10-KPeriod: FY2016

Alphabet Inc. Annual Report, Year Ended Dec 31, 2016

Filed February 3, 2017For Securities:GOOGLGOOGGOOGMGOOGN

Summary

Alphabet Inc.'s 2016 Form 10-K report highlights a year of robust growth, driven primarily by its core Google segment. Total revenues reached $90.3 billion, a 20% increase year-over-year, with Google segment revenues accounting for $89.5 billion. The company's core advertising business remains the primary revenue driver, with continued strength in mobile search and YouTube advertising. However, growth in the Google Network Members' properties revenue showed moderation, impacted by shifts in advertising buying and policy changes. The company's 'Other Bets' segment also demonstrated significant growth, with revenues increasing by 82% to $0.8 billion, signaling progress in diversifying revenue streams. Investments in research and development, particularly in areas like machine learning and artificial intelligence, remain substantial, underscoring Alphabet's commitment to innovation and future growth. The company's financial position is strong, with $86.3 billion in cash, cash equivalents, and marketable securities as of December 31, 2016, providing ample resources for continued investment and strategic initiatives.

Financial Highlights

52 data points
Beta

Revenue

$90.27B

61.1% Gross Margin

Net Income

$19.48B

21.6% Net Margin

EPS (Diluted)

$1.39

Total Assets

$167.50B

Cash & Equivalents

$12.92B

Free Cash Flow

$25.82B

Financial Statements
Beta
Revenue$90.27B
Cost of Revenue$35.14B
Gross Profit$55.13B
R&D Expenses$13.95B
Operating Expenses$66.56B
Operating Income$23.72B
Interest Expense$124.00M
Net Income$19.48B
EPS (Basic)$1.42
EPS (Diluted)$1.39

Key Highlights

  • 1Total revenues grew 20% year-over-year to $90.3 billion in 2016.
  • 2Google segment revenues reached $89.5 billion, driven by strong performance in mobile search and YouTube advertising.
  • 3Other Bets segment revenue grew significantly by 82% year-over-year to $0.8 billion.
  • 4Investment in R&D remains a priority, reflecting a commitment to innovation and future growth.
  • 5The company ended the year with a strong liquidity position, holding $86.3 billion in cash, cash equivalents, and marketable securities.
  • 6Traffic acquisition costs (TAC) represent a significant expense, indicating strong partnerships within the advertising ecosystem.

Frequently Asked Questions

Alphabet's primary source of revenue is online advertising, generated through Google properties (like Google Search, YouTube, Gmail, Maps) and Google Network Members' properties. This includes both performance advertising (pay-per-click) and brand advertising.

Alphabet Inc. is a holding company structured to manage its diverse businesses. 'Google' is its largest segment, encompassing core internet products and hardware. 'Other Bets' is a collection of early-stage businesses operating in different industries, such as life sciences (Verily), autonomous driving (Waymo), and other ventures, which are individually not material enough to be reported as separate segments.

Key drivers of revenue growth include the increasing shift of user behavior and advertising spend online, growth in mobile and YouTube engagement, and expansion in international markets. Potential pressures on margins stem from a shift towards mobile and newer advertising formats (which generally have lower margins than traditional desktop search), increased traffic acquisition costs (TAC), and investments in new businesses and technologies which may have lower initial margins.

Alphabet maintains a strong liquidity position with substantial cash, cash equivalents, and marketable securities. The company intends to retain future earnings and does not currently expect to pay cash dividends. It also has an authorized share repurchase program for its Class C capital stock, indicating a strategy of returning capital to shareholders and managing its equity structure.