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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37580

________________________________________________________________________________________

Delaware			61-1767919
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Class A Common Stock, $0.001 par value			GOOGL			Nasdaq Stock Market LLC
						(Nasdaq Global Select Market)
Class C Capital Stock, $0.001 par value			GOOG			Nasdaq Stock Market LLC
						(Nasdaq Global Select Market)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No ☒

TABLE OF CONTENTS

						Page No.
Note About Forward-Looking Statements						3
PART I. FINANCIAL INFORMATION
Item 1			Financial Statements			5
			Consolidated Balance Sheets - December 31, 2022 and March 31, 2023			5
			Consolidated Statements of Income - Three Months Ended March 31, 2022 and 2023			6
			Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2022 and 2023			7
			Consolidated Statements of Stockholders' Equity - Three Months Ended March 31, 2022 and 2023			8
			Consolidated Statements of Cash Flows - Three Months Ended March 31, 2022 and 2023			9
			Notes to Consolidated Financial Statements			10
Item 2			Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3			Quantitative and Qualitative Disclosures About Market Risk			43
Item 4			Controls and Procedures			43
PART II. OTHER INFORMATION
Item 1			Legal Proceedings			44
Item 1A			Risk Factors			44
Item 2			Unregistered Sales of Equity Securities and Use of Proceeds			44
Item 5			Other Information			49
Item 6			Exhibits			45
Signatures						46

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, among other things, statements regarding:

•the growth of our business and revenues and our expectations about the factors that influence our success and trends in our business;

•fluctuations in our revenues and margins and various factors contributing to such fluctuations;

•our expectation that the continuing shift from an offline to online world will continue to benefit our business;

•our expectation that the portion of our revenues that we derive from non-advertising revenues will continue to increase and may affect our margins;

•our expectation that our traffic acquisition costs (TAC) and the associated TAC rate will fluctuate, which could affect our overall margins;

•our expectation that our monetization trends will fluctuate, which could affect our revenues and margins;

•fluctuations in our revenues, as well as the change in paid clicks and cost-per-click and the change in impressions and cost-per-impression, and various factors contributing to such fluctuations;

•our expectation that we will continue to periodically review, refine, and update our methodologies for monitoring, gathering, and counting the number of paid clicks and impressions;

•our expectation that our results will be affected by our performance in international markets as users in developing economies increasingly come online;

•our expectation that our foreign exchange risk management program will not fully offset our net exposure to fluctuations in foreign currency exchange rates;

•the expected variability of gains and losses related to hedging activities under our foreign exchange risk management program;

•the amount and timing of revenue recognition from customer contracts with commitments for performance obligations, including our estimate of the remaining amount of commitments and when we expect to recognize revenue;

•fluctuations in our capital expenditures;

•our plans to continue to invest in new businesses, products, services and technologies, systems, land and buildings for data centers, and infrastructure, as well as to continue to invest in acquisitions and strategic investments;

•our pace of hiring and our plans to provide competitive compensation programs;

•our expectation that our cost of revenues, research and development (R&D) expenses, sales and marketing expenses, and general and administrative expenses may increase in amount and/or may increase as a percentage of revenues and may be affected by a number of factors;

•estimates of our future compensation expenses;

•our expectation that our other income (expense), net (OI&E), will fluctuate in the future, as it is largely driven by market dynamics;

•fluctuations in our effective tax rate;

•seasonal fluctuations in internet usage and advertiser expenditures, underlying business trends such as traditional retail seasonality, which are likely to cause fluctuations in our quarterly results;

•the sufficiency of our sources of funding;

•our potential exposure in connection with new and pending investigations, proceedings, and other contingencies, including the possibility that certain legal proceedings to which we are a party could harm our business, financial condition, and operating results;

•our expectation that we will continue to face heightened regulatory scrutiny, and the sufficiency and timing of our proposed remedies in response to decisions from the European Commission (EC) and other regulators and governmental entities;

•the expected timing, amount, and effect of Alphabet Inc.'s share repurchases;

•our long-term sustainability and diversity goals;

•the unpredictability of the ongoing broader economic effects resulting from the war in Ukraine on our future financial results;

•the expected financial effect of our announced workforce reduction and office space optimization;

•our expectation that the change in estimated useful life of servers and certain network equipment will have a favorable effect on our 2023 operating results;

As used herein, "Alphabet," "the company," "we," "us," "our," and similar terms include Alphabet Inc. and its subsidiaries, unless the context indicates otherwise.

"Alphabet," "Google," and other trademarks of ours appearing in this report are our property. We do not intend our use or display of other companies' trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

PART I.    FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

(in millions, except par value per share amounts)

			As of December 31, 2022						As of March 31, 2023
									(unaudited)
Assets
Current assets:
Cash and cash equivalents			$	21,879					$	25,924
Marketable securities			91,883						89,178
Total cash, cash equivalents, and marketable securities			113,762						115,102
Accounts receivable, net			40,258						36,036
Inventory			2,670						2,315
Other current assets			8,105						8,532
Total current assets			164,795						161,985
Non-marketable securities			30,492						31,213
Deferred income taxes			5,261						6,885
Property and equipment, net			112,668						117,560
Operating lease assets			14,381						14,447
Intangible assets, net			2,084						1,968
Goodwill			28,960						28,994
Other non-current assets			6,623						6,439
Total assets			$	365,264					$	369,491
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable			$	5,128					$	4,184
Accrued compensation and benefits			14,028						9,954
Accrued expenses and other current liabilities			37,866						43,185
Accrued revenue share			8,370						7,816
Deferred revenue			3,908						3,715
Total current liabilities			69,300						68,854
Long-term debt			14,701						13,697
Deferred revenue, non-current			599						610
Income taxes payable, non-current			9,258						9,722
Deferred income taxes			514						542
Operating lease liabilities			12,501						12,799
Other long-term liabilities			2,247						2,373
Total liabilities			109,120						108,597
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value per share, 100 shares authorized; no shares issued and outstanding			0						0
Class A, Class B, and Class C stock and additional paid-in capital, $0.001 par value per share: 300,000 shares authorized (Class A 180,000, Class B 60,000, Class C 60,000); 12,849 (Class A 5,964, Class B 883, Class C 6,002) and 12,722 (Class A 5,943, Class B 883, Class C 5,896) shares issued and outstanding			68,184						70,269
Accumulated other comprehensive income (loss)			(7,603)						(6,000)
Retained earnings			195,563						196,625
Total stockholders’ equity			256,144						260,894
Total liabilities and stockholders’ equity			$	365,264					$	369,491

(in millions, except per share amounts; unaudited)

			Three Months Ended
			March 31,
			2022						2023
Revenues			$	68,011					$	69,787
Costs and expenses:
Cost of revenues			29,599						30,612
Research and development			9,119						11,468
Sales and marketing			5,825						6,533
General and administrative			3,374						3,759
Total costs and expenses			47,917						52,372
Income from operations			20,094						17,415
Other income (expense), net			(1,160)						790
Income before income taxes			18,934						18,205
Provision for income taxes			2,498						3,154
Net income			$	16,436					$	15,051
Basic net income per share of Class A, Class B, and Class C stock			$	1.24					$	1.18
Diluted net income per share of Class A, Class B, and Class C stock			$	1.23					$	1.17

See accompanying notes.

(in millions; unaudited)

			Three Months Ended
			March 31,
			2022						2023
Net income			$	16,436					$	15,051
Other comprehensive income (loss):
Change in foreign currency translation adjustment			39						596
Available-for-sale investments:
Change in net unrealized gains (losses)			(2,478)						866
Less: reclassification adjustment for net (gains) losses included in net income			148						292
Net change, net of income tax benefit (expense) of $633 and $(330)			(2,330)						1,158
Cash flow hedges:
Change in net unrealized gains (losses)			114						(74)
Less: reclassification adjustment for net (gains) losses included in net income			(249)						(77)
Net change, net of income tax benefit (expense) of $44 and $30			(135)						(151)
Other comprehensive income (loss)			(2,426)						1,603
Comprehensive income			$	14,010					$	16,654

See accompanying notes.

Alphabet Inc.

			Three Months Ended March 31, 2022
			Class A, Class B, Class C Stock and Additional Paid-In Capital												Accumulated Other Comprehensive Income (Loss)						Retained Earnings						Total Stockholders’ Equity
			Shares						Amount
Balance as of December 31, 2021			13,242						$	61,774					$	(1,623)					$	191,484					$	251,635
Stock issued			31						7						0						0						7
Stock-based compensation expense			0						4,547						0						0						4,547
Tax withholding related to vesting of restricted stock units and other			0						(2,895)						0						0						(2,895)
Repurchases of stock			(98)						(601)						0						(12,699)						(13,300)
Net income			0						0						0						16,436						16,436
Other comprehensive income (loss)			0						0						(2,426)						0						(2,426)
Balance as of March 31, 2022			13,175						$	62,832					$	(4,049)					$	195,221					$	254,004

			Three Months Ended March 31, 2023
			Class A, Class B, Class C Stock and Additional Paid-In Capital												Accumulated Other Comprehensive Income (Loss)						Retained Earnings						Total Stockholders’ Equity
			Shares						Amount
Balance as of December 31, 2022			12,849						$	68,184					$	(7,603)					$	195,563					$	256,144
Stock issued			30						0						0						0						0
Stock-based compensation expense			0						5,313						0						0						5,313
Tax withholding related to vesting of restricted stock units and other			0						(2,093)						0						0						(2,093)
Repurchases of stock			(157)						(1,135)						0						(13,989)						(15,124)
Net income			0						0						0						15,051						15,051
Other comprehensive income (loss)			0						0						1,603						0						1,603
Balance as of March 31, 2023			12,722						$	70,269					$	(6,000)					$	196,625					$	260,894

See accompanying notes.

(in millions; unaudited)

			Three Months Ended
			March 31,
			2022						2023
Operating activities
Net income			$	16,436					$	15,051
Adjustments:
Depreciation and impairment of property and equipment			3,591						3,060
Amortization and impairment of intangible assets			191						126
Stock-based compensation expense			4,504						5,284
Deferred income taxes			(2,090)						(1,854)
Loss (gain) on debt and equity securities, net			1,437						(84)
Other			140						553
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net			4,364						4,454
Income taxes, net			3,820						4,069
Other assets			(776)						(746)
Accounts payable			(2,373)						(1,105)
Accrued expenses and other liabilities			(3,216)						(4,496)
Accrued revenue share			(828)						(602)
Deferred revenue			(94)						(201)
Net cash provided by operating activities			25,106						23,509
Investing activities
Purchases of property and equipment			(9,786)						(6,289)
Purchases of marketable securities			(28,462)						(14,227)
Maturities and sales of marketable securities			29,779						18,327
Purchases of non-marketable securities			(776)						(626)
Maturities and sales of non-marketable securities			12						36
Acquisitions, net of cash acquired, and purchases of intangible assets			(173)						(42)
Other investing activities			355						(125)
Net cash used in investing activities			(9,051)						(2,946)
Financing activities
Net payments related to stock-based award activities			(2,916)						(1,989)
Repurchases of stock			(13,300)						(14,557)
Proceeds from issuance of debt, net of costs			16,422						6,927
Repayments of debt			(16,420)						(6,952)
Proceeds from sale of interest in consolidated entities, net			0						3
Net cash used in financing activities			(16,214)						(16,568)
Effect of exchange rate changes on cash and cash equivalents			100						50
Net increase (decrease) in cash and cash equivalents			(59)						4,045
Cash and cash equivalents at beginning of period			20,945						21,879
Cash and cash equivalents at end of period			$	20,886					$	25,924

Google was incorporated in California in September 1998 and re-incorporated in the State of Delaware in August 2003. In 2015, we implemented a holding company reorganization, and as a result, Alphabet Inc. ("Alphabet") became the successor issuer to Google.

We generate revenues by delivering relevant, cost-effective online advertising; cloud-based solutions that provide enterprise customers with infrastructure and platform services as well as communication and collaboration tools; sales of other products and services, such as apps and in-app purchases, and hardware; and fees received for subscription-based products.

The consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models. Intercompany balances and transactions have been eliminated.

These unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP), and in our opinion, include all adjustments of a normal recurring nature necessary for fair financial statement presentation. Interim results are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. We have made estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates.

These consolidated financial statements and other information presented in this Form 10-Q should be read in conjunction with the consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC.

In January 2023, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from four years to six years and the estimated useful life of certain network equipment from five years to six years. This change in accounting estimate was effective beginning in fiscal year 2023. Based on the carrying value of servers and certain network equipment as of December 31, 2022, and those placed in service during the quarter ended March 31, 2023, the effect of this change in estimate was a reduction in depreciation expense of $988 million and an increase in net income of $770 million, or $0.06 per basic and $0.06 per diluted share, for the three months ended March 31, 2023.

On July 15, 2022, we executed a 20-for-one stock split of our Class A, Class B, and Class C stock. All prior period references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures prior to the effective date have been retroactively adjusted to reflect the effects of the Stock Split.

Certain amounts in prior periods have been reclassified to conform with current period presentation.

The following table presents revenues disaggregated by type (in millions):

			Three Months Ended
			March 31,
			2022						2023
Google Search & other			$	39,618					$	40,359
YouTube ads			6,869						6,693
Google Network			8,174						7,496
Google advertising			54,661						54,548
Google other			6,811						7,413
Google Services total			61,472						61,961
Google Cloud			5,821						7,454
Other Bets			440						288
Hedging gains (losses)			278						84
Total revenues			$	68,011					$	69,787

The following table presents revenues disaggregated by geography, based on the addresses of our customers (in millions):

			Three Months Ended
			March 31,
			2022												2023
United States			$	31,733					47		%				$	32,864					47		%
EMEA(1)			20,317						30						21,078						30
APAC(1)			11,841						17						11,681						17
Other Americas(1)			3,842						6						4,080						6
Hedging gains (losses)			278						0						84						0
Total revenues			$	68,011					100		%				$	69,787					100		%

(1)    Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific (APAC); and Canada and Latin America ("Other Americas").

As of March 31, 2023, we had $61.7 billion of remaining performance obligations (“revenue backlog”), primarily related to Google Cloud. Our revenue backlog represents commitments in customer contracts for future services that have not yet been recognized as revenue. The amount and timing of revenue recognition for these commitments is largely driven by our ability to deliver in accordance with relevant contract terms and when our customers utilize services, which could affect our estimate of revenue backlog and when we expect to recognize such as revenue. We expect to recognize approximately half of the revenue backlog as revenues over the next 24 months with the remaining to be recognized thereafter. Revenue backlog includes related deferred revenue currently recorded as well as amounts that will be invoiced in future periods, and excludes contracts with an original expected term of one year or less and cancellable contracts.

We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. Deferred revenues primarily relate to Google Cloud and Google other. Total deferred revenue as of December 31, 2022 was $4.5 billion, of which $1.6 billion was recognized as revenues during the three months ended March 31, 2023.

Fair Value Measurements

Investments Measured at Fair Value on a Recurring Basis

Cash, cash equivalents, and marketable equity securities are measured at fair value and classified within Level 1 and Level 2 in the fair value hierarchy, because we use quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets.

Debt securities are measured at fair value and classified within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. For certain marketable debt securities, we have elected the fair value option for which changes in fair value are recorded in other income (expense), net. The fair value option was elected for these securities to align with the unrealized gains and losses from related derivative contracts.

The following tables summarize our cash, cash equivalents, and marketable securities measured at fair value on a recurring basis (in millions):

												As of December 31, 2022
						Fair Value Hierarchy						Adjusted Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Cash and Cash Equivalents						Marketable Securities
Fair value changes recorded in other comprehensive income
Time deposits(1)						Level 2						$	5,297					$	0					$	0					$	5,297					$	5,293					$	4
Government bonds						Level 2						41,036						64						(2,045)						39,055						283						38,772
Corporate debt securities						Level 2						28,578						8						(1,569)						27,017						1						27,016
Mortgage-backed and asset-backed securities						Level 2						16,176						5						(1,242)						14,939						0						14,939
Total investments with fair value change reflected in other comprehensive income(2)												$	91,087					$	77					$	(4,856)					$	86,308					$	5,577					$	80,731
Fair value adjustments recorded in net income
Money market funds						Level 1																								$	7,234					$	7,234					$	0
Current marketable equity securities(3)						Level 1																								4,013						0						4,013
Mutual funds						Level 2																								339						0						339
Government bonds						Level 2																								1,877						440						1,437
Corporate debt securities						Level 2																								3,744						65						3,679
Mortgage-backed and asset-backed securities						Level 2																								1,686						2						1,684
Total investments with fair value change recorded in net income																														$	18,893					$	7,741					$	11,152
Cash																														0						8,561						0
Total												$	91,087					$	77					$	(4,856)					$	105,201					$	21,879					$	91,883

(1)The majority of our time deposits are domestic deposits.

(2)Represents gross unrealized gains and losses for debt securities recorded to accumulated other comprehensive income (AOCI).

(3)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $803 million as of December 31, 2022 is included within other non-current assets.

												As of March 31, 2023
						Fair Value Hierarchy						Adjusted Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Cash and Cash Equivalents						Marketable Securities
Fair value changes recorded in other comprehensive income
Time deposits						Level 2						$	2,880					$	0					$	0					$	2,880					$	2,880					$	0
Government bonds						Level 2						40,970						179						(1,230)						39,919						2,045						37,874
Corporate debt securities						Level 2						26,301						28						(1,244)						25,085						1						25,084
Mortgage-backed and asset-backed securities						Level 2						16,371						15						(1,039)						15,347						0						15,347
Total investments with fair value change reflected in other comprehensive income(1)												$	86,522					$	222					$	(3,513)					$	83,231					$	4,926					$	78,305
Fair value adjustments recorded in net income
Money market funds						Level 1																								$	10,604					$	10,604					$	0
Current marketable equity securities(2)						Level 1																								3,907						0						3,907
Mutual funds						Level 2																								315						0						315
Government bonds						Level 2																								2,006						672						1,334
Corporate debt securities						Level 2																								3,660						31						3,629
Mortgage-backed and asset-backed securities						Level 2																								1,688						0						1,688
Total investments with fair value change recorded in net income																														$	22,180					$	11,307					$	10,873
Cash																														0						9,691						0
Total												$	86,522					$	222					$	(3,513)					$	105,411					$	25,924					$	89,178

(1)Represents gross unrealized gains and losses for debt securities recorded to AOCI.

(2)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $920 million as of March 31, 2023 is included within other non-current assets

Our non-marketable equity securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable equity securities is adjusted to fair value upon observable transactions for identical or similar investments of the same issuer or impairment. Non-marketable equity securities that have been remeasured during the period based on observable transactions are classified within Level 2 or Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities we hold. The fair value of non-marketable equity securities that have been remeasured due to impairment are classified within Level 3.

As of March 31, 2023 the carrying value of our non-marketable equity securities was $29.1 billion, of which $10.7 billion were re-measured at fair value during the three months ended March 31, 2023 and primarily classified as Level 2 investments.

The following table summarizes the estimated fair value of investments in available-for-sale marketable debt securities by effective contractual maturity dates (in millions):

			As of March 31, 2023
Due in 1 year or less			$	11,712
Due in 1 year through 5 years			46,052
Due in 5 years through 10 years			15,228
Due after 10 years			11,964
Total			$	84,956

The following tables present fair values and gross unrealized losses recorded to AOCI, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions):

			As of December 31, 2022
			Less than 12 Months												12 Months or Greater												Total
			Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
Government bonds			$	21,039					$	(1,004)					$	13,438					$	(1,041)					$	34,477					$	(2,045)
Corporate debt securities			11,228						(440)						15,125						(1,052)						26,353						(1,492)
Mortgage-backed and asset-backed securities			7,725						(585)						6,964						(657)						14,689						(1,242)
Total			$	39,992					$	(2,029)					$	35,527					$	(2,750)					$	75,519					$	(4,779)

			As of March 31, 2023
			Less than 12 Months												12 Months or Greater												Total
			Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
Government bonds			$	12,234					$	(312)					$	14,159					$	(918)					$	26,393					$	(1,230)
Corporate debt securities			4,427						(93)						19,011						(1,072)						23,438						(1,165)
Mortgage-backed and asset-backed securities			2,597						(94)						11,212						(944)						13,809						(1,038)
Total			$	19,258					$	(499)					$	44,382					$	(2,934)					$	63,640					$	(3,433)

We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. The following table summarizes gains and losses for debt securities, reflected as a component of other income (expense), net (in millions):    

			Three Months Ended
			March 31,
			2022						2023
Unrealized gain (loss) on fair value option debt securities			$	(202)					$	145
Gross realized gain on debt securities			40						57
Gross realized loss on debt securities			(271)						(492)
(Increase)/decrease in allowance for credit losses			66						(3)
Total gain (loss) on debt securities recognized in other income (expense), net			$	(367)					$	(293)

The carrying value of equity securities is measured as the total initial cost plus the cumulative net gain (loss). Our share of gains and losses, including impairments, are included as a component of other income (expense), net, in the Consolidated Statements of Income. See Note 6 for further details on other income (expense), net.

The carrying values for marketable and non-marketable equity securities are summarized below (in millions):

			As of December 31, 2022																		As of March 31, 2023
			Marketable Equity Securities						Non-Marketable Equity Securities						Total						Marketable Equity Securities						Non-Marketable Equity Securities						Total
Total initial cost			$	5,764					$	16,157					$	21,921					$	5,720					$	16,509					$	22,229
Cumulative net gain (loss)(1)			(608)						12,372						11,764						(578)						12,613						12,035
Carrying value			$	5,156					$	28,529					$	33,685					$	5,142					$	29,122					$	34,264

(1)Non-marketable equity securities cumulative net gain (loss) is comprised of $16.8 billion gains and $4.5 billion losses (including impairments) as of December 31, 2022 and $17.8 billion gains and $5.1 billion losses (including impairments) as of March 31, 2023.

Gains and losses (including impairments), net, for marketable and non-marketable equity securities included in other income (expense), net are summarized below (in millions):

			Three Months Ended
			March 31,
			2022						2023
Realized net gain (loss) on equity securities sold during the period			$	(74)					$	105
Unrealized net gain (loss) on marketable equity securities			(1,456)						51
Unrealized net gain (loss) on non-marketable equity securities(1)			460						221
Total gain (loss) on equity securities in other income (expense), net			$	(1,070)					$	377

(1)Unrealized gain (loss) on non-marketable equity securities accounted for under the measurement alternative is comprised of $838 million and $915 million of upward adjustments for three months ended March 31, 2022 and 2023, respectively, and $378 million and $694 million of downward adjustments (including impairments) for three months ended March 31, 2022 and 2023, respectively.

In the table above, realized net gain (loss) on equity securities sold during the period reflects the difference between the sale proceeds and the carrying value of the equity securities at the beginning of the period or the purchase date, if later.

Cumulative net gains (losses) on equity securities sold during the period, which is summarized in the following table (in millions), represents the total net gains (losses) recognized after the initial purchase date of the equity security sold during the period. While these net gains (losses) may have been reflected in periods prior to the period of sale, we believe they are important supplemental information as they reflect the economic net gains (losses) on the securities sold during the period. Cumulative net gains (losses) are calculated as the difference between the sale price and the initial purchase price for the equity security sold during the period.

			Equity Securities Sold
			Three Months Ended
			March 31,
			2022						2023
Total sale price			$	364					$	312
Total initial cost			260						211
Cumulative net gain (loss)			$	104					$	101

As of December 31, 2022 and March 31, 2023 equity securities accounted for under the equity method had a carrying value of approximately $1.5 billion and $1.6 billion, respectively. Our share of gains and losses, including impairments, are included as a component of other income (expense), net, in the Consolidated Statements of Income. See Note 6 for further details on other income (expense), net.

We use derivative instruments to manage risks relating to our ongoing business operations. The primary risk managed is foreign exchange risk. We use foreign currency contracts to reduce the risk that our cash flows, earnings, and investment in foreign subsidiaries will be adversely affected by foreign currency exchange rate fluctuations. We also enter into derivative instruments to partially offset our exposure to other risks and enhance investment returns.

We recognize derivative instruments in the Consolidated Balance Sheets at fair value and classify the derivatives primarily within Level 2 in the fair value hierarchy. We present our collar contracts (an option strategy comprised of a combination of purchased and written options) at net fair values and present all other derivatives at gross fair values. The accounting treatment for derivatives is based on the intended use and hedge designation.

We designate foreign currency forward and option contracts (including collars) as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the U.S. dollar. These contracts have maturities of 24 months or less.

Cash flow hedge amounts included in the assessment of hedge effectiveness are deferred in AOCI and subsequently reclassified to revenue when the hedged item is recognized in earnings. We exclude forward points and time value from our assessment of hedge effectiveness and amortize them on a straight-line basis over the life of the hedging instrument in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI.

As of March 31, 2023 the net accumulated loss on our foreign currency cash flow hedges before tax effect was $55 million, which is expected to be reclassified from AOCI into revenues within the next 12 months.

We designate foreign currency forward contracts as fair value hedges to hedge foreign currency risks for our marketable securities denominated in currencies other than the U.S. dollar. Fair value hedge amounts included in the assessment of hedge effectiveness are recognized in other income (expense), net, along with the offsetting gains and losses of the related hedged items. We exclude forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net.

We designate foreign currency forward contracts as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. Net investment hedge amounts included in the assessment of hedge effectiveness are recognized in AOCI along with the foreign currency translation adjustment. We exclude forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net.

We enter into foreign currency forward and option contracts that are not designated as hedging instruments to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary. Gains and losses on these derivatives that are not designated as accounting hedges are primarily recorded in other income (expense), net along with the foreign currency gains and losses on monetary assets and liabilities.

We also use derivatives not designated as hedging instruments to manage risks relating to interest rates, commodity prices, credit exposures, and to enhance investment returns. From time to time, we enter into derivatives to hedge the market price risk on certain of our marketable equity securities. Gains and losses arising from other derivatives are primarily reflected within the “other” component of other income (expense), net. See Note 6 for further details.

The gross notional amounts of outstanding derivative instruments were as follows (in millions):

			As of December 31, 2022						As of March 31, 2023
Derivatives designated as hedging instruments:
Foreign exchange contracts
Cash flow hedges			$	15,972					$	17,140
Fair value hedges			$	2,117					$	1,439
Net investment hedges			$	8,751					$	9,036
Derivatives not designated as hedging instruments:
Foreign exchange contracts			$	34,979					$	33,715
Other contracts			$	7,932					$	8,423

The fair values of outstanding derivative instruments were as follows (in millions):

			As of December 31, 2022												As of March 31, 2023
			Assets(1)						Liabilities(2)						Assets(1)						Liabilities(2)
Derivatives designated as hedging instruments:
Foreign exchange contracts			$	271					$	556					$	111					$	510
Derivatives not designated as hedging instruments:
Foreign exchange contracts			365						207						284						201
Other contracts			40						47						48						65
Total derivatives not designated as hedging instruments			405						254						332						266
Total			$	676					$	810					$	443					$	776

(1)    Derivative assets are recorded as other current and non-current assets in the Consolidated Balance Sheets.

(2)    Derivative liabilities are recorded as accrued expenses and other liabilities, current and non-current in the Consolidated Balance Sheets.

The gains (losses) on derivatives in cash flow hedging and net investment hedging relationships recognized in other comprehensive income (OCI) are summarized below (in millions):

			Gains (Losses) Recognized in OCI on Derivatives Before Tax Effect
			Three Months Ended
			March 31,
			2022						2023
Derivatives in cash flow hedging relationship:
Foreign exchange contracts
Amount included in the assessment of effectiveness			$	135					$	(138)
Amount excluded from the assessment of effectiveness			(15)						47
Derivatives in net investment hedging relationship:
Foreign exchange contracts
Amount included in the assessment of effectiveness			149						(215)
Total			$	269					$	(306)

 The table below presents the gains (losses) of our derivatives on the Consolidated Statements of Income: (in millions):

			Gains (Losses) Recognized in Income
			Three Months Ended
			March 31,
			2022												2023
			Revenues						Other income (expense), net						Revenues						Other income (expense), net
Total amounts in the Consolidated Statements of Income			$	68,011					$	(1,160)					$	69,787					$	790
Effect of cash flow hedges:
Foreign exchange contracts
Amount reclassified from AOCI to income			$	297					$	0					$	88					$	0
Amount excluded from the assessment of effectiveness (amortized)			(19)						0						(4)						0
Effect of fair value hedges:
Foreign exchange contracts
Hedged items			0						13						0						32
Derivatives designated as hedging instruments			0						(12)						0						(32)
Amount excluded from the assessment of effectiveness			0						1						0						5
Effect of net investment hedges:
Foreign exchange contracts
Amount excluded from the assessment of effectiveness			0						12						0						51
Effect of non designated hedges:
Foreign exchange contracts			0						(247)						0						30
Other contracts			0						38						0						3
Total gains (losses)			$	278					$	(195)					$	84					$	89

Offsetting of Derivatives

We enter into master netting arrangements and collateral security arrangements to reduce credit risk. Cash collateral received related to derivative instruments under our collateral security arrangements are included in other current assets with a corresponding liability. Cash and non-cash collateral pledged related to derivative instruments under our collateral security arrangements are included in other current assets.

The gross amounts of derivative instruments subject to master netting arrangements with various counterparties, and cash and non-cash collateral received and pledged under such agreements were as follows (in millions):

			As of December 31, 2022
																					Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset
			Gross Amounts Recognized						Gross Amounts Offset in the Consolidated Balance Sheets						Net Amounts Presented in the Consolidated Balance Sheets						Financial Instruments(1)						Cash and Non-Cash Collateral Received or Pledged						Net Amounts
Derivatives assets			$	760					$	(84)					$	676					$	(463)					$	(132)					$	81
Derivatives liabilities			$	894					$	(84)					$	810					$	(463)					$	(28)					$	319

			As of March 31, 2023
																					Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset
			Gross Amounts Recognized						Gross Amounts Offset in the Consolidated Balance Sheets						Net Amounts Presented in the Consolidated Balance Sheets						Financial Instruments(1)						Cash and Non-Cash Collateral Received or Pledged						Net Amounts
Derivatives assets			$	525					$	(82)					$	443					$	(368)					$	(34)					$	41
Derivatives liabilities			$	858					$	(82)					$	776					$	(368)					$	(24)					$	384

(1)The balances as of December 31, 2022 and March 31, 2023 were related to derivative allowed to be net settled in accordance with our master netting agreements.

We consolidate VIEs in which we hold a variable interest and are the primary beneficiary. The results of operations and financial position of these VIEs are included in our consolidated financial statements.

For certain consolidated VIEs, their assets are not available to us and their creditors do not have recourse to us. As of December 31, 2022 and March 31, 2023, assets that can only be used to settle obligations of these VIEs were $4.1 billion and $3.2 billion, respectively, and the liabilities for which creditors only have recourse to the VIEs were $2.6 billion and $2.5 billion, respectively. We may continue to fund ongoing operations of certain VIEs that are included within Other Bets.

Total noncontrolling interests (NCI) in our consolidated subsidiaries were $3.8 billion and $3.7 billion as of December 31, 2022 and March 31, 2023, respectively, of which $1.1 billion is redeemable noncontrolling interest (RNCI) for both periods. NCI and RNCI are included within additional paid-in capital. Net loss attributable to noncontrolling interests was not material for any period presented and is included within the "other" component of OI&E. See Note 6 for further details on OI&E.

We have investments in VIEs in which we are not the primary beneficiary. These VIEs include private companies that are primarily early stage companies and certain renewable energy entities in which activities involve power generation using renewable sources.

We have determined that the governance structures of these entities do not allow us to direct the activities that would significantly affect their economic performance. Therefore, we are not the primary beneficiary, and the results of operations and financial position of these VIEs are not included in our consolidated financial statements. We account for these investments as non-marketable equity securities or equity method investments.

The maximum exposure of these unconsolidated VIEs is generally based on the current carrying value of the investments and any future funding commitments. We have determined that the single source of our exposure to these VIEs is our capital investments in them. The carrying value and maximum exposure of these unconsolidated VIEs were $2.7 billion and $2.8 billion, respectively, as of December 31, 2022 and $2.6 billion and $2.7 billion, respectively, as of March 31, 2023.

We have a debt financing program of up to $10.0 billion through the issuance of commercial paper. Net proceeds from this program are used for general corporate purposes. We had no commercial paper outstanding as of December 31, 2022 and March 31, 2023.

Our short-term debt balance also includes the current portion of certain long-term debt.

Total outstanding debt is summarized below (in millions, except percentages):

						Maturity						Coupon Rate						Effective Interest Rate						As of December 31, 2022						As of March 31, 2023
Debt
2014-2020 Notes issuances						2024 - 2060						0.45% - 3.38%						0.57% - 3.38%						$	13,000					$	13,000
Future finance lease payments, net and other (1)																								2,142						2,208
Total debt																								15,142						15,208
Unamortized discount and debt issuance costs																								(143)						(140)
Less: Current portion of long-term notes(2)																								0						(999)
Less: Current portion future finance lease payments, net and other current debt(1)(2)																								(298)						(372)
Total long-term debt																								$	14,701					$	13,697

(1)Future finance lease payments are net of imputed interest.

(2)Total current portion of long-term debt is included within other accrued expenses and current liabilities. See Note 6 for further details.

The notes in the table above are fixed-rate senior unsecured obligations and generally rank equally with each other. We may redeem the notes at any time in whole or in part at specified redemption prices. The effective interest rates are based on proceeds received with interest payable semi-annually.

The total estimated fair value of the outstanding notes was approximately $9.9 billion and $10.2 billion as of December 31, 2022 and March 31, 2023, respectively. The fair value was determined based on observable market prices of identical instruments in less active markets and is categorized accordingly as Level 2 in the fair value hierarchy.

As of March 31, 2023, we had $10.0 billion of revolving credit facilities, $4.0 billion expiring in April 2023 and $6.0 billion expiring in April 2026. In April 2023, we entered into a new $4.0 billion revolving credit facility expiring in April 2024. We also terminated the existing $6.0 billion revolving credit facility expiring in April 2026 and entered into a new $6.0 billion revolving credit facility expiring in April 2028. The interest rates for all credit facilities are determined based on a formula using certain market rates, as well as our progress toward the achievement of certain sustainability goals. No amounts were outstanding under the credit facilities as of December 31, 2022 and March 31, 2023.

The allowance for credit losses on accounts receivable was $754 million and $743 million as of December 31, 2022 and March 31, 2023, respectively.

Property and equipment, net, consisted of the following (in millions):

			As of December 31, 2022						As of March 31, 2023
Land and buildings			$	66,897					$	67,948
Information technology assets			66,267						68,577
Construction in progress			27,657						30,573
Leasehold improvements			10,575						11,011
Furniture and fixtures			314						326
Property and equipment, gross			171,710						178,435
Less: accumulated depreciation			(59,042)						(60,875)
Property and equipment, net			$	112,668					$	117,560

Accrued expenses and other current liabilities consisted of the following (in millions):

			As of December 31, 2022						As of March 31, 2023
European Commission fines(1)			$	9,106					$	9,354
Income taxes payable, net			1,632						5,217
Accrued customer liabilities			3,619						3,486
Accrued purchases of property and equipment			3,019						3,807
Current operating lease liabilities			2,477						2,625
Other accrued expenses and current liabilities			18,013						18,696
Accrued expenses and other current liabilities			$	37,866					$	43,185

(1)    While each EC decision is under appeal, the fines are included in accrued expenses and other current liabilities on our Consolidated Balance Sheets, as we provided bank guarantees (in lieu of a cash payment) for the fines. Amounts include the effects of foreign exchange and interest. See Note 9 for further details.

Components of AOCI, net of income tax, were as follows (in millions):

			Foreign Currency Translation Adjustments						Unrealized Gains (Losses) on Available-for-Sale Investments						Unrealized Gains (Losses) on Cash Flow Hedges						Total
Balance as of December 31, 2021			$	(2,306)					$	236					$	447					$	(1,623)
Other comprehensive income (loss) before reclassifications			39						(2,478)						129						(2,310)
Amounts excluded from the assessment of hedge effectiveness recorded in AOCI			0						0						(15)						(15)
Amounts reclassified from AOCI			0						148						(249)						(101)
Other comprehensive income (loss)			39						(2,330)						(135)						(2,426)
Balance as of March 31, 2022			$	(2,267)					$	(2,094)					$	312					$	(4,049)

			Foreign Currency Translation Adjustments						Unrealized Gains (Losses) on Available-for-Sale Investments						Unrealized Gains (Losses) on Cash Flow Hedges						Total
Balance as of December 31, 2022			$	(4,142)					$	(3,477)					$	16					$	(7,603)
Other comprehensive income (loss) before reclassifications			596						866						(121)						1,341
Amounts excluded from the assessment of hedge effectiveness recorded in AOCI			0						0						47						47
Amounts reclassified from AOCI			0						292						(77)						215
Other comprehensive income (loss)			596						1,158						(151)						1,603
Balance as of March 31, 2023			$	(3,546)					$	(2,319)					$	(135)					$	(6,000)

The effects on net income of amounts reclassified from AOCI were as follows (in millions):

									Gains (Losses) Reclassified from AOCI to the Consolidated Statements of Income
									Three Months Ended
									March 31,
AOCI Components						Location			2022						2023
Unrealized gains (losses) on available-for-sale investments
						Other income (expense), net			$	(190)					$	(374)
						Benefit (provision) for income taxes			42						82
						Net of income tax			(148)						(292)
Unrealized gains (losses) on cash flow hedges
Foreign exchange contracts						Revenue			297						88
Interest rate contracts						Other income (expense), net			2						2
						Benefit (provision) for income taxes			(50)						(13)
						Net of income tax			249						77
Total amount reclassified, net of income tax									$	101					$	(215)