What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-05 compared with 2025-02-05 · 177 added, 234 removed, 277 unchanged (60% of the section changed)

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Alphabet is a collection of businesses — the largest of which is Google.

We report Google in two segments, Google Services and Google Cloud;

we also report all non-Google businesses collectively as Other Bets.

We report Google in two segments, Google Services and Google Cloud, and all non-Google businesses collectively as Other Bets.

Supporting these businesses, we have centralized certain AI-related research and development focused on advanced research in AI and developing the frontier models that serve our businesses, which is reported in Alphabet-level activities.

For further details on our segments, see Part I, Item 1 Business and Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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The following long-term trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results:

• Users' behaviors and advertising continue to shift online as the digital economy evolves.

The continuing evolution of the online world has contributed to the growth of our business and our revenues since inception.

We expect that this evolution will continue to benefit our business and our revenues, although at a slower pace than we have experienced historically.

In addition, we face increasing competition for user engagement and advertisers, including from other developers and providers of AI products and services, which may affect our revenues.

• Users continue to access our products and services using diverse devices and modalities, which allows for new advertising formats that may benefit our revenues but adversely affect our margins.

Our users are accessing our products and services via diverse devices and modalities beyond traditional desktop, such as smartphones, wearables, connected TVs, and smart home devices, and want to be able to be connected no matter where they are or what they are doing.

We are focused on expanding our products and services to stay in front of these trends in order to maintain and grow our business.

We benefit from advertising revenues generated from different channels, including mobile, and newer advertising formats.

The margins from these channels and newer products have generally been lower than those from traditional desktop search.

Additionally, as the market for a particular device type or modality matures, our advertising revenues may be affected.

For example, changing dynamics within the global smartphone market, such as increased market saturation in developed countries, can affect our mobile advertising revenues.

We expect TAC paid to our distribution partners and Google Network partners to increase as our revenues grow and TAC as a percentage of our advertising revenues ("TAC rate") to be affected by changes in device mix;

• As we continue to grow our business and meet the evolving behaviors and needs of our users and customers, our revenue growth and mix along with our cost and margin profiles are being influenced by a number of factors, including:

Expanded AI Offerings in our Products and Services:

The continuing evolution of the online world has contributed to the growth of our business.

We expect that this evolution, including user engagement with AI products and services, will continue to benefit our business and our revenues.

As we continue to incorporate AI into our products and services, such as with AI Overviews and AI Mode in Search, and with enterprise AI solutions on our Google Cloud Platform, we may monetize differently than our historical consumer and enterprise offerings which could affect revenue growth rates and margin trends.

When developing new products and services we generally focus first on user experience and then on monetization.

At the same time, we face increasing competition, including from other developers and providers of AI products and services, which may affect our revenues.

Increasing Revenues Beyond Advertising:

Revenues from cloud, consumer subscriptions, platforms, and devices, which may have differing characteristics than our advertising revenues, have grown over time.

Certain of these revenues have been growing at a rate higher than our advertising revenues, becoming a larger percentage of our consolidated revenues, and we expect this trend to continue.

The margins on these revenues vary significantly and are generally lower than the margins on our advertising revenues.

Increased Investment in Technical Infrastructure:

We continue to invest in capital expenditures as we scale our technical infrastructure, in particular for AI, to meet the demand of our users and enterprise customers and to support research internally.

We invested heavily in capital expenditures in 2025 and in 2026, we expect to significantly increase , relative to 2025, our i nvestment in our technical infrastructure, including servers and network equipment, and data centers.

The costs associated with operating our technical infrastructure - depreciation, energy, equipment, and network capacity - are expected to significantly increase as developing and serving AI offerings require more compute power than our historical consumer and enterprise offerings.

While our technical infrastructure costs increase, we expect to continue to drive efficiencies in our data centers, for example, through the design of our AI models and our TPU and GPU-based technical infrastructure.

Continued Investment in Intellectual Property through R&D and Acquisitions:

We continue to make significant research and development investments in areas of strategic focus as we seek to develop new, innovative offerings, and improve our existing offerings across our businesse s.

A cquisitions and strategic investments remain important elements in our use of capital and contribute to the breadth and depth of our offerings, expand our expertise in engineering and other functional areas, and build strong partnerships around strategic initiatives.

Traffic Acquisition Costs Growth and Rate Changes:

We expect traffic acquisition costs ("TAC") paid to our distribution partners and Google Network partners to increase as our advertising revenues grow.

Our overall TAC as a percentage of our advertising revenues ("TAC rate") has been decreasing primarily due to a revenue mix

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shift from Google Network properties to Google Search & other properties.

Our TAC rate will continue to be affected by changes in device mix;

geographic mix;

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and revenue share terms.

We expect these trends to continue to affect our revenues and put pressure on our margins.

• As online advertising evolves, we continue to expand our product offerings, which may affect our monetization.

As interactions between users and advertisers change, and as online user behavior evolves, for example with AI, we continue to expand our product offerings to serve these changing needs, which may affect monetization of our products and services.

We expect to continue to incorporate AI innovations into our products, such as AI in Search, that could affect our monetization trends.

When developing new products and services we generally focus first on user experience and then on monetization.

• As users in developing economies increasingly come online, our revenues from international markets continue to increase, and may require continued investments.

In addition, movements in foreign exchange rates affect such revenues.

The shift to online, as well as the advent of the multi-device world, has brought opportunities outside of the U.S., including in emerging markets, such as India.

We continue to invest heavily and develop localized versions of our products and advertising programs relevant to our users in these markets.

This has led to a trend of increased

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revenues from emerging markets.

We expect that our results will continue to be affected by our performance in these markets, particularly as low-cost mobile devices become more available.

This trend could affect our revenues as developing markets initially monetize at a lower rate than more mature markets.

International revenues represent a significant portion of our revenues and are subject to fluctuations in foreign currency exchange rates relative to the U.S.

While we have a foreign exchange risk management program designed to reduce our exposure to these fluctuations, this program does not fully offset their effect on our revenues and earnings.

• The revenues that we derive beyond advertising are increasing and may adversely affect our margins.

Revenues from cloud, consumer subscriptions, platforms, and devices, which may have differing characteristics than our advertising revenues, have grown over time, and we expect this trend to continue as we focus on expanding our products and services.

The margins on these revenues vary significantly and are generally lower than the margins on our advertising revenues.

For example, sales of our devices adversely affect our consolidated margins due to pressures on pricing and higher cost of sales.

• As we continue to serve our users and expand our businesses, we will invest heavily in operating and capital expenditures.

We continue to make significant research and development investments in areas of strategic focus as we seek to develop new, innovative offerings, improve our existing offerings, and rapidly and responsibly deploy AI across our businesse s.

We also expect to increase, relative to 2024, our i nvestment in our technical infrastructure, including servers, network equipment, and data centers, to support the growth of our business and our long-term initiatives, in particular in support of AI products and services.

In addition, acquisitions and strategic investments remain important elements in our use of capital and contribute to the breadth and depth of our offerings, expand our expertise in engineering and other functional areas, and build strong partnerships around strategic initiatives.

• We continue to face an evolving regulatory environment, and we are subject to claims, lawsuits, investigations, and other forms of potential legal liability, which could affect our business practices and financial results.

• We have raised capital through external financing in the form of debt and we may continue to seek debt or other forms of financing in the future to support our capital and operating needs.

In 2025, we raised capital through the issuance of debt and we expect to continue to assess the use of debt and other forms of financing in the future.

We expect to continue to enter into finance leases, primarily for data centers.

Additionally, in 2025, we provided credit support, such as through backstops and guarantees, to certain infrastructure related counterparties and may continue to provide additional credit support in the future.

• We face an evolving regulatory environment, and we are subject to claims, lawsuits, investigations, and other forms of potential legal liability, which could affect our business practices and financial results.

Changes in social, political, economic, tax, and regulatory conditions or in laws and policies governing a wide range of topics and related legal matters, including investigations, lawsuits, and regulatory actions, have resulted in fines and caused us to change our business practices.

As these global trends continue, our cost of doing business may increase, our products and services may become less useful, our ability to pursue certain business practices or offer certain products or services may be limited, and we may need to change our business models and operations to comply with evolving regulatory and legal matters.

As the regulatory environment continues to evolve, we may continue to incur fines and we expect increased costs associated with compliance, modifications to our products and services, and limitations on our ability to pursue certain business practices.

For additional information, see Part I, Item 1A Risk Factors and Legal Matters in Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

• Our employees are critical to our success and we expect to continue investing in them.

Our employees are among our best assets and are critical for our continued success.

We expect to continue hiring talented employees around the globe and to provide competitive compensation programs.

For additional information, see Culture and Workforce in Part I, Item 1 Business of this Annual Report on Form 10-K.

Revenues and Monetization Metrics

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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.

and sales of other products and services, such as fees received for subscription-based products, apps and in-app purchases, and devices.

For additional information on how we recognize revenue, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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• new product, service, and market launches;

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• seasonality.

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

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We use certain metrics to track how well traffic across various properties is monetized as it relates to our advertising revenues:

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Google subscriptions, platforms, and devices revenues are comprised of the following:

• 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;

• 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, which offers access to our most capable Gemini models;

• platforms, which primarily include revenues from Google Play sales of apps and in-app purchases;

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• other products and services.

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Fluctuations in our Google subscriptions, platforms, and devices revenues have been, and may continue to be, affected by factors in addition to the general factors described above, such as changes in customer usage and demand, number of subscribers, and the timing of product launches.

Google Cloud revenues are comprised of the following:

• 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;

• Google Cloud Platform primarily generates consumption-based fees and subscriptions for infrastructure, platform, and other services.

These services provide access to solutions such as AI offerings including our enterprise AI infrastructure, Vertex AI platform, and Gemini Enterprise;

cybersecurity offerings;

and data and analytics solutions;

• Google Workspace includes subscriptions for cloud-based communication and collaboration tools for enterprises, such as Gmail, Docs, Calendar, Drive, and Meet, with integrated features like Gemini for Google Workspace;

• other enterprise services.

Fluctuations in our Google Cloud revenues have been, and may continue to be, affected by factors in addition to the general factors described above, such as changes in customer usage and demand.

Revenues from Other Bets are generated primarily from the sale of healthcare-related services, and internet services.

Fluctuations in our Google Cloud revenues have been, and may continue to be, affected by factors in addition to the general factors described above, such as changes in customer usage, demand, and supply availability.

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Revenues from Other Bets are generated primarily from the sale of autonomous transportation services and internet services.

Costs and Expenses

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cost of revenues and operating expenses.

Our operating expenses include costs related to R&D, sales and marketing, and general and administrative functions.

Our operating expenses include costs related to research and development, sales and marketing, and general and administrative functions.

Certain of our costs and expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to changes in revenue.

Additionally, fluctuations in employee compensation expenses may not directly correlate with changes in headcount, due to factors such as annual stock-based compensation (SBC) awards that generally vest over four years.

Additionally, fluctuations in employee compensation expenses may not directly correlate with changes in headcount, due to factors such as annual SBC awards that vest over time.

Cost of Revenues

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• TAC includes:

◦ amounts paid to our distribution partners who make available our search access points and services.

◦ amounts paid to our distribution partners who make available our search access points and other ad-supported services.

Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers;

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◦ 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;

◦ depreciation expense, primarily related to our technical infrastructure;

◦ 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;

◦ other technical infrastructure operations costs, including network capacity, energy, and equipment costs.

◦ other technical infrastructure operations costs, including energy, equipment, and network capacity costs.

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

Operating Expenses

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

The main components of our R&D expenses are:

• depreciation;

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

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

The main components of our research and development expenses are:

• depreciation expense, primarily related to our technical infrastructure;

• employee compensation expenses for engineering and technical employees responsible for research and development related to our existing and new products and services;

• other technical infrastructure operations costs, including energy, equipment, and network capacity costs;

• third-party services fees primarily relating to consulting and outsourced services in support of our engineering and product development efforts.

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The main components of our general and administrative expenses are:

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

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Other Income (Expense), Net

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

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

For additional information, including how we account for our investments and factors that can drive fluctuations in the value of our investments, see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Item 8 as well as Item 7A Quantitative and Qualitative Disclosures About Market Risk of this Annual Report on Form 10-K.

Provision for Income Taxes

Provision for income taxes represents the estimated amount of federal, state, and foreign income taxes incurred in the U.S.

and the many jurisdictions in which we operate.

Provision for income taxes represents the estimated amount of federal, state, and foreign income taxes incurred in the US and the many jurisdictions in which we operate.

The provision includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties.

For additional information, including a reconciliation of the U.S.

federal statutory rate to our effective tax rate, see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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For additional information, including a reconciliation of the US federal statutory rate to our effective tax rate, see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Executive Overview

The following table summarizes our consolidated financial results (in millions, except for per share information and percentages):

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

Year Ended December 31,

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Consolidated revenues $ 350,018 $ 402,836 $ 52,818 15 %

Change in consolidated constant currency revenues (1)

Cost of revenues $ 146,306 $ 162,535 $ 16,229 11 %

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Net income $ 100,118 $ 132,170 $ 32,052 32 %

Diluted EPS (2)

Diluted net income per share (1)

$ 8.04 $ 10.81 $ 2.77 34 %

(1) See "Use of Non-GAAP Constant Currency Information" below for details relating to our use of constant currency information.

(2) For additional information on the calculation of diluted EPS, see Note 12 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

(1) For additional information on the calculation of diluted net income per share, see Note 12 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

• Revenues were $402.8 billion, an increase of 15% year over year, primarily driven by an increase in Google Services revenues of $37.8 billion, or 12%, and an increase in Google Cloud revenues of $15.5 billion, or 36%.

• Total constant currency revenues, which exclude the effect of hedging, increased 15% year over year.

• Cost of revenues wa s $146.3 billion, an increase of 10% year over year, primarily driven by increases in content acquisition costs, TAC, and depreciation expense.

• Operating expenses were $91.3 billion, an increase of 2% year over year, primarily driven by increases in de preciation expense, employee compensation expenses, and third-party services fees.

These increases were partially offset by reductions in charges related to legal and other matters and charges related to our office space optimization efforts.

The overall increase in employee compensation expenses was partially offset by a reduction in employee severance and related charges.

• Cost of revenues was $162.5 billion, an increase of 11% ye ar over year, primarily driven by increases in TAC, content acquisition costs, and depreciation expense.

• Operating ex penses were $111.3 billion, an increase of 22% ye ar over year, primarily driven by increases in employee compensation expenses, expenses related to legal and other matters, and depreciation expense.

Other Information:

• Dividend payments to stockholders of Class A, Class B, and Class C shares, which were first paid in June 2024, were $3.5 billion, $519 million, and $3.3 billion, respectively, totaling $7.4 billion for the year ended December 31, 2024.

For additional information, see Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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• In 2025, we entered into definitive agreements to acquire Wiz, a leading cloud security platform, for $32.0 billion, and Intersect, a provider of data center and energy infrastructure solutions, for $4.8 billion in cash plus the assumption of debt.

Both acquisitions are expected to close in 2026, subject to customary closing conditions, including the receipt of regulatory approvals.

• In 2025, we issued senior unsecured notes for net proceeds of $37.3 billion, to be used for general corporate purposes.

• OI&E of $29.8 billion for the year ended December 31, 2025 included net gains on equity securities of $24.1 billion, primarily related to unrealized gains on our non-marketable equity securities.

• Other Bets operating loss of $7.5 billion for the year ended December 31, 2025 included a $2.1 billion employee compensation charge recognized in the fourth quarter for Waymo, primarily reflected in research and development expenses, based on estimated stock valuation.

In February 2026, Waymo announced an investment round of $16.0 billion, the significant majority of which was funded by Alphabet.

• Changes to U.S.

tax law enacted on July 4, 2025, allow, among other things, for immediate expensing of domestic research and experimentation costs and accelerated depreciation on eligible capital expenditures, the effects of which are included in operating cash flows for the year ended December 31, 2025.

• Repurchases of Class A and Class C shares were $6.5 billion and $38.9 billion, respectively, totaling $45.4 billion for the year ended December 31, 2025.

For additional information, see Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

• Employee severance and related charges for the year ended December 31, 2024 were $1.0 billion, a decrease of $1.1 billion as compared to the year ended December 31, 2023.

Office space charges, including accelerated rent and accelerated depreciation, for the year ended December 31, 2024 were $796 million, a decrease of $1.3 billion as compared to the year ended December 31, 2023.

Substantially all of these charges were included in Alphabet-level activities.

• Operating cash flow was $164.7 billion for the year ended December 31, 2025.

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• As of December 31, 2025, we had 190,820 employees.

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We are monitoring ongoing developments surrounding international trade and the macroeconomic environment.

As a result of volatility in international trade and financial markets, we may experience direct and indirect effects on our business, operations, and financial results.

Our past results may not be indicative of our future performance, and our financial results may differ materially from historical trends.

Financial Results

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Google Services

Google advertising revenues

Google Advertising

Google Search & other

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and improvements we have made in ad formats and delivery.

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YouTube ads revenues increased $4.2 billion from 2024 to 2025.

The growth was driven by our brand advertising products followed by our direct response advertising products, both of which benefited from increased spending by our advertisers.

The growth was driven by our direct response advertising products followed by our brand advertising products, both of which benefited from increased spending by our advertisers.

Google Network

Google Network revenues decreased $953 million from 2023 to 2024, primarily driven by a decrease in Google Ad Manager and AdMob revenues.

Additionally, Google Network revenues were adversely affected by changes in foreign currency exchange rates.

Google Network revenues decreased $567 million from 2024 to 2025, primarily due to a decrease in AdSense revenues, partially offset by an increase in AdMob revenues.

Monetization Metrics

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Changes in cost-per-click and cost-per-impression are driven by a number of interrelated factors including changes in device mix, geographic mix, advertiser spending, ongoing product and policy changes, product mix, property mix, and changes in foreign currency exchange rates.

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Google Subscriptions, Platforms, and Devices

Google subscriptions, platforms, and devices revenues increased $7.7 billion from 2024 to 2025.

The growth was primarily driven by an increase in subscription revenues, largely from growth in the number of paid subscribers for YouTube services followed by Google One.

Google Cloud revenues increased $10.1 billion from 2023 to 2024 primarily driven by growth in Google Cloud Platform largely from infrastructure services.

The growth was primarily driven by an increase in subscriptions revenues.

This increase was primarily due to the contribution from growth in paid subscriptions across both YouTube services and Google One.

Google Cloud revenues increased $15.5 billion from 2024 to 2025, primarily driven by growth in Google Cloud Platform largely from infrastructure and platform services.

Revenues by Geography

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United States 49 % 48 %

EMEA 30 % 29 %

APAC 17 % 16 %

Other Americas (1)

Hedging gains (losses) 0 % 0 %

(1) Regions represent Europe, the Middle East, and Africa (EMEA);

Asia-Pacific (APAC);

and Canada and Latin America ("Other Americas").

For additional information, see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Use of Non-GAAP Constant Currency Information

International revenues, which represent a significant portion of our revenues, are generally transacted in multiple currencies and therefore are affected by fluctuations in foreign currency exchange rates.

The effect of currency exchange rates on our business is an important factor in understanding period-to-period comparisons.

We use non-GAAP constant currency revenues ("constant currency revenues") and non-GAAP percentage change in constant currency revenues ("percentage change in constant currency revenues") for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

We believe the presentation of results on a constant currency basis in addition to U.S.

Generally Accepted Accounting Principles (GAAP) results helps improve the ability to understand our performance, because it excludes the effects of foreign currency volatility that are not indicative of our core operating results.

Constant currency information compares results between periods as if exchange rates had remained constant period over period.

We define constant currency revenues as revenues excluding the effect of foreign currency exchange rate movements ("FX Effect") as well as hedging activities, which are recognized at the consolidated level.

We use constant currency revenues to determine the constant currency revenue percentage change on a year-on-year basis.

Constant currency revenues are calculated by translating current period revenues using prior year comparable period exchange rates, as well as excluding any hedging effects realized in the current period.

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

These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP.

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

Alphabet Inc.

The following table presents the foreign currency exchange effect on international revenues and total revenues (in millions, except percentages):

Year Ended December 31, 2024

% Change from Prior Period

Year Ended December 31, Less FX Effect Constant Currency Revenues As Reported Less Hedging Effect Less FX Effect Constant Currency Revenues

United States $ 146,286 $ 170,447 $ 0 $ 170,447 17 % 0 % 17 %

EMEA 91,038 102,127 41 102,086 12 % 0 % 12 %

APAC 51,514 56,815 (1,369) 58,184 10 % (3) % 13 %

Other Americas 18,320 20,418 (1,608) 22,026 11 % (9) % 20 %

Revenues, excluding hedging effect

307,158 349,807 (2,936) 352,743 14 % (1) % 15 %

Hedging gains (losses) 236 211

Total revenues (1)

$ 307,394 $ 350,018 $ 352,743 14 % 0 % (1) % 15 %

(1) Total constant currency revenues of $352.7 billion for 2024 increased $45.6 billion compared to $307.2 billion in revenues, excluding hedging effect, for 2023.

EMEA revenue growth was not materially affected by changes in foreign currency exchange rates, as the effect of the U.S.

dollar strengthening relative to the Turkish lira was offset by the U.S.

dollar weakening relative to the British pound and the euro.

APAC revenue growth was unfavorably affected by changes in foreign currency exchange rates, primarily due to the U.S.

dollar strengthening relative to the Japanese yen.

Other Americas revenue growth was unfavorably affected by changes in foreign currency exchange rates, primarily due to the U.S.

dollar strengthening relative to the Argentine peso and the Brazilian real.

Costs and Expenses

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Cost of Revenues

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Total cost of revenues as a percentage of revenues 42 % 40 %

Cost of revenues increased $13.0 billion from 2023 to 2024 due to an increase in other cost of revenues and TAC of $9.0 billion and $4.0 billion, res pectively.

Cost of revenues increased $16.2 billion from 2024 to 2025 due to an increase in other cost of revenues and TAC of $11.2 billion and $5.0 billion, respectively.

The increase in TAC from 2024 to 2025 was largely due to an increase in TAC paid to distribution partners, primarily driven by growth in revenues subject to TAC.

The TAC rate decreased from 20.7% to 20.3% from 2024 to 2025, primarily due to a revenue mix shift from Google Network properties to Google Search & other properties.

The TAC rate on Google Search & other revenues increased from 2023 to 2024 primarily due to increases related to mobile searches, which carries higher TAC because more mobile searches are channeled through paid access points.

The TAC rate on Google Network revenues was substantially consistent from 2023 to 2024.

The TAC rates on Google Search & other and Google Network revenues were substantially consistent from 2024 to 2025.

The increase in other cost of revenues from 2024 to 2025 was primarily due to increases in content acquisition costs, largely for YouTube, depreciation expense, and other technical infrastructure operations costs.

Research and Development

The following table presents R&D expenses (in millions, except percentages):

Alphabet Inc.

The following table presents research and development expenses (in millions, except percentages):

Year Ended December 31,

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Research and development expenses as a percentage of revenues 14 % 15 %

R&D expenses increased $3.9 billion from 2023 to 2024, primarily driven by increases in employee compensation expenses of $1.5 billion, depreciation expense of $1.4 billion, and third-party services fees of $698 million, partially offset by a reduction in charges related to our office space optimization efforts of $640 million.

The increase in employee compensation expenses was primarily driven by a $1.3 billion increase in SBC expenses, which includes the reduction in valuation-based compensation liabilities related to certain Other Bets recognized in the prior year comparable period, partially offset by a $537 million decrease in severance and related charges.

Research and development expenses increased $11.8 billion from 2024 to 2025, primarily driven by increases in employee compensation expenses of $6.9 billion and depreciation expense of $2.4 billion.

The increase in employee compensation expenses was primarily driven by an increase in SBC expenses of $4.2 billion, which included an increase in a valuation-based compensation charge related to Waymo.

Sales and Marketing

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Sales and marketing expenses as a percentage of revenues 8 % 7 %

Sales and marketing expenses decreased $109 million from 2023 to 2024, due to a combination of factors, none of which were individually significant.

Sales and marketing expenses increased $885 million from 2024 to 2025, primarily driven by an increase in advertising and promotional activities of $1.2 billion, partially offset by a decrease in employee compensation expenses of $214 million.

General and Administrative

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General and administrative expenses as a percentage of revenues 4 % 5 %

General and administrative expenses decreased $2.2 billion from 2023 to 2024, primarily driven by a reduction in charges related to legal and other matters of $1.3 billion and a decrease in employee compensation expenses of $285 million, primarily due to a decrease in average headcount, in addition to a combination of factors, none of which were individually significant.

General and administrative expenses increased $7.3 billion from 2024 to 2025, primarily driven by an increase in expenses related to legal and other matters of $6.2 billion, largely the result of the $3.5 billion EC fine accrued in the third quarter of 2025 and a $1.4 billion legal accrual made in the second quarter of 2025.

Alphabet Inc.

Segment Profitability

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Total income from operations $ 112,390 $ 129,039

(1) In addition to the costs included in Alphabet-level activities, hedging gains (losses) related to revenue were $236 million and $211 million in 2023 and 2024 , respectively.

For the years ended December 31, 2023 and 2024 , Alphabet-level activities included substantially all of the charges related to employee severance and our office spa ce charges.

Alphabet Inc.

(1) Alphabet-level activities primarily reflect expenses related to our shared AI research and development.

Google Services

Google Services operating income increased $18.1 billion from 2024 to 2025.

The increase in operating income was primarily driven by an increase in revenues, partially offset by increases in content acquisition costs and TAC.

Additionally, a reduction in employee compensation expenses contributed to the increase in operating income.

The increase in operating income was primarily driven by an increase in revenues, partially offset by an increase in expenses related to legal and other matters, TAC, and content acquisition costs.

Google Cloud operating income increased $7.8 billion from 2024 to 2025.

The increase in operating income was primarily driven by an increase in revenues, partially offset by increases in usage costs for technical infrastructure as well as employee compensation expenses, largely driven by headcount growth.

Other Bets operating loss increased $349 million from 2023 to 2024.

The increase in operating loss was primarily due to an increase in expenses, largely driven by employee compensation expenses in addition to a combination of factors, none of which were individually significant.

The increase in employee compensation expenses was primarily as a result of the reduction in valuation-based compensation liabilities related to certain Other Bets recognized in the prior year comparable period.

The increase in operating income was primarily driven by an increase in revenues, partially offset by increases in usage costs for technical infrastructure and employee compensation expenses.

Other Bets operating loss increased $3.1 billion from 2024 to 2025.

The increase in operating loss was primarily driven by an increase in employee compensation expenses largely due to an increase in a valuation-based compensation charge related to Waymo.

Other Income (Expense), Net

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Gain (loss) on equity securities, net 3,714 24,080

Performance fees 257 218

Income (loss) and impairment from equity method investments, net (188) 281

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Other income (expense), net $ 7,425 $ 29,787

OI&E, net increased $6.0 billion from 2023 to 2024 primarily due to an increase in net gains on equity securities and a decrease in net losses on foreign currency exchange.

The net gains on equity securities were primarily due to net unrealized gains on non-marketable equity securities driven by fair value adjustments related to observable transactions, partially offset by a decrease in net unrealized gains on marketable equity securities due to market-driven changes.

Foreign currency exchange net losses decreased compared to the prior year primarily due to prior year losses in unhedged currencies.

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.

OI&E, net increased $22.4 billion from 2024 to 2025, primarily due to increases in net unrealized gains on equity securities resulting from fair value adjustments on non-marketable equity securities.

For additional information, see Note 3 and Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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Provision for Income Taxes

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The effective tax rate increased from 2024 to 2025.

This increase was primarily due to a one-time adjustment for tax rule changes issued by the Internal Revenue Service (IRS) that affected the 2023 rate 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

Alphabet Inc.

Additionally, a decrease in the 2024 U.S.

federal Foreign Derived Intangible Income tax deduction contributed to an increase in the effective tax rate.

These factors were partially offset by an increase in stock-based compensation-related tax benefits in 2024.

This increase was primarily due to a decrease in the US Federal Foreign Derived Intangible Income tax deduction, a non-deductible EC fine and legal settlement in the US, partially offset by changes in prior period tax positions.

Changes to US tax law enacted on July 4, 2025, allow for immediate expensing of domestic research and experimentation costs, accelerated depreciation on eligible capital expenditures, and other tax law changes impacting 2025 with certain changes effective in 2026.

These changes are reflected in our results for the year ended December 31, 2025 .

The OECD is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%.

Some countries have already implemented the legislation effective January 1, 2024, and we expect others to follow, however this did not have a material effect on our income tax provision for the 2024 fiscal year.

Some countries have already implemented the legislation effective January 1, 2024.

This did not have a material effect on our income tax provision for the 2025 fiscal year.

In January 2026, the OECD introduced new guidance including a "Side-by-Side Safe Harbor" which, if elected, exempts U.S.

domestic operations from being taxed by global minimum tax rules.

However, it does not exempt foreign subsidiaries from local minimum tax requirements if implemented.

As more countries enact these global minimum tax rules, our effective tax rate and cash tax payments could increase.

Financial Condition

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We regularly evaluate our cash and capital structure, including the size, pace, and form of capital return to stockholders.

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

The following table presents cash flows (in millions):

Year Ended December 31,

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Cash Provided by Operating Activities

Our largest source of cash provided by operations are advertising revenues generated by Google Search & other properties, Google Network properties, and YouTube properties.

Our largest source of cash provided by operations are advertising revenues generated by Google Search & other properties, YouTube properties, and Google Network properties.

In Google Services, we also generate cash through consumer subscriptions, the sale of apps and in-app purchases, and devices.

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Other uses of cash from operating activities include payments to suppliers for devices, to tax authorities for income taxes, and other general corporate expenditures.

Alphabet Inc.

Net cash provided by operating activities increased from 2024 to 2025 due to an increase in cash received from customers, partially offset by an increase in cash payments for cost of revenues and operating expenses.

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Cash used in investing activities consists primarily of purchases of marketable and non-marketable securities, purchases of property and equipment, and payments for acquisitions.

Net cash used in investing activities increased from 2023 to 2024 primarily due to an increase in purchases of property and equipment and purchases of marketable securities, partially offset by increases in maturities and sales of marketable securities.

The increase in purchases of property and equipment is primarily driven by investments in technical infrastructure.

Net cash used in investing activities increased from 2024 to 2025, primarily due to an increase in purchases of property and equipment, driven by investments in technical infrastructure, and a decrease in maturities and sales of marketable securities.

Cash Used in Financing Activities

Cash provided by financing activities consists primarily of proceeds from issuance of debt and proceeds from the sale of interests in consolidated entities.

Cash used in financing activities consists primarily of repurchases of stock, net payments related to stock-based award activities, payment of dividends, and repayments of debt.

Net cash used in financing activities increased from 2023 to 2024 due to dividend payments and net payments related to stock-based award activities, partially offset by an increase in proceeds from issuance of debt, net of repayments.

Alphabet Inc.

Cash used in financing activities consists primarily of repurchases of stock, repayments of debt, net payments related to stock-based award activities, and dividend payments.

Net cash used in financing activities decreased from 2024 to 2025 due to an increase in proceeds from issuance of debt and a decrease in repurchases of stock, partially offset by repayments of debt.

Liquidity and Material Cash Requirements

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

• technical infrastructure, which consists of our investments in servers and network equipment for computing, storage, and networking requirements for ongoing business activities, including AI, and data center land and building construction;

• office facilities, ground-up development projects, and building improvements (also referred to as "fit-outs").

Assets not yet in service are those that are not ready for our intended use, including assets in the process of construction or assembly, and consists primarily of technical infrastructure.

• technical infrastructure, which consists of our investments in servers and network equipment, data center land, and building construction and improvements;

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

Assets not yet in service are those that are not ready for their intended use, including assets in the process of construction or assembly, and consist primarily of technical infrastructure.

The time frame from date of purchase to placement in service of these assets may extend from months to years.

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During the years ended December 31, 2024 and 2025, we spent $52.5 billion and $91.4 billion on capital expenditures, respectively.

We expect to increase, relative to 2024, our i nvestment in our technical infrastructure, including servers, network equipment, and data centers, to support the growth of our business and our long-term initiatives, in particular in support of AI products and services.

Depreciation of our property and equipment commences when the deployment of such assets are completed and are ready for our intended use.

In 2026, we expect to significantly increase , relative to 2025, our i nvestment in our technical infrastructure, including servers and network equipment, and data centers.

Depreciation of our property and equipment commences when such assets are ready for their intended use.

For the years ended December 31, 2024 and 2025, our depreciation on property and equipment was $15.3 billion and $21.1 billion, respectively.

For the years ended December 31, 2023 and 2024, we recognized additional operating lease assets of $2.9 billion and $2.5 billion, and additional finance lease assets of $564 million and $313 million, respectively.

As of December 31, 2024, the amount of total future lease payments under operating leases, which had a weighted average remaining lease term of 7.8 years, was $17.0 billion, of which $3.2 billion is short-term, and total future lease payments under finance leases, which had a weighted average remaining lease term of 10.4 years, was $1.9 billion, of which $257 million is short-term.

As of December 31, 2024, we have entered into leases that have not yet commenced with future short-term and long-term 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 of one to 25 years.

For the years ended December 31, 2023 and 2024, our operating lease expenses (including variable lease costs) were $4.5 billion and $4.7 billion, respectively.

Finance lease costs were $504 million and $444 million for the years ended December 31, 2023 and 2024, respectively.

For additional information, see Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

We have a short-term debt financing program of up to $10.0 billion through the issuance of commercial paper.

Net proceeds from this program are used for general corporate purposes.

As of December 31, 2024, we ha d $2.3 billion of short-term commercial paper outstanding.

As of December 31, 2024, we had senior unsecured notes outstanding with a total carrying value of $11.9 billion with short-term and long-term future interest payments of $197 million and $3.4 billion, respectively.

As of December 31, 2025, the amount of total undiscounted future lease payments under operating leases was $18.3 billion, of which $3.3 billion is short-term, and total undiscounted future lease payments under finance leases was $2.9 billion, of which $491 million is short-term.

As of December 31, 2025, we have entered into leases primarily related to data centers that have not yet commenced with short-term and long-term future lease payments of $5.8 billion and $52.7 billion, respectively.

These leases will commence between 2026 and 2031 with non-cancelable lease terms primarily between one and 25 years.

In January 2026, we executed a power purchase agreement which we expect to be accounted for as a lease resulting in future payments depending on certain agreement terms of $9.9 billion between 2027 and 2047.

If certain contractual conditions for the project are not met, we would instead make a one-time payment of approximately $3.5 billion and assume ownership of the power generating assets.

Alphabet Inc.

For additional information on leases, see Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

As of December 31, 2025, we had senior unsecured notes outstanding with a total carrying value of $48.5 billion, of which $2.0 billion was short-term.

The associated short-term and long-term future interest payments were $1.8 billion and $35.7 billion, respectively.

During 2025, we issued $22.5 billion of US dollar-denominated senior unsecured notes and €13.25 billion of euro-denominated senior unsecured notes for general corporate purposes, comprised of the following:

We issued $5.0 billion of US dollar-denominated fixed-rate senior unsecured notes with a weighted-average coupon rate of 4.89%, and a weighted-average maturity of approximately 24 years.

We also issued €6.75 billion of euro-denominated fixed-rate senior unsecured notes with a weighted-average coupon rate of 3.31%, and a weighted-average maturity of approximately 14 years.

• November 2025 :

We issued $500 million of US dollar-denominated floating-rate senior unsecured notes and $17.0 billion of US dollar-denominated fixed-rate senior unsecured notes with a weighted-average coupon rate of 4.92% and a weighted-average maturity of approximately 20 years.

We also issued €6.5 billion of euro-denominated fixed-rate senior unsecured notes with a weighted-average coupon rate of 3.44% and a weighted-average maturity of approximately 16 years.

As of December 31, 2025, we had $10.0 billion of revolving credit facilities, $4.0 billion expiring in April 2026 and $6.0 billion expiring in April 2030 .

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 goals .

No amounts have been borrowed under the credit facilities.

We also have a commercial paper program of up to $25.0 billion, which is used for general corporate purposes.

As of December 31, 2025, we had no commercial paper outstanding.

For additional information, see Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Alphabet Inc.

We primarily utilize contract manufacturers for the assembly of our servers used in our technical infrastructure and devices we sell.

We have agreements where we may purchase components directly from suppliers and then supply these components to contract manufacturers for use in the assembly of the servers and devices.

Certain of these arrangements result in a portion of the cash received from and paid to the contract manufacturers to be presented as financing activities in the Consolidated Statements of Cash Flows included in Item 8 of this Annual Report on Form 10-K.

We use contract manufacturers for our technical infrastructure and device assembly and may supply them with components purchased directly from suppliers.

Certain of these arrangements result in a portion of the cash received from and paid to contract manufacturers to be presented as financing activities on the Consolidated Statements of Cash Flows included in Item 8 of this Annual Report on Form 10-K.

Share Repurchase Program

During 2025, we repurchased and subsequently retired 240 million shares for $45.4 billion.

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.

In April 2024, the company's Board of Directors authorized a $70.0 billion share repurchase program for its Class A and Class C shares.

In April 2025, the company's Board of Directors authorized an additional $70.0 billion share repurchase program for its Class A and Class C shares.

As of December 31, 2025, $69.5 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.

For additional information, see Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Dividend Program

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.

European Commission Fines

In 2017, 2018, and 2019, the European Commission (EC) announced decisions that certain actions taken by Google infringed European competition law and imposed fines of €2.4 billion ($2.7 billion as of June 27, 2017), €4.3 billion ($5.1 billion as of June 30, 2018), and €1.5 billion ($1.7 billion as of March 20, 2019), respectively.

In September 2022, the General Court affirmed the EC decision but reduced the 2018 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 September 2024, the European Court of Justice rejected our appeal of the 2017 decision and upheld the €2.4 billion fine.

In the third quarter of 2024, we made a cash payment of $3.0 billion for the 2017 shopping fine.

In September 2024, the EU's General Court overturned the 2019 decision and annulled the €1.5 billion fine.

The EC has appealed the General Court's decision to the European Court of Justice.

We included the outstanding EC fines, including any under appeal, in accrued expenses and other current liabilities on our Consolidated Balance Sheets.

During the year ended December 31, 2025, total cash dividends were $4.8 billion for Class A, $703 million for Class B, and $4.5 billion for Class C shares, respectively.

In April 2025, the company's Board of Directors increased the quarterly cash dividend by 5% to $0.21 per share of outstanding Class A, Class B, and Class C shares.

The company has declared a quarterly cash dividend in the current quarter, and 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.

Accrued Legal and Regulatory

As of December 31, 2025, we had short-term accrued legal and regulatory fines and settlements of $15.6 billion.

This amount primarily included EC fines, in addition to accruals related to other legal matters and regulatory fines and settlements.

For additional information, see Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

As of December 31, 2024 , we had income taxes payable of $2.7 billion related to a one-time transition tax payable incurred as a result of the U.S.

Tax Cuts and Jobs Act, which is due in 2025.

We also had long-term taxes payable of $8.8 billion primarily related to uncertain tax positions as of December 31, 2024 .

Purchase Commitments and Other Contractual Obligations

As of December 31, 2024, we had material purchase commitments and other contractual obligations of $55.4 billion, of which $32.5 billion was short-term.

These amounts primarily consist of purchase orders for certain technical infrastructure as well as the non-cancelable portion or the minimum cancellation fee in certain agreements related to commitments to purchase licenses, including content licenses, inventory, and network capacity.

For those agreements

Alphabet Inc.

with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of December 31, 2024.

As of December 31, 2025 , we had long-term income taxes payable of $9.5 billion primarily related to unrecognized tax benefits.

The timing and amount of any payment related to these unrecognized tax benefits are uncertain and cannot be estimated.

Purchase Commitments and Other Contractual Obligations

We have material purchase commitments and other contractual obligations primarily related to energy take-or-pay contracts, licenses (including content licenses), and technical infrastructure and inventory orders.

As of December 31, 2025, the total for these commitments was $149.1 billion, of which $113.0 billion was short-term, mostly related to technical infrastructure and inventory orders .

These amounts reflect commitments and obligations through open purchase orders as well as the non-cancelable portion or the minimum cancellation fee in certain agreements.

For those agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of December 31, 2025.

In certain instances, the amount of our contractual obligations may change based on the expected timing of order fulfillment from our suppliers.

For more information related to our content licenses, see Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

In addition, we regularly enter into multi-year, non-cancellable agreements to purchase renewable energy and energy attributes, such as renewable energy certificates.

These agreements do not include a minimum dollar commitment.

For additional information related to our content licenses, see Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

As of December 31, 2025, we provided backstops in the form of financial guarantees and credit derivatives with maximum potential amount of future payments of $5.7 billion and $16.9 billion, respectively.

For additional information on credit derivatives and financial guarantees, see Note 3 and Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

In addition, we regularly enter into multi-year, non-cancellable power purchase agreements with third-party suppliers that do not include a minimum dollar commitment.

The amounts to be paid under these agreements are based on the actual volumes to be generated and are not readily determinable.

We may experience increases in the costs associated with our purchase commitments and other contractual obligations as a result of ongoing developments surrounding international trade.

For details on risks related to our manufacturing and supply chain and other risks, refer to Part 1, Item 1A, "Risk Factors" of this Annual Report on Form 10-K.

Pending Acquisitions

In March 2025, we entered into a definitive agreement to acquire Wiz, Inc.

("Wiz"), a leading cloud security platform, for $32.0 billion, subject to closing adjustments, in an all-cash transaction.

The acquisition of Wiz is expected to close in 2026, subject to customary closing conditions, including the receipt of regulatory approvals.

In December 2025, we entered into a definitive agreement to acquire Intersect, which provides data center and energy infrastructure solutions, for $4.8 billion in cash, plus the assumption of debt.

The acquisition of Intersect is expected to close in the first half of 2026, subject to customary closing conditions.

For additional information, see Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Critical Accounting Estimates

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We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

We have reviewed our critical accounting estimates with the Audit and Compliance Committee of our Board of Directors.

We have reviewed our critical accounting estimates with the Audit Committee of our Board of Directors.

For a summary of significant accounting policies and the effect on our financial statements, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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These adjustments require quantitative assessments of the fair value of our securities, which may require the use of unobservable inputs.

Alphabet Inc.

Adjustments are determined primarily based on a market approach as of the transaction date and involve the use of estimates using the best information available, which may include cash flow projections or other available market data.

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When the quantitative remeasurements of fair value indicate an impairment exists, we write down the investment to its current fair value.

We also have compensation arrangements with payouts based on realized returns from certain investments, i.e.

performance fees.

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.

Property and Equipment

We assess the reasonableness of the useful lives of our property and equipment periodically as well as when other changes occur, such as when there are changes to ongoing business operations, changes in the planned use and utilization of assets, or technological advancements, that could indicate a change in the period over which we expect to benefit from the asset.

We are subject to income taxes in the U.S.

and foreign jurisdictions.

We assess the reasonableness of the useful lives of our property and equipment periodically or when events indicate a change is necessary.

To determine the useful lives of our technical infrastructure, we rely on multiple inputs, including historical asset performance, expected technology advancements, and our future infrastructure deployment plans.

Any change in the estimated useful lives is recognized on a prospective basis.

We are subject to income taxes in the US and foreign jurisdictions.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.

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Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such

Alphabet Inc.

differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made.

The provision for income taxes includes the effect of reserve provisions and changes to reserves as well as the related net interest and penalties.

In addition, we are subject to the continuous examination of our income tax returns by the IRS and other tax authorities which may assert assessments against us.

In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (IRS) and other tax authorities which may assert assessments against us.

We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes.

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If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

We evaluate, on a regular basis, 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 and changes to our disclosures.

Significant judgment is required to determine both the likelihood and the estimated amount of a loss related to such matters.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis