Alphabet Inc.

Previous wording

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.

Current wording

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.

Previous wording

We generate revenues by delivering relevant, cost-effective online advertising; cloud-based solutions that provide enterprise customers of all sizes with infrastructure, platform services, and applications; 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 Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Current wording

We generate revenues by delivering relevant, cost-effective online advertising; cloud-based solutions that provide enterprise customers of all sizes with infrastructure, platform services, and applications; 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.

Previous wording

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. We 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.

Current wording

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. 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.

Previous wording

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

Current wording

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

Previous wording

(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.

Current wording

(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.

Previous wording

•Revenues were $109.9 billion, an increase of 22% year over year, primarily driven by an increase in Google Services revenues of $12.4 billion, or 16%, and an increase in Google Cloud revenues of $7.8 billion, or 63%.

Current wording

•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%.

Previous wording

•Operating expenses were $28.9 billion, an increase of 24% year over year, primarily driven by increases in employee compensation expenses, advertising and promotional activities, and depreciation expense.

Current wording

•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.

Previous wording

•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.

Current wording

•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.

Previous wording

•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.

Current wording

•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.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Google Search & other revenues increased $9.7 billion from the three months ended March 31, 2025 to the three months ended March 31, 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; growth in advertiser spending; 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.

Current wording

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; growth in advertiser spending; and improvements we have made in ad formats and delivery.

Previous wording

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

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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:

Current wording

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:

Previous wording

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. 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

Google Services operating income increased $7.9 billion from the three months ended March 31, 2025 to the three months ended March 31, 2026. The increase in operating income was primarily driven by an increase in revenues, partially offset by an increase in TAC.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

Other Bets operating loss increased $874 million from the three months ended March 31, 2025 to the three months ended March 31, 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.

Current wording

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.

Previous wording

The Organization for Economic Cooperation and Development (OECD) published model rules for the implementation of a minimum global effective tax rate of 15%. Many countries have implemented or are in the process of implementing the rules. In January 2026, the OECD introduced new guidance including a "Side-by-Side Safe Harbor" which, if elected, exempts US domestic operations from being taxed by global minimum tax rules. 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. As more countries enact these global minimum tax rules, our effective tax rate and cash tax payments could be affected.

Current wording

The Organization for Economic Cooperation and Development (OECD) published model rules for the implementation of a minimum global effective tax rate of 15%. Many countries have implemented or are in the process of implementing the rules. In January 2026, the OECD introduced new guidance including a "Side-by-Side Safe Harbor" which, if elected, exempts US domestic operations from being taxed by global minimum tax rules. 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 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.

Previous wording

As of March 31, 2026, we had $126.8 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.

Current wording

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.

Previous wording

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

Current wording

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. 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.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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 repayments of debt, net payments related to stock-based award activities, and dividend payments.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

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. 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.

Current wording

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 June 30, 2026, we hadno commercial paper outstanding.

Previous wording

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.

Current wording

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.