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Exhibit
Exhibit 99.1

Alphabet Announces Third Quarter 2016 Results

MOUNTAIN VIEW, Calif. – October 27, 2016 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended September 30, 2016.
"We had a great third quarter, with 20% revenue growth year on year, and 23% on a constant currency basis. Mobile search and video are powering our core advertising business and we’re excited about the progress of newer businesses in Google and Other Bets," said Ruth Porat, CFO of Alphabet.
Q3 2016 financial highlights
The following summarizes our consolidated financial results for the quarters ended September 30, 2015 and 2016 (in millions, except for per share information; unaudited):
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
Revenues

$18,675

 

$22,451

Increase in revenues year over year
13
%
 
20
%
Increase in constant currency revenues year over year
21
%
 
23
%
 
 
 
 
GAAP operating income

$4,708

 

$5,767

GAAP operating margin
25
%
 
26
%
Non-GAAP operating income

$6,140

 

$7,627

Non-GAAP operating margin
33
%
 
34
%
 
 
 
 
GAAP net income

$3,979

 

$5,061

Non-GAAP net income

$5,102

 

$6,326

 
 
 
 
GAAP diluted EPS for Class A and B common stock and Class C capital stock

$5.73

 

$7.25

Non-GAAP diluted EPS for Class A and B common stock and
Class C capital stock

$7.35

 

$9.06

Diluted shares (in thousands)
694,319

 
698,440

Operating income, operating margin, net income, and diluted earnings per share (EPS) are reported on a GAAP and non-GAAP basis. Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense. Non-GAAP net income and non-GAAP diluted EPS exclude SBC expense, net of the SBC related tax benefits. These non-GAAP measures, free cash flow (an alternative non-GAAP measure of liquidity), and non-GAAP constant currency revenues and growth are described and reconciled to the corresponding GAAP measures at the end of this release.
The following summarizes our segment results where Google is presented as a single segment and all other Alphabet businesses are combined as Other Bets (in millions; unaudited):
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
Google segment revenues

$18,534

 

$22,254

Google operating income

$5,807

 

$6,778

 
 
 
 
Other Bets revenues

$141

 

$197

Other Bets operating loss

($980
)
 

($865
)



Q3 2016 consolidated financial summary
Revenues (in millions; unaudited):
 
Three Months Ended September 30, 2016
 
Change from Q3 2015 to Q3 2016 (YoY)
 
Change from Q2 2016 to Q3 2016 (QoQ)
Revenues

$22,451

 
20
%
 
4
%
Constant currency revenues (YoY)

$22,542

 
23
%
 
N/A

Constant currency revenues (QoQ)

$22,458

 
N/A

 
5
%
Our revenues and constant currency revenues are reconciled in the financial tables following this release.
Costs and expenses
Cost of revenues, operating expenses, SBC expense, and depreciation, amortization, and impairment charges (in millions; unaudited):
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
Cost of revenues

$7,037

 

$8,699

Cost of revenues as % of revenues
38
%
 
39
%
 
 
 
 
Operating expenses (other than cost of revenues)

$6,930

 

$7,985

Operating expenses as % of revenues
37
%
 
36
%
 
 
 
 
SBC expense*

$1,432

 

$1,860

SBC related tax benefits

($309
)
 

($595
)
Depreciation, amortization, and impairment charges

$1,248

 

$1,596

*Excludes the expense for awards accounted for as stock-based compensation that we expect to ultimately settle in cash.
Supplemental information (in millions, except for headcount data; unaudited)
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
Cash, cash equivalents, and marketable securities

$72,767

 

$83,056

Net cash provided by operating activities

$6,145

 

$9,845

Capital expenditures

$2,383

 

$2,554

Free cash flow

$3,762

 

$7,291

Effective tax rate (ETR)
19
%
 
16
%
Headcount
59,976

 
69,953

Our free cash flow is reconciled in the financial tables following this release.




Q3 2016 Google segment summary
Revenues and monetization
Google segment revenues by source (in millions; unaudited):
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
 
Change from Q3 2015 to Q3 2016 (YoY)
Google websites

$13,087

 

$16,089

 
23
%
Google Network Members' websites
3,694

 
3,732

 
1
%
Google advertising revenues
16,781

 
19,821

 
18
%
Google other revenues
1,753

 
2,433

 
39
%
Google segment revenues

$18,534

 

$22,254

 
20
%
Paid clicks and cost-per-click information (unaudited):
 
Change from Q3 2015 to Q3 2016 (YoY)
 
Change from Q2 2016 to Q3 2016 (QoQ)
Aggregate paid clicks
33
 %
 
9
 %
Paid clicks on Google websites
42
 %
 
11
 %
Paid clicks on Google Network Members' websites
1
 %
 
1
 %
 
 
 
 
Aggregate cost-per-click
(11
)%
 
(5
)%
Cost-per-click on Google websites
(13
)%
 
(6
)%
Cost-per-click on Google Network Members' websites
(14
)%
 
(6
)%
Traffic acquisition costs (TAC) and operating income
TAC to Google Network Members and distribution partners, operating income, and SBC expense (in millions; unaudited):
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
TAC to Google Network Members

$2,514

 

$2,623

TAC to Google Network Members as % of Google Network Members' revenues
68
%
 
70
%
TAC to distribution partners

$1,052

 

$1,559

TAC to distribution partners as % of Google website revenues
8
%
 
10
%
Total TAC

$3,566

 

$4,182

Total TAC as % of Google advertising revenues
21
%
 
21
%
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
Operating income

$5,807

 

$6,778

SBC expense

$1,275

 

$1,628

Operating income, excluding SBC expense

$7,082

 

$8,406

Supplemental information (in millions; unaudited)
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
Capital expenditures

$2,340

 

$2,434

Depreciation, amortization, and impairment

$1,200

 

$1,488




Q3 2016 Other Bets summary
Revenues and operating results
Other Bets revenues, operating loss, and SBC expense (in millions; unaudited):
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
Other Bets revenues

$141

 

$197

Operating loss

($980
)
 

($865
)
SBC expense

$128

 

$200

Operating loss, excluding SBC expense

($852
)
 

($665
)
Supplemental information (in millions; unaudited)
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2016
Capital expenditures

$271

 

$324

Depreciation, amortization, and impairment

$48

 

$104

Stock Repurchase
In October 2016, the board of directors of Alphabet authorized the company to repurchase up to $7,019,340,976.83 of its Class C capital stock. The repurchase is expected to 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.
Webcast and conference call information
A live audio webcast of our third quarter 2016 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 announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, 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, 2015, as updated by the Form 8-K filed on May 3, 2016, and our most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, which are on file with the SEC and are 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 September 30, 2016.  All information provided in this release and in the attachments is as of October 27, 2016, and 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: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP diluted EPS, free cash flow, non-GAAP constant currency revenues, and non-GAAP 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. Our management believes 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 for foreign currency fluctuations or our operating performance excluding not only non-cash charges, such as SBC expense, but also discrete cash charges that are infrequent in nature. 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 non-GAAP 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.
For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures," "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)
 
As of December 31, 2015
 
As of
September 30,
2016
 
 
 
(unaudited)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
16,549

 
$
9,406

Marketable securities
56,517

 
73,650

Total cash, cash equivalents, and marketable securities (including securities loaned of $4,531 and $730)
73,066

 
83,056

Accounts receivable, net of allowance of $296 and $398
11,556

 
11,979

Receivable under reverse repurchase agreements
450

 
0

Income taxes receivable, net
1,903

 
416

Inventory
491

 
559

Prepaid revenue share, expenses and other assets
2,648

 
2,536

Total current assets
90,114

 
98,546

Prepaid revenue share, expenses and other assets, non-current
3,181

 
3,276

Non-marketable investments
5,183

 
5,705

Deferred income taxes
251

 
273

Property and equipment, net
29,016

 
32,753

Intangible assets, net
3,847

 
3,367

Goodwill
15,869

 
16,028

Total assets
$
147,461

 
$
159,948

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,931

 
$
2,175

Short-term debt
3,225

 
0

Accrued compensation and benefits
3,539

 
3,672

Accrued expenses and other current liabilities
4,768

 
4,840

Accrued revenue share
2,329

 
2,542

Securities lending payable
2,428

 
0

Deferred revenue
788

 
923

Income taxes payable, net
302

 
171

Total current liabilities
19,310

 
14,323

Long-term debt
1,995

 
3,938

Deferred revenue, non-current
151

 
169

Income taxes payable, non-current
3,663

 
4,461

Deferred income taxes
189

 
393

Other long-term liabilities
1,822

 
2,561

Total liabilities
27,130

 
25,845

Commitments and contingencies
 
 
 





Stockholders’ equity:
 
 
 
Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding
0

 
0

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); 687,348 (Class A 292,297, Class B 50,295, Class C 344,756) and 689,136 (Class A 295,995, Class B 48,105, Class C 345,036) shares issued and outstanding
32,982

 
35,337

Accumulated other comprehensive loss
(1,874
)
 
(1,032
)
Retained earnings
89,223

 
99,798

Total stockholders’ equity
120,331

 
134,103

Total liabilities and stockholders’ equity
$
147,461

 
$
159,948






Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts; unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2016
 
2015
 
2016
Revenues
$
18,675

 
$
22,451

 
$
53,660

 
$
64,208

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
7,037

 
8,699

 
19,976

 
24,477

Research and development
3,230

 
3,596

 
8,772

 
10,326

Sales and marketing
2,223

 
2,565

 
6,368

 
7,367

General and administrative
1,477

 
1,824

 
4,564

 
4,961

Total costs and expenses
13,967

 
16,684

 
39,680

 
47,131

Income from operations
4,708

 
5,767

 
13,980

 
17,077

Other income (expense), net
183

 
278

 
471

 
216

Income before income taxes
4,891

 
6,045

 
14,451

 
17,293

Provision for income taxes
912

 
984

 
3,026

 
3,148

Net income
$
3,979

 
$
5,061

 
$
11,425

 
$
14,145

Less: Adjustment Payment to Class C capital stockholders
0

 
0

 
522

 
0