Press release

Alphabet Announces First Quarter 2017 Results

MOUNTAIN VIEW, Calif. – April 27, 2017 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended March 31, 2017.

"Our excellent results represent a terrific start to 2017, with revenues up 22% versus the first quarter of 2016 and 24% on a constant currency basis. We clearly continue to benefit from our ongoing investments in product innovation and have great momentum in our new businesses across Alphabet," said Ruth Porat, CFO of Alphabet.

Q1 2017 financial highlights

The following summarizes our consolidated financial results for the quarters ended March 31, 2016 and 2017 (in millions, except for per share information, effective tax rate, and headcount; unaudited):

Three Months Ended
March 31, 2016
Three Months Ended
March 31, 2017
Revenues $20,257 $24,750
Increase in revenues year over year 17 % 22 %
Increase in constant currency revenues year over year 23 % 24 %
Operating income $5,342 $6,568
Operating margin 26 % 27 %
Net income $4,207 $5,426
Diluted EPS $6.02 $7.73
Diluted shares (in thousands) 699,311 702,036
Effective tax rate (ETR) 18 % 20 %
Headcount 64,115 73,992

Q1 2017 supplemental information

Segment revenues and operating results (in millions; unaudited):

Three Months Ended
March 31, 2016
Three Months Ended
March 31, 2017
Google properties revenues $14,328 $17,403
Google Network Members' properties revenues 3,692 4,008
Google advertising revenues 18,020 21,411
Google other revenues 2,072 3,095
Google segment revenues $20,092 $24,506
Other Bets revenues $165 $244
Google operating income $6,245 $7,598
Other Bets operating loss $(774) $(855)

Traffic acquisition costs (TAC) to Google Network Members and distribution partners (in millions; unaudited):

Three Months Ended
March 31, 2016
Three Months Ended
March 31, 2017
TAC to Google Network Members $2,571 $2,824
TAC to Google Network Members as % of Google Network Members' properties revenues 70 % 70 %
TAC to distribution partners $1,217 $1,805
TAC to distribution partners as % of Google properties revenues 8 % 10 %
Total TAC $3,788 $4,629
Total TAC as % of Google advertising revenues 21 % 22 %

Paid clicks and cost-per-click information (unaudited):

Change from Q1 2016 to Q1 2017 (YoY) Change from Q4 2016 to Q1 2017 (QoQ)
Aggregate paid clicks 44 % 2 %
Paid clicks on Google properties 53 % 1 %
Paid clicks on Google Network Members' properties 10 % 6 %
Aggregate cost-per-click (19) % (4) %
Cost-per-click on Google properties (21) % (3) %
Cost-per-click on Google Network Members' properties (17) % (9) %

In the first quarter of 2017, we refined our methodology for paid clicks and cost-per-click to include additional categories of TrueView engagement ads and exclude non-engagement based trial ad formats. This change resulted in a modest increase in paid clicks and a modest decrease in cost-per-click. For comparison purposes, we have included updated data for historical periods. Please see the table captioned “Monetization metrics” included at the end of this release.

Webcast and conference call information

A live audio webcast of our first quarter 2017 earnings release call will be available 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.

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, 2016, which is on file with the SEC and is available on our investor relations website at https://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 March 31, 2017. All information provided in this release and in the attachments is as of April 27, 2017, 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: 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. 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 "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

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Q1 financial data
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