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Exhibit
Exhibit 99.1

Alphabet Announces Fourth Quarter and Fiscal Year 2018 Results
MOUNTAIN VIEW, Calif. – February 4, 2019 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter and fiscal year ended December 31, 2018.
"In 2018 we delivered strong revenue growth, up 23% year over year to $136.8 billion, and up 22% for the fourth quarter to $39.3 billion," said Ruth Porat, Chief Financial Officer of Alphabet and Google. "With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers and partners around the globe."
Q4 2018 financial highlights
The following summarizes our consolidated financial results for the quarters ended December 31, 2017 and 2018 (in millions, except for per share information, percentages, and number of employees; unaudited):
 
Three Months Ended December 31, 2017(1)
 
Three Months Ended December 31, 2018
Revenues

$32,323

 

$39,276

Increase in revenues year over year
24
%
 
22
%
Increase in constant currency revenues year over year
24
%
 
23
%
 
 
 
 
Operating income

$7,664

 

$8,203

Operating margin
24
%
 
21
%
 
 
 
 
Other income (expense), net

$354

 

$1,869

 
 
 
 
Net income (loss)

($3,020
)
 

$8,948

Diluted EPS

($4.35
)
 

$12.77

Diluted shares (in thousands)
694,604

 
700,899

 
 
 
 
Effective tax rate
138
%
 
11
%
Number of employees
80,110

 
98,771

(1) 
The Tax Act was enacted on December 22, 2017 and resulted in additional tax expense of $9.9 billion in the fourth quarter of 2017 primarily due to the one-time transition tax on accumulated foreign subsidiary earnings and deferred tax effects.
Q4 2018 supplemental information (in millions, except for EPS and percentages; unaudited)
Segment revenues and operating results
 
Three Months Ended December 31, 2017
 
Three Months Ended December 31, 2018
Google properties revenues

$22,237

 

$27,022

Google Network Members' properties revenues
4,990

 
5,613
Google advertising revenues
27,227

 
32,635
Google other revenues
4,965

 
6,487
Google segment revenues

$32,192

 

$39,122

Other Bets revenues

$131

 

$154

 
 
 
 
Google operating income

$8,595

 

$9,700

Other Bets operating loss

($748
)
 

($1,328
)


Traffic acquisition costs (TAC) to Google Network Members and distribution partners
 
Three Months Ended December 31, 2017
 
Three Months Ended December 31, 2018
TAC to Google Network Members

$3,674

 

$3,930

TAC to Google Network Members as % of Google Network Members' properties revenues
74
%
 
70
%
TAC to distribution partners

$2,776

 

$3,506

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

$6,450

 

$7,436

Total TAC as % of Google advertising revenues
24
%
 
23
%
Monetization metrics information
 
Change from Q4 2017 to Q4 2018 (YoY)
 
Change from Q3 2018 to Q4 2018 (QoQ)
Paid clicks on Google properties
66
 %
 
22
 %
Cost-per-click on Google properties
(29
)%
 
(9
)%
 
 
 
 
Impressions on Google Network Members' properties
7
 %
 
7
 %
Cost-per-impression on Google Network Members' properties
5
 %
 
7
 %
2018 effect from securities
The following summarizes the effects on our fourth quarter and fiscal year 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 other income (expense), net (OI&E) on the income statement. Performance fees related to these equity security gains were accrued in operating expenses in the periods presented. Income tax expense on the equity security gains for the year was partially offset by the release of a deferred tax asset valuation allowance.
 
Three Months Ended December 31, 2018
 
Twelve Months Ended December 31, 2018
Operating expenses effect:
 
 
 
Accrued performance fees

$18

 

$1,203

OI&E effect:
 
 
 
Gain (loss) on equity securities

($15
)
 

$5,460

Income tax effect:
 
 
 
Income tax expense (benefit)

($7
)
 
894

Release of deferred tax asset valuation allowance

$0

 

($648
)
Net income effect

($26
)
 

$4,011

Diluted EPS effect

($0.04
)
 

$5.70

The $5.5 billion gain on equity securities for 2018 includes $4.0 billion of net unrealized gains on equity investments that we hold and which may not ultimately be realized. Fluctuations in the value of these investments could contribute to the volatility of OI&E in future periods.
In addition, results for the quarter ended December 31, 2018 were affected by a $1.3 billion unrealized gain recognized in OI&E related to a non-marketable debt security.


Webcast and conference call information
A live audio webcast of our fourth 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 September 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 Annual Report on Form 10-K for the year ended December 31, 2018. All information provided in this release and in the attachments is as of February 4, 2019. 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 effect 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
 
December 31, 2018
 
 
 
(unaudited)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
10,715

 
$
16,701

Marketable securities
91,156

 
92,439

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

 
109,140

Accounts receivable, net of allowance of $674 and $729
18,336

 
20,838

Income taxes receivable, net
369

 
355

Inventory
749

 
1,107

Other current assets
2,983

 
4,236

Total current assets
124,308

 
135,676

Non-marketable investments
7,813

 
13,859

Deferred income taxes
680

 
737

Property and equipment, net
42,383

 
59,719

Intangible assets, net
2,692

 
2,220

Goodwill
16,747

 
17,888

Other non-current assets
2,672

 
2,693

Total assets
$
197,295

 
$
232,792

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

 
$
4,378

Accrued compensation and benefits
4,581

 
6,839

Accrued expenses and other current liabilities
10,177

 
16,958

Accrued revenue share
3,975

 
4,592

Deferred revenue
1,432

 
1,784

Income taxes payable, net
881

 
69

Total current liabilities
24,183

 
34,620

Long-term debt
3,969

 
4,012

Deferred revenue, non-current
340

 
396

Income taxes payable, non-current
12,812

 
11,327

Deferred income taxes
430

 
1,264

Other long-term liabilities
3,059

 
3,545

Total liabilities
44,793

 
55,164

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 695,556 (Class A 299,242, Class B 46,636, Class C 349,678) shares issued and outstanding
40,247

 
45,049

Accumulated other comprehensive loss
(992
)
 
(2,306
)
Retained earnings
113,247

 
134,885

Total stockholders’ equity
152,502

 
177,628

Total liabilities and stockholders’ equity
$
197,295

 
$
232,792





Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts; unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
 
2017
 
2018
 
2017
 
2018
Revenues
$
32,323

 
$
39,276

 
$
110,855

 
$
136,819

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
14,267

 
17,918

 
45,583

 
59,549

Research and development
4,306

 
6,034

 
16,625

 
21,419

Sales and marketing
4,310

 
5,100

 
12,893

 
16,333

General and administrative
1,776

 
2,021

 
6,872

 
8,126

European Commission fines
0

 
0

 
2,736

 
5,071

Total costs and expenses
24,659

 
31,073

 
84,709

 
110,498

Income from operations
7,664

 
8,203

 
26,146

 
26,321

Other income (expense), net
354

 
1,869

 
1,047

 
8,592

Income before income taxes
8,018

 
10,072

 
27,193

 
34,913

Provision for income taxes
11,038

 
1,124

 
14,531

 
4,177

Net income (loss)
$
(3,020
)
 
$
8,948

 
$
12,662

 
$
30,736

 
 
 
 
 
 
 
 
Basic earnings per share of Class A and B common stock and Class C capital stock
$
(4.35
)
 
$
12.87

 
$
18.27

 
$
44.22

Diluted earnings per share of Class A and B common stock and Class C capital stock
$
(4.35
)
 
$
12.77

 
$
18.00

 
$
43.70





Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions; unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
 
2017
 
2018
 
2017
 
2018
Operating activities
 
 
 
 
 
 
 
Net income (loss)
$
(3,020
)
 
$
8,948

 
$
12,662

 
$
30,736

Adjustments:
 
 
 
 
 
 
 
Depreciation and impairment of property and equipment
1,831

 
2,373

 
6,103

 
8,164

Amortization and impairment of intangible assets
195

 
207

 
812

 
871

Stock-based compensation expense
1,847

 
2,253

 
7,679

 
9,353

Deferred income taxes
16

 
55

 
258

 
778

(Gain) loss on debt and equity securities, net
(30
)
 
(1,237
)
 
37

 
(6,650
)
Other
102

 
(107
)
 
294

 
(189
)
Changes in assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
 
Accounts receivable
(3,049
)
 
(2,887
)
 
(3,768
)
 
(2,169
)
Income taxes, net
9,076

 
(360
)
 
8,211

 
(2,251
)
Other assets
(78
)
 
33

 
(2,164
)
 
(1,207
)
Accounts payable
673

 
774

 
731

 
1,067

Accrued expenses and other liabilities
1,770

 
2,157

 
4,891

 
8,614

Accrued revenue share
773

 
679

 
955

 
483

Deferred revenue
162

 
99

 
390

 
371

Net cash provided by operating activities
10,268

 
12,987

 
37,091

 
47,971

Investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(4,307
)
 
(7,081
)
 
(13,184
)
 
(25,139
)
Proceeds from disposals of property and equipment
18

 
29

 
99

 
98

Purchases of marketable securities
(13,486
)
 
(12,818
)
 
(92,195
)
 
(50,158
)
Maturities and sales of marketable securities
11,371

 
13,581

 
73,959

 
48,507

Purchases of non-marketable investments
(874
)
 
(955
)
 
(1,745
)
 
(2,073
)
Maturities and sales of non-marketable investments
318

 
407

 
533

 
1,752

Acquisitions, net of cash acquired, and purchases of intangible assets
(14
)
 
(39
)
 
(287
)
 
(1,491
)
Proceeds from collection of notes receivable
0

 
0

 
1,419

 
0

Net cash used in investing activities
(6,974
)
 
(6,876
)
 
(31,401
)
 
(28,504
)
Financing activities
 
 
 
 
 
 
 
Net payments related to stock-based award activities
(1,055
)
 
(1,041
)
 
(4,166
)
 
(4,993
)
Repurchases of capital stock
(2,101
)
 
(2,650
)
 
(4,846
)
 
(9,075
)
Proceeds from issuance of debt, net of costs
1,593

 
0

 
4,291

 
6,766

Repayments of debt
(1,615
)
 
(5
)
 
(4,377
)
 
(6,827
)
Proceeds from sale of subsidiary shares
0

 
950

 
800

 
950

Net cash used in financing activities
(3,178
)
 
(2,746
)
 
(8,298
)
 
(13,179
)
Effect of exchange rate changes on cash and cash equivalents
18

 
(107
)
 
405

 
(302
)
Net increase (decrease) in cash and cash equivalents
134

 
3,258

 
(2,203
)
 
5,986

Cash and cash equivalents at beginning of period
10,581

 
13,443

 
12,918

 
10,715

Cash and cash equivalents at end of period
$
10,715

 
$
16,701

 
$
10,715

 
$
16,701





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 December 31, 2018
Net cash provided by operating activities
$
12,987

Less: purchases of property and equipment
(7,081
)
Free cash flow
$
5,906

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 effect of foreign exchange rate movements and hedging activities, which are not indicative of our core operating results.
 
Three Months Ended December 31, 2018
 
Three Months Ended December 31, 2018
 
YoY
(using Q4'17's FX rates)
 
QoQ
(using Q3'18's FX rates)
EMEA revenues (GAAP)
$
12,350

 
$
12,350

Exclude foreign exchange effect on Q4'18 revenues using Q4'17 rates
367

 
N/A

Exclude foreign exchange effect on Q4'18 revenues using Q3'18 rates
N/A

 
175

Exclude hedging effect recognized in Q4'18
(99
)
 
(99
)
EMEA constant currency revenues (non-GAAP)
$
12,618

 
$
12,426

Prior period EMEA revenues, excluding hedging effect (non-GAAP)
$
10,488

 
$
10,909

EMEA revenue growth (GAAP)
20
%
 
13
%
EMEA constant currency revenue growth (non-GAAP)
20
%
 
14
%
 
 
 
 
APAC revenues (GAAP)
$
6,056

 
$
6,056

Exclude foreign exchange effect on Q4'18 revenues using Q4'17 rates
146

 
N/A

Exclude foreign exchange effect on Q4'18 revenues using Q3'18 rates
N/A

 
92

Exclude hedging effect recognized in Q4'18
(25
)
 
(25
)
APAC constant currency revenues (non-GAAP)
$
6,177

 
$
6,123

Prior period APAC revenues, excluding hedging effect (non-GAAP)
$
4,696

 
$
5,401

APAC revenue growth (GAAP)
29
%
 
12
%
APAC constant currency revenue growth (non-GAAP)
32
%
 
13
%
 
 
 
 
Other Americas revenues (GAAP)
$
2,201

 
$
2,201

Exclude foreign exchange effect on Q4'18 revenues using Q4'17 rates
211

 
N/A

Exclude foreign exchange effect on Q4'18 revenues using Q3'18 rates
N/A

 
27

Exclude hedging effect recognized in Q4'18
0

 
0

Other Americas constant currency revenues (non-GAAP)
$
2,412

 
$
2,228

Prior period Other Americas revenues, excluding hedging effect (non-GAAP)
$
1,909

 
$
1,827

Other Americas revenue growth (GAAP)
16
%
 
20
%
Other Americas constant currency revenue growth (non-GAAP)
26
%
 
22
%
 
 
 
 
United States revenues (GAAP)
$
18,669

 
$
18,669

United States revenue growth (GAAP)
21
%
 
20
%
 
 
 
 
Revenues (GAAP)
$
39,276

 
$
39,276

Constant currency revenues (non-GAAP)
$
39,876

 
$
39,446

Prior period revenues, excluding hedging effect (non-GAAP)
$
32,521

 
$
33,660

Revenue growth (GAAP)
22
%
 
16
%
Constant currency revenue growth (non-GAAP)
23
%
 
17
%
Non-GAAP constant currency revenues and growth: We define non-GAAP constant currency revenues as total revenues excluding the effect 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 effect 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 effect recognized in the prior period.




Other income (expense), net
The following table presents our other income (expense), net (in millions, unaudited):
 
Three Months Ended
 
December 31,
 
2017
 
2018
Interest income
$
400

 
$
542

Interest expense
(36
)
 
(29
)
Foreign currency exchange losses, net
(20
)
 
32

Gain (loss) on debt securities, net
(13
)
 
1,252

Gain (loss) on equity securities, net
43

 
(15
)
Income (loss) and impairment from equity method investments, net
(64
)
 
19

Other
44

 
68

Other income (expense), net
$
354

 
$
1,869






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
 
Twelve Months Ended
 
December 31,
 
December 31,
 
2017(1)
 
2018
 
2017(1)
 
2018
Revenues:
 
 
 
 
 
 
 
Google
$
32,192

 
$
39,122

 
$
110,378

 
$
136,224

Other Bets
131

 
154

 
477

 
595

Total revenues
$
32,323

 
$
39,276

 
$
110,855

 
$
136,819

 
 
 
 
 
 
 
 
Operating income (loss):
 
 
 
 
 
 
 
Google
$
8,595

 
$
9,700

 
$
32,287

 
$
36,517

Other Bets
(748
)
 
(1,328
)
 
(2,734
)
 
(3,358
)
Reconciling items(2)
(183
)
 
(169
)
 
(3,407
)
 
(6,838
)
Total income from operations
$
7,664

 
$
8,203

 
$
26,146

 
$
26,321

 
 
 
 
 
 
 
 
Stock-based compensation(3):
 
 
 
 
 
 
 
Google
$
1,712

 
$
2,092

 
$
7,168

 
$
8,755

Other Bets
102

 
125

 
363

 
489

Reconciling items(4)
33

 
36

 
148

 
109

Total stock-based compensation
$
1,847

 
$
2,253

 
$
7,679

 
$
9,353

 
 
 
 
 
 
 
 
Capital expenditures:
 
 
 
 
 
 
 
Google
$
3,809

 
$
6,849

 
$
12,619

 
$
25,460

Other Bets
105

 
61

 
493

 
181

Reconciling items(5)
393

 
171

 
72

 
(502
)
Total capital expenditures
$
4,307

 
$
7,081

 
$
13,184

 
$
25,139

 
 
 
 
 
 
 
 
Depreciation, amortization, and impairment:
 
 
 
 
 
 
 
Google
$
1,935

 
$
2,499

 
$
6,608

 
$
8,708

Other Bets
91

 
81

 
307

 
327

Total depreciation, amortization, and impairment
$
2,026

 
$
2,580

 
$
6,915

 
$
9,035

(1) 
Segment information for 2017 has been recast to reflect the move of Nest from Other Bets to the Google segment in Q1 2018 and to conform to the current period segment presentation. Consolidated financial information is not affected.
(2) 
Reconciling items are primarily comprised of the European Commission fines for the twelve months ended December 31, 2017 and 2018, respectively, performance fees for the twelve months ended December 31, 2018, and corporate administrative costs and other miscellaneous items that are not allocated to individual segments for all periods presented.
(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 an 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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