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Alphabet(GOOGL) - 2022 Q4 - Annual Report
GOOGLAlphabet(GOOGL)2023-02-02 16:00

Research and Development - Alphabet invested over 100 billion in research and development in the last five years to innovate and build new products and features[12] - R&D expenses increased by 7.9 billion from 2021 to 2022, primarily due to a 5.4billionincreaseincompensationexpensesanda215.4 billion increase in compensation expenses and a 21% increase in average headcount[115] Search and Advertising - 15% of daily searches on Google are new, reflecting the platform's evolution from text-based results to more intuitive search methods[16] - Google's advertising solutions remove billions of bad ads annually and focus on delivering relevant ads to ensure positive user experiences[19] - Google Search & other revenues grew by 13.5 billion year-over-year to 162.5billionin2022,drivenbyincreasedsearchqueries,advertiserspending,andimprovementsinadformats[100]−YouTubeadsrevenuesincreasedby162.5 billion in 2022, driven by increased search queries, advertiser spending, and improvements in ad formats[100] - YouTube ads revenues increased by 398 million year-over-year to 29.2billionin2022,primarilyduetogrowthinbrandadvertisinganddirectresponseproducts[101]CloudServices−GoogleCloudcontinuestointegrateAIintosolutionsfordocumentprocessing,imageanalysis,andtranslation,enhancingefficiencyforcustomers[14]−GoogleCloudPlatformprovidescybersecurity,dataanalytics,AI,andmachinelearningsolutions,enablingcustomerstorunworkloadsacrosscloud,edge,ordatacenters[19]−GoogleCloudrevenuesgrewby29.2 billion in 2022, primarily due to growth in brand advertising and direct response products[101] Cloud Services - Google Cloud continues to integrate AI into solutions for document processing, image analysis, and translation, enhancing efficiency for customers[14] - Google Cloud Platform provides cybersecurity, data analytics, AI, and machine learning solutions, enabling customers to run workloads across cloud, edge, or data centers[19] - Google Cloud revenues grew by 7.1 billion year-over-year to 26.3billionin2022,drivenbyGoogleCloudPlatformandGoogleWorkspaceofferings[106]−GoogleCloudoperatinglossdecreasedby26.3 billion in 2022, driven by Google Cloud Platform and Google Workspace offerings[106] - Google Cloud operating loss decreased by 131 million from 2021 to 2022, primarily driven by revenue growth[123] - Alphabet completed the acquisition of Mandiant for 6.1billioninSeptember2022,addingover2,600employeestoGoogleCloud[98]RevenueandFinancialPerformance−Alphabet′sconsolidatedrevenuesincreasedby106.1 billion in September 2022, adding over 2,600 employees to Google Cloud[98] Revenue and Financial Performance - Alphabet's consolidated revenues increased by 10% year-over-year to 282.8 billion in 2022, driven by a 16.0billion(716.0 billion (7%) increase in Google Services revenues and a 7.1 billion (37%) increase in Google Cloud revenues[96] - Total constant currency revenues increased to 294.2billionin2022,up294.2 billion in 2022, up 36.7 billion from 257.5billionin2021,excludinghedgingeffects[110]−Alphabet′soperatingincomedecreasedby5257.5 billion in 2021, excluding hedging effects[110] - Alphabet's operating income decreased by 5% year-over-year to 74.8 billion in 2022, with operating margin declining from 31% to 26%[96] - Alphabet's net income decreased by 21% year-over-year to 60.0billionin2022,withdilutedEPSdecliningby1960.0 billion in 2022, with diluted EPS declining by 19% to 4.56[96] - Google Services operating income decreased by 5.3billionfrom2021to2022,primarilyduetoincreasesincompensationexpensesandTAC[122]−OtherBetsoperatinglossincreasedby5.3 billion from 2021 to 2022, primarily due to increases in compensation expenses and TAC[122] - Other Bets operating loss increased by 802 million from 2021 to 2022, primarily due to increases in compensation expenses[124] Sustainability and Environmental Initiatives - Alphabet aims to achieve net-zero emissions across all operations and value chain by 2030, including consumer hardware products[24] - Alphabet's sustainability bonds raised 5.75billionin2020,fundingprojectsincleanenergy,greenbuildings,andracialequity,withproceedsfullyallocatedby2022[23]−GoogleMapsintroducedeco−friendlyroutingandfeaturestohelpusersmakesustainablechoices,suchasbookingflightswithlowercarbonfootprints[24]WorkforceandOperationalCosts−Alphabet′sworkforcetotaled190,234employeesasofDecember31,2022,withplanstoreduceapproximately12,000rolesin2023,incurring5.75 billion in 2020, funding projects in clean energy, green buildings, and racial equity, with proceeds fully allocated by 2022[23] - Google Maps introduced eco-friendly routing and features to help users make sustainable choices, such as booking flights with lower carbon footprints[24] Workforce and Operational Costs - Alphabet's workforce totaled 190,234 employees as of December 31, 2022, with plans to reduce approximately 12,000 roles in 2023, incurring 1.9 billion to 2.3billioninseverancecharges[98]−Salesandmarketingexpensesincreasedby2.3 billion in severance charges[98] - Sales and marketing expenses increased by 3.7 billion from 2021 to 2022, driven by a 1.8billionincreaseincompensationexpensesanda191.8 billion increase in compensation expenses and a 19% increase in average headcount[117] - Total cost of revenues increased by 15.3 billion from 2021 to 2022, driven by an 11.9billionincreaseinothercostofrevenuesanda11.9 billion increase in other cost of revenues and a 3.4 billion increase in TAC[112] Capital Expenditures and Investments - Alphabet's operating cash flow was 91.5billionfortheyearendedDecember31,2022,withcapitalexpendituresof91.5 billion for the year ended December 31, 2022, with capital expenditures of 31.5 billion primarily for technical infrastructure investments[98] - Capital expenditures increased from 24.6billionin2021to24.6 billion in 2021 to 31.5 billion in 2022, with depreciation and impairment expenses rising from 11.6billionto11.6 billion to 15.3 billion over the same period[138] - Operating lease assets increased from 3.0billionin2021to3.0 billion in 2021 to 4.4 billion in 2022, with future lease payments totaling 17.4billionasofDecember31,2022[139]−Thecompanyrepurchasedandretired530millionsharesfor17.4 billion as of December 31, 2022[139] - The company repurchased and retired 530 million shares for 59.3 billion in 2022, with 28.1billionremainingavailableforfurthersharerepurchases[141]LegalandTaxMatters−TheEuropeanCommissionfinesrelatedtocompetitionlawinfringementstotaled28.1 billion remaining available for further share repurchases[141] Legal and Tax Matters - The European Commission fines related to competition law infringements totaled 2.7 billion in 2017, 5.1billionin2018,and5.1 billion in 2018, and 1.7 billion in 2019, with a 217millionreductionin2022[142]−Short−termandlong−termincometaxespayableasofDecember31,2022,were217 million reduction in 2022[142] - Short-term and long-term income taxes payable as of December 31, 2022, were 1.6 billion and 4.2billion,respectively,withanadditional4.2 billion, respectively, with an additional 5.1 billion related to uncertain tax positions[145] - Non-cancelable contractual obligations as of December 31, 2022, totaled 32.0billion,with32.0 billion, with 17.3 billion being short-term[146] Other Financial Metrics - Net cash provided by operating activities decreased from 2021 to 2022 due to increased cash paid for cost of revenues, operating expenses, and tax payments, despite higher cash received from revenues[133] - The company changed the estimated useful life of servers and network equipment to six years, expected to reduce depreciation by approximately $3.4 billion for fiscal year 2023[152] YouTube and Non-Advertising Revenues - YouTube non-advertising revenues include subscriptions from services like YouTube Premium and YouTube TV, diversifying revenue streams beyond ads[19] Other Bets - Alphabet's Other Bets generate revenue primarily from health technology and internet services, with some businesses already commercializing their solutions[21] Currency Impact on Revenue - EMEA revenue growth was negatively impacted by foreign currency exchange rate changes, primarily due to the strengthening of the U.S. dollar against the Euro and British pound[110] - APAC revenue growth was negatively impacted by foreign currency exchange rate changes, primarily due to the strengthening of the U.S. dollar against the Japanese yen and Australian dollar[110] - Other Americas revenue growth was negatively impacted by foreign currency exchange rate changes, primarily due to the strengthening of the U.S. dollar against the Argentine peso[110]