10-QPeriod: Q3 FY2021

Alphabet Inc. Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 27, 2021For Securities:GOOGLGOOGGOOGMGOOGN

Summary

Alphabet Inc. reported strong financial performance for the third quarter of 2021, with total revenues reaching $65.1 billion, a significant 41% increase year-over-year. This growth was predominantly driven by a robust performance in the Google Services segment, which saw revenues climb by 41%, and a substantial 45% increase in Google Cloud revenues. The company's operating income also saw a dramatic improvement, increasing to $21.0 billion from $11.2 billion in the prior year period, resulting in an expanded operating margin of 32%. Diluted Earnings Per Share (EPS) grew to $27.99 from $16.40 year-over-year, reflecting the company's improved profitability. Key drivers for the revenue surge included strong advertiser spending across Google Search and YouTube, alongside continued growth in Google Cloud Platform (GCP) and Google Workspace offerings. The company also noted the positive impact of the Fitbit acquisition, which closed in January 2021, contributing to growth in its 'Google other' segment. Despite increased costs associated with revenue growth and strategic investments, Alphabet demonstrated effective cost management, with operating expenses growing at a slower pace than revenues.

Financial Highlights

49 data points
Beta

Revenue

$65.12B

57.6% Gross Margin

Net Income

$18.94B

29.1% Net Margin

EPS (Diluted)

$1.40

Total Assets

$347.40B

Cash & Equivalents

$23.72B

Free Cash Flow

$18.72B

Financial Statements
Beta
Revenue$65.12B
Cost of Revenue$27.62B
Gross Profit$37.50B
R&D Expenses$7.69B
Operating Expenses$44.09B
Operating Income$21.03B
Interest Expense$77.00M
Net Income$18.94B
EPS (Basic)$1.42
EPS (Diluted)$1.40

Key Highlights

  • 1Total revenues grew 41% year-over-year to $65.1 billion, driven by strong performance across all major segments.
  • 2Google Services revenue increased 41% to $59.9 billion, with Google advertising revenue up 43% to $53.1 billion.
  • 3Google Cloud revenue surged 45% year-over-year to $5.0 billion, indicating continued enterprise adoption.
  • 4Operating income more than doubled to $21.0 billion, resulting in a significant expansion of operating margin to 32%.
  • 5Diluted EPS rose to $27.99 from $16.40 in the prior year quarter, demonstrating substantial earnings growth.
  • 6The company repurchased $12.6 billion of its Class A and Class C shares during the quarter, underscoring its commitment to returning capital to shareholders.
  • 7Total assets increased to $347.4 billion from $319.6 billion at the end of 2020, reflecting continued investment and growth.

Frequently Asked Questions

The primary driver of Alphabet's revenue growth was the strong performance of its Google Services segment, which includes advertising revenues from Google Search and YouTube, as well as revenues from Google Play, hardware, and other services. Advertiser spending rebounded significantly, contributing to a 41% year-over-year increase in Google Services revenue.

Google Cloud is showing substantial growth, with revenues increasing by 45% year-over-year to $5.0 billion in the third quarter of 2021. While the segment still reported an operating loss ($0.6 billion), the loss narrowed significantly from $1.2 billion in the prior year quarter, indicating improving efficiency and increasing enterprise adoption of its cloud infrastructure and collaboration tools.

Alphabet is actively returning capital to shareholders. During the third quarter of 2021, the company repurchased $12.6 billion of its Class A and Class C shares. A significant authorization of $50 billion was approved in April 2021, with $30.8 billion remaining available for repurchase as of September 30, 2021, demonstrating a continued commitment to share buybacks.

Alphabet continues to face antitrust investigations and legal matters in various jurisdictions, particularly in Europe, relating to its business practices. While the company has accrued significant amounts for past fines (e.g., €2.4 billion, €4.3 billion, and €1.5 billion from the EC), these are currently under appeal. The company believes these complaints are without merit and will defend itself vigorously. As of the filing date, it is not possible to estimate the maximum potential amount under all indemnification agreements, but historical payments have not been materially adverse. No material indemnification claims were probable or reasonably possible as of September 30, 2021.