Alphabet Inc.

Company Overview

Business Model: Alphabet Inc. operates as a diversified technology company, with its primary businesses structured into Google Services, Google Cloud, and a portfolio of early-stage ventures known as Other Bets. The core value proposition revolves around organizing the world's information and making it universally accessible and useful, evolving to also help users accomplish tasks. Revenue generation is primarily driven by performance and brand advertising across Google Search & other properties, YouTube, and Google Network partners' properties. Additional revenue streams include consumer subscriptions (e.g., YouTube TV, Google One), platform sales (e.g., Google Play apps and in-app purchases), device sales (e.g., Pixel family), and consumption-based fees and subscriptions for Google Cloud Platform and Google Workspace. Other Bets generate revenue primarily from autonomous transportation and internet services.

Market Position: Alphabet Inc. is positioned as a pioneer and leader in artificial intelligence (AI), having declared itself an AI-first company since 2016. The company aims to build the most advanced, safe, and responsible AI through a full-stack approach, leveraging its AI-optimized infrastructure, world-class research (including custom-built Tensor Processing Units like Ironwood, its seventh-generation TPU), and integrating AI into products and platforms. All 15 of its half-billion-user products, including seven with two billion users, now utilize Gemini models. Google Cloud offerings, such as Gemini Enterprise and Gemini for Google Workspace, are designed to keep organizations at the forefront of innovation. The company maintains strong brand recognition and competitive advantages through continuous innovation in its core products and emerging technologies like autonomous driving (Waymo) and AI-driven drug discovery (Isomorphic Labs).

Recent Strategic Developments: Alphabet Inc. continues to prioritize significant investment in AI, having spent over $200 billion in research and development over the last five years. Key initiatives include the development and integration of Gemini 3, its most intelligent AI model, across its product ecosystem, including Search (AI Overviews, AI Mode) and Google Cloud (Gemini Enterprise, Gemini for Google Workspace). The company is expanding its device portfolio with products like the Pixel 10 series and Pixel Watch 4, aiming to combine AI, software, and hardware for enhanced user helpfulness. In 2025, Alphabet Inc. entered into definitive agreements to acquire Wiz, a cloud security platform, for $32.0 billion, and Intersect, a data center and energy infrastructure solutions provider, for $4.8 billion, both expected to close in 2026. Waymo, its autonomous driving technology company, is expanding paid ride-hailing services to more cities and entering international markets, supported by a $16.0 billion investment round in February 2026, primarily funded by Alphabet Inc.

Geographic Footprint: Alphabet Inc. has a significant global presence, with international revenues accounting for approximately 52% of consolidated revenues in 2025. The company owns and leases office facilities and data centers worldwide, primarily across Asia, Europe, and North America.

• United States: 48% of total revenue
• EMEA (Europe, Middle East, and Africa): 29% of total revenue
• APAC (Asia-Pacific): 17% of total revenue
• Other Americas (Canada and Latin America): 6% of total revenue Long-lived assets are distributed with $195,337 million in the United States and $66,481 million internationally as of December 31, 2025.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 59.6%
• Operating Margin: 32.0%
• Net Margin: 32.8%

Investment in Growth:

• R&D Expenditure: $61,087 million (15.2% of revenue)
• Capital Expenditures: $91,447 million
• Strategic Investments: Definitive agreements to acquire Wiz for $32.0 billion and Intersect for $4.8 billion (expected to close in 2026). Alphabet Inc. also funded the significant majority of Waymo's $16.0 billion investment round in February 2026.

Business Segment Analysis

Google Services

Financial Performance:

• Revenue: $342,721 million (+12.4% YoY)
• Operating Income: $139,404 million (+14.9% YoY)
• Operating Margin: 40.7%
• Key Growth Drivers: The increase in operating income was primarily driven by revenue growth, partially offset by increased expenses related to legal and other matters, traffic acquisition costs (TAC), and content acquisition costs. Revenue growth was fueled by increases in search queries, user adoption and usage on mobile devices, growth in advertiser spending, and improvements in ad formats and delivery. YouTube ads benefited from increased spending in direct response and brand advertising, while subscriptions saw growth across YouTube services and Google One.

Product Portfolio:

• Major product lines and services: Ads, Android, Chrome, devices, Gmail, Google Drive, Google Gemini, Google Maps, Google Photos, Google Play, Search, and YouTube.
• New product launches or major updates: AI Overviews and AI Mode in Search, leveraging Gemini's advanced reasoning and multimodal capabilities. The new Pixel 10 series and Pixel Watch 4 represent the latest generation of devices. Advertising products like Demand Gen, Performance Max, and Product Studio utilize AI to enhance advertiser outcomes.

Market Dynamics:

• Google Services operates in a highly competitive and rapidly evolving market, characterized by changing technologies and user needs. The segment leverages its world-class advertising technologies and deep partnerships with brands and agencies. AI is foundational to its advertising business, driving innovation in ad delivery and monetization. The company focuses on maintaining positive user experiences by filtering invalid traffic and removing problematic ads.

Sub-segment Breakdown:

• Google Search & other: $224,500 million revenue (+13.3% YoY)
  • Paid clicks change: +6% YoY
  • Cost-per-click change: +7% YoY
• YouTube ads: $40,367 million revenue (+11.7% YoY)
• Google Network: $29,792 million revenue (-1.9% YoY)
  • Impressions change: -7% YoY
  • Cost-per-impression change: +7% YoY
• Google subscriptions, platforms, and devices: $48,030 million revenue (+19.1% YoY)

Google Cloud

Financial Performance:

• Revenue: $58,705 million (+35.8% YoY)
• Operating Income: $13,910 million (+127.6% YoY)
• Operating Margin: 23.7%
• Key Growth Drivers: The significant increase in operating income was primarily driven by robust revenue growth, largely from Google Cloud Platform's infrastructure and platform services. This growth was partially offset by increased usage costs for technical infrastructure and employee compensation expenses.

Product Portfolio:

• Major product lines and services: Google Cloud Platform and Google Workspace.
• Key offerings: AI-optimized infrastructure (including custom TPUs and specialized GPUs), Vertex AI (a fully managed AI development platform with over 200 foundation models including Gemini), AI-powered cybersecurity solutions, and data and analytics platforms.
• Agents: Gemini Enterprise (for secure AI agent deployment and workflow automation) and Gemini for Google Workspace (integrating AI into Gmail, Docs, Sheets, etc.).

Market Dynamics:

• Google Cloud helps enterprise customers build for the future, improve productivity, reduce costs, and unlock new growth engines. Its AI-optimized infrastructure is a key differentiator. The market for enterprise cloud services is intensely competitive, with rapidly evolving pricing and delivery models, and increasing regulatory scrutiny. The company is incurring significant costs to build and maintain infrastructure, invest in cybersecurity, and hire talent to support its growth.

Other Bets

Financial Performance:

• Revenue: $1,537 million (-6.7% YoY)
• Operating Loss: $(7,515) million (increased loss of $3,071 million YoY)
• Key Growth Drivers: The increased operating loss was primarily due to a rise in employee compensation expenses, largely driven by a valuation-based compensation charge related to Waymo.

Product Portfolio:

• Major product lines and services: Waymo (fully autonomous driving technology providing paid ride-hailing services in multiple cities), Isomorphic Labs (applying AI to accelerate drug discovery), and X (the moonshot factory focused on breakthrough technologies).
• New product launches or major updates: Waymo is expanding domestically and entering international markets. Isomorphic Labs is reimagining drug discovery.

Market Dynamics:

• Other Bets comprise businesses at various stages of development, from R&D to scaling commercialization. These early-stage ventures inherently carry considerable uncertainty and face intense competition from large, experienced, and well-funded competitors. Alphabet Inc. continues to invest for the long term in these frontier technologies, including quantum computing.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $45.4 billion (240 million shares) were repurchased and retired during 2025.
• Dividend Payments: Total cash dividends of $10.049 billion were paid in 2025 ($4.8 billion for Class A, $703 million for Class B, and $4.5 billion for Class C shares).
• Future Capital Return Commitments: The Board of Directors authorized an additional $70.0 billion share repurchase program in April 2025, with $69.5 billion remaining available as of December 31, 2025. The company increased its quarterly cash dividend by 5% to $0.21 per share in April 2025 and intends to continue paying quarterly cash dividends, subject to Board discretion.

Balance Sheet Position:

• Cash and Equivalents: $30,708 million
• Total Debt: $48,543 million (comprising $1,996 million short-term and $46,547 million long-term)
• Net Cash Position: $(17,835) million (Net Debt)
• Debt Maturity Profile: Future principal payments for long-term debt include $1,000 million in 2027, $2,676 million in 2028, $1,764 million in 2029, $5,500 million in 2030, and $36,145 million thereafter. The company has $10.0 billion in revolving credit facilities, with $4.0 billion expiring in April 2026 and $6.0 billion in April 2030, with no amounts currently outstanding. A commercial paper program of up to $25.0 billion also exists, with no outstanding commercial paper as of December 31, 2025.

Cash Flow Generation:

• Operating Cash Flow: $164,713 million
• Free Cash Flow: $73,266 million (Operating Cash Flow less Capital Expenditures)

Operational Excellence

Production & Service Model: Alphabet Inc. employs a full-stack approach to its operations, particularly in AI, encompassing AI-optimized infrastructure, research, and product development. The company's technical infrastructure, including custom-built Tensor Processing Units (TPUs) and specialized Graphics Processing Units (GPUs), is a key differentiator, powering its own products and supporting Google Cloud customers. The operational philosophy emphasizes driving efficiencies in data centers to deliver products and services at increasing scale while supporting world-class research and model development. The company relies on contract manufacturers for devices, servers, and networking equipment, and may supply certain components directly.

Supply Chain Architecture: Key Suppliers & Partners:

• Contract Manufacturers: For manufacturing and assembly of devices, servers, and networking equipment.
• Component Suppliers: For technical infrastructure and devices, with some components sourced from single or limited suppliers.
• Distribution Partners: Browser providers, mobile carriers, original equipment manufacturers, and software developers for search access points and ad-supported services.
• Google Network Partners: For displaying ads on their properties (e.g., AdMob, AdSense, Google Ad Manager).
• Content Providers: For licensing video and other content, primarily for YouTube.
• Third-party Operators: For significant leasing arrangements to meet AI compute capacity demands.
• Energy Infrastructure Entities: For backstop agreements related to power generation project development.
• Data Center Entities: For leases and credit backstops.
• Third-party Suppliers: For multi-year, non-cancellable power purchase agreements.

Facility Network:

• Manufacturing: Relies on contract manufacturers; specific owned manufacturing locations are not detailed.
• Research & Development: Centralized AI-related R&D focuses on advanced research and frontier model development.
• Distribution: Utilizes distribution partners for market access; specific physical distribution centers are not detailed.
• Data Centers: Owns and leases data centers globally, primarily in Asia, Europe, and North America, with significant ongoing investments in technical infrastructure for AI.

Operational Metrics: The company focuses on driving efficiencies in its data centers through AI model design and TPU/GPU-based infrastructure. However, scaling technical infrastructure is increasingly constrained by the availability of power, water, and land. The supply of specialized AI chips and network equipment is limited to a small number of qualified suppliers.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Implied through direct engagement with advertisers, agencies, and publishers for digital marketing solutions.
• Channel Partners: Includes browser providers, mobile carriers, original equipment manufacturers, and software developers for search access points and ad-supported services. Google Network partners are crucial for ad placement on their properties.
• Digital Platforms: Leverages Google Ads, Google Ad Manager, Google Display & Video 360, Google Marketing Platform for advertising, Google Play for app and in-app purchases, and YouTube for subscription services.

Customer Portfolio: Enterprise Customers: Google Cloud serves enterprise customers of all sizes with infrastructure, platform services, and applications. The company also engages with financial services, healthcare, and public sector customers, which may involve additional regulatory compliance risks. Customer Concentration: No individual customer or groups of affiliated customers represented more than 10% of total revenues in 2025.

Geographic Revenue Distribution:

• United States: 48% of total revenue
• EMEA: 29% of total revenue
• APAC: 17% of total revenue
• Other Americas: 6% of total revenue Growth Markets: The company notes traffic growth in emerging markets as a factor influencing advertising revenues and is expanding Waymo's autonomous transportation services into international markets.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The business environment is characterized by rapid change, disruptive technologies, and intense competition. The rise of AI is identified as a profound platform shift reshaping industries, including advertising. The devices market is highly competitive, with frequent product introductions, rapid technological advancements, and evolving consumer preferences. AI technology and services are rapidly evolving and require significant investment.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Alphabet Inc. faces formidable competition across all business aspects from:

• General purpose search engines and information services.
• Vertical search engines and e-commerce providers (e.g., for travel, jobs, health).
• Online advertising platforms and networks, including online shopping and streaming services.
• Other forms of advertising (e.g., billboards, magazines, radio, television).
• Digital content and application platform providers.
• Providers of enterprise cloud services.
• AI model developers and providers of AI products and services.
• Companies designing, manufacturing, and marketing consumer hardware products.
• Providers of digital video services.
• Social networks.
• Providers of workspace communication and connectivity products.

Emerging Competitive Threats: The company faces threats from new entrants, disruptive technologies, and alternative solutions, particularly from other companies developing AI products and technologies that may be similar, superior, or more cost-effective.

Competitive Response Strategy: Alphabet Inc. maintains its competitive advantage by continually developing and distributing innovative products and technologies. This includes significant investments in technical infrastructure (e.g., custom TPUs) and R&D to enhance existing offerings and build powerful AI tools. The company also invests in platforms like Android, Chrome, and its family of devices, and focuses on long-term product development.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Advertising Revenue Concentration: Over 70% of total revenues in 2025 were from online advertising, making the business vulnerable to reduced advertiser spending, loss of partners, shifts in online advertising, and technologies that block or impair personalized ads.
• AI Reshaping Industry: The rapid reshaping of the advertising industry by AI presents a risk if the company fails to adapt effectively and competitively.
• Macroeconomic Conditions: Advertiser expenditures correlate with economic conditions, and adverse macroeconomic conditions could negatively impact advertising demand and financial results.
• Technology Disruption: The rapidly evolving technological landscape and frequent introduction of rival products pose a risk if the company fails to innovate and provide useful products and services in a timely manner.
• Customer Usage & Demand: Changes in customer usage patterns, demand for existing products, and increasing demand for competing technologies could lead to a decline in revenue growth rates.
• Device & Platform Evolution: Failure to achieve widespread adoption of its products and services on evolving platforms and devices could harm the business.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on contract manufacturers and third-party component suppliers, some of which are single or limited sources, exposes the company to supply shortages, price increases, and quality issues.
• Capacity Constraints: Scaling technical infrastructure is constrained by the availability of power, water, and land, with energy supply for AI compute being a global challenge. Supply of specialized AI chips is limited to a small number of qualified suppliers.
• Quality Issues: Potential for quality issues in devices or technical infrastructure equipment could harm the business and reputation.
• Third-Party Non-Performance: Risks associated with contract manufacturers and other partners failing to meet obligations.
• Long-Duration Commercial Agreements: Large, long-duration commercial agreements could increase liabilities in case of non-performance. Intellectual Property Protection: Inability to protect patents, trademarks, copyrights, and trade secrets could reduce the value of products and brands and affect competitiveness. Brand Reputation: Factors such as reputational issues, problematic third-party content, data privacy and security concerns, and product performance failures could harm brand strength. Problematic Content: Violations of content guidelines, web spam, and misuse of AI in offerings could affect service quality, reputation, and user engagement. System Interruptions: Vulnerability of complex IT and communications systems to damage, interference, or interruption from cyber attacks, natural disasters, geopolitical tensions, and technical errors could disrupt service delivery.

Financial & Regulatory Risks

Market & Financial Risks:

• Revenue Growth Rate Decline: Various factors, including competition, pricing changes, and shifts to lower-margin products, could lead to a decline in the revenue growth rate.
• Operating Margin Pressure: Increasing costs for technical infrastructure, regulations, and competition, along with a mix shift towards lower-margin products (e.g., Google Cloud, devices, consumer subscriptions), could pressure operating margins.
• Foreign Exchange: Exposure to fluctuations in foreign currency exchange rates can adversely affect revenues and earnings, despite hedging efforts.
• Credit & Liquidity: Difficulties in accessing capital markets or managing indebtedness could restrict investment and reduce financial flexibility.
• Investment Fair Value Fluctuations: Exposure to fluctuations in the fair values of marketable and non-marketable investments could lead to significant declines in value.
• Acquisition Risks: Acquisitions and strategic arrangements carry risks of operating difficulties, diversion of management attention, integration challenges, and potential liabilities. Regulatory & Compliance Risks:
• Evolving Regulatory Environment: Subject to a wide variety of new, existing, and changing laws and regulations globally, particularly in AI, competition, consumer protection, content moderation, and data privacy and security, which can increase costs and limit business practices.
• AI Regulation: Evolving AI-specific regulations (e.g., EU AI Act, US state laws) could lead to competitive harm, regulatory action, legal liability, and reputational damage.
• Competition & Antitrust: Ongoing and potential antitrust lawsuits and investigations in the US, Europe, and other jurisdictions (e.g., related to Search, Android, Advertising Technology, Google Play, Digital Markets Act) could result in significant fines, remedies, and changes to business practices.
• Data Privacy & Security: Complex and rapidly evolving data privacy and security regulations (e.g., GDPR, CCPA, children's data laws, data localization) and security breaches could lead to significant liability, reputational harm, and deter users.
• Content Moderation: Laws and proposed legislation regarding content moderation and removal could impose penalties or conflict with free expression rights.
• Intellectual Property Infringement Claims: Frequent litigation over intellectual property rights could result in monetary damages, costly licensing, or orders limiting product offerings.
• Tax Law Changes: Changes in tax rates, new US or international tax legislation (e.g., global minimum tax, US excise tax on share repurchases), or exposure to additional tax liabilities could harm financial condition.

Geopolitical & External Risks

Geopolitical Exposure: International operations expose the company to risks such as foreign ownership restrictions, exchange controls, sanctions, tariffs, political unrest, geopolitical tensions (e.g., Middle East, Ukraine conflicts), and changes in trade relations. Climate Change: The effects of climate change are noted as a risk to the supply chain and systems, and AI's energy and water demands make emissions reduction efforts more complex.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: Alphabet Inc. is deeply focused on Artificial Intelligence (AI), having been an AI-first company since 2016. This includes developing AI-optimized infrastructure, world-class research in models and tooling, and integrating AI into products and platforms. Key developments include custom-built Tensor Processing Units (TPUs) like Ironwood (seventh-generation) and the Gemini 3 AI model, designed for advanced multimodal understanding and generative coding. The company also invests in other frontier technologies such as quantum computing. Autonomous driving technology (Waymo) and AI-driven drug discovery (Isomorphic Labs) are significant R&D areas within Other Bets. Innovation Pipeline: The company has invested over $200 billion in R&D in the last five years, continuously developing new offerings and enhancing existing ones across its businesses. This includes developing frontier generative AI models and embedding AI capabilities into products and services.

Intellectual Property Portfolio: Alphabet Inc. relies on a comprehensive intellectual property portfolio, including trademarks, copyrights, patents, and trade secrets, protected through registrations, applications, and confidentiality procedures. The company has filed patent applications globally, particularly for AI innovations, and acquires patent assets to supplement its portfolio. Licensing of rights to other parties has occurred and is expected in the future.

Technology Partnerships: The company engages in deep partnerships with brands and agencies for advertising. It collaborates with content creators and partners to develop new ways for digital content discovery and creation. For Google Cloud, it may seek partners to deliver localized services internationally. Additionally, Alphabet Inc. partners with outside companies for specialized services or temporary needs.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Sundar Pichai is identified as critical to the overall management of Alphabet Inc. and its subsidiaries, playing an important role in technology development, culture maintenance, and strategic direction. The company's future success depends on retaining and motivating key technical leads and senior management. All executive officers and key employees are at-will.

Board Composition: The Board of Directors has the right to elect directors to fill vacancies and can issue undesignated preferred stock without stockholder approval. Cumulative voting in director elections is prohibited. Key board members include John L. Hennessy (Chair), Sergey Brin (Co-Founder and Director), and Larry Page (Co-Founder and Director). The Risk and Compliance Committee oversees cybersecurity risks and reports to the full Board.

Human Capital Strategy

Workforce Composition: As of December 31, 2025, Alphabet Inc. had 190,820 employees. The company recruits for both technical and non-technical roles, with intense competition for qualified employees, particularly AI talent.

Talent Management: Acquisition & Retention: Alphabet Inc. prioritizes creating an environment for fulfilling careers and high performance, offering industry-leading benefits, career growth opportunities, financial health resources, and healthcare choices. Competitive compensation programs, including equity award programs, are used to attract and retain key talent. Immigration policy changes are noted as a potential factor affecting global talent acquisition and retention. Diversity & Development: The company provides high-quality training and support for managers, ranging from new manager courses to feedback and performance management resources. It is committed to supporting protected labor rights, maintaining an open culture, and listening to employees, with work councils and statutory employee representation obligations in certain countries.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Efforts to reduce emissions are made more complex and challenging by the energy and water demands of AI. The company has executed a power purchase agreement in January 2026, expected to be accounted for as a lease, with future payments of $9.9 billion between 2027 and 2047. Supply Chain Sustainability: Suppliers and business partners are required to comply with laws and company policies, such as the Google Supplier Code of Conduct, regarding environmental compliance.

Social Impact Initiatives: Alphabet Inc.'s mission to organize the world's information and make it universally accessible and useful underpins its social impact. YouTube supports the creator economy, and the company aims to provide tools to increase knowledge, health, happiness, and success. A core philosophy involves investing in "moonshots" to solve big problems. Privacy and security are prioritized, with continuous investment in secure products and responsible data practices. The company is guided by AI principles to develop AI responsibly, maximizing positive societal benefits while addressing potential challenges. Corporate philanthropic activities are also undertaken.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Advertising revenues are subject to seasonal fluctuations in internet usage, advertising expenditures, and traditional retail seasonality.
• Economic Sensitivity: Advertiser spending tends to correlate with overall economic conditions, making advertising demand sensitive to macroeconomic conditions. Volatility in international trade and financial markets can also directly and indirectly affect the business.

Planning & Forecasting: The company's financial results can fluctuate due to factors beyond its control, including cyclicality and seasonality, making period-to-period comparisons potentially less meaningful.

Regulatory Environment & Compliance

Regulatory Framework: Alphabet Inc. is subject to a wide array of new, existing, and evolving US federal, state, and foreign laws and regulations. Industry-Specific Regulations:

• AI: The EU AI Act (effective August 1, 2024, fully applicable after two years) introduces transparency, safety, and copyright requirements for AI systems. Various countries (Brazil, India, Japan, South Korea, Singapore, Vietnam) are enacting or considering AI regulations. In the US, states like California and New York passed acts in 2025 imposing safety and reporting obligations on frontier model developers.
• Competition and Technology Platforms: Laws like the EU Digital Markets Act and Japan's Act on Promotion of Competition for Specified Smartphone Software, along with regulations and legal settlements in the US and South Korea, impact business practices, including Google Play's billing policies.
• Data Privacy, Collection, Processing, and Portability: Regulations such as the EU and UK GDPR, US federal and state privacy laws (e.g., COPPA, New York Child Data Protection Act), and the EU Data Act impose restrictions on data collection, processing, sharing, and portability, including for AI training.
• Copyright and Intellectual Property: Laws like the EU Directive on Copyright in the Digital Single Market introduce new licensing regimes and potential liability for user-uploaded content.
• Content Moderation: Laws such as the EU Digital Services Act and legislation in Florida, Texas, Singapore, Australia, and the UK impose obligations and penalties related to content moderation, including for minors.
• Consumer Protection: Laws like the EU's New Deal for Consumers create new compliance obligations. International Compliance: The company faces challenges from differing and sometimes conflicting international laws and regulations, with uncertain applicability and scope.

Trade & Export Controls: The company is subject to sanctions, tariffs, import and export controls, and other market access barriers. Google LLC filed notifications with the Russian Federal Security Service (FSB) regarding encryption control requirements.

Legal Proceedings: Alphabet Inc. is involved in numerous formal and informal inquiries, investigations, and lawsuits globally, including:

• Antitrust Matters: Significant ongoing cases include the US DOJ/States Search lawsuit (ruled against Google in August 2024, final judgment December 2025, appealed by Alphabet in January 2026), US DOJ/States Advertising Technology lawsuits (mixed decision in April 2025, remedies proceeding in September 2025, DOJ proposed structural remedies), EC Advertising Technology fine of €3.0 billion in September 2025 (appealed by Alphabet in November 2025), and Google Play lawsuits (settlement with US states, ongoing appeal to US Supreme Court in Epic Games v. Google, and settlement with Epic in October 2025).
• Privacy Matters: Ongoing investigations and litigation in the US and EU regarding data collection, location information, user choices, and advertising practices, with a $1.4 billion settlement finalized in October 2025 for certain matters.
• Patent and Intellectual Property Claims: Frequent litigation alleging infringement of intellectual property rights, which could result in monetary damages, licensing costs, or injunctions.
• Other Legal Matters: Includes data incidents, regulatory investigations, and matters related to Russia.

Tax Strategy & Considerations

Tax Profile: Alphabet Inc.'s effective tax rate increased from 16.4% in 2024 to 16.8% in 2025. The effective tax rate is influenced by the mix of earnings in different jurisdictions, foreign tax effects (e.g., Brazil withholding taxes), and cross-border tax laws (e.g., Foreign-derived intangible income deduction).

• Tax Reform Impact: US tax law changes enacted on July 4, 2025, allow for immediate expensing of domestic R&D costs and accelerated depreciation, impacting 2025 results. The OECD's negotiations for a 15% global minimum tax rate could increase the effective tax rate and cash tax payments as more countries enact these rules, despite a "Side-by-Side Safe Harbor" for US domestic operations. The US also imposes a 1% excise tax on share repurchases.
• Unrecognized Tax Benefits: As of December 31, 2025, gross unrecognized tax benefits totaled $11.5 billion, with $9.7 billion potentially affecting the effective tax rate if recognized.
• IRS Examination: The IRS is currently examining tax returns for 2019 through 2021.

Insurance & Risk Transfer

Risk Management Framework: Alphabet Inc. manages financial market risks through various mechanisms.

• Insurance Coverage: Not explicitly detailed in the filing.
• Risk Transfer Mechanisms:
  • Hedging: The company monitors foreign currency exposures and hedges risks using derivative and non-derivative instruments (forwards, options, cross-currency swaps, foreign currency-denominated debt). Interest rate derivatives may also be used for hedging.
  • Financial Guarantees: Provides financial guarantees, such as backstop agreements for power generation project development, with a maximum potential future payment of $5.7 billion as of December 31, 2025.
  • Credit Derivatives: Enters into credit derivatives to backstop obligations related to data center leases, with a notional value of $16.9 billion as of December 31, 2025.
  • Indemnifications: Indemnifies various parties, including advertisers, partners, and customers, against certain claims, including intellectual property infringement.