our Android distribution practices. In September 2022, the General Court affirmed the EC decision but reduced the fine from € 4.3 billion to € 4.1 billion. We subsequently appealed the General Court's affirmation of the EC decision with the European Court of Justice, which remains pending. In 2018, we recognized a charge of $ 5.1 billion for the fine, which we reduced by $ 217 million in 2022. • AdSense for Search: In March 2019, the EC announced its decision that certain provisions in Google's agreements with AdSense for Search partners infringed European antitrust laws, imposed a fine of € 1.5 billion, and directed actions related to AdSense for Search partners' agreements, which we implemented prior to the decision. In 2019, we recognized a charge of $ 1.7 billion for the fine and appealed the EC decision. In September 2024, the General Court overturned the EC decision and annulled the € 1.5 billion fine. The EC has appealed the General Court's decision with the European Court of Justice. • Search: In October 2020, the DOJ and a number of state Attorneys General filed a lawsuit in the U.S. District Court for the District of Columbia alleging that Google violated U.S. antitrust laws relating to Search and Search advertising. In August 2024, the U.S. District Court for the District of Columbia ruled that Google violated such U.S. antitrust laws. A separate proceeding is being held to determine remedies, the range of which vary widely. The DOJ has proposed a high level remedy framework, which includes alterations to our products and services and our business models and operations, including structural remedies, and/or our distribution arrangements, among other changes, some of which could have a material adverse effect on our business. We have filed our own remedies proposal ahead of a hearing on remedies in April 2025. We expect a decision likely in the second half of 2025, after which we intend to appeal. Further, in June 2022, the Australian Competition and Consumer Commission and in October 2023, the Japanese Fair Trade Commission each opened an investigation into Search distribution practices. Given the nature of these matters, we cannot estimate a possible loss. • Advertising Technology: In December 2020, a number of state Attorneys General filed a lawsuit 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 relating to its advertising technology, and a trial is scheduled for March 2025. Additionally, in January 2023, the DOJ, along with a number of state Attorneys General, filed a lawsuit in the U.S. District Court for the Eastern District of Virginia alleging that Google violated U.S. antitrust laws relating to its advertising technology, and a number of additional state Attorneys General subsequently joined the lawsuit. The trial ended in September 2024, and we expect a decision in early 2025. Further, in June 2023, the EC issued a Statement of Objections informing Google of its preliminary view that Google violated European antitrust laws relating to its advertising technology, to which we responded. Given the nature of these matters, we cannot estimate a possible loss. • Google Play: In July 2021, a number of state Attorneys General filed a lawsuit in the U.S. District Court for the Northern District of California alleging that Google’s operation of Android and Google Play violated U.S. antitrust laws and state antitrust and consumer protection laws. In September 2023, we reached a settlement in principle with 50 state Attorneys General and three territories and recognized a charge. Final approval of the settlement remains pending before the court. In May 2024, we funded the settlement amount to an escrow agent. In December 2023, a California jury delivered a verdict in Epic Games v. Google finding that Google violated U.S. antitrust laws related to Google Play's business. Epic did not seek monetary damages. The presiding judge issued a remedies decision in October 2024, ordering a variety of alterations to our business models and operations and contractual agreements for Android and Google Play. We are appealing the verdict and the trial court judge temporarily paused the implementation of the remedies while the Court of Appeals considers our request to pause implementation of the remedies pending the duration of the appeal. Given the nature of this matter, we cannot estimate a possible loss. 79. Table of Contents Alphabet Inc. • European Digital Markets Act: In March 2024, the EC opened two investigations regarding Google's compliance with certain provisions of EU's Digital Markets Act relating to Google Play and Search. Given the preliminary stages of this matter, we cannot estimate a possible loss. In addition to these proceedings, private individual and collective actions that overlap with claims pursued by regulatory authorities are pending in the U.S. and in several other jurisdictions. We believe we have strong arguments against these open claims and will defend ourselves vigorously. We continue to cooperate with federal and state regulators in the U.S., the EC, and other regulators around the world. Privacy Matters We are subject to a number of privacy-related laws and regulations, and we currently are party to a number of privacy investigations and lawsuits ongoing in multiple jurisdictions. For example, there are ongoing investigations and litigation in the U.S. and the EU, including those relating to our collection and use of location information, alleged violations of state biometric statutes, the choices we offer users, and advertising practices, which could result in significant fines, judgments, and product changes. Patent and Intellectual Property Claims We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe others' intellectual property rights. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, functionalities, products, or services. As a result, we may have to change our business practices and develop non-infringing products or technologies, which could result in a loss of revenues for us and otherwise harm our business. In addition, the U.S. International Trade Commission (ITC) has increasingly become an important forum to litigate intellectual property disputes because an ultimate loss in an ITC action can result in a prohibition on importing infringing products into the U.S. Because the U.S. is an important market, a prohibition on importation could have an adverse effect on us, including preventing us from importing many important products into the U.S. or necessitating workarounds that may limit certain features of our products. Further, 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. Other We are subject to claims, lawsuits, regulatory and government inquiries and 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 services offered by advertisers or publishers using our platforms, personal injury, consumer protection, and other matters. For example, we periodically have data incidents that we report to relevant regulators as required by law. Such claims, consent orders, lawsuits, regulatory and government investigations, and other proceedings could result in substantial fines and penalties, injunctive relief, ongoing monitoring and auditing obligations, changes to our products and services, alterations to our business models and operations, and collateral related civil litigation or other adverse consequences, all of which could harm our business, reputation, financial condition, and operating results. We have ongoing legal matters relating to Russia. For example, some matters concern civil judgments that include compounding penalties imposed upon us in connection with disputes regarding the termination of accounts, including those of sanctioned parties. We do not expect these ongoing legal matters will have a material adverse effect. Non-Income Taxes We are under audit by various domestic and foreign tax authorities with regards to non-income tax matters. The subject matter of non-income tax audits primarily arises from disputes on the tax treatment and tax rate applied to the sale of our products and services in these jurisdictions and the tax treatment of certain employee benefits. We accrue non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from our expectations. See Note 14 for information regarding income tax contingencies. 80. Table of Contents Alphabet Inc. Note 11. Stockholders' Equity Class A and Class B Common Stock and Class C Capital Stock Our Board of Directors has authorized three classes of stock, Class A and Class B common stock, and Class C capital stock. The rights of the holders of each class of our common and capital stock are identical, except with respect to voting. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 10 votes per share. Class C capital stock has no voting rights, except as required by applicable law. Shares of Class B common stock may be converted at any time at the option of the stockholder and automatically convert upon sale or transfer to Class A common stock. Share Repurchases In the years ended December 31, 2022, 2023, and 2024 , we continued to repurchase both Class A and Class C shares in a manner deemed in the best interest of the company and its stockholders, taking into account the economic cost and prevailing market conditions, including the relative trading prices and volumes of the Class A and Class C shares. During the years ended December 31, 2022, 2023, and 2024, we repurchased $ 59.3 billion, $ 62.2 billion, and $ 62.0 billion, respectively, of Alphabet's Class A and Class C shares. In April 2024, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $ 70.0 billion of its Class A and Class C shares. As of December 31, 2024, $ 44.7 billion remained available for Class A and Class C share repurchases. The following table presents Class A and Class C shares repurchased and subsequently retired (in millions): Year Ended December 31, 2023 Year Ended December 31, 2024 Shares Amount Shares Amount Class A share repurchases 78 $ 9,316 73 $ 11,855 Class C share repurchases 450 52,868 306 50,192 Total share repurchases (1) 528 $ 62,184 379 $ 62,047 (1) Shares repurchased include unsettled repurchases. 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 plans. The repurchase program does not have an expiration date. Dividends During the year ended December 31, 2024, total cash dividends, which were first paid in June 2024, were $ 3.5 billion, $ 519 million, and $ 3.3 billion for Class A, Class B, and Class C shares, respectively. The company intends to pay quarterly cash dividends in the future, subject to review and approval by the company’s Board of Directors in its sole discretion. Note 12. Net Income Per Share We compute net income per share of Class A, Class B, and Class C stock using the two-class method. Basic net income per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of RSUs and other contingently issuable shares. The dilutive effect of outstanding RSUs and other contingently issuable shares is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A stock assumes the conversion of Class B stock, while the diluted net income per share of Class B stock does not assume the conversion of those shares. In accordance with our certificate of incorporation, the rights, including the liquidation and dividend rights, of the holders of our Class A, Class B, and Class C stock are identical, except with respect to voting. Furthermore, there are a number of safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our Board of Directors from declaring or paying unequal per share dividends on our Class A, Class B, and Class C stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock must be approved by the class of stock adversely affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our Board of Directors. 81. Table of Contents Alphabet Inc. Immaterial differences in net income per share across our Class A, Class B, and Class C shares may arise due to the allocation of distributed earnings, which is based on the holders as of the record date, compared with the allocation of undistributed earnings and number of shares, which is based on the weighted average shares outstanding over the periods. The following tables set 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): Year Ended December 31, 2022 Class A Class B Class C Consolidated Basic net income per share: Numerator Allocation of distributed earnings (cash dividends paid) $ 0 $ 0 $ 0 $ 0 Allocation of undistributed earnings 27,518 4,072 28,382 59,972 Net income $ 27,518 $ 4,072 $ 28,382 $ 59,972 Denominator Number of shares used in per share computation 5,994 887 6,182 13,063 Basic net income per share $ 4.59 $ 4.59 $ 4.59 $ 4.59 Diluted net income per share: Numerator Allocation of total earnings for basic computation $ 27,518 $ 4,072 $ 28,382 $ 59,972 Reallocation of total earnings as a result of conversion of Class B to Class A shares 4,072 0 0 _ (1) Reallocation of undistributed earnings ( 230 ) ( 30 ) 230 _ (1) Net income $ 31,360 $ 4,042 $ 28,612 $ 59,972 Denominator Number of shares used in basic computation 5,994 887 6,182 13,063 Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A shares outstanding 887 0 0 _ (1) Restricted stock units and other contingently issuable shares 0 0 96 96 Number of shares used in per share computation 6,881 887 6,278 13,159 Diluted net income per share $ 4.56 $ 4.56 $ 4.56 $ 4.56 (1) Not applicable for consolidated net income per share. 82. 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Year Ended December 31, 2023 Class A Class B Class C Consolidated Basic net income per share: Numerator Allocation of distributed earnings (cash dividends paid) $ 0 $ 0 $ 0 $ 0 Allocation of undistributed earnings 34,601 5,124 34,070 73,795 Net income $ 34,601 $ 5,124 $ 34,070 $ 73,795 Denominator Number of shares used in per share computation 5,922 877 5,831 12,630 Basic net income per share $ 5.84 $ 5.84 $ 5.84 $ 5.84 Diluted net income per share: Numerator Allocation of total earnings for basic computation $ 34,601 $ 5,124 $ 34,070 $ 73,795 Reallocation of total earnings as a result of conversion of Class B to Class A shares 5,124 0 0 _ (1) Reallocation of undistributed earnings ( 287 ) ( 37 ) 287 _ (1) Net income $ 39,438 $ 5,087 $ 34,357 $ 73,795 Denominator Number of shares used in basic computation 5,922 877 5,831 12,630 Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A shares outstanding 877 0 0 _ (1) Restricted stock units and other contingently issuable shares 0 0 92 92 Number of shares used in per share computation 6,799 877 5,923 12,722 Diluted net income per share $ 5.80 $ 5.80 $ 5.80 $ 5.80 (1) Not applicable for consolidated net income per share. Year Ended December 31, 2024 Class A Class B Class C Consolidated Basic net income per share: Numerator Allocation of distributed earnings (cash dividends paid) $ 3,509 $ 519 $ 3,335 $ 7,363 Allocation of undistributed earnings 44,085 6,520 42,150 92,755 Net income $ 47,594 $ 7,039 $ 45,485 $ 100,118 Denominator Number of shares used in per share computation 5,855 866 5,598 12,319 Basic net income per share $ 8.13 $ 8.13 $ 8.13 $ 8.13 Diluted net income per share: Numerator Allocation of total earnings for basic computation $ 47,594 $ 7,039 $ 45,485 $ 100,118 Reallocation of total earnings as a result of conversion of Class B to Class A shares 7,039 0 0 _ (1) Reallocation of undistributed earnings ( 520 ) ( 67 ) 520 _ (1) Net income $ 54,113 $ 6,972 $ 46,005 $ 100,118 Denominator Number of shares used in basic computation 5,855 866 5,598 12,319 Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A shares outstanding 866 0 0 _ (1) Restricted stock units and other contingently issuable shares 0 0 128 128 Number of shares used in per share computation 6,721 866 5,726 12,447 Diluted net income per share $ 8.05 $ 8.05 $ 8.03 $ 8.04 (1) Not applicable for consolidated net income per share. 83. Table of Contents Alphabet Inc. Note 13. Compensation Plans Stock Plans Our stock plans include the Alphabet Amended and Restated 2021 Stock Plan ("Alphabet 2021 Stock Plan") and Other Bets stock-based plans. Under our stock plans, RSUs and other types of awards may be granted. Under the Alphabet 2021 Stock Plan, an RSU award is an agreement to issue shares of our Class C stock at the time the award vests. RSUs generally vest over four years contingent upon employment on the vesting date. RSUs are awarded dividend equivalents, which are subject to the same vesting conditions as the underlying award, and settled in Class C shares. As of December 31, 2024, there were 633 million shares of Class C stock reserved for future issuance under the Alphabet 2021 Stock Plan. Stock-Based Compensation For the years ended December 31, 2022, 2023, and 2024, total SBC expense was $ 19.5 billion, $ 22.1 billion, and $ 22.8 billion, including amounts associated with awards we expect to settle in Alphabet stock of $ 18.8 billion, $ 21.7 billion, and $ 22.0 billion, respectively. For the years ended December 31, 2022, 2023, and 2024, we recognized tax benefits on total SBC expense, which are reflected in the provision for income taxes in the Consolidated Statements of Income, of $ 3.9 billion, $ 4.5 billion, and $ 4.6 billion, respectively. For the years ended December 31, 2022, 2023, and 2024, tax benefit realized related to awards vested or exercised during the period was $ 4.7 billion, $ 5.6 billion, and $ 6.8 billion, respectively. These amounts do not include the indirect effects of stock-based awards, which primarily relate to the R&D tax credit. Stock-Based Award Activities The following table summarizes the activities for unvested Alphabet RSUs, which include dividend equivalents awarded to holders of unvested stock, for the year ended December 31, 2024 (in millions, except per share amounts): Number of Shares Weighted- Average Grant-Date Fair Value Unvested as of December 31, 2023 338 $ 104.93 Granted 195 $ 140.04 Vested ( 199 ) $ 110.89 Forfeited/canceled ( 35 ) $ 113.52 Unvested as of December 31, 2024 299 $ 122.77 The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2022 and 2023 was $ 127.22 and $ 97.59 , respectively. Total fair value of RSUs, as of their respective vesting dates, during the years ended December 31, 2022, 2023, and 2024, were $ 23.9 billion, $ 26.6 billion, and $ 33.3 billion, respectively. As of December 31, 2024, there was $ 34.8 billion of unrecognized compensation cost related to unvested RSUs. This amount is expected to be recognized over a weighted-average period of 2.5 years. Note 14. Income Taxes Income from continuing operations before income taxes consisted of the following (in millions): Year Ended December 31, 2022 2023 2024 Domestic operations $ 61,307 $ 73,600 $ 108,076 Foreign operations 10,021 12,117 11,739 Total $ 71,328 $ 85,717 $ 119,815 84. Table of Contents Alphabet Inc. Provision for income taxes consisted of the following (in millions): Year Ended December 31, 2022 2023 2024 Current: Federal and state $ 17,120 $ 17,125 $ 22,485 Foreign 2,434 2,526 2,468 Total 19,554 19,651 24,953 Deferred: Federal and state ( 8,052 ) ( 7,482 ) ( 5,350 ) Foreign ( 146 ) ( 247 ) 94 Total ( 8,198 ) ( 7,729 ) ( 5,256 ) Provision for income taxes $ 11,356 $ 11,922 $ 19,697 The reconciliation of federal statutory income tax rate to our effective income tax rate was as follows: Year Ended December 31, 2022 2023 2024 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % Foreign income taxed at different rates 3.0 0.3 0.5 Foreign-derived intangible income deduction ( 5.4 ) ( 4.6 ) ( 3.8 ) Stock-based compensation expense ( 1.2 ) ( 0.8 ) ( 1.5 ) Federal research credit ( 2.2 ) ( 1.8 ) ( 1.5 ) Deferred tax asset valuation allowance 0.9 0.6 0.4 State and local income taxes 0.8 1.0 1.1 Effect of tax law change 0.0 ( 1.4 ) 0.0 Other ( 1.0 ) ( 0.4 ) 0.2 Effective tax rate 15.9 % 13.9 % 16.4 % In 2023, the IRS issued a rule change allowing taxpayers to temporarily apply the regulations in effect prior to 2022 related to U.S. federal foreign tax credits as well as a separate rule change with guidance on the capitalization and amortization of R&D expenses. A cumulative one-time adjustment for these tax rule changes was recorded in 2023. 85. Table of Contents Alphabet Inc. Deferred Income Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows (in millions): As of December 31, 2023 2024 Deferred tax assets: Accrued employee benefits $ 1,855 $ 1,834 Accruals and reserves not currently deductible 2,481 2,552 Tax credits 6,609 6,384 Net operating losses 2,965 3,472 Operating leases 3,526 3,336 Capitalized research and development 17,757 25,903 Other 1,951 1,376 Total deferred tax assets 37,144 44,857 Valuation allowance ( 10,999 ) ( 11,493 ) Total deferred tax assets net of valuation allowance 26,145 33,364 Deferred tax liabilities: Property and equipment, net ( 8,189 ) ( 9,932 ) Net investment gains ( 2,405 ) ( 2,978 ) Operating leases ( 2,965 ) ( 2,986 ) Other ( 902 ) ( 1,008 ) Total deferred tax liabilities ( 14,461 ) ( 16,904 ) Net deferred tax assets (liabilities) $ 11,684 $ 16,460 As of December 31, 2024, our federal, state, and foreign net operating loss carryforwards for income tax purposes were approximately $ 8.4 billion, $ 19.4 billion, and $ 2.5 billion respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in 2025, foreign net operating loss carryforwards will begin to expire in 2025 and the state net operating loss carryforwards will begin to expire in 2033. It is more likely than not that the majority of the net operating loss carryforwards will not be realized. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions. As of December 31, 2024 , our Federal and California research and development credit carryforwards for income tax purposes were approximately $ 700 million and $ 6.4 billion, respectively. If not utilized, the Federal R&D credit will begin to expire in 2037 and the California R&D credit can be carried over indefinitely. We believe the majority of the federal tax credit and state tax credit is not likely to be realized. As of December 31, 2024 , our investment tax credit carryforwards for state income tax purposes were approximately $ 1.2 billion and will begin to expire in 2030. We use the flow-through method of accounting for investment tax credits. We believe this tax credit is not likely to be realized. As of December 31, 2024, we maintained a valuation allowance with respect to California deferred tax assets, certain federal net operating losses, certain state net operating losses and tax credits, net deferred tax assets relating to Other Bet companies, and certain foreign net operating losses that we believe are not likely to be realized. We continue to reassess the remaining valuation allowance quarterly, and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly. Cash paid for income taxes, net of refunds, was $ 18.9 billion, $ 19.2 billion, and $ 27.4 billion as of December 31, 2022, 2023, and 2024, respectively. 86. Table of Contents Alphabet Inc. Uncertain Tax Positions The following table summarizes the activity related to our gross unrecognized tax benefits (in millions): Year Ended December 31, 2022 2023 2024 Beginning gross unrecognized tax benefits $ 5,158 $ 7,055 $ 9,438 Increases related to prior year tax positions 253 740 896 Decreases related to prior year tax positions ( 437 ) ( 682 ) ( 83 ) Decreases related to settlement with tax authorities ( 140 ) ( 21 ) ( 311 ) Increases related to current year tax positions 2,221 2,346 2,679 Ending gross unrecognized tax benefits $ 7,055 $ 9,438 $ 12,619 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 gross unrecognized tax benefits was $ 7.1 billion, $ 9.4 billion, and $ 12.6 billion as of December 31, 2022 , 2023, and 2024, respectively, of which $ 5.3 billion, $ 7.4 billion, and $ 10.0 billion, if recognized, would affect our effective tax rate, respectively. As of December 31, 2023 and 2024, we accrued $ 622 million and $ 1.1 billion in interest and penalties in provision for income taxes, respectively. We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. Our two major tax jurisdictions are the U.S. federal and Ireland. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. The IRS is currently examining our 2016 through 2021 tax returns. We have also received tax assessments in multiple foreign jurisdictions asserting transfer pricing adjustments or permanent establishment. We continue to defend such claims as presented. The tax years 2016 through 2023 remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are other ongoing audits in various other jurisdictions that are not material to our financial statements. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolutions occur. Although the timing of resolution, settlement, and closure of audits is not certain, we do not believe it is reasonably possible that our unrecognized tax benefits from certain U.S. federal, state, and non U.S. tax positions will materially change in the next 12 months. Note 15. Information about Segments and Geographic Areas 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, as well as Google One; the sale of apps and in-app purchases; and devices. • Google Cloud includes infrastructure and platform services, applications, 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. Revenues, certain costs, such as costs associated with content and traffic acquisition, certain engineering activities, and devices, as well as certain operating expenses are directly attributable to our segments. Due to the integrated nature of Alphabet, other costs and expenses, such as technical infrastructure and office facilities, are managed centrally at a consolidated level. These costs, including the associated depreciation, are allocated to operating segments as a service cost generally based on usage, headcount, or revenue. 87. Table of Contents Alphabet Inc. As announced in April 2024, we consolidated teams that focus on building general AI models across Google Research and Google DeepMind to further accelerate our progress in AI. General AI model development teams previously under Google Research in our Google Services segment are reported within Alphabet-level activities prospectively beginning in the second quarter of 2024. As further announced, in October 2024, the Gemini app team that is developing the direct consumer interface to our Gemini models joined Google DeepMind. The costs associated with the Gemini app team continue to be reported within our Google Services segment. Certain costs are not allocated to our segments because they represent Alphabet-level activities. These costs primarily include certain 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 employee severance and office space reductions during 2023 and 2024 were also not allocated to our segments. Additionally, hedging gains (losses) related to revenue are not allocated to our segments. Our Chief Operating Decision Maker (CODM) is our Chief Executive Officer, Sundar Pichai. Our CODM uses segment operating income (loss) to allocate resources to our segments in our annual planning process and to assess the performance of our segments, primarily by monitoring actual results versus the annual plan. Our operating segments are not evaluated using asset information. The following table presents revenue, profitability, and expense information about our segments (in millions): Year Ended December 31, 2022 2023 2024 Revenues: Google Services $ 253,528 $ 272,543 $ 304,930 Google Cloud 26,280 33,088 43,229 Other Bets 1,068 1,527 1,648 Hedging gains (losses) 1,960 236 211 Total revenues $ 282,836 $ 307,394 $ 350,018 Operating income (loss): Google Services $ 82,699 $ 95,858 $ 121,263 Google Cloud ( 1,922 ) 1,716 6,112 Other Bets ( 4,636 ) ( 4,095 ) ( 4,444 ) Alphabet-level activities ( 1,299 ) ( 9,186 ) ( 10,541 ) Total income from operations $ 74,842 $ 84,293 $ 112,390 Supplemental information about our segment expenses: Google Services: Employee compensation expenses $ 43,529 $ 46,224 $ 44,560 Other costs and expenses 127,300 130,461 139,107 Total Google Services costs and expenses $ 170,829 $ 176,685 $ 183,667 Google Cloud: Employee compensation expenses $ 16,132 $ 19,054 $ 20,519 Other costs and expenses 12,070 12,318 16,598 Total Google Cloud costs and expenses $ 28,202 $ 31,372 $ 37,117 Google Services and Google Cloud employee compensation expenses include the costs associated with direct and allocated employees. Google Services and Google Cloud other costs and expenses primarily include direct costs, such as advertising and promotional activities and third party services fees as well as allocated costs, such as technical infrastructure and office facilities usage costs. Additionally, Google Services other costs and expenses include content and traffic acquisition costs and device costs. See Note 2 for information relating to revenues by geography. 88. Table of Contents Alphabet Inc. 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, 2023 2024 Long-lived assets: United States $ 110,053 $ 138,993 International 38,383 45,631 Total long-lived assets $ 148,436 $ 184,624 Note 16. Subsequent Event In January 2025, we recognized an $ 8.0 billion unrealized gain on our non-marketable equity securities related to our investment in a private company. The unrealized gain reflects an increase in the fair value measurement of our investment following an observable transaction in January 2025. See Note 3 and Note 7 for further details on equity investments and OI&E. 89. Table of Contents Alphabet Inc. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.