What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-07-23 compared with 2026-04-30 · 132 added, 104 removed, 294 unchanged (45% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Please read the following discussion and analysis of our financial condition and results of operations together with "Note about Forward-Looking Statements" and our consolidated financial statements and related notes included under Item 1 of this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, including Part I, Item 1A "Risk Factors," as updated in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Please read the following discussion and analysis of our financial condition and results of operations together with "Note about Forward-Looking Statements" and our consolidated financial statements and related notes included under Item 1 of this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, including Part I, Item 1A "Risk Factors," as updated in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, and in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Understanding Alphabet’s Financial Results

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cloud-based solutions that provide enterprise customers of all sizes with infrastructure, platform services, and applications;

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

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

For additional information on how we recognize revenue, see Note 1 of the Notes to Consolidated Financial Statements included in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

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• 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.

• Product sales, primarily the sale of TPU systems.

• 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, demand, and supply availability.

have signed a limited number of agreements to supply Tensor Processing Units (TPU) hardware to customers who require or provide on-premises infrastructure for specialized, high-scale workloads.

We expect to begin recognizing revenues from these agreements later in 2026, with the significant majority to be recognized in 2027.

We have signed a limited number of agreements to supply TPU systems to customers who require or provide on-premises infrastructure for specialized, high-scale workloads.

In the second quarter of 2026, we began recognizing revenues from these agreements, with the significant majority to be recognized in 2027.

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

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◦ 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;

◦ inventory and other costs related to the devices and TPU system hardware we sell;

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

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Other income (expense), net $ 2,662 $ 97,983 $ 95,321 3,581 %

$ 34,540 $ 62,578 $ 28,038 81 %

Diluted net income per share (1)

Net income available to common stockholders $ 28,196 $ 112,107 83,911 298 %

Diluted net income per common share (1)

$ 2.31 $ 9.11 $ 6.80 294 %

(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 1 of this Quarterly Report on Form 10-Q.

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

• Revenues were $119.8 billion, an increase of 24% year over year, primarily driven by an increase in Google Services revenues of $12.0 billion, or 15%, and an increase in Google Cloud revenues of $11.1 billion, or 82%.

• Cost of revenues was $41.3 billion, an increase of 14% year over year, primarily driven by increases in depreciation expense, TAC, content acquisition costs, and employee compensation expenses, partially offset by an accrual reversal for digital services tax related to the recently repealed law in Canada.

• Cost of revenues was $45.9 billion, an increase of 18% year over year, primarily driven by increases in depreciation expense, TAC, inventory and other costs, content acquisition costs, and other technical infrastructure operations costs.

• Operating expenses were $33.1 billion, an increase of 27% year over year, primarily driven by increases in employee compensation expenses, advertising and promotional activities, and depreciation expense.

Other Information:

• Google Cloud has entered into a limited number of agreements to supply multiple gigawatts of TPU hardware to customers who require or provide on-premises infrastructure for specialized, high-scale workloads.

Revenues for these transactions are included in our backlog as of March 31, 2026.

We expect to begin recognizing revenues from these agreements later in 2026, with the significant majority to be recognized in 2027.

In connection with certain of these agreements, we have agreed to provide credit backstops to support third-party data centers and power infrastructure.

• In March 2026, we committed to a $40.0 billion investment in a private company consisting of a $10.0 billion capital commitment and $30.0 billion of future capital funding contingent upon the achievement of specified operational and financial milestones.

• On March 11, 2026, we completed our acquisition of Wiz for $29.5 billion, after purchase price adjustments and excluding post combination compensation arrangements.

Following the close of the acquisition, the financial results are included in our consolidated financial statements within the Google Cloud segment.

For additional information on the purchase price allocation, see Note 8 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

• On March 10, 2026, we completed our acquisition of Intersect for $5.9 billion, after purchase price adjustments.

Following the close of the acquisition, the financial results are included in our consolidated financial statements and are allocated to our segments.

For additional information on the purchase price allocation, see Note 8 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

• In March 2026, we entered into a definitive agreement to contribute our ownership interest in GFiber into a newly formed entity.

Upon closing, we expect to receive $1.5 billion in cash, a $2.0 billion note receivable, and a 49.99% equity interest.

The transaction is expected to close in late 2026.

For additional information on the pending divestiture, see Note 8 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

• In February 2026, Waymo received $16.0 billion in funding, the significant majority of which was funded by Alphabet.

• In the first quarter of 2026, we issued senior unsecured notes for net proceeds of $31.1 billion, to be used for general corporate purposes.

• OI&E of $37.7 billion for the three months ended March 31, 2026 included net gains on equity securities of $36.9 billion, primarily related to unrealized gains on our non-marketable equity securities.

• Operating cash flow was $45.8 billion for the three months ended March 31, 2026.

• Capital expenditures, which primarily reflected investments in technical infrastructure, were $35.7 billion for the three months ended March 31, 2026.

• As of March 31, 2026, we had 194,668 employees.

• In June 2026, we issued a combination of Class A stock and Class C stock and mandatory convertible preferred stock for aggregate net proceeds of $49.6 billion, to be used for general corporate purposes, including capital expenditures to scale AI infrastructure and global compute.

Additionally, we entered into an equity distribution agreement with certain sales agents to sell up to $40.0 billion of our Class A stock and Class C stock from time to time through an ATM Program.

The proceeds of the ATM Program are primarily intended to be used to meet tax obligations associated with employee equity grants.

As of June 30, 2026, we have not sold any shares under the ATM Program.

For additional information regarding the equity capital raise and related capped call transactions, see Note 11 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

• On July 2, 2026, the EC upheld its 2018 decision that certain provisions in Google's Android-related distribution agreements infringed European antitrust laws.

The court imposed fine and interest of $5.2 billion, which was previously accrued, was paid in July 2026.

• In the second quarter of 2026, we issued senior unsecured notes for net proceeds of $20.3 billion, to be used for general corporate purposes.

• OI&E of $98.0 billion for the three months ended June 30, 2026 included net gains on equity securities of $99.0 billion, primarily related to unrealized gains in our equity securities portfolio from SpaceX and a private company.

• In the second quarter of 2026, we accrued $2.1 billion in legal charges related to a Stockholm Patent and Market Court decision regarding a private action brought against Google by PriceRunner (a subsidiary of Klarna).

The principal damages of $1.5 billion were accrued in general and administrative expenses in our Google Services segment, and accrued interest and costs of $581 million was recognized in other income (expense), net.

• Operating cash flow was $39.1 billion for the three months ended June 30, 2026.

• Capital expenditures, which primarily reflected investments in technical infrastructure, were $44.9 billion for the three months ended June 30, 2026.

• As of June 30, 2026, we had 198,933 employees.

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

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The following table presents revenues by type (in millions):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

Google Search & other $ 54,190 $ 63,271 $ 104,892 $ 123,670

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Google Search & other

Google Search & other revenues increased $9.7 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026.

Google Search & other revenues increased $9.1 billion and $18.8 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026.

The overall growth was driven by interrelated factors including increases in search queries resulting from growth in user adoption and usage on mobile devices;

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and improvements we have made in ad formats and delivery.

Additionally, Google Search & other revenues were favorably affected by changes in foreign currency exchange rates for the three months ended March 31, 2026.

YouTube ads revenues increased $956 million from the three months ended March 31, 2025 to the three months ended March 31, 2026.

YouTube ads revenues increased $1.3 billion and $2.2 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026.

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 $285 million from the three months ended March 31, 2025 to the three months ended March 31, 2026, primarily due to a decrease in AdSense revenues, partially offset by an increase in AdMob revenues.

Google Network revenues decreased $51 million and $336 million from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026, primarily due to a decrease in AdSense revenues, partially offset by an increase in AdMob revenues.

Monetization Metrics

The following table presents changes in monetization metrics for Google Search & other revenues (paid clicks and cost-per-click) and Google Network revenues (impressions and cost-per-impression), expressed as a percentage, from the three months ended March 31, 2025 to the three months ended March 31, 2026:

The following table presents changes in monetization metrics for Google Search & other revenues (paid clicks and cost-per-click) and Google Network revenues (impressions and cost-per-impression), expressed as a percentage, from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026:

Three Months Ended Six Months Ended

June 30, 2026 June 30, 2026

Google Search & other

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Google Subscriptions, Platforms, and Devices

Google subscriptions, platforms, and devices revenues increased $2.0 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026.

Google subscriptions, platforms, and devices revenues increased $1.7 billion and $3.7 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026.

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.

Additionally, Google subscriptions, platforms, and devices revenues were favorably affected by changes in foreign currency exchange rates for the three months ended March 31, 2026.

Google Cloud revenues increased $7.8 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026 primarily driven by growth in Google Cloud Platform largely from infrastructure and platform services.

Google Cloud revenues increased $11.1 billion and $18.9 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026 primarily driven by growth in Google Cloud Platform largely from infrastructure and platform services.

In addition, in the second quarter of 2026, we began recognizing revenue from the sale of TPU systems.

Revenues by Geography

The following table presents revenues by geography as a percentage of revenues, determined based on the addresses of our customers:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

United States 48 % 51 % 48 % 50 %

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The following table presents cost of revenues, including TAC (in millions, except percentages):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

TAC $ 14,705 $ 16,179 $ 28,453 $ 31,407

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Total cost of revenues as a percentage of revenues 41 % 38 % 40 % 38 %

Cost of revenues increased $4.9 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026 due to an increase in other cost of revenues and TAC of $3.4 billion and $1.5 billion, respectively.

The increase in TAC from the three months ended March 31, 2025 to the three months ended March 31, 2026 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 20.6% to 19.7% from the three months ended March 31, 2025 to the three months ended March 31, 2026, primarily due to a revenue mix shift from Google Network properties to Google Search & other properties.

The TAC rates on Google Search & other revenues was substantially consistent from the three months ended March 31, 2025 to the three months ended March 31, 2026.

The TAC rates on Google Network revenues reflected a slight increase from the three months ended March 31, 2025 to the three months ended March 31, 2026 due to a combination of factors, none of which were individually significant.

The increase in other cost of revenues from the three months ended March 31, 2025 to the three months ended March 31, 2026 was primarily due to increases in depreciation expense, content acquisition costs, largely for

YouTube, and employee compensation expenses, partially offset by an accrual reversal for digital services tax related to the recently repealed law in Canada.

Cost of revenues increased $6.9 billion from the three months ended June 30, 2025 to the three months ended June 30, 2026 due to an increase in other cost of revenues and TAC of $5.4 billion and $1.5 billion, respectively.

Cost of revenues increased $11.8 billion from the six months ended June 30, 2025 to the six months ended June 30, 2026 due to an increase in other cost of revenues and TAC of $8.9 billion and $3.0 billion, respectively.

The increase in TAC from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026 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 20.6% to 19.8% from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026, primarily due to a revenue mix shift from Google Network properties to Google Search & other properties.

The TAC rate on Google Search & other revenues was substantially consistent from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026.

The TAC rates on Google Network revenues reflected a slight increase from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026 due to a combination of factors, none of which were individually significant.

The increase in other cost of revenues from the three months ended June 30, 2025 to the three months ended June 30, 2026 was primarily due to increases in depreciation expense, inventory and other costs, content acquisition costs, largely for YouTube, and other technical infrastructure operations costs.

The increase in other cost of revenues from the six months ended June 30, 2025 to the six months ended June 30, 2026 was primarily due to increases in depreciation expense, content acquisition costs, largely for YouTube, inventory and other costs, employee compensation expenses, and other technical infrastructure operation costs.

Research and Development

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

Research and development expenses $ 13,808 $ 18,219 $ 27,364 $ 35,251

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

Research and development expenses increased $3.5 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026, primarily driven by increases in employee compensation expenses of $2.5 billion and depreciation expense of $506 million.

Research and development expenses increased $4.4 billion and $7.9 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026, primarily driven by increases in employee compensation expenses of $2.9 billion and $5.3 billion, as well as depreciation expense of $592 million and $1.1 billion, respectively.

Sales and Marketing

The following table presents sales and marketing expenses (in millions, except percentages):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

Sales and marketing expenses $ 7,101 $ 8,403 $ 13,273 $ 16,009

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

Sales and marketing expenses increased $1.4 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026, primarily driven by increases in advertising and promotional activities of $600 million, employee compensation expenses of $404 million, and office space impairment charges of $300 million.

Sales and marketing expenses increased $1.3 billion and $2.7 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026, primarily driven by increases in advertising and promotional activities of $764 million and $1.4 billion, as well as employee compensation expenses of $402 million and $806 million, respectively.

General and Administrative

The following table presents general and administrative expenses (in millions, except percentages):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

General and administrative expenses $ 5,209 $ 6,461 $ 8,748 $ 10,752

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

General and administrative expenses increased $752 million from the three months ended March 31, 2025 to the three months ended March 31, 2026, primarily driven by increases in employee compensation expenses of $272 million, expenses related to legal and other matters of $208 million, and a combination of other factors, none of which were individually significant.

General and administrative expenses increased $1.3 billion from the three months ended June 30, 2025 to the three months ended June 30, 2026, primarily driven by increases in employee compensation expenses of $279 million, non-income tax expenses of $258 million, expenses related to legal and other matters of $231 million which included a $1.5 billion charge related to a certain legal matter, and a combination of other factors, none of which were individually significant.

General and administrative expenses increased $2.0 billion from the six months ended June 30, 2025 to the six months ended June 30, 2026, primarily driven by increases in employee compensation expenses of $551 million, expenses related to legal and other matters of $439 million which included a $1.5 billion charge related to a certain legal matter, non-income tax expenses of $367 million, and a combination of other factors, none of which were individually significant.

Segment Profitability

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The following table presents segment operating income (loss) (in millions):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

Operating income (loss):

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Google Services

Google Services operating income increased $7.9 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026.

Google Services operating income increased $6.5 billion and $14.4 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026, respectively.

The increase in operating income was primarily driven by an increase in revenues, partially offset by an increase in TAC.

Google Cloud operating income increased $4.4 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026.

Google Cloud operating income increased $6.0 billion and $10.4 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026, respectively.

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 $874 million from the three months ended March 31, 2025 to the three months ended March 31, 2026.

Other Bets operating loss increased $553 million from the three months ended June 30, 2025 to the three months ended June 30, 2026.

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

Other Bets operating loss increased $1.4 billion from the six months ended June 30, 2025 to the six months ended June 30, 2026.

The increase in operating loss was primarily driven by increases in employee compensation expenses, third-party services fees, and a combination of other factors, none of which were individually significant.

Other Income (Expense), Net

The following table presents OI&E (in millions):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

Interest income $ 1,050 $ 1,430 $ 2,051 $ 2,811

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Other income (expense), net $ 2,662 $ 97,983 $ 13,845 $ 135,699

OI&E, net increased $26.5 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026, primarily due to increases in net unrealized gains on equity securities resulting from fair value adjustments on non-marketable equity securities.

OI&E, net increased $95.3 billion and $121.9 billion from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026, respectively, primarily related to unrealized gains in our equity securities portfolio from SpaceX and a private company.

For additional information, see Note 3 and Note 7 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

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The following table presents provision for income taxes (in millions, except effective tax rate):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2026 2025 2026

Income before provision for income taxes $ 33,933 $ 138,753 $ 75,722 $ 216,165

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Effective tax rate 16.9 % 19.1 % 17.1 % 19.1 %

The effective tax rate increased from the three months ended March 31, 2025 to the three months ended March 31, 2026.

This increase was primarily due to an increase in acquisition-related tax integration costs, partially offset by an increase in SBC-related tax benefits and a discrete tax benefit in connection with the deconsolidation of one of the Bets.

The effective tax rate increased from the three and six months ended June 30, 2025 to the three and six months ended June 30, 2026.

The increase is primarily attributed to higher pre-tax earnings from unrealized gains on equity securities that are deferred tax liabilities at the statutory tax rate.

The Organization for Economic Cooperation and Development (OECD) published model rules for the implementation of a minimum global effective tax rate of 15%.

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

These rules did not have a material effect on our income tax provision for the three months ended March 31, 2026.

These rules did not have a material effect on our income tax provision for the six months ended June 30, 2026.

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

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Cash, Cash Equivalents, and Marketable Securities

As of March 31, 2026, we had $126.8 billion in cash, cash equivalents, and short-term marketable securities.

As of June 30, 2026, we had $242.5 billion in cash, cash equivalents, and short-term marketable securities.

Cash equivalents and marketable securities are comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities, and marketable equity securities.

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The following table presents cash flows (in millions):

Three Months Ended

Six Months Ended

Net cash provided by operating activities $ 63,897 $ 84,859

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

In Google Cloud, we generate cash through consumption-based fees and subscriptions for infrastructure, platform, applications, and other cloud services.

In Google Cloud, we generate cash through consumption-based fees and subscriptions for infrastructure, platform, applications, and other cloud services, as well as from product sales.

Our primary uses of cash from operating activities include payments to distribution and Google Network partners, to employees for compensation, and to content providers.

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

Net cash provided by operating activities increased from the three months ended March 31, 2025 to the three months ended March 31, 2026 due to an increase in cash received from customers, partially offset by an increase in cash payments for cost of revenues and operating expenses.

Other uses of cash from operating activities

include payments to suppliers for inventory, to tax authorities for income taxes, and other general corporate expenditures.

Net cash provided by operating activities increased from the six months ended June 30, 2025 to the six months ended June 30, 2026 due to an increase in cash received from customers, partially offset by an increase in cash payments for cost of revenues and operating expenses.

Cash Used in Investing Activities

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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 the three months ended March 31, 2025 to the three months ended March 31, 2026 primarily due to an increase in payments for acquisitions, an increase in purchases of property and equipment, driven by investments in technical infrastructure, and an increase in purchases of marketable securities, partially offset by an increase in maturities and sales of marketable securities.

Net cash used in investing activities increased from the six months ended June 30, 2025 to the six months ended June 30, 2026 primarily due to an increase in purchases of property and equipment, driven by investments in technical infrastructure, an increase in purchases of marketable securities, and an increase in payments for acquisitions.

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

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

Net cash provided by financing activities for the three months ended March 31, 2026 compared to net cash used in financing activities for the three months ended March 31, 2025 was primarily due to an increase in proceeds from issuance of debt and a decrease in repurchases of stock.

Net cash provided by financing activities for the six months ended June 30, 2026 compared to net cash used in financing activities for the six months ended June 30, 2025 was primarily due to the issuance of common stock, a decrease in repurchases of stock, an increase in the issuance of debt, and the issuance of mandatory convertible preferred stock.

Liquidity and Material Cash Requirements

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For example, our data center construction projects are generally multi-year projects with multiple phases, where we acquire land and buildings, construct buildings, and secure and install servers and network equipment.

During the three months ended March 31, 2025 and 2026, we spent $17.2 billion and $35.7 billion on capital expenditures, respectively.

During the six months ended June 30, 2025 and 2026, we spent $39.6 billion and $80.6 billion on capital expenditures, respectively.

In 2026, we expect to significantly increase, relative to 2025, our investment 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 three months ended March 31, 2025 and 2026, our depreciation on property and equipment was $4.5 billion and $6.5 billion, respectively.

As of March 31, 2026, the amount of total undiscounted future lease payments under operating and finance leases was $18.8 billion and $2.6 billion, respectively.

As of March 31, 2026, we have entered into leases primarily related to data centers that have not yet commenced with future lease payments of $75.6 billion.

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

For the six months ended June 30, 2025 and 2026, our depreciation on property and equipment was $9.5 billion and $13.6 billion, respectively.

As of June 30, 2026, the amount of total undiscounted future lease payments under operating and finance leases was $21.3 billion and $2.9 billion, respectively.

As of June 30, 2026, we have entered into leases, primarily related to data centers, that have not yet commenced with future lease payments of $85.2 billion.

These leases will commence between 2026 and 2031 with non-cancelable lease terms between one and 26 years.

Additionally, in June 2026, we entered into a short-term lease agreement with a non-cancelable commitment of approximately $5.8 billion, which will commence in the third quarter of 2026.

For additional information on leases, see Note 4 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

As of March 31, 2026, we had senior unsecured notes outstanding with a total carrying value of $79.1 billion.

During the first quarter of 2026, we issued fixed-rate senior unsecured notes consisting of:

$20.0 billion US dollar-denominated notes with a weighted-average coupon rate of 4.80% and a weighted-average maturity of 15 years;

£5.5 billion Sterling-denominated notes with a weighted-average coupon rate of 5.31% and a weighted-average maturity of 31 years;

and CHF3.1 billion Swiss Franc-denominated notes with a weighted-average coupon rate of 1.06% and a weighted-average maturity of 10 years.

As of March 31, 2026, we had $11.7 billion of credit facilities expiring at various dates through April 2030, of which $1.2 billion was outstanding.

As of June 30, 2026, we had long-term debt outstanding with a total carrying value of $98.2 billion .

During the six months ended June 30, 2026, we issued $20.0 billion of U.S.

dollar-denominated fixed-rate senior unsecured notes and $31.8 billion of foreign currency-denominated fixed-rate senior unsecured notes for general corporate purposes, across Sterling, Swiss Franc, Euro, Canadian dollars, and Japanese yen.

As of June 30, 2026, we had $11.7 billion of credit facilities, expiring at various dates through April 2030, of which $1.3 billion was outstanding.

The outstanding debt under the credit facilities bears an interest rate of SOFR plus 1.5% to 2.25% that is paid quarterly.

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

As of March 31, 2026, we had no commercial paper outstanding.

As of June 30, 2026, we had no commercial paper outstanding.

For additional information, see Note 6 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Share Repurchase Program

In the three months ended March 31, 2026, there were no repurchases of the company's Class A or Class C shares.

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

As of March 31, 2026, $ 69.5 bil lion remained available for Class A and Class C share repurchases.

On June 4, 2026, the company completed an underwritten public offering of 29 million Class A shares at a price of $355.1982 per share and 29 million Class C shares at a price of $351.8018 per share.

The net proceeds received by the company were $20.5 billion which will be used for general corporate purposes, including capital expenditures to scale AI infrastructure and global compute.

Concurrently on June 4, 2026, the company completed a $10.0 billion private placement of 14 million Class A and 14 million Class C shares to an affiliate of Berkshire Hathaway Inc.

Mandatory Convertible Preferred Stock

On June 5, 2026, the company issued an aggregate amount of 385 million Series A and Series B depositary shares, representing 19 million shares of 6.25% mandatory convertible preferred stock, split evenly into Series A (indexed to Class A stock) and Series B (indexed to Class C stock).

Aggregate net proceeds were $19.0 billion which will be used for general corporate purposes, including capital expenditures to scale AI infrastructure and global compute.

At-the-Market Program

On June 1, 2026, the company entered into an equity distribution agreement with certain sales agents party thereto, pursuant to which we may sell both our Class A and Class C stock having aggregate sales proceeds of up to $40.0 billion from time to time through the ATM Program.

The proceeds from offerings under the ATM Program, if any, are primarily intended to be used to meet tax obligations associated with employee equity grants.

As of June 30, 2026, we have not sold any shares under the ATM Program, and the full $40.0 billion remains available for future issuance.

For additional information, see Note 11 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Dividend Program

In the three months ended March 31, 2026, total cash dividends were $1.2 billion for Class A, $176 million for Class B, and $1.1 billion for Class C shares, respectively.

In April 2026, the company's Board of Directors declared a quarterly cash dividend of $0.22 per share, representing a 5% increase from the previous quarterly dividend of $0.21 per share.

The dividend is payable on June 15, 2026 to stockholders of record for each of the company's Class A, Class B, and Class C shares as of June 8, 2026.

Preferred and Common Dividends

In the three and six months ended June 30, 2026, total cash dividends on common stock were $1.3 billion and $2.5 billion for Class A, $184 million and $359 million for Class B, and $1.2 billion and $2.4 billion for Class C shares, respectively.

In April 2026, the company's Board of Directors declared a quarterly cash dividend on common stock of $0.22 per share, representing a 5% increase from the previous quarterly dividend of $0.21 per share.

In July 2026, the company's Board of Directors declared a quarterly cash dividend of $12.15 per share on each of our Series A and Series B mandatory convertible preferred stock (equivalent to approximately $0.60 per each of our Series A and Series B Depositary Shares) and a quarterly cash dividend of $0.22 per share on our Class A, Class B, and Class C stock.

The mandatory convertible preferred stock dividend is payable on August 15, 2026 to stockholders of record for each of the company's Series A and Series B shares as of August 1, 2026, and the common stock dividend is payable on September 14, 2026 to stockholders of record for each of the company's Class A, Class B, and Class C shares as of September 7, 2026.

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.

Share Repurchase Program

In the three and six months ended June 30, 2026, there were no repurchases of the company's Class A or Class C shares.

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

As of June 30, 2026, $69.5 billion remained available for Class A and Class C share repurchases.

Repurchases may be 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 programs do not have an expiration date.

Accrued Legal and Regulatory

As of March 31, 2026, we had short-term accrued legal and regulatory fines and settlements of $15.6 billion.

As of June 30, 2026, we had short-term accrued legal and regulatory fines and settlements of $17.4 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 1 of this Quarterly Report on Form 10-Q.

As of March 31, 2026, we had long-term income taxes payable of $12.5 billion primarily related to unrecognized tax benefits.

As of June 30, 2026, we had long-term income taxes payable of $11.3 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

As of March 31, 2026, we had material purchase commitments and other contractual obligations totaling $332.4 billion, of which $138.0 billion was short-term.

As of June 30, 2026, we had material purchase commitments and other contractual obligations totaling $811.0 billion, of which $200.7 billion was short-term.

These purchase commitments primarily relate to costs for technical infrastructure and inventory through long-term supply agreements and open purchase orders.

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For additional information related to our long-term supply agreements, energy take-or-pay contracts, and content licenses, see Note 10 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

As of March 31, 2026, we provided backstops in the form of financial guarantees and credit derivatives with maximum potential amount of future payments of $9.0 billion and $28.4 billion, respectively.

As of June 30, 2026, we provided backstops in the form of financial guarantees and credit derivatives with maximum potential amount of future payments of $7.6 billion and $43.8 billion, respectively.

Upon a default under these backstops, we retain the right to assume the underlying leases for internal use or to sublease to third parties.

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For additional information, see Note 3 and Note 10 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

We have also entered into an agreement to provide up to $33.3 billion of future backstops to support the build-out of data center and energy supply infrastructure, subject to finalization of terms with data center providers.

Against this remaining commitment, in April 2026, we entered into an agreement with a data center provider to backstop approximately $15.3 billion.

We have also entered into an agreement to provide an estimated $24.1 billion of future backstops to support the build-out of data center and energy supply infrastructure, subject to finalization of terms with data center providers.

For additional information, see Note 3 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Additionally, as of March 31, 2026, we have commitments for a future private investment consisting of a $10.0 billion capital commitment and $30.0 billion of future capital funding contingent upon the achievement of specified operational and financial milestones through 2030, which is accounted for as an equity derivative.

We expect to fund $10.0 billion in the second quarter of 2026 in the form of a non-marketable security.

Additionally, as of June 30, 2026, we have $20.0 billion of future capital funding commitments with a private company contingent upon the achievement of specified operational and financial milestones through 2030, which is accounted for as an equity derivative.

For additional information, see Note 3 and Note 5 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

For agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of March 31, 2026.

For agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of June 30, 2026.

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

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We recognize intangible assets acquired in business combinations at fair value as of the acquisition date.

Critical estimates in valuing the acquired intangible assets require judgment and the use of unobservable inputs,

including future expected cash flows, discount rates, estimated customer attrition rates and anticipated growth, and royalty rate, among others.

Critical estimates in valuing the acquired intangible assets require judgment and the use of unobservable inputs, including future expected cash flows, discount rates, estimated customer attrition rates and anticipated growth, and royalty rate, among others.

Other estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

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Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items that may be material or of interest to our investors, including SEC filings, investor events, press and earnings releases, and blogs.

We also share Google news and product updates on Google’s Keyword blog at https://www.blog.google/ and News From Google page on X at x.com/NewsFromGoogle, and our executive officers may also use certain social media channels, such as X and LinkedIn, to communicate information about earnings results and company updates, which may be of interest or material to our investors.

which may be of interest or material to our investors.

Further, corporate governance information, including our certificate of incorporation, bylaws, corporate governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading "Governance." The information contained on, or that may be accessed through our websites or our executive officers' social media channels, is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

2 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis