Alphabet Announces First Quarter 2018 Results
MOUNTAIN VIEW, Calif. – April 23, 2018 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial
results for the quarter ended March 31, 2018.
"Our ongoing strong revenue growth reflects our momentum globally, up 26% versus the first quarter of 2017 and 23%
on a constant currency basis to $31.1 billion. We have a clear set of exciting opportunities ahead, and our strong
growth enables us to invest in them with confidence," said Ruth Porat, CFO of Alphabet and Google.
Q1 2018 financial highlights
The following summarizes our consolidated financial results for the quarters ended March 31, 2017 and 2018 (in
millions, except for per share information, percentages, and number of employees; unaudited) with results for the
quarter ended March 31, 2018 affected by gains on equity securities reflected in other income (expense), net (OI&E):

Revenues
Increase in revenues year over year
Increase in constant currency revenues year over year
Operating income
Operating margin
OI&E
Net income
Diluted EPS
Diluted shares (in thousands)
Effective tax rate
Number of employees

Three Months Ended Three Months Ended
March 31, 2017
March 31, 2018
$24,750
$31,146
22%
26%
24%
23%
$6,568
27%

$7,001
22%

$251

$3,542

$5,426
$7.73
702,036

$9,401
$13.33
705,134

20%
73,992

11%
85,050

Q1 2018 impact from equity securities*
Our Q1 2018 financial results were affected by a new accounting standard (ASU 2016-01) that changes the way
companies account for equity security investments. As a result, all gains and losses, unrealized and realized, on equity
security investments are recognized in OI&E on the income statement. Performance fees related to the equity security
gains in Q1 2018 were accrued in the period. Income tax expense on the equity security gains was offset by the release
of a deferred tax asset valuation allowance. The following summarizes the impact to our Q1 2018 results (in millions,
except for EPS and percentages; unaudited):
Three Months Ended
March 31, 2018
Operating expenses impact:
Accrued performance fees
OI&E impact:
Gain on equity securities
Income tax impact:
Deferred income tax expense
Release of deferred tax asset valuation allowance
Net income impact
Diluted EPS impact
Effective tax rate reduction

$632
$3,031
$475
($475)
$2,399
$3.40
5%

*Additional information about the new accounting standard affecting our equity security investments can be found in our blog post
on April 2, 2018 and our Q1 2018 10-Q.

Q1 2018 supplemental information (in millions, except percentages; unaudited)
Segment revenues and operating results
In Q1 2018, Nest joined forces with Google’s hardware team. Consequently, the financial results of Nest have been
reported in the Google segment, with Nest revenues reflected in Google other revenues. Prior period segment
information has been recast to conform to the current period segment presentation. Consolidated financial results are
not affected.

Google properties revenues
Google Network Members' properties revenues
Google advertising revenues
Google other revenues
Google segment revenues
Other Bets revenues
Google operating income
Other Bets operating loss

Three Months Ended
March 31, 2017
$17,403
4,008
21,411
3,207
$24,618
$132
$7,446
($703)

Three Months Ended
March 31, 2018
$21,998
4,644
26,642
4,354
$30,996
$150
$8,368
($571)

Traffic acquisition costs (TAC) to Google Network Members and distribution partners

TAC to Google Network Members
TAC to Google Network Members as % of Google Network
Members' properties revenues
TAC to distribution partners
TAC to distribution partners as % of Google properties revenues
Total TAC
Total TAC as % of Google advertising revenues

Three Months Ended
March 31, 2017
$2,824
70%
$1,805
10%
$4,629
22%

Three Months Ended
March 31, 2018
$3,386
73%
$2,902
13%
$6,288
24%

Monetization metrics information
In Q1 2018, we changed our monetization metrics for Google Network Members’ properties revenues from the
percentage change in the number of paid clicks and cost-per-click to the percentage change in the number of
impressions and cost-per-impression. The monetization metrics for Google properties revenues remain unchanged.

Paid clicks on Google properties
Cost-per-click on Google properties
Impressions on Google Network Members' properties
Cost-per-impression on Google Network Members' properties

Change from Q1
2017 to Q1 2018
(YoY)
59 %
(19)%

Change from Q4
2017 to Q1 2018
(QoQ)
8%
(7)%

0%
18 %

5%
(10)%

Webcast and conference call information
A live audio webcast of our first quarter 2018 earnings release call will be available at http://abc.xyz/investor. The call
begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, including the reconciliations of certain non-GAAP
measures to their nearest comparable GAAP measures, is also available on that site.
We also provide announcements regarding our financial performance, including SEC filings, investor events, press
and earnings releases, and blogs, on our investor relations website (http://abc.xyz/investor).
Forward-looking statements
This press release may contain forward-looking statements that involve risks and uncertainties. Actual results may
differ materially from the results predicted, and reported results should not be considered as an indication of future
performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted
include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the
year ended December 31, 2017, which is on file with the SEC and is available on our investor relations website at
http://abc.xyz/investor and on the SEC website at www.sec.gov. Additional information will also be set forth in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. All information provided in this release and in
the attachments is as of April 23, 2018. Undue reliance should not be placed on the forward-looking statements in this
press release, which are based on information available to us on the date hereof. We undertake no duty to update this
information unless required by law.
About non-GAAP financial measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP,
we use the following non-GAAP financial measures: free cash flow; constant currency revenues; and constant currency
revenue growth. The presentation of this financial information is not intended to be considered in isolation or as a
substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate
period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental
information regarding our performance and liquidity by excluding certain items that may not be indicative of our recurring
core business operating results, such as our revenues excluding the impact of foreign exchange rate movements and
hedging activities. We believe that both management and investors benefit from referring to these non-GAAP financial
measures in assessing our performance and when planning, forecasting, and analyzing future periods. These nonGAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity
as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are
useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management
in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst
community to help them analyze the health of our business.
There are a number of limitations related to the use of non-GAAP financial measures. We compensate for these
limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial
measures and evaluating these non-GAAP financial measures together with their relevant financial measures in
accordance with GAAP.
For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliation from
net cash provided by operating activities to free cash flow" and "Reconciliation from GAAP revenues to non-GAAP
constant currency revenues" included at the end of this release.
Contact
Investor relations
investor-relations@abc.xyz

Media
press@abc.xyz

Alphabet Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts which are reflected in thousands and par value per share amounts)
December 31,
2017

March 31,
2018
(unaudited)

Assets
Current assets:
Cash and cash equivalents

$

Marketable securities

10,715

$

12,658

91,156

90,227

Total cash, cash equivalents, and marketable securities

101,871

102,885

Accounts receivable, net of allowance of $674 and $536

18,336

16,777

369

37

Income taxes receivable, net
Inventory
Other current assets
Total current assets
Non-marketable investments
Deferred income taxes
Property and equipment, net
Intangible assets, net
Goodwill
Other non-current assets
Total assets

749

636

2,983

3,426

124,308

123,761

7,813

10,976

680

678

42,383

48,845

2,692

2,809

16,747

17,862

2,672

2,004

$

197,295

$

206,935

$

3,137

$

3,526

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Short-term debt
Accrued compensation and benefits
Accrued expenses and other current liabilities

0

1,329

4,581

3,812

10,177

10,065

Accrued revenue share

3,975

3,723

Deferred revenue

1,432

1,596

881

1,343

24,183

25,394

3,969

3,973

Income taxes payable, net
Total current liabilities
Long-term debt
Deferred revenue, non-current
Income taxes payable, non-current
Deferred income taxes

340

315

12,812

12,885

430

394

Other long-term liabilities

3,059

3,149

Total liabilities

44,793

46,110

0

0

40,247

41,487

Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no
shares issued and outstanding
Class A and Class B common stock, and Class C capital stock and additional paid-in
capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000,
Class B 3,000,000, Class C 3,000,000); 694,783 (Class A 298,470, Class B 46,972,
Class C 349,341) and 694,945 (Class A 298,652, Class B 46,940, Class C 349,353)
shares issued and outstanding
Accumulated other comprehensive loss

(992)

Retained earnings

113,247

Total stockholders’ equity
Total liabilities and stockholders’ equity

(670)
120,008

152,502
$

197,295

160,825
$

206,935

Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts; unaudited)
Three Months Ended
March 31,
2017
Revenues

$

2018

24,750

$

31,146

Costs and expenses:
Cost of revenues

9,795

13,467

Research and development

3,942

5,039

Sales and marketing

2,644

3,604

General and administrative

1,801

2,035

18,182

24,145

6,568

7,001

Other income (expense), net

251

3,542

Income before income taxes

6,819

10,543

Provision for income taxes

1,393

1,142

Total costs and expenses
Income from operations

Net income

$

5,426

$

9,401

Basic earnings per share of Class A and B common stock and Class C capital stock

$

7.85

$

13.53

Diluted earnings per share of Class A and B common stock and Class C capital stock

$

7.73

$

13.33

Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions; unaudited)
Three Months Ended
March 31,
2017

2018

Operating activities
Net income

$

5,426

$

9,401

Adjustments:
Depreciation and impairment of property and equipment

1,287

Amortization and impairment of intangible assets
Stock-based compensation expense
Deferred income taxes

1,791

216

195

2,009

2,457

613

(18)

(Gain) loss on debt and equity securities, net

19

(2,992)

Other

57

(257)

Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable
Income taxes, net
Other assets
Accounts payable
Accrued expenses and other liabilities
Accrued revenue share
Deferred revenue
Net cash provided by operating activities

1,267

1,700

510

782

(128)

(241)

103

122

(1,868)

(1,142)

(74)

(286)

111

130

9,548

11,642

(2,508)

(7,299)

Investing activities
Purchases of property and equipment
Proceeds from disposals of property and equipment

41

Purchases of marketable securities
Maturities and sales of marketable securities
Purchases of non-marketable investments

30

(20,119)

(8,849)

19,362

9,351

(354)

Maturities and sales of non-marketable investments

(327)

78

Acquisitions, net of cash acquired, and purchases of intangible assets

498

(101)

Proceeds from collection of notes receivable

(1,250)

750

Net cash used in investing activities

0

(2,851)

(7,846)

Net payments related to stock-based award activities

(1,009)

(1,158)

Repurchases of capital stock

(1,127)

(2,173)

Financing activities

Proceeds from issuance of debt, net of costs

0

4,691

Repayments of debt

(18)

(3,378)

Proceeds from sale of subsidiary shares

480

Net cash used in financing activities

(1,674)

Effect of exchange rate changes on cash and cash equivalents

(2,018)

191

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

0

$

165

5,214

1,943

12,918

10,715

18,132

$

12,658

Reconciliation from net cash provided by operating activities to free cash flow (in millions, unaudited):
We provide free cash flow because it is a liquidity measure that provides useful information to management and investors about
the amount of cash generated by the business that can be used for strategic opportunities, including investing in our business and
acquisitions, and to strengthen our balance sheet.
Three Months Ended
March 31, 2018
Net cash provided by operating activities

$

Less: purchases of property and equipment
Free cash flow

11,642
(7,299)

$

Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.

4,343

Reconciliation from GAAP revenues to non-GAAP constant currency revenues (in millions, unaudited):
We provide non-GAAP constant currency revenues and growth because they facilitate the comparison of current results to historic
performance by excluding the impact of foreign exchange rate movements and hedging activities, which are not indicative of our
core operating results.

EMEA revenues (GAAP)

Three Months Ended
March 31, 2018

Three Months Ended
March 31, 2018

YoY
(using Q1'17's FX rates)

QoQ
(using Q4'17's FX rates)

$

$

Exclude foreign exchange impact on Q1'18 revenues using Q1'17 rates

10,474
(1,094)

10,474
N/A

Exclude foreign exchange impact on Q1'18 revenues using Q4'17 rates

N/A

(324)

Exclude hedging impact recognized in Q1'18

217

217

EMEA constant currency revenues (non-GAAP)

$

9,597

$

10,367

Prior period EMEA revenues, excluding hedging impact (non-GAAP)

$

7,933

$

10,488

EMEA revenue growth (GAAP)

29%

2%

EMEA constant currency revenue growth (non-GAAP)

21%

(1)%

APAC revenues (GAAP)

$

4,804

$

4,804

Exclude foreign exchange impact on Q1'18 revenues using Q1'17 rates

(198)

N/A

Exclude foreign exchange impact on Q1'18 revenues using Q4'17 rates

N/A

(96)

Exclude hedging impact recognized in Q1'18

15

15

APAC constant currency revenues (non-GAAP)

$

4,621

$

4,723

Prior period APAC revenues, excluding hedging impact (non-GAAP)

$

3,560

$

4,696

APAC revenue growth (GAAP)

33%

2%

APAC constant currency revenue growth (non-GAAP)

30%

1%

Other Americas revenues (GAAP)

$

1,724

$

1,724

Exclude foreign exchange impact on Q1'18 revenues using Q1'17 rates

(19)

Exclude foreign exchange impact on Q1'18 revenues using Q4'17 rates

N/A

3

7

7

Exclude hedging impact recognized in Q1'18
Other Americas constant currency revenues (non-GAAP)

N/A

$

1,712

$

1,734

Prior period Other Americas revenues, excluding hedging impact (non-GAAP) $

1,271

$

1,909

Other Americas revenue growth (GAAP)

36%

(9)%

Other Americas constant currency revenue growth (non-GAAP)

35%

(9)%

United States revenues (GAAP)

$

United States revenue growth (GAAP)

14,144

$

20%

14,144
(8)%

Revenues (GAAP)

$

31,146

$

31,146

Constant currency revenues (non-GAAP)

$

30,074

$

30,968

Prior period revenues, excluding hedging impact (non-GAAP)

$

24,533

$

32,521

Revenue growth (GAAP)

26%

(4)%

Constant currency revenue growth (non-GAAP)

23%

(5)%

Non-GAAP constant currency revenues and growth: We define non-GAAP constant currency revenues as total revenues excluding
the impact of foreign exchange rate movements and hedging activities, and we use it to determine the constant currency revenue
growth on year-on-year and quarter-on-quarter bases. Non-GAAP constant currency revenues are calculated by translating current
quarter revenues using prior period exchange rates and excluding any hedging impact recognized in the current quarter. Constant
currency revenue growth (expressed as a percentage) is calculated by determining the increase in current quarter non-GAAP
constant currency revenues over prior period revenues, excluding any hedging impact recognized in the prior period.

Other income (expense), net
The following table presents our other income (expense), net (in millions, unaudited):
Three Months Ended
March 31,
2017
Interest income

$

Interest expense
Foreign currency exchange losses, net
Loss on debt securities, net
Gain on equity securities, net

312

$

(30)

(2)

(24)

(25)

(39)
3,031

(49)

Other

(7)

34
$

399

(25)

6

Loss and impairment from equity method investments, net
Other income (expense), net

2018

251

212
$

3,542

Segment results
The following table presents our revenues, operating income (loss), stock-based compensation, capital expenditures, and
depreciation, amortization, and impairment by segment (in millions, unaudited):
Three Months Ended
March 31,
2017

(1)

2018

Revenues:
Google

$

Other Bets

24,618

$

132

Total revenues

30,996
150

$

24,750

$

31,146

$

7,446

$

8,368

Operating income (loss):
Google
Other Bets
Reconciling items

(2)

Total income from operations

(703)

(571)

(175)

(796)

$

6,568

$

7,001

$

1,882

$

2,304

Stock-based compensation(3):
Google
Other Bets

86

112

Reconciling items(4)

41

41

Total stock-based compensation

$

2,009

$

2,457

$

2,409

$

7,669

Capital expenditures:
Google
Other Bets
Reconciling items

167
(5)

Total capital expenditures

55

(68)

(425)

$

2,508

$

7,299

$

1,416

$

1,901

Depreciation, amortization, and impairment:
Google
Other Bets
Total depreciation, amortization, and impairment
(1)

(2)

(3)
(4)
(5)

87
$

1,503

85
$

1,986

Segment information for Q1 2017 has been recast to reflect the move of Nest from Other Bets to the Google segment and
conform to the current period segment presentation. Consolidated financial information is not affected.
Reconciling items are primarily related to performance fees for the three months ended March 31, 2018, as well as corporate
administrative costs and other miscellaneous items that are not allocated to individual segments.
For purposes of segment reporting, SBC represents awards that we expect to settle in Alphabet stock.
Reconciling items are primarily related to corporate administrative costs that are not allocated to individual segments.
Reconciling items are related to timing differences of payments, as segment capital expenditures are on accrual basis while
total capital expenditures shown on the Consolidated Statements of Cash Flows are on cash basis, and other miscellaneous
differences.

Recast segment results
The following table presents our recast segment results for all quarters in 2017 to reflect the move of Nest from Other Bets to the
Google segment and conform to the current period segment presentation (in millions, unaudited):
Three Months Ended
Mar 31, 2017

Jun 30, 2017

Sep 30, 2017

Dec 31, 2017

$

24,618

$

25,913

$

27,655

$

32,192

$

24,750

$

26,010

$

27,772

$

32,323

$

7,446

$

7,664

$

8,582

$

8,595

Revenues:
Google
Other Bets

132

Total revenues

97

117

131

Operating income (loss):
Google
Other Bets
Reconciling items

(703)
(1)

Total income from operations

(633)

(175)

(650)

(2,899)

(748)

(150)

(183)

$

6,568

$

4,132

$

7,782

$

7,664

$

1,882

$

1,884

$

1,690

$

1,712

Stock-based compensation(2):
Google
Other Bets
Reconciling items

(3)

Total stock-based compensation

86

81

94

102

41

38

36

33

$

2,009

$

2,003

$

1,820

$

1,847

$

2,409

$

2,838

$

3,563

$

3,809

Capital expenditures:
Google
Other Bets

167

148

73

105

Reconciling items(4)

(68)

(155)

(98)

393

Total capital expenditures

$

2,508

$

2,831

$

3,538

$

4,307

$

1,416

$

1,564

$

1,693

$

1,935

Depreciation, amortization, and impairment:
Google
Other Bets
Total depreciation, amortization, and impairment
(1)

(2)
(3)
(4)

87
$

1,503

61
$

1,625

68
$

1,761

91
$

2,026

Reconciling items are primarily related to the European Commission fine for the three months ended June 30, 2017, as well
as corporate administrative costs and other miscellaneous items that are not allocated to individual segments.
For purposes of segment reporting, SBC represents awards that we expect to settle in Alphabet stock.
Reconciling items are primarily related to corporate administrative costs that are not allocated to individual segments.
Reconciling items are related to timing differences of payments, as segment capital expenditures are on accrual basis while
total capital expenditures shown on the Consolidated Statements of Cash Flows are on cash basis, and other miscellaneous
differences.

Monetization metrics
To provide a basis for comparison, we have included the percentage change in impressions and cost-per-impression for Google
Network Members' properties revenues for all quarters of 2017 along with the percentage change in paid clicks and cost-per-click
for Q1 2018. We do not plan to include clicks and cost-per-click metrics for Google Network Members' properties revenues going
forward.
The following table presents our impressions and cost-per-impression metrics for Google Network Members' properties revenues
for all quarters in 2017 (unaudited):
Three Months Ended
Mar 31, 2017

Jun 30, 2017

Sep 30, 2017

Dec 31, 2017

Year-over-year change
Impressions on Google Network Members' properties
Cost-per-impression on Google Network Members' properties

8%

3%

4%

(3)%

(2)%

7%

10 %

19 %

1%

(5)%

(1)%

1%

(10)%

11 %

5%

14 %

Quarter-over-quarter change
Impressions on Google Network Members' properties
Cost-per-impression on Google Network Members' properties

The following table presents our clicks and cost-per-click metrics for Q1 2018 (unaudited):
Change from Q1
2017 to Q1 2018
(YoY)

Change from Q4
2017 to Q1 2018
(QoQ)

Aggregate paid clicks

55 %

11 %

Paid clicks on Google Network Members' properties

37 %

29 %

Aggregate cost-per-click

(18)%

(9)%

Cost-per-click on Google Network Members' properties

(17)%

(21)%