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Exhibit
Exhibit 99.1

Alphabet Announces Third Quarter 2018 Results
MOUNTAIN VIEW, Calif. – October 25, 2018 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended September 30, 2018.
"Our business continues to have strong momentum globally, led by mobile search and our many products that help billions of people every day," said Ruth Porat, Chief Financial Officer of Alphabet and Google. "Alphabet revenues were $33.7 billion, up 21% versus the third quarter of 2017, and we remain focused on delivering on the opportunities we see."
Q3 2018 financial highlights
The following summarizes our consolidated financial results for the quarters ended September 30, 2017 and 2018 (in millions, except for per share information, percentages, and number of employees; unaudited) with results for the quarter ended September 30, 2018 affected by gains on equity securities reflected in other income (expense), net (OI&E):
 
Three Months Ended September 30, 2017
 
Three Months Ended September 30, 2018
Revenues

$27,772

 

$33,740

Increase in revenues year over year
24
%
 
21
%
Increase in constant currency revenues year over year
24
%
 
22
%
 
 
 
 
Operating income

$7,782

 

$8,310

Operating margin
28
%
 
25
%
 
 
 
 
OI&E

$197

 

$1,773

 
 
 
 
Net income

$6,732

 

$9,192

Diluted EPS

$9.57

 

$13.06

Diluted shares (in thousands)
703,716

 
703,859

 
 
 
 
Effective tax rate
16
%
 
9
%
Number of employees
78,101

 
94,372

Q3 2018 supplemental information (in millions, except for EPS and percentages; unaudited)
Segment revenues and operating results
 
Three Months Ended September 30, 2017
 
Three Months Ended September 30, 2018
Google properties revenues

$19,723

 

$24,054

Google Network Members' properties revenues
4,342

 
4,900
Google advertising revenues
24,065

 
28,954
Google other revenues
3,590

 
4,640
Google segment revenues

$27,655

 

$33,594

Other Bets revenues

$117

 

$146

 
 
 
 
Google operating income

$8,582

 

$9,490

Other Bets operating loss

($650
)
 

($727
)


Traffic acquisition costs (TAC) to Google Network Members and distribution partners
 
Three Months Ended September 30, 2017
 
Three Months Ended September 30, 2018
TAC to Google Network Members

$3,101

 

$3,427

TAC to Google Network Members as % of Google Network Members' properties revenues
71
%
 
70
%
TAC to distribution partners

$2,401

 

$3,155

TAC to distribution partners as % of Google properties revenues
12
%
 
13
%
Total TAC

$5,502

 

$6,582

Total TAC as % of Google advertising revenues
23
%
 
23
%
Monetization metrics information
 
Change from Q3 2017 to Q3 2018 (YoY)
 
Change from Q2 2018 to Q3 2018 (QoQ)
Paid clicks on Google properties
62
 %
 
10
 %
Cost-per-click on Google properties
(28
)%
 
(7
)%
 
 
 
 
Impressions on Google Network Members' properties
1
 %
 
(1
)%
Cost-per-impression on Google Network Members' properties
11
 %
 
2
 %
Q3 2018 impact from equity securities
The following summarizes the effects on our Q3 2018 results of an accounting standard (ASU 2016-01) adopted on January 1, 2018 that changed the way companies are required to account for equity security investments. Specifically, all gains and losses, unrealized and realized, on equity security investments must be recognized in OI&E on the income statement. In addition, performance fees related to these equity security gains in Q3 2018 were accrued in operating expenses in the period.
 
Three Months Ended September 30, 2018
Operating expenses impact:
 
Accrued performance fees

$315

OI&E impact:
 
Gain on equity securities

$1,382

Income tax impact:
 
Income tax expense

$224

Net income impact

$843

Diluted EPS impact

$1.20

Webcast and conference call information
A live audio webcast of our third 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 and our most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, 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, 2018. All information provided in this release and in the attachments is as of October 25, 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 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.

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                    Media
investor-relations@abc.xyz                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
 
September 30,
2018
 
 
 
(unaudited)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
10,715

 
$
13,443

Marketable securities
91,156

 
92,973

Total cash, cash equivalents, and marketable securities
101,871

 
106,416

Accounts receivable, net of allowance of $674 and $652
18,336

 
17,897

Income taxes receivable, net
369

 
170

Inventory
749

 
1,212

Other current assets
2,983

 
4,007

Total current assets
124,308

 
129,702

Non-marketable investments
7,813

 
12,673

Deferred income taxes
680

 
682

Property and equipment, net
42,383

 
55,300

Intangible assets, net
2,692

 
2,448

Goodwill
16,747

 
17,895

Other non-current assets
2,672

 
2,838

Total assets
$
197,295

 
$
221,538

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
3,137

 
$
3,789

Accrued compensation and benefits
4,581

 
5,946

Accrued expenses and other current liabilities
10,177

 
15,936

Accrued revenue share
3,975

 
3,878

Deferred revenue
1,432

 
1,752

Income taxes payable, net
881

 
0

Total current liabilities
24,183

 
31,301

Long-term debt
3,969

 
3,986

Deferred revenue, non-current
340

 
317

Income taxes payable, non-current
12,812

 
11,562

Deferred income taxes
430

 
1,318

Other long-term liabilities
3,059

 
3,214

Total liabilities
44,793

 
51,698

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); 694,783 (Class A 298,470, Class B 46,972, Class C 349,341) and 695,957 (Class A 298,967, Class B 46,880, Class C 350,110) shares issued and outstanding
40,247

 
43,111

Accumulated other comprehensive loss
(992
)
 
(1,676
)
Retained earnings
113,247

 
128,405

Total stockholders’ equity
152,502

 
169,840

Total liabilities and stockholders’ equity
$
197,295

 
$
221,538





Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts; unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2018
 
2017
 
2018
Revenues
$
27,772

 
$
33,740

 
$
78,532

 
$
97,543

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
11,148

 
14,281

 
31,316

 
41,631

Research and development
4,205

 
5,232

 
12,319

 
15,385

Sales and marketing
3,042

 
3,849

 
8,583

 
11,233

General and administrative
1,595

 
2,068

 
5,096

 
6,105

European Commission fines
0

 
0

 
2,736

 
5,071

Total costs and expenses
19,990

 
25,430

 
60,050

 
79,425

Income from operations
7,782

 
8,310

 
18,482

 
18,118

Other income (expense), net
197

 
1,773

 
693

 
6,723

Income before income taxes
7,979

 
10,083

 
19,175

 
24,841

Provision for income taxes
1,247

 
891

 
3,493

 
3,053

Net income
$
6,732

 
$
9,192

 
$
15,682

 
$
21,788

 
 
 
 
 
 
 
 
Basic earnings per share of Class A and B common stock and Class C capital stock
$
9.71

 
$
13.21

 
$
22.65

 
$
31.34

Diluted earnings per share of Class A and B common stock and Class C capital stock
$
9.57

 
$
13.06

 
$
22.30

 
$
30.95





Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions; unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2018
 
2017
 
2018
Operating activities
 
 
 
 
 
 
 
Net income
$
6,732

 
$
9,192

 
$
15,682

 
$
21,788

Adjustments:
 
 
 
 
 
 
 
Depreciation and impairment of property and equipment
1,561

 
2,138

 
4,272

 
5,791

Amortization and impairment of intangible assets
200

 
217

 
617

 
664

Stock-based compensation expense
1,820

 
2,230

 
5,832

 
7,100

Deferred income taxes
(296
)
 
880

 
242

 
723

(Gain) loss on debt and equity securities, net
45

 
(1,353
)
 
67

 
(5,413
)
Other
96

 
38

 
192

 
(82
)
Changes in assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
 
Accounts receivable
(1,150
)
 
(670
)
 
(719
)
 
718

Income taxes, net
914

 
(1,235
)
 
(865
)
 
(1,891
)
Other assets
(1,632
)
 
(484
)
 
(2,086
)
 
(1,240
)
Accounts payable
(61
)
 
316

 
58

 
293

Accrued expenses and other liabilities
1,434

 
1,857

 
3,121

 
6,457

Accrued revenue share
176

 
107

 
182

 
(196
)
Deferred revenue
33

 
(23
)
 
228

 
272

Net cash provided by operating activities
9,872

 
13,210

 
26,823

 
34,984

Investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(3,538
)
 
(5,282
)
 
(8,877
)
 
(18,058
)
Proceeds from disposals of property and equipment
27

 
20

 
81

 
69

Purchases of marketable securities
(39,033
)
 
(14,299
)
 
(78,709
)
 
(37,340
)
Maturities and sales of marketable securities
28,350

 
9,403

 
62,588

 
34,926

Purchases of non-marketable investments
(177
)
 
(386
)
 
(871
)
 
(1,118
)
Maturities and sales of non-marketable investments
97

 
154

 
215

 
1,345

Acquisitions, net of cash acquired, and purchases of intangible assets
(130
)
 
(18
)
 
(273
)
 
(1,452
)
Proceeds from collection of notes receivable
0

 
0

 
1,419

 
0

Net cash used in investing activities
(14,404
)
 
(10,408
)
 
(24,427
)
 
(21,628
)
Financing activities
 
 
 
 
 
 
 
Net payments related to stock-based award activities
(1,018
)
 
(1,253
)
 
(3,111
)
 
(3,952
)
Repurchases of capital stock
0

 
(2,200
)
 
(2,745
)
 
(6,425
)
Proceeds from issuance of debt, net of costs
2,698

 
530

 
2,698

 
6,766

Repayments of debt
(2,706
)
 
(555
)
 
(2,762
)
 
(6,822
)
Proceeds from sale of subsidiary shares
320

 
0

 
800

 
0

Net cash used in financing activities
(706
)
 
(3,478
)
 
(5,120
)
 
(10,433
)
Effect of exchange rate changes on cash and cash equivalents
108

 
(29
)
 
387

 
(195
)
Net increase (decrease) in cash and cash equivalents
(5,130
)
 
(705
)
 
(2,337
)
 
2,728

Cash and cash equivalents at beginning of period
15,711

 
14,148

 
12,918

 
10,715

Cash and cash equivalents at end of period
$
10,581

 
$
13,443

 
$
10,581

 
$
13,443





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 September 30, 2018
Net cash provided by operating activities
$
13,210

Less: purchases of property and equipment
(5,282
)
Free cash flow
$
7,928

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




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.
 
Three Months Ended September 30, 2018
 
Three Months Ended September 30, 2018
 
YoY
(using Q3'17's FX rates)
 
QoQ
(using Q2'18's FX rates)
EMEA revenues (GAAP)
$
10,958

 
$
10,958

Exclude foreign exchange impact on Q3'18 revenues using Q3'17 rates
123

 
N/A

Exclude foreign exchange impact on Q3'18 revenues using Q2'18 rates
N/A

 
398

Exclude hedging impact recognized in Q3'18
(49
)
 
(49
)
EMEA constant currency revenues (non-GAAP)
$
11,032

 
$
11,307

Prior period EMEA revenues, excluding hedging impact (non-GAAP)
$
9,258

 
$
10,888

EMEA revenue growth (GAAP)
20
%
 
2
 %
EMEA constant currency revenue growth (non-GAAP)
19
%
 
4
 %
 
 
 
 
APAC revenues (GAAP)
$
5,424

 
$
5,424

Exclude foreign exchange impact on Q3'18 revenues using Q3'17 rates
94

 
N/A

Exclude foreign exchange impact on Q3'18 revenues using Q2'18 rates
N/A

 
135

Exclude hedging impact recognized in Q3'18
(23
)
 
(23
)
APAC constant currency revenues (non-GAAP)
$
5,495

 
$
5,536

Prior period APAC revenues, excluding hedging impact (non-GAAP)
$
4,217

 
$
5,090

APAC revenue growth (GAAP)
29
%
 
7
 %
APAC constant currency revenue growth (non-GAAP)
30
%
 
9
 %
 
 
 
 
Other Americas revenues (GAAP)
$
1,835

 
$
1,835

Exclude foreign exchange impact on Q3'18 revenues using Q3'17 rates
168

 
N/A

Exclude foreign exchange impact on Q3'18 revenues using Q2'18 rates
N/A

 
82

Exclude hedging impact recognized in Q3'18
(8
)
 
(8
)
Other Americas constant currency revenues (non-GAAP)
$
1,995

 
$
1,909

Prior period Other Americas revenues, excluding hedging impact (non-GAAP)
$
1,558

 
$
1,849

Other Americas revenue growth (GAAP)
19
%
 
(1
)%
Other Americas constant currency revenue growth (non-GAAP)
28
%
 
3
 %
 
 
 
 
United States revenues (GAAP)
$
15,523

 
$
15,523

United States revenue growth (GAAP)
20
%
 
4
 %
 
 
 
 
Revenues (GAAP)
$
33,740

 
$
33,740

Constant currency revenues (non-GAAP)
$
34,045

 
$
34,275

Prior period revenues, excluding hedging impact (non-GAAP)
$
27,963

 
$
32,760

Revenue growth (GAAP)
21
%
 
3
 %
Constant currency revenue growth (non-GAAP)
22
%
 
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
 
September 30,
 
2017
 
2018
Interest income
$
306

 
$
481

Interest expense
(27
)
 
(28
)
Foreign currency exchange losses, net
(53
)
 
(55
)
Loss on debt securities, net
(46
)
 
(29
)
Gain on equity securities, net
1

 
1,382

Loss and impairment from equity method investments, net
(31
)
 
(27
)
Other
47

 
49

Other income (expense), net
$
197

 
$
1,773






Segment results
The following table presents our revenues, operating income (loss), stock-based compensation (SBC), capital expenditures, and depreciation, amortization, and impairment by segment (in millions, unaudited):
 
Three Months Ended
 
September 30,
 
2017(1)
 
2018
Revenues:
 
 
 
Google
$
27,655

 
$
33,594

Other Bets
117

 
146

Total revenues
$
27,772

 
$
33,740

 
 
 
 
Operating income (loss):
 
 
 
Google
$
8,582

 
$
9,490

Other Bets
(650
)
 
(727
)
Reconciling items(2)
(150
)
 
(453
)
Total income from operations
$
7,782

 
$
8,310

 
 
 
 
Stock-based compensation(3):
 
 
 
Google
$
1,690

 
$
2,071

Other Bets
94

 
125

Reconciling items(4)
36

 
34

Total stock-based compensation
$
1,820

 
$
2,230

 
 
 
 
Capital expenditures:
 
 
 
Google
$
3,563

 
$
5,643

Other Bets
73

 
55

Reconciling items(5)
(98
)
 
(416
)
Total capital expenditures
$
3,538

 
$
5,282

 
 
 
 
Depreciation, amortization, and impairment:
 
 
 
Google
$
1,693

 
$
2,277

Other Bets
68

 
78

Total depreciation, amortization, and impairment
$
1,761

 
$
2,355

(1) 
Segment information for Q3 2017 has been recast to reflect the move of Nest from Other Bets to the Google segment in Q1 2018 and conform to the current period segment presentation. Consolidated financial information is not affected.
(2) 
Reconciling items are primarily related to performance fees for the three months ended September 30, 2018, as well as corporate administrative costs and other miscellaneous items that are not allocated to individual segments.
(3) 
For purposes of segment reporting, SBC represents awards that we expect to settle in Alphabet stock.
(4) 
Reconciling items are primarily related to corporate administrative costs that are not allocated to individual segments.
(5) 
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 a cash basis, and other miscellaneous differences.


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