alphabet.csv

,Company,Reporting_Date,1,1A,1B,2,3,5,7,7A,8,9A
0,goog,20211231," ITEM 1. BUSINESS Overview As our founders Larry and Sergey wrote in the original founders' letter, ""Google is not a conventional company. We do not intend to become one."" That unconventional spirit has been a driving force throughout our history, inspiring us to tackle big problems and invest in moonshots like artificial intelligence (AI) research and quantum computing. We continue this work under the leadership of Sundar Pichai, who has served as CEO of Google since 2015 and as CEO of Alphabet since 2019. Alphabet is a collection of businesses  the largest of which is Google. We report Google in two segments, Google Services and Google Cloud; we also report all non-Google businesses collectively as Other Bets. Other Bets include earlier stage technologies that are further afield from our core Google business. We take a long-term view and manage the portfolio of Other Bets with the discipline and rigor needed to deliver long-term returns. Alphabet's structure is about helping each of our businesses prosper through strong leaders and independence. Access and technology for everyone The Internet is one of the worlds most powerful equalizers; it propels ideas, people and businesses large and small. Our mission to organize the worlds information and make it universally accessible and useful is as relevant today as it was when we were founded in 1998. Since then, we have evolved from a company that helps people find answers to a company that also helps people get things done. We are focused on building an even more helpful Google for everyone, and we aspire to give everyone the tools they need to increase their knowledge, health, happiness, and success. Every year, there are trillions of searches on Google, and 15% of the searches we see every day are new. We continue to invest deeply in AI and other technologies to ensure the most helpful search experience possible. YouTube provides people with entertainment, information, and opportunities to learn something new. And Google Assistant offers the best way to get things done seamlessly across different devices, providing intelligent help throughout a person's day, no matter where they are. We are continually innovating and building new product features that will help our users, partners, customers, and communities. We have invested more than $100 billion in RD over the last five years. In addition, with the onset of Alphabet Inc. the pandemic, we have focused in particular on features that help people in their daily lives and that support businesses working to serve their customers. For example, we have added live busyness trends in Google Maps that help users instantly spot when a neighborhood or part of town is near or at its busiest. We have also helped businesses navigate uncertainty during an uneven economic recovery, and we have worked to address the complex challenge of distributing critical information about COVID-19 vaccines to billions of people around the world. Importantly, we have made authoritative content a key focus area across both Google Search and YouTube to help users find trusted public health information. Other Bets also remain focused on innovation through technology that can positively affect people's lives. For instance, Waymo is working toward our goal of making transportation safer and easier for everyone and Verily is developing tools and platforms to improve health outcomes. Moonshots Many companies get comfortable doing what they have always done, making only incremental changes. This incrementalism leads to irrelevance over time, especially in technology, where change tends to be revolutionary, not evolutionary. People thought we were crazy when we acquired YouTube and Android and when we launched Chrome, but those efforts have matured into major platforms for digital video and mobile devices and a safer, popular browser. We continue to look toward the future and to invest for the long term within each of our segments. As we said in the original founders' letter, we will not shy away from high-risk, high-reward projects that we believe in, as they are the key to our long-term success. The power of AI Across the company, investments in AI and machine learning are increasingly driving many of our latest innovations and have enabled us to build products that are smarter and more helpful. For example, in May of 2021, we introduced Multitask Unified Model  or MUM  which has the potential to transform how Google helps with complex tasks. MUM is trained across 75 different languages, which means that it can learn from sources written in one language and help bring that information to people in another. It is also multimodal, so it understands information across text and images and, in the future, can expand to more modalities like video and audio. We are currently experimenting with MUMs capabilities to make searching more natural and intuitive and even enable entirely new ways to search. DeepMind also made a significant AI-powered breakthrough, solving a 50-year-old protein folding challenge, which will help the world better understand one of lifes fundamental building blocks, and will enable researchers to tackle new and difficult problems, from fighting diseases to environmental sustainability. DeepMind has since shared its new AlphaFold protein structure database, which doubled the number of high-accuracy human protein structures available to researchers. Google For reporting purposes, Google comprises two segments: Google Services and Google Cloud. Google Services Serving our users We have always been a company committed to building helpful products that can improve the lives of millions of people. Our product innovations have made our services widely used, and our brand one of the most recognized in the world. Google Services' core products and platforms include ads, Android, Chrome, hardware, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube, each with broad and growing adoption by users around the world. Our products and services have come a long way since the company was founded more than two decades ago. Rather than the ten blue links in our early search results, users can now get direct answers to their questions using their computer, mobile device, or their own voice, making it quicker, easier and more natural to find what they are looking for. This drive to make information more accessible and helpful has led us over the years to improve the discovery and creation of digital content both on the web and through platforms like Google Play and YouTube. With the continued adoption of mobile, people are consuming more digital content by watching more videos, playing more games, listening to more music, reading more books, and using more apps than ever before. Working with content creators and partners, we continue to build new ways for people around the world to find great digital content. Fueling all of these great digital experiences are extraordinary platforms and hardware. That is why we continue to invest in platforms like our Android mobile operating system, Chrome browser, and Chrome operating system, as Alphabet Inc. well as growing our family of hardware devices. We see tremendous potential for devices to be helpful and make people's lives easier by combining the best of our AI, software and hardware. This potential is reflected in our latest generation of hardware products such as Pixel 5a 5G and Pixel 6 phones, the Fitbit Charge 5, Chromecast with Google TV, and the new Google Nest Cams and Nest Doorbell. Creating products that people rely on every day is a journey that we are investing in for the long run. The key to building helpful products for users is our commitment to privacy, security, and user choice. We protect user privacy and security with products that are secure by default and private by design, and that keep users in control of their data. Our privacy-preserving technologies safeguard individual privacy and enhance data protection. As the Internet evolves, so does our approach to privacy and security. We continue to enhance our anti-malware features in Chrome and drive improvements such as auto-delete controls that automatically delete web and app searches after 18 months. And we continue to keep users and their passwords safe through advances like our built-in password manager. How we make money We have built world-class advertising technologies for advertisers, agencies, and publishers to power their digital marketing businesses. Our advertising solutions help millions of companies grow their businesses through our wide range of products across devices and formats, and we aim to ensure positive user experiences by serving the right ads at the right time and by building deep partnerships with brands and agencies. Google Services generates revenues primarily by delivering both performance and brand advertising that appears on Google Search  other properties, YouTube and Google Network partners' properties (""Google Network properties""). We continue to invest in both performance and brand advertising and seek to improve the measurability of advertising so advertisers understand the effectiveness of their campaigns.  Performance advertising creates and delivers relevant ads that users will click on, leading to direct engagement with advertisers. Performance advertising lets our advertisers connect with users while driving measurable results. Our ads tools allow performance advertisers to create simple text-based ads.  Brand advertising helps enhance users' awareness of and affinity for advertisers' products and services, through videos, text, images, and other interactive ads that run across various devices. We help brand advertisers deliver digital videos and other types of ads to specific audiences for their brand-building marketing campaigns. We have allocated substantial resources to stopping bad advertising practices and protecting users on the web. We focus on creating the best advertising experiences for our users and advertisers in many ways, including filtering out invalid traffic, removing billions of bad ads from our systems every year, and closely monitoring the sites, apps, and videos where ads appear and blocklisting them when necessary to ensure that ads do not fund bad content. We continue to look to the future and are making long-term investments that we expect to grow revenues beyond advertising, including revenues from Google Play, hardware, and YouTube non-advertising.  Google Play generates revenues from sales of apps and in-app purchases and digital content sold in the Google Play store.  Hardware generates revenues from sales of Fitbit wearable devices, Google Nest home products, Pixel phones, and other devices.  YouTube non-advertising generates revenues from YouTube Premium and YouTube TV subscriptions and other services. Google Cloud Google was a company built in the cloud. We continue to invest in infrastructure, security, data management, analytics, and AI. We see significant opportunity in helping businesses utilize these strengths with features like data migration, modern development environments, and machine learning tools to provide enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. Google Cloud Platform enables developers to build, test, and deploy applications on its highly scalable and reliable infrastructure. Google Workspace collaboration tools  which include apps like Gmail, Docs, Drive, Calendar, Meet and more  are designed with real-time collaboration and machine intelligence to help people work smarter. Because more and more of todays digital experiences are being built in the cloud, Google Cloud products help businesses of all sizes take advantage of the latest technology advances to operate more efficiently.  Google Cloud Platform generates revenues from infrastructure, platform and other services. Alphabet Inc.  Google Workspace generates revenues from cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar and Meet. Our cloud services are generally provided on either a consumption or subscription basis and may have contract terms longer than a year. Other Bets Across Alphabet, we are also using technology to try to solve big problems that affect a wide variety of industries. Alphabets investment in the portfolio of Other Bets includes emerging businesses at various stages of development, ranging from those in the RD phase to those that are in the beginning stages of commercialization, and our goal is for them to become thriving, successful businesses in the medium to long term. While these early-stage businesses naturally come with considerable uncertainty, some of them are already generating revenue and making important strides in their industries. Revenues from Other Bets are generated primarily from the sale of health technology and internet services. Other Bets operate as independent companies and some of them have their own boards with independent members and outside investors. We are investing in the portfolio of Other Bets and being very deliberate about the focus, scale, and pace of investments. Competition Our business is characterized by rapid change as well as new and disruptive technologies. We face formidable competition in every aspect of our business, including from:  General purpose search engines and information services, such as Baidu, Microsoft's Bing, Naver, Seznam, Yahoo, and Yandex.  Vertical search engines and e-commerce providers, such as Amazon and eBay (e-commerce), Booking's Kayak (travel queries), Microsoft's LinkedIn (job queries), and WebMD (health queries). Some users will navigate directly to such content, websites, and apps rather than go through Google.  Social networks offered by ByteDance, Meta, Snap, and Twitter. Some users increasingly rely on social networks for product or service referrals, rather than seeking information through traditional search engines.  Other online advertising platforms and networks, such as Amazon, AppNexus, Criteo, and Meta, that compete for advertisers that use Google Ads, our primary auction-based advertising platform.  Other forms of advertising, such as billboards, magazines, newspapers, radio, and television. Our advertisers typically advertise in multiple media, both online and offline.  Companies that design, manufacture, and market consumer hardware products, including businesses that have developed proprietary platforms, such as Amazon, Apple, and Microsoft.  Digital assistant providers, such as Amazon and Apple.  Providers of enterprise cloud services, such as Alibaba, Amazon, Microsoft, and Salesforce.  Providers of digital video services, such as Amazon, Apple, ATT, ByteDance, Disney, Hulu, Meta, and Netflix.  Other digital content and application platform providers, such as Amazon and Apple.  Providers of workspace connectivity and productivity products, such as Meta, Microsoft, Salesforce, and Zoom. Competing successfully depends heavily on our ability to develop and distribute innovative products and technologies to the marketplace across our businesses. Specifically, for advertising, competing successfully depends on attracting and retaining:  users, for whom other products and services are literally one click away, largely on the basis of the relevance of our advertising, as well as the general usefulness, security, and availability of our products and services;  advertisers, primarily based on our ability to generate sales leads, and ultimately customers, and to deliver their advertisements in an efficient and effective manner across a variety of distribution channels; and  content providers, primarily based on the quality of our advertiser base, our ability to help these partners generate revenues from advertising, and the terms of our agreements with them. For additional information about competition, see Risk Factors in Item 1A of this Annual Report on Form 10-K. Alphabet Inc. Ongoing Commitment to Sustainability We believe that every business has the opportunity and obligation to protect our planet. Sustainability is one of our core values at Google, and we strive to build sustainability into everything we do. We have been a leader on sustainability and climate change since Googles founding over 20 years ago. These are some of our key achievements over the past two decades:  In 2007, we became the first major company to be carbon neutral for our operations.  In 2017, we became the first major company to match 100% of our annual electricity use with renewable energy, which we have achieved for four consecutive years.  In 2020, we issued $5.75 billion in sustainability bondsthe largest sustainability or green bond issuance by any company in history at the time. The net proceeds from the issuance are used to fund environmentally and socially responsible projects in the following eight areas: energy efficiency, clean energy, green buildings, clean transportation, circular economy and design, affordable housing, commitment to racial equity, and support for small businesses and COVID-19 crisis response. As of December 31, 2020, we have allocated $3.47 billion of the net proceeds, as outlined in our Sustainability Bond Impact Report published in 2021.  Also in 2020, we compensated for our legacy carbon footprint, making Google the first major company to be carbon neutral for its entire operating history. Our sustainability strategy is focused on three key pillars: accelerating the transition to carbon-free energy and a circular economy, empowering everyone with technology, and benefiting the people and places where we operate. To accelerate the transition to a carbon-free economy, in 2020, we launched our third decade of climate action, and we are now working toward a new set of ambitious goals. By 2030, we aim to:  achieve net-zero emissions across all of our operations and value chain;  become the first major company to run on carbon-free energy 24 hours a day, seven days a week, 365 days a year;  enable 5 gigawatts of new carbon-free energy through investments in our key manufacturing regions; and  help more than 500 cities and local governments reduce an aggregate of 1 gigaton of carbon emissions annually. To accelerate the transition to a circular economy, we are working to maximize the reuse of finite resources across our operations, products, and supply chains and to enable others to do the same. We are also working to empower everyone with technology by committing to help 1 billion people make more sustainable choices by the end of 2022 through our core products. To benefit the people and places where we operate, we have set goals to replenish more water than we consume by 2030 and to support water security in communities where we operate. We will focus on three areas: enhancing our stewardship of water resources across Google office campuses and data centers; replenishing our water use and improving watershed health and ecosystems in water-stressed communities; and sharing technology and tools that help everyone predict, prevent, and recover from water stress. We remain steadfast in our commitment to sustainability, and we will continue to lead and encourage others to join us in improving the health of our planet. We are proud of what we have achieved so far, and we are energized to help move the world closer to a more sustainable and carbon-free future for all. More information on our approach to sustainability can be found in our annual sustainability reports, including Googles Environmental Report and Alphabets 2021 Sustainability Bond Impact Report, which outlines the allocation of our net proceeds from our sustainability bonds. The contents of our sustainability reports are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. For additional information about risks and uncertainties applicable to our commitments to attain certain sustainability goals, see Risk Factors in Item 1A of this Annual Report on Form 10-K. Culture and Workforce We are a company of curious, talented, and passionate people. We embrace collaboration and creativity, and encourage the iteration of ideas to address complex challenges in technology and society. Our people are critical for our continued success, so we work hard to create an environment where employees can have fulfilling careers, and be happy, healthy, and productive. We offer industry-leading benefits and programs to take care of the diverse needs of our employees and their families, including opportunities for career growth and Alphabet Inc. development, resources to support their financial health, and access to excellent healthcare choices. Our competitive compensation programs help us to attract and retain top candidates, and we will continue to invest in recruiting talented people to technical and non-technical roles, and rewarding them well. We provide a variety of high quality training and support to our managers to build and strengthen their capabilities-ranging from courses for new managers, to learning resources that help them provide feedback and manage performance, to coaching and individual support. At Alphabet, we are committed to making diversity, equity, and inclusion part of everything we do and to growing a workforce that is representative of the users we serve. More information on Googles approach to diversity can be found in our annual diversity reports, available publicly at diversity.google. The contents of our diversity reports are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. As of December 31, 2021, Alphabet had 156,500 employees. We have work councils and statutory employee representation obligations in certain countries, and we are committed to supporting protected labor rights, maintaining an open culture and listening to all employees. Supporting healthy and open dialogue is central to how we work, and we communicate information about the company through multiple internal channels to our employees. When necessary, we contract with businesses around the world to provide specialized services where we do not have appropriate in-house expertise or resources, often in fields that require specialized training like cafe operations, content moderation, customer support, and physical security. We also contract with temporary staffing agencies when we need to cover short-term leaves, when we have spikes in business needs, or when we need to quickly incubate special projects. We choose our partners and staffing agencies carefully, and review their compliance with Googles Supplier Code of Conduct. We continually make improvements to promote a respectful and positive working environment for everyone  employees, vendors, and temporary staff alike. Government Regulation We are subject to numerous United States (U.S.) federal, state, and foreign laws and regulations covering a wide variety of subject matters. Like other companies in the technology industry, we face heightened scrutiny from both U.S. and foreign governments with respect to our compliance with laws and regulations. Many of these laws and regulations are evolving and their applicability and scope, as interpreted by the courts, remain uncertain. Our compliance with these laws and regulations may be onerous and could, individually or in the aggregate, increase our cost of doing business, make our products and services less useful, limit our ability to pursue certain business models, cause us to change our business practices, affect our competitive position relative to our peers, and/or otherwise have an adverse effect on our business, reputation, financial condition, and operating results. For additional information about government regulation applicable to our business, see Risk Factors in Item 1A, Trends in Our Business and Financial Effect in Part II, Item 7, and Legal Matters in Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Intellectual Property We rely on various intellectual property laws, confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We have registered, and applied for the registration of, U.S. and international trademarks, service marks, domain names and copyrights. We have also filed patent applications in the U.S. and foreign countries covering certain of our technology, and acquired patent assets to supplement our portfolio. We have licensed in the past, and expect that we may license in the future, certain of our rights to other parties. For additional information, see Risk Factors in Item 1A of this Annual Report on Form 10-K. Available Information Our website is located at www.abc.xyz, and our investor relations website is located at www.abc.xyz/investor. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, are available through our investor relations website, free of charge, after we file them with the SEC. We also provide a link to the section of the SEC's website at www.sec.gov that has all of the reports that we file or furnish with the SEC. We webcast via our investor relations website our earnings calls and certain events we participate in or host with members of the investment community. Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items that may be material or of interest to our investors, including SEC filings, investor events, press and earnings releases, and blogs. We also share Google news and product updates on Google's Keyword blog at https://www.blog.google/, that may be material or of interest to our investors. Further, corporate governance information, including our certificate of incorporation, bylaws, governance Alphabet Inc. guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading ""Other."" The contents of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. "," ITEM 1A. RISK FACTORS Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could harm our business, reputation, financial condition, and operating results, and affect the trading price of our Class A and Class C stock. Risks Specific to our Company We generate a significant portion of our revenues from advertising, and reduced spending by advertisers, a loss of partners, or new and existing technologies that block ads online and/or affect our ability to customize ads could harm our business. We generated more than 80% of total revenues from the display of ads online in 2021. Many of our advertisers, companies that distribute our products and services, digital publishers, and content providers can terminate their contracts with us at any time. These partners may not continue to do business with us if we do not create more value (such as increased numbers of users or customers, new sales leads, increased brand awareness, or more effective monetization) than their available alternatives. Changes to our advertising policies and data privacy practices, as well as changes to other companies advertising and/or data privacy practices have in the past, and may in the future, affect the advertising that we are able to provide, which could harm our business. In addition, technologies have been developed that make customized ads more difficult or that block the display of ads altogether and some providers of online services have integrated technologies that could potentially impair the availability and functionality of third-party digital advertising. Failing to provide superior value or deliver advertisements effectively and competitively could harm our reputation, financial condition, and operating results. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions have affected, and may in the future affect, the demand for advertising, resulting in fluctuations in the amounts our advertisers spend on advertising, which could harm our financial condition and operating results. We face intense competition. If we do not continue to innovate and provide products and services that are useful to users, customers, and other partners, we may not remain competitive, which could harm our business and operating results. Our business environment is rapidly evolving and intensely competitive. Our businesses face changing technologies, shifting user needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant and useful products, services, and technologies in a timely manner. As our businesses evolve, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in RD, including through acquisitions, in order to enhance our technology and new and existing products and services. We have many competitors in different industries. Our current and potential domestic and international competitors range from large and established companies to emerging start-ups. Some competitors have longer operating histories and well established relationships in various sectors. They can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, continuing to invest heavily in RD and in talent, aggressively initiating intellectual property claims (whether or not meritorious), and continuing to compete aggressively for users, advertisers, customers, and content providers. Further, discrepancies in enforcement of existing laws may enable our lesser known competitors to aggressively interpret those laws without commensurate scrutiny, thereby affording them competitive advantages. Our competitors may also be able to innovate and provide products and services faster than we can or may foresee the need for products and services before us. Our operating results may also suffer if our products and services are not responsive to the needs of our users, advertisers, publishers, customers, and content providers. As technologies continue to develop, our competitors may be able to offer experiences that are, or that are seen to be, substantially similar to or better than ours. This may force us to compete in different ways and expend significant resources in order to remain competitive. If our competitors are more successful than we are in providing compelling products and services or in attracting and retaining users, advertisers, publishers, customers, and content providers, our operating results could be harmed. Our ongoing investment in new businesses, products, services, and technologies is inherently risky, and could divert management attention and harm our financial condition and operating results. Alphabet Inc. We have invested and expect to continue to invest in new businesses, products, services, and technologies. The investments that we are making across Google Services, Google Cloud, and Other Bets reflect our ongoing efforts to innovate and provide products and services that are useful to users, advertisers, publishers, customers, and content providers. Our investments in Google Services, Google Cloud, and Other Bets span a wide range of industries beyond online advertising. Such investments ultimately may not be commercially viable or may not result in an adequate return of capital and, in pursuing new strategies, we may incur unanticipated liabilities. These endeavors may involve significant risks and uncertainties, including diversion of resources and management attention from current operations and, with respect to Other Bets, the use of alternative investment, governance, or compensation structures that may fail to adequately align incentives across the company or otherwise accomplish their objectives. Within Google Services, we continue to invest heavily in hardware, including our smartphones, home devices, and wearables, which is a highly competitive market with frequent introduction of new products and services, rapid adoption of technological advancements by competitors, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, and price and feature sensitivity on the part of consumers and businesses. There can be no assurance we will be able to provide hardware that competes effectively. Within Google Cloud, we devote significant resources to develop and deploy our enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. We are incurring costs to build and maintain infrastructure to support cloud computing services and hire talent, particularly to support and scale our salesforce. At the same time, our competitors are rapidly developing and deploying cloud-based services. Pricing and delivery models are competitive and evolving, and we may not attain sufficient scale and profitability to achieve our business objectives. Within Other Bets, we are investing significantly in the areas of health, life sciences, and transportation, among others. These investment areas face intense competition from large, experienced, and well-funded competitors and our offerings may not be able to compete effectively or to operate at sufficient levels of profitability. In addition, new and evolving products and services, including those that use AI and machine learning, raise ethical, technological, legal, regulatory, and other challenges, which may negatively affect our brands and demand for our products and services. Because all of these new ventures are inherently risky, no assurance can be given that such strategies and offerings will be successful and will not harm our reputation, financial condition, and operating results. Our revenue growth rate could decline over time, and we anticipate downward pressure on our operating margin in the future. Our revenue growth rate could decline over time as a result of a number of factors, including increasing competition. Changes in device mix, geographic mix, ongoing product and policy changes, product mix, and property mix and an increasing competition for advertising may also affect our advertising revenue growth rate. We may also experience a decline in our revenue growth rate as our revenues increase to higher levels, if there is a decrease in the rate of adoption of our products, services, and technologies, or due to deceleration or decline in demand for devices used to access our services, among other factors. In addition, we may also experience downward pressure on our operating margin resulting from a variety of factors, such as the continued expansion of our business into new fields, including products and services such as hardware, Google Cloud, and subscription products, as well as significant investments in Other Bets, all of which may have margins lower than those we generate from advertising. We may also experience downward pressure on our operating margins from increasing regulations, increasing competition, and increased costs for many aspects of our business. Due to these factors and the evolving nature of our business, our historical revenue growth rate and historical operating margin may not be indicative of our future performance. For additional information, see Trends in Our Business and Financial Effect in Part II, Item 7 of this Annual Report on Form 10-K. Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brands as well as affect our ability to compete. Our patents, trademarks, trade secrets, copyrights, and other intellectual property rights are important assets for us. Various events outside of our control pose a threat to our intellectual property rights, as well as to our products, services, and technologies. For example, effective intellectual property protection may not be available in every country in which our products and services are distributed or made available through the Internet. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Although we seek to obtain patent protection for our innovations, it is possible we may not be able to protect some of these innovations. Moreover, we may not have adequate patent or copyright protection for certain innovations that later turn out to be important. There is always the possibility that the scope of the protection gained will be insufficient or that an issued patent may be deemed invalid or unenforceable. Alphabet Inc. We also seek to maintain certain intellectual property as trade secrets. The secrecy of such trade secrets and other sensitive information could be compromised, which could cause us to lose the competitive advantage resulting from these trade secrets. We also face risks associated with our trademarks. For example, there is a risk that the word Google could become so commonly used that it becomes synonymous with the word search. Some courts have ruled that ""Google"" is a protectable trademark, but it is possible that other courts, particularly those outside of the U.S., may reach a different determination. If this happens, we could lose protection for this trademark, which could result in other people using the word Google to refer to their own products, thus diminishing our brand. Any significant impairment of our intellectual property rights could harm our business and our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results. Our business depends on strong brands, and failing to maintain and enhance our brands would hurt our ability to expand our base of users, advertisers, customers, content providers, and other partners. Our strong brands have significantly contributed to the success of our business. Maintaining and enhancing the brands within Google Services, Google Cloud, and Other Bets increases our ability to enter new categories and launch new and innovative products and services that better serve the needs of our users, advertisers, customers, content providers, and other partners. Our brands have been, and may in the future be, negatively affected by a number of factors, including, among others, reputational issues, third-party content shared on our platforms, data privacy and security issues and developments, and product or technical performance failures. For example, if we fail to respond appropriately to the sharing of misinformation or objectionable content on our services and/or products or objectionable practices by advertisers, or otherwise to adequately address user concerns, our users may lose confidence in our brands. Furthermore, failure to maintain and enhance equity in our brands may harm our business, financial condition, and operating results. Our success will depend largely on our ability to remain a technology leader and continue to provide high-quality, trustworthy, innovative products and services that are truly useful and play a valuable role in a range of settings. We face a number of manufacturing and supply chain risks that could harm our financial condition, operating results, and prospects. We face a number of risks related to manufacturing and supply chain management, which could affect our ability to supply both our products and our internet-based services. We rely on other companies to manufacture many of our finished products; to design certain of our components and parts; to participate in the distribution of our products and services; and to design, manufacture, or assemble certain components and parts in our technical infrastructure. Our business could be negatively affected if we are not able to engage these companies with the necessary capabilities or capacity on reasonable terms, or if those we engage fail to meet their obligations (whether due to financial difficulties or other reasons), or make adverse changes in the pricing or other material terms of our arrangements with them. We have experienced and/or may in the future experience supply shortages and/or price increases that could negatively affect our operations, driven by raw material, component or part availability, manufacturing capacity, labor shortages, industry allocations, logistics capacity, tariffs, trade disputes and barriers, natural disasters or pandemics, the effects of climate change (such as sea level rise, drought, flooding, heat waves, wildfires and resultant air quality effects and power shutoffs associated with wildfire prevention, and increased storm severity), and significant changes in the financial or business condition of our suppliers. In addition, some of the components we use in our technical infrastructure and products are available from only one or limited sources, and we may not be able to find replacement vendors on favorable terms in the event of a supply chain disruption. In addition, a significant supply interruption that affects us or our vendors could delay critical data center upgrades or expansions and delay product availability. We may enter into long-term contracts for materials and products that commit us to significant terms and conditions. We may be liable for materials and products that are not consumed due to market acceptance, technological change, obsolescences, quality, product recalls, and warranty issues. For instance, because certain of our hardware supply contracts have volume-based pricing or minimum purchase requirements, if the volume of our hardware sales decreases or does not reach projected targets, we could face increased materials and manufacturing costs or other financial liabilities that could make our products more costly per unit to manufacture and negatively affect our financial results. Furthermore, certain of our competitors may negotiate more favorable contractual terms based on volume and other commitments that may provide them with competitive advantages and may affect our supply. Alphabet Inc. Our products and services have had, and in the future may have, quality issues resulting from design, manufacturing, or operations. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers. If the quality of our products and services does not meet expectations or our products or services are defective, it could harm our reputation, financial condition, and operating results. We require our suppliers and business partners to comply with laws and, where applicable, our company policies, such as the Google Supplier Code of Conduct, regarding workplace and employment practices, data security, environmental compliance, and intellectual property licensing, but we do not control them or their practices. Violations of law or unethical business practices could result in supply chain disruptions, canceled orders, harm to key relationships, and damage to our reputation. Their failure to procure necessary license rights to intellectual property could affect our ability to sell our products or services and expose us to litigation or financial claims. Interruption to, interference with, or failure of our complex information technology and communications systems could hurt our ability to effectively provide our products and services, which could harm our reputation, financial condition, and operating results. In addition, problems with the design or implementation of our new global enterprise resource planning system could harm our business and operations. The availability of our products and services and fulfillment of our customer contracts depend on the continuing operation of our information technology and communications systems. Our systems are vulnerable to damage, interference, or interruption from modifications or upgrades, terrorist attacks, natural disasters or pandemics, the effects of climate change (such as sea level rise, drought, flooding, heat waves, wildfires and resultant air quality effects and power shutoffs associated with wildfire prevention, and increased storm severity), power loss, telecommunications failures, computer viruses, ransomware attacks, computer denial of service attacks, phishing schemes, or other attempts to harm or access our systems. Some of our data centers are located in areas with a high risk of major earthquakes or other natural disasters. Our data centers are also subject to break-ins, sabotage, and intentional acts of vandalism, and, in some cases, to potential disruptions resulting from problems experienced by facility operators. Some of our systems are not fully redundant, and disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster or pandemic, closure of a facility, or other unanticipated problems affecting our data centers could result in lengthy interruptions in our service. In addition, our products and services are highly technical and complex and have contained in the past, and may contain in the future, errors or vulnerabilities, which could result in interruptions in or failure of our services or systems. In addition, we rely extensively on information systems and technology to manage our business and summarize operating results. We are in the process of a multi-year implementation of a new ERP system, which is designed to accurately maintain our financial records, enhance the flow of financial information, improve data management, and provide timely information to our management team. As the phased implementation continues, we may experience delays, increased costs, and other difficulties. Failure to successfully design and implement the ERP system as planned could harm our business, financial condition, and operating results. Additionally, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively affected. Our international operations expose us to additional risks that could harm our business, our financial condition, and operating results. Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. International revenues accounted for approximately 54% of our consolidated revenues in 2021. In addition to risks described elsewhere in this section, our international operations expose us to other risks, including the following:  restrictions on foreign ownership and investments, and stringent foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S.;  import and export requirements, tariffs and other market access barriers that may prevent or impede us from offering products or providing services to a particular market, or that could limit our ability to source assemblies and finished products from a particular market, and may increase our operating costs;  longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud;  an evolving foreign policy landscape that may adversely affect our revenues and could subject us to new regulatory costs and challenges (including the transfer of personal data between the EU and the United Kingdom and new customer requirements), in addition to other adverse effects that we are unable to effectively anticipate; Alphabet Inc.  anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, and other local laws prohibiting certain payments to government officials, violations of which could result in civil and criminal penalties;  uncertainty regarding liability for services and content, including uncertainty as a result of local laws and lack of legal precedent; and  different employee/employer relationships, existence of works councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions. Because we conduct business in currencies other than U.S. dollars but report our financial results in U.S. dollars, we have faced, and will continue to face, exposure to fluctuations in foreign currency exchange rates. Although we hedge a portion of our international currency exposure, significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings. Hedging programs are also inherently risky and could expose us to additional risks that could harm our financial condition and operating results. Risks Related to our Industry People access the Internet through a variety of platforms and devices that continue to evolve with the advancement of technology and user preferences. If manufacturers and users do not widely adopt versions of our products and services developed for these interfaces, our business could be harmed. People access the Internet through a growing variety of devices such as desktop computers, mobile phones, smartphones, laptops and tablets, video game consoles, voice-activated speakers, wearables, automobiles, and television-streaming devices. Our products and services may be less popular on some interfaces. Each manufacturer or distributor may establish unique technical standards for its devices, and our products and services may not be available or may only be available with limited functionality for our users or our advertisers on these devices as a result. Some manufacturers may also elect not to include our products on their devices. In addition, search queries are increasingly being undertaken via voice-activated speakers, apps, social media or other platforms, which could harm our business. It is hard to predict the challenges we may encounter in adapting our products and services and developing competitive new products and services. We expect to continue to devote significant resources to creating and supporting products and services across multiple platforms and devices. Failing to attract and retain a substantial number of new device manufacturers, suppliers, distributors, developers, and users, or failing to develop products and technologies that work well on new devices and platforms, could harm our business, financial condition, and operating results and ability to capture future business opportunities. Data privacy and security concerns relating to our technology and our practices could damage our reputation, cause us to incur significant liability, and deter current and potential users or customers from using our products and services. Software bugs or defects, security breaches, and attacks on our systems could result in the improper disclosure and use of user data and interference with our users and customers ability to use our products and services, harming our business operations and reputation. Concerns about, including the adequacy of, our practices with regard to the collection, use, governance, disclosure, or security of personal information or other data-privacy-related matters, even if unfounded, could harm our reputation, financial condition, and operating results. Our policies and practices may change over time as expectations and regulations regarding privacy and data change. Our products and services involve the storage, handling, and transmission of proprietary and other sensitive information. Software bugs, theft, misuse, defects, vulnerabilities in our products and services, and security breaches expose us to a risk of loss or improper use and disclosure of such information, which could result in litigation and other potential liability, including regulatory fines and penalties, as well as reputational harm. Additionally, our products incorporate highly technical and complex technologies, and thus our technologies and software have contained, and are likely in the future to contain, undetected errors, bugs, or vulnerabilities. We have in the past discovered, and may in the future discover, some errors in our software code only after we have released the code. Systems and control failures, security breaches, failure to comply with our privacy policies, and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm our reputation, brand, and business, and impair our ability to attract and retain users or customers. Such incidents have occurred in the past and may continue to occur due to the scale and nature of our products and services. While there is no guarantee that such incidents will not cause significant damage, we expect to continue to expend significant resources to maintain security protections that limit the effect of bugs, theft, misuse, and security vulnerabilities or breaches. We experience cyber attacks and other attempts to gain unauthorized access to our systems on a regular basis. Cyber attacks continue to evolve in sophistication and volume, and inherently may be difficult to detect for long periods of time. We have seen, and will continue to see, industry-wide vulnerabilities, such as the Log4j vulnerability reported in December 2021, which could affect our or other parties systems. We expect to continue to experience such Alphabet Inc. incidents or vulnerabilities in the future. Our efforts to address undesirable activity on our platform may also increase the risk of retaliatory attack. We may experience future security issues, whether due to employee error or malfeasance or system errors or vulnerabilities in our or other parties systems. While we may not determine some of these issues to be material at the time they occur and may remedy them quickly, there is no guarantee that these issues will not ultimately result in significant legal, financial, and reputational harm, including government inquiries and enforcement actions, litigation, and negative publicity. Because the techniques used to obtain unauthorized access to, disable or degrade service provided by or otherwise sabotage systems change frequently and often are recognized only after being launched against a target, even taking all reasonable precautions, including those required by law, we have been unable in the past and may continue to be unable to anticipate or detect attacks or vulnerabilities or implement adequate preventative measures. Further, if any partners with whom we share user or other customer information fail to implement adequate data-security practices or fail to comply with our terms and policies or otherwise suffer a network or other security breach, our users information may be improperly accessed, used, or disclosed. If an actual or perceived breach of our or our business partners or service providers security occurs, the market perception of the effectiveness of our security measures would be harmed, we could lose users and customers, our trade secrets or those of our business partners may be compromised, and we may be exposed to significant legal and financial risks, including legal claims (which may include class-action litigation) and regulatory action, fines, and penalties. Any of the foregoing consequences could have a material and adverse effect on our business, reputation, and results of operations. While we have dedicated significant resources to privacy and security incident response capabilities, including dedicated worldwide incident response teams, our response process, particularly during times of a natural disaster or pandemic, may not be adequate, may fail to accurately assess the severity of an incident, may not be fast enough to prevent or limit harm, or may fail to sufficiently remediate an incident. As a result, we may suffer significant legal, reputational, or financial exposure, which could harm our business, financial condition, and operating results. For additional information, see also our risk factor on privacy and data protection regulations under Risks Related to Laws and Regulations below. Our ongoing investments in safety, security, and content review will likely continue to identify abuse of our platforms and misuse of user data. In addition to our efforts to prevent and mitigate cyber attacks, we are making significant investments in safety, security, and review efforts to combat misuse of our services and unauthorized access to user data by third parties, including investigation and review of platform applications that could access the information of users of our services. As a result of these efforts, we have in the past discovered, and may in the future discover, incidents of unnecessary access to or misuse of user data or other undesirable activity by third parties. However, we may not have discovered, and may in the future not discover, all such incidents or activity, whether as a result of our data limitations, including our lack of visibility over our encrypted services, the scale of activity on our platform, or other factors, including factors outside of our control such as a natural disaster or pandemic, and we may learn of such incidents or activity via third parties. Such incidents and activities may include the use of user data or our systems in a manner inconsistent with our terms, contracts or policies, the existence of false or undesirable user accounts, election interference, improper ad purchases, activities that threaten peoples safety on- or off-line, or instances of spamming, scraping, or spreading disinformation. While we may not determine some of these incidents to be material at the time they occurred and we may remedy them quickly, there is no guarantee that these issues will not ultimately result in significant legal, financial, and reputational harm, including government inquiries and enforcement actions, litigation, and negative publicity. We may also be unsuccessful in our efforts to enforce our policies or otherwise prevent or remediate any such incidents. Any of the foregoing developments may negatively affect user trust and engagement, harm our reputation and brands, require us to change our business practices in ways that harm our business operations and adversely affect our business and financial results. Any such developments may also subject us to additional litigation and regulatory inquiries, which could result in monetary penalties and damages, divert managements time and attention, and lead to enhanced regulatory oversight. Problematic content on our platforms, including low-quality user-generated content, web spam, content farms, and other violations of our guidelines could affect the quality of our services, which could damage our reputation and deter our current and potential users from using our products and services. We, like others in the industry, face violations of our content guidelines across our platforms, including sophisticated attempts by bad actors to manipulate our hosting and advertising systems to fraudulently generate revenues, or to otherwise generate traffic that does not represent genuine user interest or intent. While we invest significantly in efforts to promote high-quality and relevant results and to detect and prevent low-quality content and Alphabet Inc. invalid traffic, we have been unable and may continue to be unable to adequately detect and prevent all such abuses or promote uniformly high-quality content. Many websites violate or attempt to violate our guidelines, including by seeking to inappropriately rank higher in search results than our search engine's assessment of their relevance and utility would rank them. Such efforts have affected, and may continue to affect, the quality of content on our platforms and lead them to display false, misleading, or undesirable content. Although English-language web spam in our search results has been reduced, and web spam in most other languages is limited, we expect web spammers will continue to seek inappropriate ways to improve their rankings. We continuously combat web spam in our search results, including through indexing technology that makes it harder for spam-like, less useful web content to rank highly. We also continue to invest in and deploy proprietary technology to detect and prevent web spam on our platforms. We also face other challenges from low-quality and irrelevant content websites, including content farms, which are websites that generate large quantities of low-quality content to help them improve their search rankings. We are continually launching algorithmic changes designed to detect and prevent abuse from low-quality websites. We also face other challenges on our platforms, including violations of our content guidelines involving incidents such as attempted election interference, activities that threaten the safety and/or well-being of our users on- or off-line, and the spreading of misinformation or disinformation. If we fail to either detect and prevent an increase in problematic content or effectively promote high-quality content, it could hurt our reputation for delivering relevant information or reduce use of our platforms, harming our financial condition or operating results. It may also subject us to litigation and regulatory action, which could result in monetary penalties and damages and divert managements time and attention. Our business depends on continued and unimpeded access to the Internet by us and our users. Internet access providers may be able to restrict, block, degrade, or charge for access to certain of our products and services, which could lead to additional expenses and the loss of users and advertisers. Our products and services depend on the ability of our users to access the Internet, and certain of our products require significant bandwidth to work effectively. Currently, this access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, and government-owned service providers. Some of these providers have taken, or have stated that they may take measures that could degrade, disrupt, or increase the cost of user access to certain of our products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, by charging increased fees to us or our users to provide our offerings, or by providing our competitors preferential access. Some jurisdictions have adopted regulations prohibiting certain forms of discrimination by internet access providers; however, substantial uncertainty exists in the U.S. and elsewhere regarding such protections. For example, in 2018 the U.S. Federal Communications Commission repealed net neutrality rules, which could permit internet access providers to restrict, block, degrade, or charge for access to certain of our products and services. In addition, in some jurisdictions, our products and services have been subject to government-initiated restrictions or blockages. These could harm existing key relationships, including with our users, customers, advertisers, and/or content providers, and impair our ability to attract new ones; damage our reputation; and increase costs, thereby negatively affecting our business. Risks Related to Laws, Regulations, and Policies We face increased regulatory scrutiny as well as changes in regulatory conditions, laws, and policies governing a wide range of topics that may negatively affect our business. We and other companies in the technology industry face increased regulatory scrutiny, enforcement action, and other proceedings. For instance, the U.S. Department of Justice, joined by a number of state Attorneys General, filed an antitrust complaint against Google on October 20, 2020, alleging that Google violated U.S. antitrust laws relating to Search and Search advertising. Similarly, on December 16, 2020, a number of state Attorneys General filed an antitrust complaint against Google in the U.S. District Court for the Eastern District of Texas, alleging that Google violated U.S. antitrust laws as well as state deceptive trade laws relating to its advertising technology. Various other regulatory agencies in the U.S. and around the world, including competition enforcers, consumer protection agencies, data protection authorities, grand juries, inter-agency consultative groups, and a range of other governmental bodies have and continue to review and in some cases challenge our products and services and their compliance with laws and regulations around the world. We continue to cooperate with these investigations and defend litigation where appropriate. Various laws, regulations, investigations, enforcement lawsuits, and regulatory actions have in the past, and may in the future, result in substantial fines and penalties, injunctive relief, ongoing auditing and monitoring obligations, changes to our products and services, alterations to our business models and operations, and collateral litigation, all of which could harm our business, reputation, financial condition, and operating results. Alphabet Inc. Changes in international and local social, political, economic, tax, and regulatory conditions or in laws and policies have in the past, and may in the future, increase our cost of doing business and limit our ability to pursue certain business models, offer products or services in certain jurisdictions, or cause us to change our business practices. We have in the past had to alter or stop offering certain products and services as a result of laws or regulations that made them unfeasible, and new laws or regulations could result in our having to terminate, alter, or withdraw products and services in the future. Additional costs of doing business, new limitations, or changes to our business model or practices could harm our business, reputation, financial condition, and operating results. We are subject to regulations, laws, and policies that govern a wide range of topics, including those related to matters beyond our core products and services. For instance, new regulations, laws, policies, and international accords relating to environmental and social matters, including sustainability, climate change, human capital, and diversity, are being developed and formalized in Europe, the U.S., and elsewhere, which may entail specific, target-driven frameworks and/or disclosure requirements. We have implemented robust environmental and social programs, adopted reporting frameworks and principles, and announced a number of goals and initiatives, including those related to environmental sustainability and diversity. The implementation of these goals and initiatives may require considerable investments, and our goals, with all of their contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance, are complex and ambitious, and we cannot guarantee that we will achieve them. Additionally, there can be no assurance that our current programs, reporting frameworks, and principles will be in compliance with any new environmental and social laws and regulations that may be promulgated in the U.S. and elsewhere, and the costs of changing any of our current practices to comply with any new legal and regulatory requirements in the U.S. and elsewhere may be substantial. Furthermore, industry and market practices may further develop to become even more robust than what is required under any new laws and regulations, and we may have to expend significant efforts and resources to keep up with market trends and stay competitive among our peers. A variety of new and existing laws and/or interpretations could harm our business. We are subject to numerous U.S. and foreign laws and regulations covering a wide variety of subject matters. New laws and regulations, or new interpretations or applications of existing laws and regulations in a manner inconsistent with our practices, have made, and may continue to make, our products and services less useful, limit our ability to pursue certain business models or offer certain products and services in certain jurisdictions, require us to incur substantial costs, expose us to civil or criminal liability, or cause us to change our business practices. These laws and regulations are evolving and involve matters central to our business, including, among others:  Laws and regulations around the world focused on large technology platforms, including the Digital Markets Act in the European Union and proposed antitrust legislation on self-preferencing and mergers and acquisitions in the U.S., which may limit certain business practices, and in some cases, create the risk of significant penalties.  Privacy laws, such as the GDPR, CCPA, CPRA, Virginia CDPA, and ColoPA (as defined and discussed further below).  Data protection laws passed by many states within the U.S. and by certain countries regarding notification to data subjects and/or regulators when there is a security breach of personal data.  Consumer protection laws, including EUs New Deal for Consumers, which could result in monetary penalties and create a range of new compliance obligations.  New laws further restricting the collection, processing and/or sharing of advertising-related data. Copyright or similar laws around the world, including the EU Directive on Copyright in the Digital Single Market (EUCD) and EU member state transpositions. These and similar laws that have been adopted or proposed introduce new licensing regimes that could affect our ability to operate. The EUCD and similar laws could also increase the liability of some content-sharing services with respect to content uploaded by their users. Some of these laws, as well as follow-on administrative or judicial actions, have also created or may create a new property right in news publications that limits the ability of some online services to link to, interact with, or present such content. They may also require individual or collective compensation negotiations with news agencies and publishers for the use of such content, which may result in payment obligations that significantly exceed the value that such content provides to Google and its users, potentially harming our services, commercial operations, and business results.  Data localization laws, which generally mandate that certain types of data collected in a particular country be stored and/or processed within that country. Alphabet Inc.  Various U.S. and international laws that govern the distribution of certain materials to children and regulate the ability of online services to collect information from minors, including the Childrens Online Privacy Protection Act of 1998 and the United Kingdoms Age-Appropriate Design Code.  Various laws with regard to content moderation and removal, and related disclosure obligations, such as the Network Enforcement Act in Germany and the European Union's pending Digital Services Act, which may affect our businesses and operations and may subject us to significant fines if such laws are interpreted and applied in a manner inconsistent with our practices or when we may not proactively discover such content due to the scale of third-party content and the limitations of existing technologies. Other countries, including Singapore, Australia, and the United Kingdom, have implemented or are considering similar legislation imposing penalties for failure to remove certain types of content.  Various legislative, litigation, and regulatory activity regarding our Google Play billing policies and business model, which could result in monetary penalties, damages and/or prohibition.  Various legislative and regulatory activity requiring disclosure of information about the operation of our services and algorithms, which may make it easier for websites to artificially promote low-quality, deceptive, or harmful content on services like Google Search and YouTube, potentially harming the quality of our services. In addition, the applicability and scope of these laws, as interpreted by the courts, remain uncertain and could harm our business. For example:  We rely on statutory safe harbors, as set forth in the Digital Millennium Copyright Act and Section 230 of the Communications Decency Act in the U.S. and the E-Commerce Directive in Europe, against liability for various linking, caching, and hosting activities. Any legislation or court rulings affecting these safe harbors may adversely affect us. There are legislative proposals in both the U.S. and EU that could reduce our safe harbor protection.  Court decisions such as the judgment of the Court of Justice of the European Union (CJEU) on May 13, 2014 on the right to be forgotten, which allows individuals to demand that Google remove search results about them in certain instances, may limit the content we can show to our users and impose significant operational burdens. The introduction of new businesses, products, services, and technologies, our activities in certain jurisdictions, or other actions we take have subjected us, and will likely continue to subject us, to additional laws and regulations. Our investment in a variety of new fields, such as healthcare and payment services, has expanded, and will continue to expand, the scope of regulations that apply to our business. The costs of compliance with these laws and regulations are high and are likely to increase in the future. Any failure on our part to comply with laws and regulations can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties. We are subject to claims, suits, government investigations, other proceedings, and consent decrees that may harm our business, financial condition, and operating results. We are subject to claims, suits, government investigations, other proceedings, and consent decrees involving competition, intellectual property, data privacy and security, consumer protection, tax, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, and other matters. Due to our manufacturing and sale of an expanded suite of products and services, including hardware as well as Google Cloud offerings, we also are subject to a variety of claims including product warranty, product liability, and consumer protection claims related to product defects, among other litigation. We may also be subject to claims involving health and safety, hazardous materials usage, other environmental effects, or service disruptions or failures. Any of these types of legal proceedings can have an adverse effect on us because of legal costs, diversion of management resources, negative publicity and other factors. Determining reserves for our pending litigation is a complex, fact-intensive process that requires significant judgment. The resolution of one or more such proceedings has resulted in, and may in the future result in, additional substantial fines, penalties, injunctions, and other sanctions that could harm our business, financial condition, and operating results. We may be subject to legal liability associated with providing online services or content. Our products and services let users exchange information, advertise products and services, conduct business, and engage in various online activities. We also place advertisements displayed on other companies websites, and we offer third-party products, services, and/or content. The law relating to the liability of online service providers for others activities on their services is still somewhat unsettled around the world. Claims have been brought against us, and we Alphabet Inc. expect will continue to be brought against us, for defamation, negligence, breaches of contract, copyright and trademark infringement, unfair competition, unlawful activity, torts, fraud, or other legal theories based on the nature and content of information available on or via our services. We may be subject to claims by virtue of our involvement in hosting, transmitting, marketing, branding, or providing access to content created by third parties. Defense of such actions could be costly and involve significant time and attention of our management and other resources, may result in monetary liabilities or penalties, and may require us to change our business in an adverse manner. Privacy and data protection regulations are complex and rapidly evolving areas. Any failure or alleged failure to comply with these laws could harm our business, reputation, financial condition, and operating results. Authorities around the world have adopted and are considering a number of legislative and regulatory proposals concerning data protection and limits on encryption of user data. Adverse legal rulings, legislation, or regulation have resulted in, and may continue to result in, fines and orders requiring that we change our data practices, which could have an adverse effect on our ability to provide services, harming our business operations. Complying with these evolving laws could result in substantial costs and harm the quality of our products and services, negatively affecting our business, and may be particularly challenging during certain times, such as a natural disaster or pandemic. Amongst others, we are and will be subject to the following laws and regulations:  The General Data Protection Regulation (GDPR), which applies to all of our activities conducted from an establishment in the EU or related to products and services that we offer to EU users or customers, or the monitoring of their behavior in the EU. Ensuring compliance with the range of obligations created by the GDPR is an ongoing commitment that involves substantial costs. Despite our efforts, governmental authorities or others have asserted and may continue to assert that our business practices fail to comply with its requirements. If our operations are found to violate the GDPR requirements, we may incur substantial fines, have to change our business practices, and face reputational harm, any of which could have an adverse effect on our business. Serious breaches of the GDPR can result in administrative fines of up to 4% of annual worldwide revenues. Fines of up to 2% of annual worldwide revenues can be levied for other specified violations.  Various state privacy laws, such as the California Consumer Privacy Act of 2018 (CCPA), which came into effect in January of 2020; the California Privacy Rights Act (CPRA), which will go into effect in 2023; the Virginia Consumer Data Protection Act (Virginia CDPA), which will go into effect in 2023; and the Colorado Privacy Act (ColoPA), which will go into effect in 2023; all of which give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data.  SB-327 in California, which regulates the security of data in connection with internet connected devices. Further, we are subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process and/or receive personal data. The EU-U.S. and the Swiss-U.S. Privacy Shield frameworks that previously allowed U.S. companies that self-certify to the U.S. Department of Commerce and publicly commit to comply with specified requirements to import personal data from the EU and Switzerland have been invalidated by the CJEU. The CJEU upheld Standard Contractual Clauses (SCCs) as a valid transfer mechanism, provided they meet certain requirements. On June 4, 2021, the European Commission published new SCCs for this purpose, and we may have to adapt our existing contractual arrangements to meet these new requirements. The validity of data transfer mechanisms remains subject to legal, regulatory, and political developments in both Europe and the U.S., such as recent recommendations from the European Data Protection Board, decisions from supervisory authorities, recent proposals for reform of the data transfer mechanisms for transfers of personal data outside the United Kingdom, and potential invalidation of other data transfer mechanisms, which, together with increased enforcement action from supervisory authorities in relation to cross-border transfers of personal data, could have a significant adverse effect on our ability to process and transfer personal data outside of the European Economic Area and/or the United Kingdom. These laws and regulations are evolving and subject to interpretation, including developments which create some uncertainty, and compliance obligations could cause us to incur costs or harm the operations of our products and services in ways that harm our business. For example, in the EU, several supervisory authorities have issued new guidance concerning the ePrivacy Directives requirements regarding the use of cookies and similar technologies, including limitations on the use of data across messaging products and specific requirements for enabling users to accept or reject cookies, and have in some cases brought (and may seek to bring in the future) enforcement action in relation to those requirements. In the U.S., certain types of cookies may be deemed sales of personal information Alphabet Inc. within the CCPA and other state laws, such that certain disclosure requirements and limitations apply to the use of such cookies. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data that could increase the cost and complexity of delivering our services and carries the potential of service interruptions in those countries. We face, and may continue to face, intellectual property and other claims that could be costly to defend, result in significant damage awards or other costs (including indemnification awards), and limit our ability to use certain technologies in the future. We, like other internet, technology and media companies, are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. In addition, patent-holding companies may frequently seek to generate income from patents they have obtained by bringing claims against us. As we have grown, the number of intellectual property claims against us has increased and may continue to increase as we develop new products, services, and technologies. We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe the intellectual property rights of others. Other parties have also sought broad injunctive relief against us by filing claims in U.S. and international courts and the U.S. International Trade Commission (ITC) for exclusion and cease-and-desist orders, which could limit our ability to sell our products or services in the U.S. or elsewhere if our products or services or those of our customers or suppliers are found to infringe the intellectual property subject to the claims. Adverse results in any of these lawsuits may include awards of monetary damages, costly royalty or licensing agreements (if licenses are available at all), or orders preventing us from offering certain features, functionalities, products, or services. They may also cause us to change our business practices and require development of non-infringing products, services, or technologies, which could result in a loss of revenues for us and otherwise harm our business. Many of our agreements with our customers and partners, including certain suppliers, require us to defend against certain intellectual property infringement claims and in some cases indemnify them for certain intellectual property infringement claims against them, which could result in increased costs for defending such claims or significant damages if there were an adverse ruling in any such claims. Such customers and partners may also discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. Moreover, intellectual property indemnities provided to us by our suppliers, when obtainable, may not cover all damages and losses suffered by us and our customers arising from intellectual property infringement claims. Furthermore, in connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, including those associated with intellectual property claims. Regardless of their merits, intellectual property claims are often time consuming and expensive to litigate or settle. To the extent such claims are successful, they may harm our business, including our product and service offerings, financial condition, or operating results. Risks Related to Ownership of our Stock We cannot guarantee that any share repurchase program will be fully consummated or will enhance long-term stockholder value, and share repurchases could increase the volatility of our stock prices and could diminish our cash reserves. We engage in share repurchases of our Class A and Class C stock from time to time in accordance with authorizations from the Board of Directors of Alphabet. Our repurchase program does not have an expiration date and does not obligate Alphabet to repurchase any specific dollar amount or to acquire any specific number of shares. Further, our share repurchases could affect our share trading prices, increase their volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in the trading prices of our stock. The concentration of our stock ownership limits our stockholders ability to influence corporate matters. Our Class B stock has 10 votes per share, our Class A stock has one vote per share, and our Class C stock has no voting rights. As of December 31, 2021, Larry Page and Sergey Brin beneficially owned approximately 85.9% of our outstanding Class B stock, which represented approximately 51.4% of the voting power of our outstanding common stock. Through their stock ownership, Larry and Sergey have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. In addition, because our Class C stock carries no voting rights (except as required by applicable law), the issuance of the Class C stock, including in future stock-based acquisition transactions and to fund employee equity incentive programs, could continue Larry and Sergeys current relative voting power and their ability to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders. The share repurchases made pursuant to our repurchase program may also Alphabet Inc. affect Larry and Sergeys relative voting power. This concentrated control limits or severely restricts other stockholders ability to influence corporate matters and we may take actions that some of our stockholders do not view as beneficial, which could reduce the market price of our Class A stock and our Class C stock. Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable. Provisions in Alphabets certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:  Our certificate of incorporation provides for a tri-class capital stock structure. As a result of this structure, Larry and Sergey have significant influence over all matters requiring stockholder approval. This concentrated control could discourage others from initiating any potential merger, takeover, or other change of control transaction that other stockholders may view as beneficial.  Our Board of Directors has the right to elect directors to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director.  Our stockholders may not act by written consent, which makes it difficult to take certain actions without holding a stockholders' meeting.  Our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates.  Stockholders must provide advance notice to nominate individuals for election to the Board of Directors or to propose matters that can be acted upon at a stockholders meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.  Our Board of Directors may issue, without stockholder approval, shares of undesignated preferred stock, which makes it possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its outstanding voting stock unless the holder has held the stock for three years or, among other things, the Board of Directors has approved the transaction. Our Board of Directors could rely on Delaware law to prevent or delay an acquisition of us. General Risks The continuing effects of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on our business, operations and our future financial performance. Since COVID-19 was declared a global pandemic by the World Health Organization, our business, operations and financial performance have been, and may continue to be, affected by the macroeconomic impacts resulting from the efforts to control the spread of COVID-19. As a result of the scale of the ongoing pandemic, including the introduction of new variants of COVID-19 and vaccination and other efforts to control the spread, our revenue growth rate and expenses as a percentage of our revenues in future periods may differ significantly from our historical rates, and our future operating results may fall below expectations. Additionally, we may experience a significant and prolonged shift in user behavior such as a shift in interests to less commercial topics. As a result of the pandemic, our workforce shifted to operating in a primarily remote working environment, which continues to create inherent productivity, connectivity, and oversight challenges. The effects of the ongoing pandemic are dynamic and uneven. As we prepare to return our workforce in more locations back to the office, we may experience increased costs and/or disruption as we experiment with hybrid work models, in addition to potential effects on our ability to operate effectively and maintain our corporate culture. Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations. Our operating results have fluctuated, and may in the future fluctuate, as a result of a number of factors, many outside of our control, including the cyclicality and seasonality in our business and geopolitical events. As a result, comparing our operating results (including our expenses as a percentage of our revenues) on a period-to-period basis may not be meaningful, and our past results should not be relied on as an indication of our future performance. Consequently, our operating results in future quarters may fall below expectations. Alphabet Inc. Acquisitions, joint ventures, investments, and divestitures could result in operating difficulties, dilution, and other consequences that may harm our business, financial condition, and operating results. Acquisitions, joint ventures, investments and divestitures are important elements of our overall corporate strategy and use of capital, and these transactions could be material to our financial condition and operating results. We expect to continue to evaluate and enter into discussions regarding a wide array of such potential strategic transactions, which could create unforeseen operating difficulties and expenditures. Some of the areas where we face risks include:  diversion of management time and focus from operating our business to challenges related to acquisitions and other strategic transactions;  failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of a transaction;  failure to successfully integrate and further develop the acquired business or technology;  implementation or remediation of controls, procedures, and policies at the acquired company;  integration of the acquired companys accounting, human resource (including cultural integration and retention of employees), and other administrative systems, and coordination of product, engineering, and sales and marketing functions;  transition of operations, users, and customers onto our existing platforms;  in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries;  liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, data privacy and security issues, violations of laws, commercial disputes, tax liabilities, warranty claims, product liabilities, and other known and unknown liabilities; and  litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders, or other third parties. Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities, and harm our business generally. Our acquisitions and other strategic transactions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, or impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or operating results. Also, the anticipated benefits or value of our acquisitions and other strategic transactions may not materialize. In connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, which may harm our financial condition or operating results. If we were to lose the services of key personnel, we may not be able to execute our business strategy. Our future success depends in large part upon the continued service of key members of our senior management team. For instance, Sundar Pichai is critical to the overall management of Alphabet and its subsidiaries and plays an important role in the development of our technology, maintaining our culture, and setting our strategic direction. All of our executive officers and key employees are at-will employees, and we do not maintain any key-person life insurance policies. The loss of key personnel could seriously harm our business. We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel, hire qualified personnel, or maintain our corporate culture, we may not be able to grow effectively. Our performance largely depends on the talents and efforts of highly skilled individuals. Our ability to compete effectively and our future success depends on our continuing to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense, and certain of our competitors have directly targeted our employees. In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. Restrictive immigration policy and regulatory changes may also affect our ability to hire, mobilize, or retain some of our global talent. Alphabet Inc. In addition, we believe that our corporate culture fosters innovation, creativity, and teamwork. As our organization grows and evolves, we may need to implement more complex organizational management structures or adapt our corporate culture and work environments to ever-changing circumstances, such as during times of a natural disaster or pandemic, and these changes could affect our ability to compete effectively or have an adverse effect on our corporate culture. We are exposed to fluctuations in the fair values of our investments and, in some instances, our financial statements incorporate valuation methodologies that are subjective in nature resulting in fluctuations over time. The fair value of our investments may in the future be, and certain investments have been in the past, negatively affected by liquidity, credit deterioration or losses, performance and financial results of the underlying entities, foreign exchange rates, changes in interest rates, including changes that may result from the implementation of new benchmark rates, the effect of new or changing regulations, the stock market in general, or other factors. We measure certain of our non-marketable equity and debt securities, certain other instruments including stock-based compensation awards settled in the stock of certain Other Bets, and certain assets and liabilities acquired in a business combination, at fair value on a nonrecurring basis. The determination of fair value involves use of appropriate valuation methods and certain unobservable inputs, requires management judgment and estimation, and may change over time. We adjust the carrying value of our non-marketable equity securities to fair value for observable transactions of identical or similar investments of the same issuer or for impairments. All gains and losses on non-marketable equity securities, are recognized in other income (expense), which increases the volatility of our other income (expense). The unrealized gains and losses we record from fair value remeasurements of our non-marketable equity securities in any particular period may differ significantly from the gains or losses we ultimately experience on such investments. As a result of these factors, the value or liquidity of our cash equivalents, as well as our marketable and non-marketable securities could decline and result in a material impairment, which could adversely affect our financial condition and operating results. We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. Our future income taxes could be negatively affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, the net gains and losses recognized by legal entities on certain hedges and related hedged intercompany and other transactions under our foreign exchange risk management program, decreases in our stock price for shares paid as employee compensation, changes in the valuation of our deferred tax assets or liabilities, the application of different provisions of tax laws or changes in tax laws, regulations, or accounting principles (including changes in the interpretation of existing laws), as well as certain discrete items. In addition, we are subject to regular review and audit by both domestic and foreign tax authorities. As a result, we have received, and may in the future receive, assessments in multiple jurisdictions, including in Europe, on various tax-related assertions, such as transfer-pricing adjustments or permanent-establishment claims. Any adverse outcome of such a review or audit could have a negative effect on our operating results and financial condition and could require us to change our business practices in a manner adverse to our business. It may also subject us to additional litigation and regulatory inquiries, resulting in the diversion of managements time and attention. In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations for which the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may affect our financial results in the period or periods for which such determination is made. Furthermore, due to shifting economic and political conditions, tax policies, laws, or rates in various jurisdictions may be subject to significant changes in ways that impair our financial results. Various jurisdictions around the world have enacted or are considering digital services taxes, which could lead to inconsistent and potentially overlapping international tax regimes. The Organization for Economic Cooperation and Development (OECD) continues to advance proposals relating to its initiative for modernizing international tax rules, with the goal of having different countries implement a modernized and aligned international tax framework, but there can be no guarantee that this will occur. In addition, in response to significant market volatility and disruptions to business operations resulting from the global spread of COVID-19, legislatures and taxing authorities in many jurisdictions in which we operate may propose changes to their tax rules. These changes could include modifications that have temporary effect, and more permanent Alphabet Inc. changes. The effect of these potential new rules on us, our long-term tax planning, and our effective tax rate could be material. The trading price for our Class A stock and non-voting Class C stock may continue to be volatile. The trading price of our stock has at times experienced substantial price volatility and may continue to be volatile. In addition to the factors discussed in this report, the trading price of our Class A stock and Class C stock have fluctuated, and may continue to fluctuate widely, in response to various factors, many of which are beyond our control, including, among others, the activities of our peers and changes in broader economic and political conditions around the world. These broad market and industry factors may harm the market price of our Class A stock and our Class C stock, regardless of our actual operating performance. ", ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ," ITEM 2. PROPERTIES Our headquarters are located in Mountain View, California. We also own and lease office and building space in the surrounding areas near our headquarters. In addition, we own and lease office/building space and RD sites around the world, primarily in North America, Europe, South America, and Asia. We own and operate data centers in the U.S., Europe, South America, and Asia. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business. "," ITEM 3. LEGAL PROCEEDINGS For a description of our material pending legal proceedings, see Legal Matters in Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. "," ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of October 2, 2015, Alphabet Inc. became the successor issuer of Google Inc. pursuant to Rule 12g-3(a) under the Exchange Act. Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol GOOG since August 19, 2004 and under the symbol ""GOOGL"" since April 3, 2014. Prior to August 19, 2004, there was no public market for our stock. Our Class B common stock is neither listed nor traded. Our Class C capital stock has been listed on the Nasdaq Global Select Market under the symbol GOOG since April 3, 2014. Holders of Record As of December 31, 2021, there were approximately 4,907 and 1,733 stockholders of record of our Class A common stock and Class C capital stock, respectively. Because many of our shares of Class A common stock and Class C capital stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2021, there were approximately 64 stockholders of record of our Class B common stock. Dividend Policy We have never declared or paid any cash dividend on our common or capital stock. The primary use of capital continues to be to invest for the long-term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace, and form of capital return to stockholders. Issuer Purchases of Equity Securities The following table presents information with respect to Alphabet's repurchases of Class A common stock and Class C capital stock during the quarter ended December 31, 2021: Period Total Number of Class A Shares Purchased (in thousands) (1) Total Number of Class C Shares Purchased (in thousands) (1) Average Price Paid per Class A Share (2) Average Price Paid per Class C Share (2) Total Number of Shares Purchased as Part of Publicly Announced Programs (in thousands) (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) October 1 - 31 126 1,445 $ 2,812.76 $ 2,794.72 1,571 $ 26,450 November 1 - 30 289 1,393 $ 2,943.97 $ 2,956.73 1,682 $ 21,479 December 1 - 31 250 1,169 $ 2,880.79 $ 2,898.56 1,419 $ 17,371 Total 665 4,007 4,672 (1)  The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information related to share repurchases. (2)  Average price paid per share includes costs associated with the repurchases. Alphabet Inc. Stock Performance Graphs The graph below matches Alphabet Inc. Class A's cumulative 5-year total stockholder return on common stock with the cumulative total returns of the SP 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2016 to December 31, 2021. The returns shown are based on historical results and are not intended to suggest future performance. COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN* ALPHABET INC. CLASS A COMMON STOCK Among Alphabet Inc., the SP 500 Index, the NASDAQ Composite Index, and the RDG Internet Composite Index *$100 invested on December 31, 2016 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright  2022 SP, a division of The McGraw-Hill Companies Inc. All rights reserved. Alphabet Inc. The graph below matches Alphabet Inc. Class C's cumulative 5-year total stockholder return on capital stock with the cumulative total returns of the SP 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our Class C capital stock and in each index (with the reinvestment of all dividends) from December 31, 2016 to December 31, 2021. The returns shown are based on historical results and are not intended to suggest future performance. COMPARISON OF CUMULATIVE 5-YEAR TOTAL RETURN* ALPHABET INC. CLASS C CAPITAL STOCK Among Alphabet Inc., the SP 500 Index, the NASDAQ Composite Index, and the RDG Internet Composite Index *$100 invested on December 31, 2016 in stock or in index, including reinvestment of dividends. Fiscal year ending December 31. Copyright  2022 SP, a division of The McGraw-Hill Companies Inc. All rights reserved. "," ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Please read the following discussion and analysis of our financial condition and results of operations together with Note about Forward-Looking Statements, Part I, Item 1 ""Business,"" Part I, Item 1A ""Risk Factors,"" and our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K. We have omitted discussion of 2019 results where it would be redundant to the discussion previously included in Item 7 of our 2020 Annual Report on Form 10-K. Understanding Alphabets Financial Results Alphabet is a collection of businesses  the largest of which is Google. We report Google in two segments, Google Services and Google Cloud; we also report all non-Google businesses collectively as Other Bets. Other Bets include earlier stage technologies that are further afield from our core Google business. For further details on our segments, see Part I, Item 1 Business and Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Trends in Our Business and Financial Effect The following long-term trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results:  Users' behaviors and advertising continue to shift online as the digital economy evolves. The continuing shift from an offline to online world has contributed to the growth of our business since inception, contributing to revenue growth, and we expect that this online shift will continue to benefit our business.  Users are increasingly using diverse devices and modalities to access our products and services, and our advertising revenues are increasingly coming from new formats. Our users are accessing the Internet via diverse devices and modalities, such as smartphones, wearables and smart home devices, and want to be able to be connected no matter where they are or what they are doing. We are focused on expanding our products and services to stay in front of these trends in order to maintain and grow our business. We are increasingly generating advertising revenues from different channels, including mobile, and newer advertising formats. The margins on advertising revenues from these channels and newer products have generally been lower than those from traditional desktop search. Additionally, as the market for a particular device type or modality matures, our revenues may be affected. For example, growth in the global smartphone market has slowed due to various factors, including increased market saturation in developed countries, which can affect our mobile advertising revenue growth rates. We expect TAC paid to our distribution partners and Google Network partners to increase as our revenues grow and TAC as a percentage of our advertising revenues (""TAC rate"") to be affected by changes in device mix; geographic mix; partner mix; partner agreement terms; the percentage of queries channeled through paid access points; product mix; the relative revenue growth rates of advertising revenues from different channels; and revenue share terms. We expect these trends to continue to affect our revenue growth rates and put pressure on our margins.  As online advertising evolves, we continue to expand our product offerings, which may affect our monetization. As interactions between users and advertisers change, and as online user behavior evolves, we continue to expand and evolve our product offerings to serve these changing needs. Over time, we expect our monetization trends to fluctuate. For example, we have seen an increase in revenues from ads on YouTube and Google Play, which monetize at a lower rate than our traditional search ads.  As users in developing economies increasingly come online, our revenues from international markets continue to increase and movements in foreign exchange rates affect such revenues. The shift to online, as well as the advent of the multi-device world, has brought opportunities outside of the U.S., including in emerging markets, such as India. We continue to invest heavily and develop localized versions of our products and advertising programs relevant to our users in these markets. This has led to a trend of increased revenues from emerging markets. We expect that our results will continue to be affected by our performance in these markets, particularly as low-cost mobile devices become more available. This trend could affect our revenues as developing markets initially monetize at a lower rate than more mature markets. Alphabet Inc. International revenues represent a significant portion of our revenues and are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. While we have a foreign exchange risk management program designed to reduce our exposure to these fluctuations, this program does not fully offset their effect on our revenues and earnings.  The portion of revenues that we derive from non-advertising revenues is increasing and may adversely affect margins. Non-advertising revenues have grown over time. We expect this trend to continue as we focus on expanding our offerings through products and services like Google Cloud, Google Play, hardware products, and YouTube subscriptions. We currently derive non-advertising revenues primarily from sales of apps and in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud services and subscription and other services. A number of Other Bets initiatives are in their initial development stages, and as such, revenues from these businesses could be volatile. In addition, the margins on these revenues vary significantly and may be lower than the margins on our advertising revenues.  As we continue to serve our users and expand our businesses, we will invest heavily in operating and capital expenditures. We continue to make significant RD investments in areas of strategic focus across Google Services, Google Cloud and Other Bets. We also expect to continue to invest in land and buildings for data centers and offices, and information technology assets, which includes servers and network equipment, to support the long-term growth of our business. In addition, acquisitions and strategic investments contribute to the breadth and depth of our offerings, expand our expertise in engineering and other functional areas, and build strong partnerships around strategic initiatives. For example, in January 2021 we closed the acquisition of Fitbit, Inc. for $2.1 billion, which is expected to help spur innovation in wearable devices.  We face continuing changes in regulatory conditions, laws, and public policies, which could affect our business practices and financial results. Changes in social, political, economic, tax, and regulatory conditions or in laws and policies governing a wide range of topics and related legal matters have resulted in fines and caused us to change our business practices. As these global trends continue, our cost of doing business may increase, and our ability to pursue certain business models or offer certain products or services may be limited. Examples include the antitrust complaints filed by the U.S. Department of Justice and a number of state Attorneys General, the Digital Markets Act in Europe, and various legislative proposals in the U.S. focused on large technology platforms.  Our employees are critical to our success and we expect to continue investing in them. Our employees are among our best assets and are critical for our continued success. We expect to continue hiring talented employees around the globe and to provide competitive compensation programs. For additional information see Culture and Workforce in Part I, Item 1 Business. Seasonality and other Our advertising revenues are affected by seasonal fluctuations in internet usage, advertising expenditures, and underlying business trends, such as traditional retail seasonality. Additionally, our non-advertising revenues, including those generated from Google Cloud, Google Play, hardware, and YouTube, may be affected by fluctuations driven by changes in pricing, digital content releases, fee structures, new product and service launches, other market dynamics, as well as seasonality. Revenues and Monetization Metrics Google Services Google Services revenues consist of revenues generated from advertising (Google advertising) as well as revenues from other sources (Google other revenues). Google Advertising Google advertising revenues are comprised of the following:  Google Search  other, which includes revenues generated on Google search properties (including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.), and other Google owned and operated properties like Gmail, Google Maps, and Google Play;  YouTube ads, which includes revenues generated on YouTube properties; and Alphabet Inc.  Google Network, which includes revenues generated on Google Network properties participating in AdMob, AdSense, and Google Ad Manager. We use certain metrics to track how well traffic across various properties is monetized as it relates to our advertising revenues: paid clicks and cost-per-click pertain to traffic on Google Search  other properties, while impressions and cost-per-impressions pertain to traffic on our Network partners properties. Paid clicks represent engagement by users and include clicks on advertisements by end-users on Google search properties and other Google owned and operated properties including Gmail, Google Maps, and Google Play. Cost-per-click is defined as click-driven revenues divided by our total number of paid clicks and represents the average amount we charge advertisers for each engagement by users. Impressions include impressions displayed to users on Google Network properties participating primarily in AdMob, AdSense, and Google Ad Manager. Cost-per-impression is defined as impression-based and click-based revenues divided by our total number of impressions, and represents the average amount we charge advertisers for each impression displayed to users. As our business evolves, we periodically review, refine, and update our methodologies for monitoring, gathering, and counting the number of paid clicks and the number of impressions, and for identifying the revenues generated by the corresponding click and impression activity. Our advertising revenue growth, as well as the change in paid clicks and cost-per-click on Google Search  other properties and the change in impressions and cost-per-impression on Google Network properties and the correlation between these items, have been affected and may continue to be affected by various factors, including:  advertiser competition for keywords;  changes in advertising quality, formats, delivery or policy;  changes in device mix;  changes in foreign currency exchange rates;  fees advertisers are willing to pay based on how they manage their advertising costs;  general economic conditions, including the effect of COVID-19;  seasonality; and  traffic growth in emerging markets compared to more mature markets and across various advertising verticals and channels. Google Other Google other revenues are comprised of the following:  Google Play, which includes sales of apps and in-app purchases and digital content sold in the Google Play store;  Devices and Services, which includes sales of hardware, including Fitbit wearable devices, Google Nest home products, and Pixel phones;  YouTube non-advertising, which includes YouTube Premium and YouTube TV subscriptions; and  other products and services. Google Cloud Google Cloud revenues are comprised of the following:  Google Cloud Platform, which includes fees for infrastructure, platform, and other services;  Google Workspace, which includes fees for cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar and Meet; and  other enterprise services. Other Bets Revenues from Other Bets are generated primarily from the sale of health technology and internet services. Alphabet Inc. For further details on how we recognize revenue, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Costs and Expenses Our cost structure has two components: cost of revenues and operating expenses. Our operating expenses include costs related to RD, sales and marketing, and general and administrative functions. Certain of these expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to the changes in revenue. Cost of Revenues Cost of revenues is comprised of TAC and other costs of revenues.  TAC includes:  Amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers.  Amounts paid to Google Network partners primarily for ads displayed on their properties.  Other cost of revenues includes:  Content acquisition costs, which are payments to content providers from whom we license video and other content for distribution on YouTube and Google Play (we pay fees to these content providers based on revenues generated or a flat fee).  Expenses associated with our data centers (including bandwidth, compensation expenses, depreciation, energy, and other equipment costs) as well as other operations costs (such as content review as well as customer and product support costs).  Inventory and other costs related to the hardware we sell. The cost of revenues as a percentage of revenues generated from ads placed on Google Network properties are significantly higher than the cost of revenues as a percentage of revenues generated from ads placed on Google Search  other properties, because most of the advertiser revenues from ads served on Google Network properties are paid as TAC to our Google Network partners. Operating Expenses Operating expenses are generally incurred during our normal course of business, which we categorize as either RD, sales and marketing, or general and administrative. The main components of our RD expenses are:  compensation expenses for engineering and technical employees responsible for RD related to our existing and new products and services;  depreciation; and  professional services fees primarily related to consulting and outsourcing services. The main components of our sales and marketing expenses are:  compensation expenses for employees engaged in sales and marketing, sales support, and certain customer service functions; and  spending relating to our advertising and promotional activities in support of our products and services. The main components of our general and administrative expenses are:  compensation expenses for employees in finance, human resources, information technology, legal, and other administrative support functions;  expenses related to legal matters, including fines and settlements; and  professional services fees, including audit, consulting, outside legal, and outsourcing services. Alphabet Inc. Other Income (Expense), Net Other income (expense), net primarily consists of interest income (expense), the effect of foreign currency exchange gains (losses), net gains (losses) and impairment on our marketable and non-marketable securities, performance fees, and income (loss) and impairment from our equity method investments. For additional details, including how we account for our investments and factors that can drive fluctuations in the value of our investments, see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K as well as Item 7A, Quantitative and Qualitative Disclosures About Market Risk. Provision for Income Taxes Provision for income taxes represents the estimated amount of federal, state, and foreign income taxes incurred in the U.S. and the many jurisdictions in which we operate. The provision includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. For additional details, including a reconciliation of the U.S. federal statutory rate to our effective tax rate, see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Executive Overview The following table summarizes consolidated financial results for the years ended December 31, 2020 and 2021 unless otherwise specified (in millions, except for per share information and percentages): Year Ended December 31, 2020 2021 $ Change % Change Consolidated revenues $ 182,527 $ 257,637 $ 75,110 41 % Change in consolidated constant currency revenues 39 % Cost of revenues $ 84,732 $ 110,939 $ 26,207 31 % Operating expenses $ 56,571 $ 67,984 $ 11,413 20 % Operating income $ 41,224 $ 78,714 $ 37,490 91 % Operating margin 23 % 31 % 8 % Other income (expense), net $ 6,858 $ 12,020 $ 5,162 75 % Net Income $ 40,269 $ 76,033 $ 35,764 89 % Diluted EPS $ 58.61 $ 112.20 $ 53.59 91 % Number of Employees 135,301 156,500 21,199 16 %  Revenues were $257.6 billion, an increase of 41%. The increase in revenues was primarily driven by Google Services and Google Cloud. The adverse effect of COVID-19 on 2020 advertising revenues also contributed to the year-over-year growth.  Cost of revenues was $110.9 billion, an increase of 31%, primarily driven by increases in TAC and content acquisition costs. An overall increase in data centers and other operations costs was partially offset by a reduction in depreciation expense due to the change in the estimated useful life of our servers and certain network equipment.  Operating expenses were $68.0 billion, an increase of 20%, primarily driven by headcount growth, increases in advertising and promotional expenses and charges related to legal matters. Other information:  Operating cash flow was $91.7 billion, primarily driven by revenues generated from our advertising products.  Share repurchases were $50.3 billion, an increase of 62%. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information. Alphabet Inc.  Capital expenditures, which primarily reflected investments in technical infrastructure, were $24.6 billion.  In January 2021, we updated the useful lives of certain of our servers and network equipment, resulting in a reduction in depreciation expense of $2.6 billion recorded primarily in cost of revenues and RD. See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.  Our acquisition of Fitbit closed in early January 2021, and the related revenues are included in Google other. See Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.  On February 1, 2022, the Company announced that the Board of Directors had approved and declared a 20-for-one stock split in the form of a one-time special stock dividend on each share of the Companys Class A, Class B, and Class C stock. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information. The Effect of COVID-19 on our Financial Results We began to observe the effect of COVID-19 on our financial results in March 2020 when, despite an increase in users' search activity, our advertising revenues declined compared to the prior year. This was due to a shift of user search activity to less commercial topics and reduced spending by our advertisers. For the quarter ended June 30, 2020 our advertising revenues declined due to the continued effects of COVID-19 and the related reductions in global economic activity, but we observed a gradual return in user search activity to more commercial topics. This was followed by increased spending by our advertisers, which continued throughout the second half of 2020. Additionally, over the course of 2020, we experienced variability in our margins as many of our expenses are less variable in nature and/or may not correlate to changes in revenues. Market volatility contributed to fluctuations in the valuation of our equity investments. Further, our assessment of the credit deterioration of our customers due to changes in the macroeconomic environment during the period was reflected in our allowance for credit losses for accounts receivable. Throughout 2021 we remained focused on innovating and investing in the services we offer to consumers and businesses to support our long-term growth. The impact of COVID-19 on 2020 financial results affected year-over-year growth trends. The COVID-19 pandemic continues to evolve, be unpredictable and affect our business and financial results. Our past results may not be indicative of our future performance, and historical trends in our financial results may differ materially. Financial Results Revenues The following table presents revenues by type (in millions): Year Ended December 31, 2020 2021 Google Search  other $ 104,062 $ 148,951 YouTube ads 19,772 28,845 Google Network 23,090 31,701 Google advertising 146,924 209,497 Google other 21,711 28,032 Google Services total 168,635 237,529 Google Cloud 13,059 19,206 Other Bets 657 753 Hedging gains (losses) 176 149 Total revenues $ 182,527 $ 257,637 Google Services Google advertising revenues Google Search  other Google Search  other revenues increased $44.9 billion from 2020 to 2021. The overall growth was driven by interrelated factors including increases in search queries resulting from growth in user adoption and usage, primarily Alphabet Inc. on mobile devices, growth in advertiser spending, and improvements we have made in ad formats and delivery. The adverse effect of COVID-19 on 2020 revenues also contributed to the year-over-year increase. YouTube ads YouTube ads revenues increased $9.1 billion from 2020 to 2021. Growth was driven by our direct response and brand advertising products. Growth for our direct response advertising products was primarily driven by increased advertiser spending as well as improvements to ad formats and delivery. Growth for our brand advertising products was primarily driven by increased spending by our advertisers and the adverse effect of COVID-19 on 2020 revenues. Google Network Google Network revenues increased $8.6 billion from 2020 to 2021. The growth was primarily driven by strength in AdMob, Google Ad Manager, and AdSense. The adverse effect of COVID-19 on 2020 revenues also contributed to the year-over-year increase. Monetization Metrics Paid clicks and cost-per-click The following table presents changes in paid clicks and cost-per-click (expressed as a percentage) from 2020 to 2021:  Year Ended December 31,  2021 Paid clicks change 23 % Cost-per-click change 15 % Paid clicks increased from 2020 to 2021 driven by a number of interrelated factors, including an increase in search queries resulting from growth in user adoption and usage, primarily on mobile devices; an increase in clicks relating to ads on Google Play; growth in advertiser spending; and improvements we have made in ad formats and delivery. The adverse effect of COVID-19 on 2020 paid clicks also contributed to the increase. The increase in cost-per-click from 2020 to 2021 was driven by a number of interrelated factors including changes in device mix, geographic mix, growth in advertiser spending, ongoing product changes, and property mix, as well as the adverse effect of COVID-19 in 2020. Impressions and cost-per-impression The following table presents changes in impressions and cost-per-impression (expressed as a percentage) from 2020 to 2021:  Year Ended December 31,  2021 Impressions change 2 % Cost-per-impression change 35 % Impressions increased from 2020 to 2021 primarily driven by growth in AdMob, partially offset by a decline in impressions related to AdSense. The increase in cost-per-impression was primarily driven by the adverse effect of COVID-19 in 2020 as well as the effect of interrelated factors including ongoing product and policy changes and improvements we have made in ad formats and delivery, changes in device mix, geographic mix, product mix, and property mix. Google other revenues Google other revenues increased $6.3 billion from 2020 to 2021. The growth was primarily driven by YouTube non-advertising and hardware, followed by Google Play. Growth for YouTube non-advertising was primarily due to an increase in paid subscribers. Growth in hardware reflects the inclusion of Fitbit revenues, as the acquisition closed in January 2021, and an increase in phone sales. Growth for Google Play was primarily driven by sales of apps and in-app purchases. Alphabet Inc. Google Cloud Google Cloud revenues increased $6.1 billion from 2020 to 2021. The growth was primarily driven by GCP followed by Google Workspace offerings. Google Cloud's infrastructure and platform services were the largest drivers of growth in GCP. Revenues by Geography The following table presents revenues by geography as a percentage of revenues, determined based on the addresses of our customers:  Year Ended December 31,  2020 2021 United States 47 % 46 % EMEA 30 % 31 % APAC 18 % 18 % Other Americas 5 % 5 % For further details on revenues by geography, see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Use of Constant Currency Revenues and Constant Currency Revenue Percentage Change The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. We use non-GAAP constant currency revenues and non-GAAP percentage change in constant currency revenues for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of results on a constant currency basis in addition to U.S. Generally Accepted Accounting Principles (GAAP) results helps improve the ability to understand our performance because it excludes the effects of foreign currency volatility that are not indicative of our core operating results. Constant currency information compares results between periods as if exchange rates had remained constant period over period. We define constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and use it to determine the constant currency revenue percentage change on a year-on-year basis. Constant currency revenues are calculated by translating current period revenues using prior year comparable period exchange rates, as well as excluding any hedging effects realized in the current period. Constant currency revenue percentage change is calculated by determining the change in current period revenues over prior year comparable period revenues where current period foreign currency revenues are translated using prior year comparable period exchange rates and hedging effects are excluded from revenues of both periods. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP. Alphabet Inc. The following table presents the foreign exchange effect on international revenues and total revenues (in millions, except percentages):  Year Ended December 31, 2020 2021 % Change from Prior Year EMEA revenues $ 55,370 $ 79,107 43 % EMEA constant currency revenues 76,321 38 % APAC revenues 32,550 46,123 42 % APAC constant currency revenues 45,666 40 % Other Americas revenues 9,417 14,404 53 % Other Americas constant currency revenues 14,317 52 % United States revenues 85,014 117,854 39 % Hedging gains (losses) 176 149 Total revenues $ 182,527 $ 257,637 41 % Revenues, excluding hedging effect $ 182,351 $ 257,488 Exchange rate effect (3,330) Total constant currency revenues $ 254,158 39 % EMEA revenue growth from 2020 to 2021 was favorably affected by foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Euro and British pound. APAC revenue growth from 2020 to 2021 was favorably affected by foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Australian dollar, partially offset by the U.S. dollar strengthening relative to the Japanese yen. Other Americas growth change from 2020 to 2021 was favorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Canadian dollar, partially offset by the U.S. dollar strengthening relative to the Argentine peso and the Brazilian real. Costs and Expenses Cost of Revenues The following tables present cost of revenues, including TAC (in millions, except percentages):  Year Ended December 31,  2020 2021 TAC $ 32,778 $ 45,566 Other cost of revenues 51,954 65,373 Total cost of revenues $ 84,732 $ 110,939 Total cost of revenues as a percentage of revenues 46.4 % 43.1 % Cost of revenues increased $26.2 billion from 2020 to 2021. The increase was due to an increase in other cost of revenues and TAC of $13.4 billion and $12.8 billion, respectively. The increase in TAC from 2020 to 2021 was due to an increase in TAC paid to distribution partners and to Google Network partners, primarily driven by growth in revenues subject to TAC. The TAC rate decreased from 22.3% to 21.8% from 2020 to 2021 primarily due to a revenue mix shift from Google Network properties to Google Search  other properties. The TAC rate on Google Search  other properties revenues and the TAC rate on Google Network revenues were both substantially consistent from 2020 to 2021. The increase in other cost of revenues from 2020 to 2021 was driven by increases in content acquisition costs primarily for YouTube, data center and other operations costs, and hardware costs. The increase in data center and Alphabet Inc. other operations costs was partially offset by a reduction in depreciation expense due to the change in the estimated useful life of our servers and certain network equipment beginning in the first quarter of 2021. Research and Development The following table presents RD expenses (in millions, except percentages):  Year Ended December 31,  2020 2021 Research and development expenses $ 27,573 $ 31,562 Research and development expenses as a percentage of revenues 15.1 % 12.3 % RD expenses increased $4.0 billion from 2020 to 2021. The increase was primarily due to an increase in compensation expenses of $3.5 billion, largely resulting from an 11% increase in headcount, and an increase in professional service fees of $516 million. This increase was partially offset by a reduction in depreciation expense of $450 million including the effect of our change in the estimated useful life of our servers and certain network equipment. Sales and Marketing The following table presents sales and marketing expenses (in millions, except percentages):  Year Ended December 31,  2020 2021 Sales and marketing expenses $ 17,946 $ 22,912 Sales and marketing expenses as a percentage of revenues 9.8 % 8.9 % Sales and marketing expenses increased $5.0 billion from 2020 to 2021, primarily driven by an increase in advertising and promotional activities of $2.5 billion and an increase in compensation expenses of $2.2 billion. The increase in advertising and promotional activities was driven by both increased spending in the current period and a reduction in spending in 2020 due to COVID-19. The increase in compensation expenses was largely due to a 14% increase in headcount. General and Administrative The following table presents general and administrative expenses (in millions, except percentages):  Year Ended December 31,  2020 2021 General and administrative expenses $ 11,052 $ 13,510 General and administrative expenses as a percentage of revenues 6.1 % 5.2 % General and administrative expenses increased $2.5 billion from 2020 to 2021. The increase was primarily driven by a $1.7 billion increase in charges relating to legal matters and a $664 million increase in compensation expenses, largely resulting from a 14% increase in headcount. These increases were partially offset by a reduction in expense of $808 million related to a decline in allowance for credit losses for accounts receivable, as 2020 reflected a higher allowance related to the economic effect of COVID-19. Alphabet Inc. Segment Profitability The following table presents segment operating income (loss) (in millions). Year Ended December 31, 2020 2021 Operating income (loss): Google Services $ 54,606 $ 91,855 Google Cloud (5,607) (3,099) Other Bets (4,476) (5,281) Corporate costs, unallocated (1) (3,299) (4,761) Total income from operations $ 41,224 $ 78,714 (1) Unallocated corporate costs primarily include corporate initiatives, corporate shared costs, such as finance and legal, including certain fines and settlements, as well as costs associated with certain shared RD activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs. Google Services Google services operating income increased $37.2 billion from 2020 to 2021. The increase was due to growth in revenues partially offset by increases in TAC, content acquisition costs, compensation expenses, advertising and promotional expenses, and charges related to certain legal matters. The increase in expenses was partially offset by a reduction in costs driven by the change in the estimated useful life of our servers and certain network equipment. The effect of COVID-19 on 2020 results affected the year-over-year increase in operating income. Google Cloud Google Cloud operating loss decreased $2.5 billion from 2020 to 2021. The decrease in operating loss was primarily driven by growth in revenues, partially offset by an increase in expenses, primarily driven by compensation expenses. The increase in expenses was partially offset by a reduction in costs driven by the change in the estimated useful life of our servers and certain network equipment. Other Bets Other Bets operating loss increased $805 million from 2020 to 2021. The increase in operating loss was primarily driven by increases in compensation expenses, including an increase in valuation-based compensation charges during the second quarter of 2021. Other Income (Expense), Net The following table presents other income (expense), net, (in millions):  Year Ended December 31,  2020 2021 Other income (expense), net $ 6,858 $ 12,020 Other income (expense), net, increased $5.2 billion from 2020 to 2021. The increase was primarily driven by increases in net unrealized gains recognized for our marketable and non-marketable equity securities of $6.9 billion, partially offset by an increase in accrued performance fees related to certain investments of $1.3 billion. See Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information. Provision for Income Taxes The following table presents provision for income taxes (in millions, except for effective tax rate):  Year Ended December 31,  2020 2021 Provision for income taxes $ 7,813 $ 14,701 Effective tax rate 16.2 % 16.2 % The provision for income taxes increased from 2020 to 2021, primarily due to an increase in pre-tax earnings, including in countries that have higher statutory rates, partially offset by an increase in the stock-based compensation related tax benefit, and the U.S. federal Foreign-Derived Intangible Income tax deduction benefit. Our effective tax rate Alphabet Inc. was substantially consistent from 2020 to 2021. See Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information. Financial Condition Cash, Cash Equivalents, and Marketable Securities As of December 31, 2021, we had $139.6 billion in cash, cash equivalents, and short-term marketable securities. Ca sh equivalents and marketable securities a re comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities, and marketable equity securities. Sources, Uses of Cash and Related Trends Our principal sources of liquidity are cash, cash equivalents, and marketable securities, as well as the cash flow that we generate from operations. The primary use of capital continues to be to invest for the long-term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace and form of capital return to stockholders. The following table presents our cash flows (in millions):  Year Ended December 31,  2020 2021 Net cash provided by operating activities $ 65,124 $ 91,652 Net cash used in investing activities $ (32,773) $ (35,523) Net cash used in financing activities $ (24,408) $ (61,362) Cash Provided by Operating Activities Our largest source of cash provided by operations are advertising revenues generated by Google Search  other properties, Google Network properties, and YouTube ads. Additionally, we generate cash through sales of apps and in-app purchases, digital content products, and hardware; and licensing and service fees including fees received for Google Cloud offerings and subscription-based products. Our primary uses of cash from operating activities include payments to distribution and Google Network partners, for compensation and related costs, and for content acquisition costs. In addition, uses of cash from operating activities include hardware inventory costs, income taxes, and other general corporate expenditures. Net cash provided by operating activities increased from 2020 to 2021 primarily due to the net effect of an increase in cash received from revenues and cash paid for cost of revenues and operating expenses, and changes in operating assets and liabilities. Cash Used in Investing Activities Cash provided by investing activities consists primarily of maturities and sales of our investments in marketable and non-marketable securities. Cash used in investing activities consists primarily of purchases of marketable and non-marketable securities, purchases of property and equipment, and payments for acquisitions. Net cash used in investing activities increased from 2020 to 2021 primarily due to a decrease in maturities and sales of marketable securities, an increase in purchases of property and equipment, offset by a decrease in purchases of non-marketable securities. Cash Used in Financing Activities Cash provided by financing activities consists primarily of proceeds from issuance of debt and proceeds from the sale of interest in consolidated entities. Cash used in financing activities consists primarily of repurchases of common and capital stock, net payments related to stock-based award activities, and repayments of debt. Net cash used in financing activities increased from 2020 to 2021 primarily due to repayment of debt and an increase in cash payments for repurchases of common and capital stock. Liquidity and Material Cash Requirements We expect existing cash, cash equivalents, short-term marketable securities, cash flows from operations and financing activities to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future. Alphabet Inc. Capital Expenditures and Leases We make investments in land and buildings for data centers and offices and information technology assets through purchases of property and equipment and lease arrangements to provide capacity for the growth of our services and products. Capital Expenditures Our capital investments in property and equipment consist primarily of the following major categories:  technical infrastructure, which consists of our investments in servers and network equipment for computing, storage and networking requirements for ongoing business activities, including machine learning (collectively referred to as our information technology assets) and data center land and building construction; and  office facilities, ground up development projects and related building improvements. Construction in progress consists primarily of technical infrastructure and office facilities which have not yet been placed in service for our intended use. The time frame from date of purchase to placement in service of these assets may extend from months to years. For example, our data center construction projects are generally multi-year projects with multiple phases, where we acquire qualified land and buildings, construct buildings, and secure and install information technology assets. During the years ended December 31, 2020 and 2021, we spent $22.3 billion and $24.6 billion on capital expenditures, respectively. Depreciation of our property and equipment commences when the deployment of such assets are completed and are ready for our intended use. Land is not depreciated. For the years ended December 31, 2020 and 2021, our depreciation and impairment expenses on property and equipment were $12.9 billion and $11.6 billion, respectively. Leases For the years ended December 31, 2020 and 2021, we recognized total operating lease assets of $2.8 billion and $3.0 billion, respectively. As of December 31, 2021, the amount of total future lease payments under operating leases, which had a weighted average remaining lease term of 8 years, was $15.5 billion, of which $2.5 billion is short-term. As of December 31, 2021, we have entered into leases that have not yet commenced with future short-term and long-term lease payments of $606 million and $5.2 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2022 and 2026 with non-cancelable lease terms of 1 to 25 years. For the years ended December 31, 2020 and 2021, our operating lease expenses (including variable lease costs) were $2.9 billion and $3.4 billion, respectively. Finance lease costs were not material for the years ended December 31, 2020 and 2021. See Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information on leases. Financing We have a short-term debt financing program of up to $ 10.0 billion through the issuance of commercial paper, which increased from $5.0 billion in September 2021. Net proceeds from this program are used for general corporate purposes. As of December 31, 2021, we had no commercial paper outstanding. As of December 31, 2021, we had $ 10.0 billion of revolving credit facilities with no amounts outstanding. In April 2021, we terminated the existing revolving credit facilities, which were scheduled to expire in July 2023, and entered into two new revolving credit facilities in the amounts of $ 4.0 billion and $ 6.0 billion, which will expire in April 2022 and April 2026, respectively. The interest rates for the new 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 have been borrowed under the new credit facilities. As of December 31, 2021, we have senior unsecured notes outstanding with a total carrying value of $12.8 billion with short-term and long-term future interest payments of $231 million and $4.0 billion, respectively. See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information on our debt. Share Repurchase Program In April 2021, the Board of Directors of Alphabet authorized the company to repurchase up to $ 50.0 billion of its Class C stock. In July 2021, the Alphabet board approved an amendment to the April 2021 authorization, permitting the company to repurchase both Class A and Class C shares in a manner deemed in the best interest of the company and its stockholders, taking into account the economic cost and prevailing market conditions, including the relative trading Alphabet Inc. prices and volumes of the Class A and Class C shares. In accordance with the authorizations of the Board of Directors of Alphabet, during 2021 we repurchased and subsequently retired 20.3 million aggregate shares for $ 50.3 billion. Of the aggregate amount repurchased and subsequently retired, 1.2 million shares were Class A stock repurchased for $ 3.4 billion. As of December 31, 2021, $ 17.4 billion remains available for Class A and Class C share repurchases under the amended authorization. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. European Commission Fines In 2017, 2018 and 2019, the EC announced decisions that certain actions taken by Google infringed European competition law and imposed fines of  2.4 billion ($ 2.7 billion as of June 27, 2017),  4.3 billion ($ 5.1 billion as of June 30, 2018), and  1.5 billion ($ 1.7 billion as of March 20, 2019), respectively. While each EC decision is under appeal, we included the fines 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. Taxes As of December 31, 2021, we had short-term and long-term income taxes payable of $784 million and $5.7 billion related to a one-time transition tax payable incurred as a result of the U.S. Tax Cuts and Jobs Act (""Tax Act""). As permitted by the Tax Act, we will pay the transition tax in annual interest-free installments through 2025. We also have taxes payable of $3.5 billion primarily related to uncertain tax positions as of December 31, 2021. Purchase Commitments We regularly enter into significant non-cancelable contractual obligations primarily related to data center operations and build-outs, information technology assets, office buildings, purchases of inventory, and network capacity arrangements. As of December 31, 2021, such purchase commitments, which do not qualify for recognition on our Consolidated Balance Sheets, amount to $13.7 billion, of which $11.9 billion is short-term. These amounts represent the non-cancelable portion of agreements or the minimum cancellation fee. For those agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of December 31, 2021. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit and compliance committee of our Board of Directors. See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements. Fair Value Measurements of Non-Marketable Equity Securities We measure certain financial instruments at fair value on a nonrecurring basis, consisting primarily of our non-marketable equity securities. These investments are accounted for under the measurement alternative and are measured at cost, less impairment, subject to upward and downward adjustments resulting from observable price changes for identical or similar investments of the same issuer. These adjustments require quantitative assessments of the fair value of our securities, which may require the use of unobservable inputs. Pricing adjustments are determined by using various valuation methodologies and involve the use of estimates using the best information available, which may include cash flow projections or other available market data. Non-marketable equity securities are also evaluated for impairment, based on qualitative factors including the companies' financial and liquidity position and access to capital resources, among others. When indicators of impairment exist, we prepare quantitative measurements of the fair value of our equity investments using a market approach or an income approach, which requires judgment and the use of unobservable inputs, including discount rates, investee revenues and costs, and comparable market data of private and public companies, among others. When our assessment indicates that an impairment exists, we write down the investment to its fair value. Alphabet Inc. We also have compensation arrangements with payouts based on realized returns from certain investments, i.e. performance fees. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized, and may require the use of unobservable inputs. Property and Equipment We assess the reasonableness of the useful lives of our property and equipment periodically as well as when other changes occur, such as when there are changes to ongoing business operations, changes in the planned use and utilization of assets, or technological advancements, that could indicate a change in the period over which we expect to benefit from the assets. Income Taxes We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Recording an uncertain tax position involves various qualitative considerations, including evaluation of comparable and resolved tax exposures, applicability of tax laws, and likelihood of settlement. We evaluate uncertain tax positions periodically, considering changes in facts and circumstances, such as new regulations or recent judicial opinions, as well as the status of audit activities by taxing authorities. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Services (IRS) and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes. Loss Contingencies We are regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury consumer protection, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We evaluate, on a regular basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both the likelihood and the estimated amount of a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Change in Accounting Estimate In January 2021, we completed an assessment of the useful lives of our servers and certain network equipment. In doing so, we determined we should adjust the estimated useful life. This change in accounting estimate was effective beginning fiscal year 2021 and is detailed further in Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. "," ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to financial market risks, including changes in foreign currency exchange rates, interest rates, and equity investment risks. Foreign Currency Exchange Risk We transact business globally in multiple currencies. International revenues, as well as costs and expenses denominated in foreign currencies, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. Principal currencies hedged included the Australian dollar, British pound, Canadian dollar, Euro, and Japanese yen. For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in Alphabet Inc. foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term. We use foreign exchange forward contracts to offset the foreign exchange risk on assets and liabilities denominated in currencies other than the functional currency of the subsidiary. These forward contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements on our assets and liabilities. The foreign currency gains and losses on these assets and liabilities are recorded in other income (expense), net, which are offset by the gains and losses on the forward contracts. If an adverse 10% foreign currency exchange rate change was applied to total monetary assets, liabilities, and commitments denominated in currencies other than the functional currencies at the balance sheet date, it would have resulted in an adverse effect on income before income taxes of approxima tely $497 million and $285 million as of December 31, 2020 and 2021, respectively, after consideration of the effect of foreign exchange contracts in place for the years ended December 31, 2020 and 2021. We use foreign currency forwards and option contracts, including collars (an option strategy comprised of a combination of purchased and written options) to protect forecasted U.S. dollar-equivalent earnings from changes in foreign currency exchange rates. When the U.S. dollar strengthens, gains from foreign currency options and forwards reduce the foreign currency losses related to our earnings. When the U.S. dollar weakens, losses from foreign currency collars and forwards offset the foreign currency gains related to our earnings. These hedging contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements. We designate these contracts as cash flow hedges for accounting purposes. We reflect the gains or losses of foreign currency spot rate changes as a component of AOCI and subsequently reclassify them into revenues to offset the hedged exposures as they occur. I f the U.S. dollar weakened by 10% as of December 31, 2020 and 2021, the amount recorded in AOCI related to our foreign exchange contracts before tax effect would have been approximately $912 million and $1.3 billion lower as of December 31, 2020 and 2021, respectively. The change in the value recorded in AOCI would be expected to offset a corresponding foreign currency change in forecasted hedged revenues when recognized. We use foreign exchange forward contracts designated as net investment hedges to hedge the foreign currency risks related to investment in foreign subsidiaries. These forward contracts serve to offset the foreign currency translation risk from our foreign operations. If the U.S. dollar weakened by 10%, the amount recorded in cumulative translation adjustment (CTA) within AOCI related to our net investment hedge would have been approximately $1.0 billion lower as of both December 31, 2020 and 2021. The change in value recorded in CTA would be expected to offset a corresponding foreign currency translation gain or loss from our investment in foreign subsidiaries. Interest Rate Risk Our Corporate Treasury investment strategy is to achieve a return that w ill allow us to preserve capital and maintain liquidity. We invest primarily in debt securities, including those of the U.S. government and its agencies, corporate debt securities, mortgage-backed securities, money market and other funds, municipal securities, time deposits, asset backed securities, and debt instruments issued by foreign governments. By policy, we limit the amount of credit exposure to any one issuer. Our investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Unrealized gains or losses on our marketable debt securities are primarily due to interest rate fluctuations as compared to interest rates at the time of purchase. For certain fixed and variable rate debt securities, we have elected the fair value option for which changes in fair value are recorded in other income (expense), net. We measure securities for which we have not elected the fair value option at fair value with gains and losses recorded in AOCI until the securities are sold, less any expected credit losses. We use value-at-risk (VaR) analysis to determine the potential effect of fluctuations in interest rates on the value of our marketable debt security portfolio. The VaR is the expected loss in fair value, for a given confidence interval, for our investment portfolio due to adverse movements in interest rates. We use a variance/covariance VaR model with 95% confidence interval. The estimated one-day loss in fair value of marketable debt securities as of December 31, 2020 and 2021 are shown below (in millions):  As of December 31, 12-Month Average As of December 31,  2020 2021 2020 2021 Risk Category - Interest Rate $ 144 $ 139 $ 145 $ 148 Alphabet Inc. Actual future gains and losses associated with our marketable debt security portfolio may differ materially from the sensitivity analyses performed as of December 31, 2020 and 2021 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates and our actual exposures and positions. VaR analysis is not intended to represent actual losses but is used as a risk estimation. Equity Investment Risk Our marketable and non-marketable equity securities are subject to a wide variety of market-related risks that could substantially reduce or increase the fair value of our holdings. Our marketable equity securities are publicly traded stocks or funds and our non-marketable equity securities are investments in privately held companies, some of which are in the startup or development stages. We record marketable equity securities not accounted for under the equity method at fair value based on readily determinable market values, of which publicly traded stocks and mutual funds are subject to market price volatility, and represent $5.9 billion and $7.8 billion of our investments as of December 31, 2020 and 2021, respectively. A hypothetical adverse price change of 10% on our December 31, 2021 balance, which could be experienced in the near term, would decrease the fair value of marketable equity securities by $780 million. From time to time, we may enter into derivatives to hedge the market price risk on certain of our marketable equity securities. Our non-marketable equity securities not accounted for under the equity method are adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). The fair value measured at the time of the observable transaction is not necessarily an indication of the current fair value as of the balance sheet date. These investments, especially those that are in the early stages, are inherently risky because the technologies or products these companies have under development are typically in the early phases and may never materialize, and they may experience a decline in financial condition, which could result in a loss of a substantial part of our investment in these companies. The success of our investment in any private company is also typically dependent on the likelihood of our ability to realize appreciation in the value of investments through liquidity events such as public offerings, acquisitions, private sales or other market events. As of December 31, 2020 and 2021, the carrying value of our non-marketable equity securities, which were accounted for under the measurement alternative, was $18.9 billion and $27.6 billion, respectively. Valuations of our equity investments in private companies are inherently more complex due to the lack of readily available market data. Volatility in the global economic climate and financial markets could result in a significant impairment charge relating to our non-marketable equity securities. Changes in valuation of non-marketable equity securities may not directly correlate with changes in valuation of marketable equity securities. Additionally, observable transactions at lower valuations could result in significant losses on our non-marketable equity securities. The effect of COVID-19 on our impairment assessment requires significant judgment due to the uncertainty around the duration and severity of the effect. The carrying values of our equity method investments, which totaled approximately $1.4 billion and $1.5 billion as of December 31, 2020 and 2021, respectively, generally do not fluctuate based on market price changes. However, these investments could be impaired if the carrying value exceeds the fair value and is not expected to recover. For further information about our equity investments, see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Alphabet Inc. "," ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Alphabet Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) Financial Statements: Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 45 Alphabet Inc. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alphabet Inc. (the Company) as of December 31, 2020 and 2021, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 1, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Alphabet Inc. Loss Contingencies Description of the Matter The Company is regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by its users, goods and services offered by advertisers or publishers using their platforms, personal injury, consumer protection, and other matters. As described in Note 10 to the consolidated financial statements Contingencies such claims, suits, regulatory and government investigations, and other proceedings could result in adverse consequences. Significant judgment is required to determine both the likelihood, and the estimated amount, of a loss related to such matters. Auditing managements accounting for and disclosure of loss contingencies from these matters involved challenging and subjective auditor judgment in assessing the Companys evaluation of the probability of a loss, and the estimated amount or range of loss. How We Addressed the Matter in Our Audit We tested relevant controls over the identified risks associated with managements accounting for and disclosure of these matters. This included controls over managements assessment of the probability of incurrence of a loss and whether the loss or range of loss was reasonably estimable and the development of related disclosures. Our audit procedures included gaining an understanding of previous rulings issued by regulators and the status of ongoing lawsuits, reviewing letters addressing the matters from internal and external legal counsel, meeting with internal legal counsel to discuss the allegations, and obtaining a representation letter from management on these matters. We also evaluated the Companys disclosures in relation to these matters. /s/ Ernst  Young LLP We have served as the Company's auditor since 1999. San Jose, California February 1, 2022 Alphabet Inc. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on Internal Control over Financial Reporting We have audited Alphabet Inc.s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Alphabet Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 consolidated financial statements of the Company and our report dated February 1, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst  Young LLP San Jose, California February 1, 2022 Alphabet Inc. Alphabet Inc. CONSOLIDATED BALANCE SHEETS (In millions, except share amounts which are reflected in thousands, and par value per share amounts) As of December 31, 2020 2021 Assets Current assets: Cash and cash equivalents $ 26,465  $ 20,945  Marketable securities 110,229  118,704  Total cash, cash equivalents, and marketable securities 136,694  139,649  Accounts receivable, net 30,930  39,304  Income taxes receivable, net 454  966  Inventory 728  1,170  Other current assets 5,490  7,054  Total current assets 174,296  188,143  Non-marketable securities 20,703  29,549  Deferred income taxes 1,084  1,284  Property and equipment, net 84,749  97,599  Operating lease assets 12,211  12,959  Intangible assets, net 1,445  1,417  Goodwill 21,175  22,956  Other non-current assets 3,953  5,361  Total assets $ 319,616  $ 359,268  Liabilities and Stockholders Equity Current liabilities: Accounts payable $ 5,589  $ 6,037  Accrued compensation and benefits 11,086  13,889  Accrued expenses and other current liabilities 28,631  31,236  Accrued revenue share 7,500  8,996  Deferred revenue 2,543  3,288  Income taxes payable, net 1,485  808  Total current liabilities 56,834  64,254  Long-term debt 13,932  14,817  Deferred revenue, non-current 481  535  Income taxes payable, non-current 8,849  9,176  Deferred income taxes 3,561  5,257  Operating lease liabilities 11,146  11,389  Other long-term liabilities 2,269  2,205  Total liabilities 97,072  107,633  Contingencies (Note 10) Stockholders equity: Preferred stock, $ 0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding 0  0  Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $ 0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ); 675,222 (Class A 300,730 , Class B 45,843 , Class C 328,649 ) and 662,121 (Class A 300,737 , Class B 44,665 , Class C 316,719 ) shares issued and outstanding 58,510  61,774  Accumulated other comprehensive income (loss) 633  ( 1,623 ) Retained earnings 163,401  191,484  Total stockholders equity 222,544  251,635  Total liabilities and stockholders equity $ 319,616  $ 359,268  See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts)  Year Ended December 31,  2019 2020 2021 Revenues $ 161,857  $ 182,527  $ 257,637  Costs and expenses: Cost of revenues 71,896  84,732  110,939  Research and development 26,018  27,573  31,562  Sales and marketing 18,464  17,946  22,912  General and administrative 9,551  11,052  13,510  European Commission fines 1,697  0  0  Total costs and expenses 127,626  141,303  178,923  Income from operations 34,231  41,224  78,714  Other income (expense), net 5,394  6,858  12,020  Income before income taxes 39,625  48,082  90,734  Provision for income taxes 5,282  7,813  14,701  Net income $ 34,343  $ 40,269  $ 76,033  Basic net income per share of Class A and B common stock and Class C capital stock $ 49.59  $ 59.15  $ 113.88  Diluted net income per share of Class A and B common stock and Class C capital stock $ 49.16  $ 58.61  $ 112.20  See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions)  Year Ended December 31,  2019 2020 2021 Net income $ 34,343  $ 40,269  $ 76,033  Other comprehensive income (loss): Change in foreign currency translation adjustment ( 119 ) 1,139  ( 1,442 ) Available-for-sale investments: Change in net unrealized gains (losses) 1,611  1,313  ( 1,312 ) Less: reclassification adjustment for net (gains) losses included in net income ( 111 ) ( 513 ) ( 64 ) Net change, net of income tax benefit (expense) of $( 221 ), $( 230 ), and $ 394 1,500  800  ( 1,376 ) Cash flow hedges: Change in net unrealized gains (losses) 22  42  716  Less: reclassification adjustment for net (gains) losses included in net income ( 299 ) ( 116 ) ( 154 ) Net change, net of income tax benefit (expense) of $ 42 , $ 11 , and $( 122 ) ( 277 ) ( 74 ) 562  Other comprehensive income (loss) 1,104  1,865  ( 2,256 ) Comprehensive income $ 35,447  $ 42,134  $ 73,777  See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (In millions, except share amounts which are reflected in thousands)  Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Stockholders Equity  Shares Amount Balance as of December 31, 2018 695,556  $ 45,049  $ ( 2,306 ) $ 134,885  $ 177,628  Cumulative effect of accounting change 0 0 ( 30 ) ( 4 ) ( 34 ) Common and capital stock issued 8,120  202  0 0 202  Stock-based compensation expense 0 10,890  0 0 10,890  Income tax withholding related to vesting of restricted stock units and other 0 ( 4,455 ) 0 0 ( 4,455 ) Repurchases of capital stock ( 15,341 ) ( 1,294 ) 0 ( 17,102 ) ( 18,396 ) Sale of interest in consolidated entities 0 160  0 0 160  Net income 0 0 0 34,343  34,343  Other comprehensive income (loss) 0 0 1,104  0 1,104  Balance as of December 31, 2019 688,335  50,552  ( 1,232 ) 152,122  201,442  Common and capital stock issued 8,398  168  0 0 168  Stock-based compensation expense 0 13,123  0 0 13,123  Income tax withholding related to vesting of restricted stock units and other 0 ( 5,969 ) 0 0 ( 5,969 ) Repurchases of capital stock ( 21,511 ) ( 2,159 ) 0 ( 28,990 ) ( 31,149 ) Sale of interest in consolidated entities 0 2,795  0 0 2,795  Net income 0 0 0 40,269  40,269  Other comprehensive income (loss) 0 0 1,865  0 1,865  Balance as of December 31, 2020 675,222  58,510  633  163,401  222,544  Common and capital stock issued 7,225  12  0 0 12  Stock-based compensation expense 0 15,539  0 0 15,539  Income tax withholding related to vesting of restricted stock units and other 0 ( 10,273 ) 0 0 ( 10,273 ) Repurchases of common and capital stock ( 20,326 ) ( 2,324 ) 0 ( 47,950 ) ( 50,274 ) Sale of interest in consolidated entities 0 310  0 0 310  Net income 0 0 0 76,033  76,033  Other comprehensive income (loss) 0 0 ( 2,256 ) 0 ( 2,256 ) Balance as of December 31, 2021 662,121  $ 61,774  $ ( 1,623 ) $ 191,484  $ 251,635  See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)  Year Ended December 31,  2019 2020 2021 Operating activities Net income $ 34,343  $ 40,269  $ 76,033  Adjustments: Depreciation and impairment of property and equipment 10,856  12,905  11,555  Amortization and impairment of intangible assets 925  792  886  Stock-based compensation expense 10,794  12,991  15,376  Deferred income taxes 173  1,390  1,808  Gain on debt and equity securities, net ( 2,798 ) ( 6,317 ) ( 12,270 ) Other ( 592 ) 1,267  ( 213 ) Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable ( 4,340 ) ( 6,524 ) ( 9,095 ) Income taxes, net ( 3,128 ) 1,209  ( 625 ) Other assets ( 621 ) ( 1,330 ) ( 1,846 ) Accounts payable 428  694  283  Accrued expenses and other liabilities 7,170  5,504  7,304  Accrued revenue share 1,273  1,639  1,682  Deferred revenue 37  635  774  Net cash provided by operating activities 54,520  65,124  91,652  Investing activities Purchases of property and equipment ( 23,548 ) ( 22,281 ) ( 24,640 ) Purchases of marketable securities ( 100,315 ) ( 136,576 ) ( 135,196 ) Maturities and sales of marketable securities 97,825  132,906  128,294  Purchases of non-marketable securities ( 1,932 ) ( 7,175 ) ( 2,838 ) Maturities and sales of non-marketable securities 405  1,023  934  Acquisitions, net of cash acquired, and purchases of intangible assets ( 2,515 ) ( 738 ) ( 2,618 ) Other investing activities 589  68  541  Net cash used in investing activities ( 29,491 ) ( 32,773 ) ( 35,523 ) Financing activities Net payments related to stock-based award activities ( 4,765 ) ( 5,720 ) ( 10,162 ) Repurchases of common and capital stock ( 18,396 ) ( 31,149 ) ( 50,274 ) Proceeds from issuance of debt, net of costs 317  11,761  20,199  Repayments of debt ( 585 ) ( 2,100 ) ( 21,435 ) Proceeds from sale of interest in consolidated entities, net 220  2,800  310  Net cash used in financing activities ( 23,209 ) ( 24,408 ) ( 61,362 ) Effect of exchange rate changes on cash and cash equivalents ( 23 ) 24  ( 287 ) Net increase (decrease) in cash and cash equivalents 1,797  7,967  ( 5,520 ) Cash and cash equivalents at beginning of period 16,701  18,498  26,465  Cash and cash equivalents at end of period $ 18,498  $ 26,465  $ 20,945  Supplemental disclosures of cash flow information Cash paid for income taxes, net of refunds $ 8,203  $ 4,990  $ 13,412  See accompanying notes. Alphabet Inc. Alphabet Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies 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. Basis of Consolidation The consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models. All intercompany balances and transactions have been eliminated. Use of Estimates Preparation of consolidated financial statements in conformity with GAAP requires us to make 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 due to uncertainties, including the effects of COVID-19. On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses; fair values of financial instruments, intangible assets, and goodwill; useful lives of intangible assets and property and equipment; income taxes; and contingent liabilities, among others. We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, and the results of which form the basis for making judgments about the carrying values of assets and liabilities. In January 2021, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years . This change in accounting estimate was effective beginning in fiscal year 2021. Based on the carrying value of servers and certain network equipment as of December 31, 2020 and those acquired during the year ended December 31, 2021, the effect of this change in estimate was a reduction in depreciation expense of $ 2.6 billion and an increase in net income of $ 2.0 billion, or $ 3.02 per basic share and $ 2.98 per diluted share, for the year ended December 31, 2021. Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to our customers, and the collectibility of an amount that we expect in exchange for those goods or services is probable. Sales and other similar taxes are excluded from revenues. Advertising Revenues We generate advertising revenues primarily by delivering advertising on:  Google Search and other properties, including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc. and other Google owned and operated properties like Gmail, Google Maps, and Google Play;  YouTube properties; and  Google Network properties, including revenues from Google Network properties participating in AdMob, AdSense, and Google Ad Manager. Our customers generally purchase advertising inventory through Google Ads, Google Ad Manager, and Google Marketing Platform, among others. We offer advertising by delivering both performance and brand advertising. We recognize revenues for performance advertising when a user engages with the advertisement, such as a click, a view, or a purchase. For brand advertising, we recognize revenues when the ad is displayed, or a user views the ad. For ads placed on Google Network properties, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, we report advertising revenues for ads placed on Google Network properties on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to Google Network partners are recorded as cost of revenues. Where we are the principal, we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers and is further supported by us being primarily responsible to our customers and having a level of discretion in establishing pricing. Alphabet Inc. Google Cloud Revenues Google Cloud revenues consist of revenues from:  Google Cloud Platform, which includes fees for infrastructure, platform, and other services;  Google Workspace, which includes fees for cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar, and Meet; and  other enterprise services. Our cloud services are generally provided on either a consumption or subscription basis and may have contract terms longer than a year. Revenues related to cloud services provided on a consumption basis are recognized when the customer utilizes the services, based on the quantity of services consumed. Revenues related to cloud services provided on a subscription basis are recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services. Google Other Revenues Google other revenues consist of revenues from:  Google Play, which includes sales of apps and in-app purchases and digital content sold in the Google Play store;  hardware, which includes sales of Fitbit wearable devices, Google Nest home products, and Pixel phones;  YouTube non-advertising, which includes YouTube Premium and YouTube TV subscriptions; and  other products and services. As it relates to Google other revenues, the most significant judgment is determining whether we are the principal or agent for app sales and in-app purchases through the Google Play store. We report revenues from these transactions on a net basis because our performance obligation is to facilitate a transaction between app developers and end users, for which we earn a service fee. Arrangements with Multiple Performance Obligations Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost plus margin. Customer Incentives and Credits Certain customers receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues. We believe that there will not be significant changes to our estimates of variable consideration. Sales Commissions We expense sales commissions when incurred and when the amortization period (the period of the expected benefit) is one year or less. We recognize an asset for certain sales commissions if we expect the period of benefit of these costs to exceed one year and recognize the expense over the amortization period. These costs are recorded within sales and marketing expenses. Cost of Revenues Cost of revenues consists of TAC and other costs of revenues.  TAC includes:  Amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers.  Amounts paid to Google Network partners primarily for ads displayed on their properties.  Other cost of revenues includes:  Content acquisition costs, which are payments to content providers from whom we license video and other content for distribution on YouTube and Google Play (we pay fees to these content providers based on revenues generated or a flat fee). Alphabet Inc.  Expenses associated with our data centers (including bandwidth, compensation expenses, depreciation, energy, and other equipment costs) as well as other operations costs (such as content review as well as customer and product support costs).  Inventory and other costs related to the hardware we sell. Software Development Costs We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products. As a result, development costs that meet the criteria for capitalization were not material for the periods presented. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented. Stock-based Compensation Stock-based compensation primarily consists of Alphabet restricted stock units (RSUs). RSUs are equity classified and measured at the fair market value of the underlying stock at the grant date. We recognize RSU expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur. For RSUs, shares are issued on the vesting dates net of the applicable statutory income tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued than the number of RSUs outstanding, and the income tax withholding is recorded as a reduction to additional paid-in capital. Additionally, stock-based compensation also includes other stock-based awards, such as performance stock units (PSUs) that include market conditions and awards that may be settled in cash or the stock of certain Other Bets. PSUs and certain Other Bet awards are equity classified and expense is recognized over the requisite service period. Certain Other Bet awards are liability classified and remeasured at fair value through settlement. The fair value of Other Bet awards is based on the equity valuation of the respective Other Bet. Advertising and Promotional Expenses We expense advertising and promotional costs in the period in which they are incurred. For the years ended December 31, 2019, 2020 and 2021, advertising and promotional expenses totaled approximately $ 6.8 billion, $ 5.4 billion, and $ 7.9 billion, respectively. Performance Fees Performance fees refer to compensation arrangements with payouts based on realized returns from certain investments. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized, and may require the use of unobservable inputs. Performance fees are recorded as a component of other income (expense), net. Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings. Level 3 - Unobservable inputs that are supported by little or no market activities. Alphabet Inc. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative financial instruments, and certain non-marketable debt securities. Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities. Other financial assets and liabilities are carried at cost with fair value disclosed, if required. We measure certain other instruments, including stock-based compensation awards settled in the stock of certain Other Bets, and certain assets and liabilities acquired in a business combination, also at fair value on a nonrecurring basis. The determination of fair value involves the use of appropriate valuation methods and relevant inputs into valuation models. Financial Instruments Our financial instruments include cash, cash equivalents, marketable and non-marketable securities, derivative financial instruments and accounts receivable. Credit Risks We are subject to credit risk from cash equivalents, marketable securities, derivative financial instruments, including foreign exchange contracts, and accounts receivable. We manage our credit risk exposure through timely assessment of our counterparty creditworthiness, credit limits and use of collateral management. Foreign exchange contracts are transacted with various financial institutions with high credit standing. Accounts receivable are typically unsecured and are derived from revenues earned from customers located around the world. We manage our credit risk exposure by performing ongoing evaluations to determine customer credit and we limit the amount of credit we extend. We generally do not require collateral from our customers. Cash Equivalents We invest excess cash primarily in government bonds, corporate debt securities, mortgage-backed and asset-backed securities, time deposits, and money market funds. Marketable Securities We classify all marketable debt securities that have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities on our Consolidated Balance Sheets. We determine the appropriate classification of our investments in marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt securities as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities. As we view these securities as available to support current operations, we classify highly liquid securities with maturities beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders equity, except for the changes in allowance for expected credit losses, which are recorded in other income (expense), net. 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. We determine any realized gains or losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net. Our investments in marketable equity securities are measured at fair value with the related gains and losses, including unrealized, recognized in other income (expense), net. We classify our marketable equity securities subject to long-term lock-up restrictions beyond twelve months as other non-current assets on the Consolidated Balance Sheets. Non-Marketable Securities We account for non-marketable equity securities through which we exercise significant influence but do not have control over the investee under the equity method. Our non-marketable equity securities not accounted for under the equity method are primarily accounted for under the measurement alternative. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined primarily based on a market approach as of the transaction date and are recorded as a component of other income (expense), net. Non-marketable debt securities are classified as available-for-sale securities. Alphabet Inc. Non-marketable securities that do not have stated contractual maturity dates are classified as other non-current assets on the Consolidated Balance Sheets. Derivative Financial Instruments See Note 3 for the accounting policy pertaining to derivative financial instruments. Accounts Receivable Our payment terms for accounts receivable vary by the types and locations of our customers and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customers, we require payment before the products or services are delivered to the customer. We maintain an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as general and administrative expense in the Consolidated Statements of Income. We assess collectibility by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectibility issues. In determining the amount of the allowance for credit losses, we consider historical collectibility based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions (such as the effects caused by COVID-19), and reasonable and supportable forecasts of future economic conditions. The allowance for credit losses on accounts receivable was $ 789 million and $ 550 million as of December 31, 2020 and 2021, respectively. Other Our financial instruments also include debt and equity investments in companies with which we also have commercial arrangements. For these transactions, judgment is required to assess the substance of the arrangements, such as the market value of similar transactions or the fair value of the investment based on stand-alone transactions, and whether the agreements should be accounted for as separate transactions under the applicable GAAP. Impairment of Investments We periodically review our debt and non-marketable equity securities for impairment. For debt securities in an unrealized loss position, we determine whether a credit loss exists. The credit loss is estimated by considering available information relevant to the collectibility of the security and information about past events, current conditions, and reasonable and supportable forecasts. Any credit loss is recorded as a charge to other income (expense), net, not to exceed the amount of the unrealized loss. Unrealized losses other than the credit loss are recognized in accumulated other comprehensive income (AOCI). If we have an intent to sell, or if it is more likely than not that we will be required to sell a debt security in an unrealized loss position before recovery of its amortized cost basis, we will write down the security to its fair value and record the corresponding charge as a component of other income (expense), net. For non-marketable equity securities, including equity method investments, we consider whether impairment indicators exist by evaluating the companies' financial and liquidity position and access to capital resources, among other indicators. If the assessment indicates that the investment is impaired, we write down the investment to its fair value by recording the corresponding charge as a component of other income (expense), net. We prepare quantitative measurements of the fair value of our equity investments using a market approach or an income approach. Inventory Inventory consists primarily of finished goods and is stated at the lower of cost and net realizable value. Cost is computed using the first-in, first-out method. Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a variable interest entity (VIE). We consolidate VIEs when we are the primary beneficiary. We are the primary beneficiary of a VIE when we have the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP. Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether we are the primary beneficiary. Alphabet Inc. Property and Equipment Property and equipment includes the following categories: land and buildings, information technology assets, construction in progress, leasehold improvements, and furniture and fixtures. Land and buildings include land, offices, data centers, and related building improvements. Information technology assets include servers and network equipment. We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, which we regularly evaluate. We depreciate buildings over periods of seven to 25 years. We depreciate information technology assets generally over periods of four to five years (generally, four years for servers and five years for network equipment). We depreciate leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. Construction in progress is the construction or development of property and equipment that have not yet been placed in service for our intended use. Depreciation for equipment, buildings, and leasehold improvements commences once they are ready for our intended use. Land is not depreciated. Leases We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments affected by the Consumer Price Index, payments contingent on wind or solar production for power purchase arrangements, and payments for maintenance and utilities. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments and lease incentives. Operating lease assets and liabilities are included on our Consolidated Balance Sheet. The current portion of our operating lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion is included in operating lease liabilities. Finance lease assets are included in property and equipment, net. Finance lease liabilities are included in accrued expenses and other current liabilities or long-term debt. Operating lease expense (excluding variable lease costs) is recognized on a straight-line basis over the lease term. Long-Lived Assets, Goodwill and Other Acquired Intangible Assets We review property and equipment and intangible assets, excluding goodwill, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets or asset group is not recoverable, the impairment recognized is measured as the amount by which the carrying value exceeds its fair value. Impairments were not material for the periods presented. We allocate goodwill to reporting units based on the expected benefit from the business combination. We evaluate our reporting units periodically, as well as when changes in our operating segments occur. For changes in reporting units, we reassign goodwill using a relative fair value allocation approach. We test our goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill impairments were no t material for the periods presented. Intangible assets with definite lives are amortized over their estimated useful lives on a straight-line basis generally over periods ranging from one to twelve years . Alphabet Inc. Income Taxes We account for income taxes using the asset and liability method, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized. We recognize the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority. In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision. Business Combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Foreign Currency We translate the financial statements of our international subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities, and average rates for the annual period derived from month-end exchange rates for revenues, costs, and expenses. We record translation gains and losses in AOCI as a component of stockholders equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gain (loss) in other income (expense), net. Prior Period Reclassifications Certain amounts in prior periods have been reclassified to conform with current period presentation. Note 2. Revenues Revenue Recognition The following table presents revenues disaggregated by type (in millions): Year Ended December 31, 2019 2020 2021 Google Search  other $ 98,115  $ 104,062  $ 148,951  YouTube ads 15,149  19,772  28,845  Google Network 21,547  23,090  31,701  Google advertising 134,811  146,924  209,497  Google other 17,014  21,711  28,032  Google Services total 151,825  168,635  237,529  Google Cloud 8,918  13,059  19,206  Other Bets 659  657  753  Hedging gains (losses) 455  176  149  Total revenues $ 161,857  $ 182,527  $ 257,637  No individual customer or groups of affiliated customers represented more than 10% of our revenues in 2019, 2020, or 2021. Alphabet Inc. The following table presents revenues disaggregated by geography, based on the addresses of our customers (in millions): Year Ended December 31,  2019 2020 2021 United States $ 74,843  46  % $ 85,014  47  % $ 117,854  46  % EMEA (1) 50,645  31  55,370  30  79,107  31  APAC (1) 26,928  17  32,550  18  46,123  18  Other Americas (1) 8,986  6  9,417  5  14,404  5  Hedging gains (losses) 455  0 176  0 149  0 Total revenues $ 161,857  100  % $ 182,527  100  % $ 257,637  100  % (1)  Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific (APAC); and Canada and Latin America (""Other Americas""). Revenue Backlog and Deferred Revenues As of December 31, 2021 we had $ 51.0 billion of remaining performance obligations (revenue backlog), primarily related to Google Cloud, a nd expect to recognize approximately half of this amount as revenues over the next 24 months with the remaining thereafter. Our revenue backlog represents commitments in customer contracts for future services that have not yet been recog nized as revenues. The amount and timing of revenue recognition for these commitments is largely driven by when our customers utilize services and our ability to deliver in accordance with relevant contract terms, which could affect our estimate of revenue backlog and when we expect to recognize such as revenues. 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, 2020 was $ 3.0 billion, of which $ 2.3 billion was recognized as revenues for the year ending December 31, 2021. Note 3. Financial Instruments Debt Securities We classify our marketable debt securities, which are accounted for as available-for-sale 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. Unrealized net gains (losses) related to debt securities still held where we have elected the fair value option were $ 87 million and $( 35 ) million as of December 31, 2020 and December 31, 2021, respectively. As of December 31, 2020 and December 31, 2021, the fair value of these debt securities was $ 2.0 billion and $ 4.7 billion, respectively. Alphabet Inc.  The following tables summarize debt securities, for which we did not elect the fair value option, by significant investment categories as of December 31, 2020 and 2021 (in millions):  As of December 31, 2020  Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities Level 2: Time deposits (1) $ 3,564  $ 0  $ 0  $ 3,564  $ 3,564  $ 0  Government bonds 55,156  793  ( 9 ) 55,940  2,527  53,413  Corporate debt securities 31,521  704  ( 2 ) 32,223  8  32,215  Mortgage-backed and asset-backed securities 16,767  364  ( 7 ) 17,124  0  17,124  Total $ 107,008  $ 1,861  $ ( 18 ) $ 108,851  $ 6,099  $ 102,752   As of December 31, 2021  Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities Level 2: Time deposits (1) $ 5,133  $ 0  $ 0  $ 5,133  $ 5,133  $ 0  Government bonds 53,288  258  ( 238 ) 53,308  5  53,303  Corporate debt securities 35,605  194  ( 223 ) 35,576  12  35,564  Mortgage-backed and asset-backed securities 18,829  96  ( 112 ) 18,813  0  18,813  Total $ 112,855  $ 548  $ ( 573 ) $ 112,830  $ 5,150  $ 107,680  (1) The majority of our time deposits are domestic deposits. We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. We recognized gross realized gains of $ 292 million, $ 899 million, and $ 432 million for the years ended December 31, 2019, 2020, and 2021, respectively. We recognized gross realized losses of $ 143 million, $ 184 million, and $ 329 million for the years ended December 31, 2019, 2020, and 2021, respectively. We reflect these gains and losses as a component of other income (expense), net. The following table summarizes the estimated fair value of investments in marketable debt securities by stated contractual maturity dates (in millions): As of December 31, 2021 Due in 1 year or less $ 16,192  Due in 1 year through 5 years 78,625  Due in 5 years through 10 years 4,675  Due after 10 years 12,864  Total $ 112,356  The following tables present fair values and gross unrealized losses recorded to AOCI as of December 31, 2020 and 2021, 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, 2020  Less than 12 Months 12 Months or Greater Total  Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Government bonds $ 5,516  $ ( 9 ) $ 3  $ 0  $ 5,519  $ ( 9 ) Corporate debt securities 1,999  ( 1 ) 0  0  1,999  ( 1 ) Mortgage-backed and asset-backed securities 929  ( 5 ) 242  ( 2 ) 1,171  ( 7 ) Total $ 8,444  $ ( 15 ) $ 245  $ ( 2 ) $ 8,689  $ ( 17 ) Alphabet Inc.  As of December 31, 2021  Less than 12 Months 12 Months or Greater Total  Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Government bonds $ 32,843  $ ( 236 ) $ 71  $ ( 2 ) $ 32,914  $ ( 238 ) Corporate debt securities 22,737  ( 152 ) 303  ( 5 ) 23,040  ( 157 ) Mortgage-backed and asset-backed securities 11,502  ( 106 ) 248  ( 6 ) 11,750  ( 112 ) Total $ 67,082  $ ( 494 ) $ 622  $ ( 13 ) $ 67,704  $ ( 507 ) During the years ended December 31, 2020 and 2021, we did not recognize significant credit losses and the ending allowance for credit losses was immaterial. See Note 7 for further details on other income (expense), net. Equity Investments The following discusses our marketable equity securities, non-marketable equity securities, gains and losses on marketable and non-marketable equity securities, as well as our equity securities accounted for under the equity method. Our marketable equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 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. 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 (referred to as the measurement alternative). 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. Gains and losses on marketable and non-marketable equity securities Gains and losses reflected in other income (expense), net, for marketable and non-marketable equity securities are summarized below (in millions): Year Ended December 31,  2020 2021 Net gain (loss) on equity securities sold during the period $ 1,339  $ 1,196  Unrealized gain (loss) on equity securities held as of the end of the period 4,253  11,184  Total gain (loss) recognized in other income (expense), net $ 5,592  $ 12,380  In the table above, 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. While these net gains 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 recognized on the securities sold during the period. Cumulative net gains are calculated as the difference between the sale price and the initial purchase price for the equity security sold during the period. Alphabet Inc. Equity Securities Sold During the Year Ended December 31,  2020 2021 Total sale price $ 4,767  $ 5,604  Total initial cost 2,674  1,206  Cumulative net gains (1) $ 2,093  $ 4,398  (1) Cumulative net gains excludes cumulative losses of $ 738 million resulting from our equity derivatives, which hedged the changes in fair value of certain marketable equity securities sold during the year ended December 31, 2021. The associated derivative liabilities arising from these losses were settled against our holdings of the underlying equity securities. Carrying value of marketable and non-marketable equity securities The carrying value is measured as the total initial cost plus the cumulative net gain (loss). The carrying values for marketable and non-marketable equity securities are summarized below (in millions): As of December 31, 2020 Marketable Equity Securities Non-Marketable Equity Securities Total Total initial cost $ 2,227  $ 14,616  $ 16,843  Cumulative net gain (loss) (1) 3,631  4,277  7,908  Carrying value (2) $ 5,858  $ 18,893  $ 24,751  (1) Non-marketable equity securities cumulative net gain (loss) is comprised of $ 6.1 billion gains and $ 1.9 billion losses (including impairment). (2) The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $ 429 million is included within other non-current assets. As of December 31, 2021 Marketable Equity Securities Non-Marketable Equity Securities Total Total initial cost $ 4,211  $ 15,135  $ 19,346  Cumulative net gain (loss) (1) 3,587  12,436  16,023  Carrying value (2) $ 7,798  $ 27,571  $ 35,369  (1) Non-marketable equity securities cumulative net gain (loss) is comprised of $ 14.1 billion gains and $ 1.7 billion losses (including impairment). (2) The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $ 1.4 billion is included within other non-current assets. Marketable equity securities The following table summarizes marketable equity securities measured at fair value by significant investment categories as of December 31, 2020 and 2021 (in millions):  As of December 31, 2020 As of December 31, 2021  Cash and Cash Equivalents Marketable Equity Securities Cash and Cash Equivalents Marketable Equity Securities Level 1: Money market funds $ 12,210  $ 0 $ 7,499  $ 0 Marketable equity securities (1)(2) 0 5,470  0 7,447  12,210  5,470  7,499  7,447  Level 2: Mutual funds 0 388  0 351  Total $ 12,210  $ 5,858  $ 7,499  $ 7,798  (1)  The balance as of December 31, 2020 and 2021 includes investments that were reclassified from non-marketable equity securities following the commencement of public market trading of the issuers or acquisition by public entities (certain investments are subject to short-term lock-up restrictions). (2)  As of December 31, 2020 and 2021, the long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $ 429 million and $ 1.4 billion, respectively, is included within other non-current assets. Alphabet Inc. Non-marketable equity securities The following is a summary of unrealized gains and losses recorded in other income (expense), net, which are included as adjustments to the carrying value of non-marketable equity securities held as of the end of the period (in millions): Year Ended December 31, 2020 2021 Unrealized gains on non-marketable equity securities $ 3,020  $ 9,971  Unrealized losses on non-marketable equity securities (including impairment) ( 1,489 ) ( 122 ) Total unrealized gain (loss) recognized on non-marketable equity securities $ 1,531  $ 9,849  During the year ended December 31, 2021, included in the $ 27.6 billion of non-marketable equity securities held as of the end of the period, $ 18.6 billion were measured at fair value resulting in a net unrealized gain of $ 9.8 billion. Equity securities accounted for under the Equity Method As of December 31, 2020 and 2021, equity securities accounted for under the equity method had a carrying value of approximately $ 1.4 billion and $ 1.5 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 7 for further details on other income (expense), net. Derivative Financial Instruments We enter into derivative instruments to manage risks relating to our ongoing business operations. The primary risk managed with derivative instruments 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 as either assets or liabilities 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 where both the purchased and written options are with the same counterparty. For other derivative contracts, we present at gross fair values. We primarily record changes in the fair value in the Consolidated Statements of Income as either other income (expense), net, or revenues, or in the Consolidated Balance Sheets in AOCI, as discussed below. We enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. Further, we enter into collateral security arrangements that provide for collateral to be received or pledged when the net fair value of certain financial instruments fluctuates from contractually established thresholds. 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. Cash Flow Hedges 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 the change in forward points and time value from our assessment of hedge effectiveness. The initial value of the excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI. If the hedged transactions become probable of not occurring, the corresponding amounts in AOCI are reclassified to other income (expense), net in the period of de-designation. As of December 31, 2021, the net accumulated gain on our foreign currency cash flow hedges before tax effect was $ 518 million, which is expected to be reclassified from AOCI into earnings within the next 12 months. Fair Value Hedges We designate foreign currency forward contracts as fair value hedges to hedge foreign currency risks for our investments denominated in currencies other than the U.S. dollar. Fair value hedge amounts included in the Alphabet Inc. 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 changes in forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net. Net Investment Hedges 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 changes in forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net. Other Derivatives Other derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use 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 contracts, as well as the related costs, are recognized 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. Additionally, from time to time, we enter into derivatives to hedge the market price risk on certain of our marketable equity securities. Gains (losses) arising from these derivatives are reflected within the ""other"" component of other income (expense), net and the offsetting recognized gains (losses) on the marketable equity securities are reflected within the gain (loss) on equity securities, net component of other income (expense), net. See Note 7 for further details on other income (expense), net. The gross notional amounts of outstanding derivative instruments were as follows (in millions): As of December 31, 2020 2021 Derivatives Designated as Hedging Instruments: Foreign exchange contracts Cash flow hedges $ 10,187  $ 16,362  Fair value hedges $ 1,569  $ 2,556  Net investment hedges $ 9,965  $ 10,159  Derivatives Not Designated as Hedging Instruments: Foreign exchange contracts $ 39,861  $ 41,031  Other contracts $ 2,399  $ 4,275  Alphabet Inc. The fair values of outstanding derivative instruments were as follows (in millions):   As of December 31, 2020   Balance Sheet Location Fair Value of Derivatives Designated as Hedging Instruments Fair Value of Derivatives Not Designated as Hedging Instruments Total Fair Value Derivative Assets: Level 2: Foreign exchange contracts Other current and non-current assets $ 33  $ 316  $ 349  Other contracts Other current and non-current assets 0  16  16  Total $ 33  $ 332  $ 365  Derivative Liabilities: Level 2: Foreign exchange contracts Accrued expenses and other liabilities, current and non-current $ 395  $ 185  $ 580  Other contracts Accrued expenses and other liabilities, current and non-current 0  942  942  Total $ 395  $ 1,127  $ 1,522    As of December 31, 2021   Balance Sheet Location Fair Value of Derivatives Designated as Hedging Instruments Fair Value of Derivatives Not Designated as Hedging Instruments Total Fair Value Derivative Assets: Level 2: Foreign exchange contracts Other current and non-current assets $ 867  $ 42  $ 909  Other contracts Other current and non-current assets 0  52  52  Total $ 867  $ 94  $ 961  Derivative Liabilities: Level 2: Foreign exchange contracts Accrued expenses and other liabilities, current and non-current $ 8  $ 452  $ 460  Other contracts Accrued expenses and other liabilities, current and non-current 0  121  121  Total $ 8  $ 573  $ 581  Alphabet Inc. The gains (losses) on derivatives in cash flow hedging and net investment hedging relationships recognized in other comprehensive income (OCI) were summarized below (in millions):  Gains (Losses) Recognized in OCI on Derivatives Before Tax Effect  Year Ended December 31, 2019 2020 2021 Derivatives in Cash Flow Hedging Relationship: Foreign exchange contracts Amount included in the assessment of effectiveness $ 38  $ 102  $ 806  Amount excluded from the assessment of effectiveness ( 14 ) ( 37 ) 48  Derivatives in Net Investment Hedging Relationship: Foreign exchange contracts Amount included in the assessment of effectiveness 131  ( 851 ) 754  Total $ 155  $ ( 786 ) $ 1,608  The effect of derivative instruments on income was summarized below (in millions):  Gains (Losses) Recognized in Income Year Ended December 31, 2019 2020 2021 Revenues Other income (expense), net Revenues Other income (expense), net Revenues Other income (expense), net Total amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded $ 161,857  $ 5,394  $ 182,527  $ 6,858  $ 257,637  $ 12,020  Gains (Losses) on Derivatives in Cash Flow Hedging Relationship: Foreign exchange contracts Amount of gains (losses) reclassified from AOCI to income $ 367  $ 0  $ 144  $ 0  $ 165  $ 0  Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach 88  0  33  0  ( 16 ) 0  Gains (Losses) on Derivatives in Fair Value Hedging Relationship: Foreign exchange contracts Hedged items 0  ( 19 ) 0  18  0  ( 95 ) Derivatives designated as hedging instruments 0  19  0  ( 18 ) 0  95  Amount excluded from the assessment of effectiveness 0  25  0  4  0  8  Gains (Losses) on Derivatives in Net Investment Hedging Relationship: Foreign exchange contracts Amount excluded from the assessment of effectiveness 0  243  0  151  0  82  Gains (Losses) on Derivatives Not Designated as Hedging Instruments: Foreign exchange contracts 0  ( 413 ) 0 718  0  ( 860 ) Other Contracts 0  0  0  ( 906 ) 0  101  Total gains (losses) $ 455  $ ( 145 ) $ 177  $ ( 33 ) $ 149  $ ( 669 ) Alphabet Inc. Offsetting of Derivatives 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): Offsetting of Assets As of December 31, 2020 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received Non-Cash Collateral Received Net Assets Exposed Derivatives $ 397  $ ( 32 ) $ 365  $ ( 295 ) (1) $ ( 16 ) $ 0  $ 54  As of December 31, 2021 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received Non-Cash Collateral Received Net Assets Exposed Derivatives $ 999  $ ( 38 ) $ 961  $ ( 434 ) (1) $ ( 394 ) $ ( 12 ) $ 121  (1) The balances as of December 31, 2020 and 2021 were related to derivative liabilities which are allowed to be net settled against derivative assets in accordance with our master netting agreements. Offsetting of Liabilities As of December 31, 2020 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Non-Cash Collateral Pledged Net Liabilities Derivatives $ 1,554  $ ( 32 ) $ 1,522  $ ( 295 ) (2) $ ( 1 ) $ ( 943 ) $ 283  As of December 31, 2021 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Non-Cash Collateral Pledged Net Liabilities Derivatives $ 619  $ ( 38 ) $ 581  $ ( 434 ) (2) $ ( 4 ) $ ( 110 ) $ 33  (2) The balances as of December 31, 2020 and 2021 were related to derivative assets which are allowed to be net settled against derivative liabilities in accordance with our master netting agreements. Note 4. Leases We have entered into operating lease agreements primarily for data centers, land and offices throughout the world with lease periods expiring between 2022 and 2063. Components of operating lease expense were as follows (in millions): Year Ended December 31, 2020 2021 Operating lease cost $ 2,267  $ 2,699  Variable lease cost 619  726  Total operating lease cost $ 2,886  $ 3,425  Alphabet Inc. Supplemental information related to operating leases was as follows (in millions): Year Ended December 31, 2020 2021 Cash payments for operating leases $ 2,004  $ 2,489  New operating lease assets obtained in exchange for operating lease liabilities $ 2,765  $ 2,951  As of December 31, 2021, our operating leases had a weighted average remaining lease term of 8 years and a weighted average discount rate of 2.3 %. Future lease payments under operating leases as of December 31, 2021 were as follows (in millions): 2022 $ 2,539  2023 2,527  2024 2,226  2025 1,815  2026 1,401  Thereafter 4,948  Total future lease payments 15,456  Less imputed interest ( 1,878 ) Total lease liability balance $ 13,578  As of December 31, 2021, we have entered into leases that have not yet commenced with short-term and long-term future lease payments of $ 606 million and $ 5.2 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2022 and 2026 with non-cancelable lease terms of 1 to 25 years. Note 5. Variable Interest Entities Consolidated VIEs 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, 2020 and 2021, assets that can only be used to settle obligations of these VIEs were $ 5.7 billion and $ 6.0 billion, respectively, and the liabilities for which creditors only have recourse to the VIEs were $ 2.3 billion and $ 2.5 billion, respectively. Total noncontrolling interests (NCI), including redeemable noncontrolling interests (RNCI), in our consolidated subsidiaries was $ 3.9 billion and $ 4.3 billion as of December 31, 2020 and 2021, respectively. 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 other income (expense), net. See Note 7 for further details on other income (expense), net. Waymo In June 2021, Waymo, a self-driving technology development company and a consolidated VIE, completed an investment round of $ 2.5 billion, the majority of which represented investment from Alphabet. The investments from external parties were accounted for as equity transactions and resulted in recognition of noncontrolling interests. Unconsolidated VIEs 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 Alphabet Inc. VIEs is our capital investments in them. The carrying value, and maximum exposure of these unconsolidated VIEs were $ 1.7 billion and $ 1.9 billion, respectively, as of December 31, 2020 and $ 2.7 billion and $ 2.9 billion, respectively, as of December 31, 2021 . Note 6. Debt Short-Term Debt We have a debt financing program of up to $ 10.0 billion through the issuance of commercial paper, which increased from $ 5.0 billion in September 2021. Net proceeds from this program are used for general corporate purposes. We had no commercial paper outstanding as of December 31, 2020 and 2021. Our short-term debt balance also includes the current portion of certain long-term debt. Long-Term Debt Total outstanding debt is summarized below (in millions, except percentages): Effective Interest Rate As of December 31, Maturity Coupon Rate 2020 2021 Debt 2011-2020 Notes Issuances 2024 - 2060 0.45 % - 3.38 % 0.57 % - 3.38 % $ 14,000  $ 13,000  Future finance lease payments, net (1) 1,201  2,086  Total debt 15,201  15,086  Unamortized discount and debt issuance costs ( 169 ) ( 156 ) Less: Current portion of Notes (2) ( 999 )   Less: Current portion future finance lease payments, net (1)(2) ( 101 ) ( 113 ) Total long-term debt $ 13,932  $ 14,817  (1) Net of imputed interest. (2) Total current portion of long-term debt is included within other accrued expenses and current liabilities. See Note 7. The notes in the table above are comprised of 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, including the current portion, was approximately $ 14.0 billion and $ 12.4 billion as of December 31, 2020 and December 31, 2021, 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 December 31, 2021, the aggregate future principal payments for long-term debt, including finance lease liabilities, for each of the next five years and thereafter were as follows (in millions): 2022 $ 187  2023 146 2024 1,159 2025 1,162 2026 2,165 Thereafter 10,621 Total $ 15,440  Credit Facility As of December 31, 2021, we have $ 10.0 billion of revolving credit facilities. No amounts were outstanding under the credit facilities as of December 31, 2020 and 2021. Alphabet Inc. In April 2021, we terminated the existin g $ 4.0 billion revolving credit facilities, which were scheduled to expire in July 2023, and entered into two new revolving credit facilities in the amounts of $ 4.0 billion and $ 6.0 billion , which will expire in April 2022 and April 2026, respectively. The interest rates for the new 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 have been borrowed under the new credit facilities. Note 7. Supplemental Financial Statement Information Property and Equipment, Net Property and equipment, net, consisted of the following (in millions): As of December 31, 2020 2021 Land and buildings $ 49,732  $ 58,881  Information technology assets 45,906  55,606  Construction in progress 23,111  23,171  Leasehold improvements 7,516  9,146  Furniture and fixtures 197  208  Property and equipment, gross 126,462  147,012  Less: accumulated depreciation ( 41,713 ) ( 49,414 ) Property and equipment, net $ 84,749  $ 97,599  Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following (in millions): As of December 31, 2020 2021 European Commission fines (1) $ 10,409  $ 9,799  Payables to brokers for unsettled investment trades 754  397  Accrued customer liabilities 3,118  3,505  Accrued purchases of property and equipment 2,197  2,415  Current operating lease liabilities 1,694  2,189  Other accrued expenses and current liabilities 10,459  12,931  Accrued expenses and other current liabilities $ 28,631  $ 31,236  (1) Includes the effects of foreign exchange and interest. See Note 10 for further details. Alphabet Inc. Accumulated Other Comprehensive Income (Loss) 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, 2018 $ ( 1,884 ) $ ( 688 ) $ 266  $ ( 2,306 ) Cumulative effect of accounting change 0  0  ( 30 ) ( 30 ) Other comprehensive income (loss) before reclassifications ( 119 ) 1,611  36  1,528  Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0  0  ( 14 ) ( 14 ) Amounts reclassified from AOCI 0  ( 111 ) ( 299 ) ( 410 ) Other comprehensive income (loss) ( 119 ) 1,500  ( 277 ) 1,104  Balance as of December 31, 2019 ( 2,003 ) 812  ( 41 ) ( 1,232 ) Other comprehensive income (loss) before reclassifications 1,139  1,313  79  2,531  Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0  0  ( 37 ) ( 37 ) Amounts reclassified from AOCI 0  ( 513 ) ( 116 ) ( 629 ) Other comprehensive income (loss) 1,139  800  ( 74 ) 1,865  Balance as of December 31, 2020 ( 864 ) 1,612  ( 115 ) 633  Other comprehensive income (loss) before reclassifications ( 1,442 ) ( 1,312 ) 668  ( 2,086 ) Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0  0  48  48  Amounts reclassified from AOCI 0  ( 64 ) ( 154 ) ( 218 ) Other comprehensive income (loss) ( 1,442 ) ( 1,376 ) 562  ( 2,256 ) Balance as of December 31, 2021 $ ( 2,306 ) $ 236  $ 447  $ ( 1,623 ) 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 Year Ended December 31, AOCI Components Location 2019 2020 2021 Unrealized gains (losses) on available-for-sale investments Other income (expense), net $ 149  $ 650  $ 82  Benefit (provision) for income taxes ( 38 ) ( 137 ) ( 18 ) Net of income tax 111  513  64  Unrealized gains (losses) on cash flow hedges Foreign exchange contracts Revenue 367  144  165  Interest rate contracts Other income (expense), net 6  6  6  Benefit (provision) for income taxes ( 74 ) ( 34 ) ( 17 ) Net of income tax 299  116  154  Total amount reclassified, net of income tax $ 410  $ 629  $ 218  Alphabet Inc. Other Income (Expense), Net Components of other income (expense), net, were as follows (in millions):  Year Ended December 31,  2019 2020 2021 Interest income $ 2,427  $ 1,865  $ 1,499  Interest expense (1) ( 100 ) ( 135 ) ( 346 ) Foreign currency exchange gain (loss), net (2) 103  ( 344 ) ( 240 ) Gain (loss) on debt securities, net 149  725  ( 110 ) Gain (loss) on equity securities, net 2,649  5,592  12,380  Performance fees ( 326 ) ( 609 ) ( 1,908 ) Income (loss) and impairment from equity method investments, net 390  401  334  Other (3) 102  ( 637 ) 411  Other income (expense), net $ 5,394  $ 6,858  $ 12,020  (1) Interest expense is net of interest capitalized of $ 167 million, $ 218 million, and $ 163 million for the years ended December 31, 2019, 2020, and 2021, respectively. (2) Our foreign currency exchange gain (loss), net, is primarily related to the forward points for our foreign currency hedging contracts and foreign exchange transaction gains and losses from the conversion of the transaction currency to the functional currency, offset by the foreign currency hedging contracts' losses and gains. (3) During the year ended December 31, 2020, we entered into derivatives that hedged the changes in fair value of certain marketable equity securities, which resulted in losses of $ 902 million and gains of $ 92 million for the years ended December 31, 2020 and 2021, respectively. The offsetting recognized gains and losses on the marketable equity securities are reflected in Gain (loss) on equity securities, net. Note 8. Acquisitions Fitbit In January 2021, we closed the acquisition of Fitbit, a leading wearables brand for $ 2.1 billion. The addition of Fitbit to Google Services is expected to help spur innovation in wearable devices. The assets acquired and liabilities assumed were recorded at fair value. The purchase price excludes post acquisition compensation arrangements. The purchase price was attributed to $ 440 million cash acquired, $ 590 million of intangible assets, $ 1.2 billion of goodwill and $ 92 million of net liabilities assumed. Goodwill was recorded in the Google Services segment and primarily attributable to synergies expected to arise after the acquisition. Goodwill is not expected to be deductible for tax purposes. Other Acquisitions During the year ended December 31, 2021, we completed other acquisitions and purchases of intangible assets for total consideration of approximately $ 885 million, net of cash acquired, of which the total amount of goodwill expected to be deductible for tax purposes is approximately $ 118 million. Pro forma results of operations for these acquisitions have not been presented because they are not material to our consolidated results of operations, either individually or in the aggregate. Alphabet Inc. Note 9. Goodwill and Other Intangible Assets Goodwill Changes in the carrying amount of goodwill for the years ended December 31, 2020 and 2021 were as follows (in millions): Google Google Services Google Cloud Other Bets Total Balance as of December 31, 2019 $ 19,921  $ 0  $ 0  $ 703  $ 20,624  Acquisitions 204  53  189  0  446  Foreign currency translation and other adjustments 46  56  5  ( 2 ) 105  Allocation in the fourth quarter of 2020 (1) ( 20,171 ) 18,408  1,763  0  0  Balance as of December 31, 2020 0  18,517  1,957  701  21,175  Acquisitions 0  1,325  382  103  1,810  Foreign currency translation and other adjustments 0  ( 16 ) ( 2 ) ( 11 ) ( 29 ) Balance as of December 31, 2021 $ 0  $ 19,826  $ 2,337  $ 793  $ 22,956  (1) Represents reallocation of goodwill as a result of our change in segments in the fourth quarter of 2020. See Note 15 for further details. Other Intangible Assets Information regarding purchased intangible assets was as follows (in millions):  As of December 31, 2020  Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents and developed technology $ 4,639  $ 3,649  $ 990  Customer relationships 266  49  217  Trade names and other 624  461  163  Total definite-lived intangible assets 5,529  4,159  1,370  Indefinite-lived intangible assets 75  0 75  Total intangible assets $ 5,604  $ 4,159  $ 1,445   As of December 31, 2021  Gross Carrying Amount Accumulated Amortization Net Carrying Value Patents and developed technology $ 4,786  $ 4,112  $ 674  Customer relationships 506  140  366  Trade names and other 534  295  239  Total definite-lived intangible assets 5,826  4,547  1,279  Indefinite-lived intangible assets 138  0 138  Total intangible assets $ 5,964  $ 4,547  $ 1,417  Patents and developed technology, customer relationships, and trade names and other have weighted-average remaining useful lives of 0.7 years, 3.5 years, and 4.5 years, respectively. For all intangible assets acquired and purchased during the year ended December 31, 2021, patents and developed technology have a weighted-average useful life of 4.1 years, customer relationships have a weighted-average useful life of 4.3 years, and trade names and other have a weighted-average useful life of 9.9 years. Amortization expense relating to purchased intangible assets was $ 795 million, $ 774 million, and $ 875 million for the years ended December 31, 2019, 2020, and 2021, respectively. Alphabet Inc. As of December 31, 2021, expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter was as follows (in millions):  2022 $ 537  2023 255  2024 226  2025 98  2026 61  Thereafter 102  $ 1,279  Note 10. Contingencies Indemnifications In the normal course of business, including to facilitate transactions in our services and products and corporate activities, we indemnify certain parties, including advertisers, Google Network partners, customers of Google Cloud offerings, lessors and service providers with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents. It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims, and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of December 31, 2021, we did not have any material indemnification claims that were probable or reasonably possible. Legal Matters Antitrust Investigations On November 30, 2010, the EC's Directorate General for Competition opened an investigation into various antitrust-related complaints against us. On June 27, 2017, the EC announced its decision that certain actions taken by Google regarding its display and ranking of shopping search results and ads infringed European competition law. The EC decision imposed a  2.4 billion ($ 2.7 billion as of June 27, 2017) fine. On September 11, 2017, we appealed the EC decision to the General Court, and on September 27, 2017, we implemented product changes to bring shopping ads into compliance with the EC's decision. We recognized a charge of $ 2.7 billion for the fine in the second quarter of 2017. On November 10, 2021, the General Court rejected our appeal, and we subsequently filed an appeal with the European Court of Justice on January 20, 2022. On July 18, 2018, the EC announced its decision that certain provisions in Googles Android-related distribution agreements infringed European competition law. The EC decision imposed a  4.3 billion ($ 5.1 billion as of June 30, 2018) fine and directed the termination of the conduct at issue. On October 9, 2018, we appealed the EC decision. On October 29, 2018, we implemented changes to certain of our Android distribution practices. We recognized a charge of $ 5.1 billion for the fine in the second quarter of 2018. On March 20, 2019, the EC announced its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law. The EC decision imposed a fine of  1.5 billion ($ 1.7 billion as of March 20, 2019) and directed actions related to AdSense for Search partners' agreements, which we implemented prior to the decision. On June 4, 2019, we appealed the EC decision. We recognized a charge of $ 1.7 billion for the fine in the first quarter of 2019. While each EC decision is under appeal, we included the fines 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. Alphabet Inc. From time to time we are subject to formal and informal inquiries and investigations on competition matters by regulatory authorities in the U.S., Europe, and other jurisdictions. In August 2019, we began receiving civil investigative demands from the U.S. Department of Justice (DOJ) requesting information and documents relating to our prior antitrust investigations and certain aspects of our business. The DOJ and a number of state Attorneys General filed a lawsuit on October 20, 2020 alleging that Google violated U.S. antitrust laws relating to Search and Search advertising. Separately, on December 16, 2020, a number of state Attorneys General filed an antitrust complaint against Google in the U.S. District Court for the Eastern District of Texas, alleging that Google violated U.S. antitrust laws as well as state deceptive trade laws relating to its advertising technology. On June 22, 2021, the EC opened a formal investigation into Google's advertising technology business practices. On July 7, 2021, a number of state Attorneys General filed an antitrust complaint against us in the U.S. District Court for the Northern District of California, alleging that Googles operation of Android and Google Play violated U.S. antitrust laws and state antitrust and consumer protection laws. We believe these complaints are without merit and will defend ourselves vigorously. The DOJ and state Attorneys General continue their investigations into certain aspects of our business. We continue to cooperate with federal and state regulators in the U.S., the EC and other regulators around the world. Patent and Intellectual Property Claims We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe others' intellectual property rights. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, functionalities, products, or services. As a result, we may have to change our business practices and develop non-infringing products or technologies, which could result in a loss of revenues for us and otherwise harm our business. In addition, the U.S. International Trade Commission (ITC) has increasingly become an important forum to litigate intellectual property disputes because an ultimate loss in an ITC action can result in a prohibition on importing infringing products into the U.S. Because the U.S. is an important market, a prohibition on importation could have an adverse effect on us, including preventing us from importing many important products into the U.S. or necessitating workarounds that may limit certain features of our products. Furthermore, many of our agreements with our customers and partners require us to indemnify them against certain intellectual property infringement claims, which would increase our costs as a result of defending such claims, and may require that we pay significant damages if there were an adverse ruling in any such claims. In addition, our customers and partners may discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. In 2010, Oracle America, Inc. (Oracle) brought a copyright lawsuit against Google in the Northern District of California, alleging that Google's Android operating system infringes Oracle's copyrights related to certain Java application programming interfaces (Java APIs). After trial, final judgment was entered by the district court in favor of Google on June 8, 2016, and the court decided post-trial motions in favor of Google. Oracle appealed and on March 27, 2018, the Federal Circuit Court of Appeals reversed and remanded the case for a trial on damages. On May 29, 2018, we filed a petition for a rehearing at the Federal Circuit, and on August 28, 2018, the Federal Circuit denied the petition. On January 24, 2019, we filed a petition to the U.S. Supreme Court to review the case. On April 29, 2019, the Supreme Court requested the views of the Solicitor General regarding our petition. On September 27, 2019, the Solicitor General recommended denying our petition, and we provided our response on October 16, 2019. On November 15, 2019, the Supreme Court granted our petition and made a decision to review the case. The Supreme Court heard oral arguments in our case on October 7, 2020. On April 5, 2021, the Supreme Court reversed the Federal Circuit's ruling and found that Googles use of the Java APIs was a fair use as a matter of law. The Supreme Court remanded the case to the Federal Circuit for further proceedings in conformity with the Supreme Court opinion. On May 14, 2021, the Federal Circuit entered an order affirming the district courts final judgment in favor of Google. On June 21, 2021, the Federal Circuit issued a mandate returning the case to the district court, and the case is now concluded. Other We are also regularly subject to claims, suits, regulatory and government investigations, other proceedings, and consent decrees involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury, consumer protection, and other matters. For example, we have a number of privacy investigations and suits ongoing in multiple jurisdictions. Such claims, suits, regulatory and government investigations, other proceedings, and consent decrees could result in substantial fines and penalties, injunctive relief, ongoing auditing and monitoring obligations, changes to our products and services, alterations to our business models and operations, and collateral related civil litigation or other adverse consequences, all of which could harm our business, reputation, financial condition, and operating results. Alphabet Inc. Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable that a loss has been incurred, and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is required to determine both the likelihood of there being and the estimated amount of a loss related to such matters. With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties. We expense legal fees in the period in which they are incurred. Non-Income Taxes We are under audit by various domestic and foreign tax authorities with regards to non-income tax matters. The subject matter of non-income tax audits primarily arises from disputes on the tax treatment and tax rate applied to the sale of our products and services in these jurisdictions and the tax treatment of certain employee benefits. We accrue non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from our expectations. For information regarding income tax contingencies, see Note 14. Note 11. Stockholders' Equity Preferred Stock Our Board of Directors has authorized 100 million shares of preferred stock, $ 0.001 par value, issuable in series. As of December 31, 2020 and 2021, no shares were issued or outstanding. Class A and Class B Common Stock and Class C Capital Stock Our Board of Directors has authorized three classes of stock, Class A and Class B common stock, and Class C capital stock. The rights of the holders of each class of our common and capital stock are identical, except with respect to voting. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 10 votes per share. Class C capital stock has no voting rights, except as required by applicable law. Shares of Class B common stock may be converted at any time at the option of the stockholder and automatically convert upon sale or transfer to Class A common stock. Share Repurchases In April 2021, the Board of Directors of Alphabet authorized the company to repurchase up to $ 50.0 billion of its Class C stock. In July 2021, the Alphabet board approved an amendment to the April 2021 authorization, permitting the company to repurchase both Class A and Class C shares in a manner deemed in the best interest of the company and its stockholders, taking into account the economic cost and prevailing market conditions, including the relative trading prices and volumes of the Class A and Class C shares. As of December 31, 2021, $ 17.4 billion remains available for Class A and Class C share repurchases under the amended authorization. In accordance with the authorizations of the Board of Directors of Alphabet, during the years ended December 31, 2020 and 2021, we repurchased and subsequently retired 21.5 million and 20.3 million aggregate shares for $ 31.1 billion and $ 50.3 billion, respectively. Of the aggregate amount repurchased and subsequently retired during 2021, 1.2 million shares were Class A stock for $ 3.4 billion. Stock Split Effected in Form of Stock Dividend (Stock Split) On February 1, 2022, the Company announced that the Board of Directors had approved and declared a 20-for-one stock split in the form of a one-time special stock dividend on each share of the Companys Class A, Class B, and Class C stock. The Stock Split is subject to stockholder approval of an amendment to the Companys Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Class A, Class B, and Class C stock to accommodate the Stock Split. Alphabet Inc. If approval is obtained, each of the Companys stockholders of record at the close of business on July 1, 2022 (the Record Date), will receive, after the close of business on July 15, 2022, a dividend of 19 additional shares of the same class of stock for every share held by such stockholder as of the Record Date. Note 12. Net Income Per Share We compute net income per share of Class A, Class B, and Class C stock using the two-class method. Basic net income per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of restricted stock units and other contingently issuable shares. The dilutive effect of outstanding restricted stock units and other contingently issuable shares is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A stock assumes the conversion of Class B stock, while the diluted net income per share of Class B stock does not assume the conversion of those shares. The rights, including the liquidation and dividend rights, of the holders of our Class A, Class B, and Class C stock are identical, except with respect to voting. Furthermore, there are a number of safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our Board of Directors from declaring or paying unequal per share dividends on our Class A, Class B, and Class C stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock must be approved by the class of stock adversely affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our Board of Directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A, Class B, and Class C stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. In the years ended December 31, 2019, 2020 and 2021, the net income per share amounts are the same for Class A, Class B, and Class C stock because the holders of each class are entitled to equal per share dividends or distributions in liquidation in accordance with the Amended and Restated Certificate of Incorporation of Alphabet Inc. The following tables set forth the computation of basic and diluted net income per share of Class A, Class B, and Class C stock (in millions, except share amounts which are reflected in thousands and per share amounts):  Year Ended December 31,  2019  Class A Class B Class C Basic net income per share: Numerator Allocation of undistributed earnings $ 14,846  $ 2,307  $ 17,190  Denominator Number of shares used in per share computation 299,402  46,527  346,667  Basic net income per share $ 49.59  $ 49.59  $ 49.59  Diluted net income per share: Numerator Allocation of undistributed earnings for basic computation $ 14,846  $ 2,307  $ 17,190  Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 2,307  0  0  Reallocation of undistributed earnings ( 126 ) ( 20 ) 126  Allocation of undistributed earnings $ 17,027  $ 2,287  $ 17,316  Denominator Number of shares used in basic computation 299,402  46,527  346,667  Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A shares outstanding 46,527  0  0  Restricted stock units and other contingently issuable shares 413  0  5,547  Number of shares used in per share computation 346,342  46,527  352,214  Diluted net income per share $ 49.16  $ 49.16  $ 49.16  Alphabet Inc.  Year Ended December 31,  2020  Class A Class B Class C Basic net income per share: Numerator Allocation of undistributed earnings $ 17,733  $ 2,732  $ 19,804  Denominator Number of shares used in per share computation 299,815  46,182  334,819  Basic net income per share $ 59.15  $ 59.15  $ 59.15  Diluted net income per share: Numerator Allocation of undistributed earnings for basic computation $ 17,733  $ 2,732  $ 19,804  Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 2,732  0  0  Reallocation of undistributed earnings ( 180 ) ( 25 ) 180  Allocation of undistributed earnings $ 20,285  $ 2,707  $ 19,984  Denominator Number of shares used in basic computation 299,815  46,182  334,819  Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A shares outstanding 46,182  0  0  Restricted stock units and other contingently issuable shares 87  0  6,125  Number of shares used in per share computation 346,084  46,182  340,944  Diluted net income per share $ 58.61  $ 58.61  $ 58.61   Year Ended December 31,  2021  Class A Class B Class C Basic net income per share: Numerator Allocation of undistributed earnings $ 34,200  $ 5,174  $ 36,659  Denominator Number of shares used in per share computation 300,310  45,430  321,910  Basic net income per share $ 113.88  $ 113.88  $ 113.88  Diluted net income per share: Numerator Allocation of undistributed earnings for basic computation $ 34,200  $ 5,174  $ 36,659  Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 5,174  0  0  Reallocation of undistributed earnings ( 581 ) ( 77 ) 581  Allocation of undistributed earnings $ 38,793  $ 5,097  $ 37,240  Denominator Number of shares used in basic computation 300,310  45,430  321,910  Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A shares outstanding 45,430  0  0  Restricted stock units and other contingently issuable shares 15  0  10,009  Number of shares used in per share computation 345,755  45,430  331,919  Diluted net income per share $ 112.20  $ 112.20  $ 112.20  Alphabet Inc. Note 13. Compensation Plans Stock Plans Our stock plans include the Alphabet Amended and Restated 2012 Stock Plan, the Alphabet 2021 Stock Plan and Other Bet stock-based plans. Under our stock plans, RSUs and other types of awards may be granted. An RSU award is an agreement to issue shares of our Class C stock at the time the award vests. RSUs generally vest over four years contingent upon employment on the vesting date. As of December 31, 2021, there were 37,479,707 shares of Class C stock reserved for future issuance under the Alphabet 2021 Stock Plan. Stock-Based Compensation For the years ended December 31, 2019, 2020, and 2021, total stock-based compensation expense was $ 11.7 billion, $ 13.4 billion, and $ 15.7 billion, including amounts associated with awards we expect to settle in Alphabet stock of $ 10.8 billion, $ 12.8 billion, and $ 15.0 billion, respectively. For the years ended December 31, 2019, 2020, and 2021, we recognized tax benefits on total stock-based compensation expense, which are reflected in the provision for income taxes in the Consolidated Statements of Income, of $ 1.8 billion, $ 2.7 billion, and $ 3.1 billion, respectively. For the years ended December 31, 2019, 2020, and 2021, tax benefit realized related to awards vested or exercised during the period was $ 2.2 billion, $ 3.6 billion, and $ 5.9 billion, respectively. These amounts do not include the indirect effects of stock-based awards, which primarily relate to the RD tax credit. Stock-Based Award Activities The following table summarizes the activities for unvested Alphabet RSUs for the year ended December 31, 2021: Unvested Restricted Stock Units  Number of Shares Weighted- Average Grant-Date Fair Value Unvested as of December 31, 2020 19,288,793  $ 1,262.13  Granted 10,582,700  $ 1,949.16  Vested ( 11,209,486 ) $ 1,345.98  Forfeited/canceled ( 1,767,294 ) $ 1,425.48  Unvested as of December 31, 2021 16,894,713  $ 1,626.13  The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2019 and 2020 was $ 1,092.36 and $ 1,407.97 , respectively. Total fair value of RSUs, as of their respective vesting dates, during the years ended December 31, 2019, 2020, and 2021 were $ 15.2 billion, $ 17.8 billion, and $ 28.8 billion, respectively. As of December 31, 2021, there was $ 25.8 billion of unrecognized compensation cost related to unvested employee RSUs. This amount is expected to be recognized over a weighted-average period of 2.5 years. 401(k) Plans We have two 401(k) Savings Plans that qualify as deferred salary arrangements under Section 401(k) of the Internal Revenue Code. Under these 401(k) Plans, matching contributions are based upon the amount of the employees contributions subject to certain limitations. We recognized expense of approximately $ 724 million, $ 855 million, and $ 916 million for the years ended December 31, 2019, 2020, and 2021, respectively. Note 14. Income Taxes Income from continuing operations before income taxes consisted of the following (in millions): Year Ended December 31,  2019 2020 2021 Domestic operations $ 16,426  $ 37,576  $ 77,016  Foreign operations 23,199  10,506  13,718  Total $ 39,625  $ 48,082  $ 90,734  Alphabet Inc. Provision for income taxes consisted of the following (in millions): Year Ended December 31,  2019 2020 2021 Current: Federal and state $ 2,424  $ 4,789  $ 10,126  Foreign 2,713  1,687  2,692  Total 5,137  6,476  12,818  Deferred: Federal and state 286  1,552  2,018  Foreign ( 141 ) ( 215 ) ( 135 ) Total 145  1,337  1,883  Provision for income taxes $ 5,282  $ 7,813  $ 14,701  The reconciliation of federal statutory income tax rate to our effective income tax rate was as follows: Year Ended December 31,  2019 2020 2021 U.S. federal statutory tax rate 21.0  % 21.0  % 21.0  % Foreign income taxed at different rates ( 4.9 ) ( 0.3 ) 0.2  Foreign-derived intangible income deduction ( 0.7 ) ( 3.0 ) ( 2.5 ) Stock-based compensation expense ( 0.7 ) ( 1.7 ) ( 2.5 ) Federal research credit ( 2.5 ) ( 2.3 ) ( 1.6 ) Deferred tax asset valuation allowance 0.0  1.4  0.6  State and local income taxes 1.1  1.1  1.0  Effective tax rate 13.3  % 16.2  % 16.2  % Our effective tax rate for 2019 was affected significantly by earnings realized in foreign jurisdictions with statutory tax rates lower than the federal statutory tax rate because substantially all of the income from foreign operations was earned by an Irish subsidiary. As of December 31, 2019, we have simplified our corporate legal entity structure and now license intellectual property from the U.S. that was previously licensed from Bermuda resulting in an increase in the portion of our income earned in the U.S. On July 27, 2015, the U.S. Tax Court, in an opinion in Altera Corp. v. Commissioner, invalidated the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. The U.S. Tax Court issued the final decision on December 28, 2015. As a result of that decision, we recorded a tax benefit related to the anticipated reimbursement of cost share payment for previously shared stock-based compensation costs. On June 7, 2019, the U.S. Court of Appeals for the Ninth Circuit overturned the 2015 Tax Court decision in Altera Corp. v. Commissioner, and upheld the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. As a result of the Ninth Circuit court decision, our cumulative net tax benefit of $ 418 million related to previously shared stock-based compensation costs was reversed in the year ended December 31, 2019. In 2020, there was an increase in valuation allowance for net deferred tax assets that are not likely to be realized relating to certain of our Other Bets. Alphabet Inc. Deferred Income Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows (in millions): As of December 31, 2020 2021 Deferred tax assets: Accrued employee benefits $ 580  $ 549  Accruals and reserves not currently deductible 1,049  1,816  Tax credits 3,723  5,179  Net operating losses 1,085  1,790  Operating leases 2,620  2,503  Intangible assets 1,525  2,034  Other 981  925  Total deferred tax assets 11,563  14,796  Valuation allowance ( 4,823 ) ( 7,129 ) Total deferred tax assets net of valuation allowance 6,740  7,667  Deferred tax liabilities: Property and equipment, net ( 3,382 ) ( 5,237 ) Net investment gains ( 1,901 ) ( 3,229 ) Operating leases ( 2,354 ) ( 2,228 ) Other ( 1,580 ) ( 946 ) Total deferred tax liabilities ( 9,217 ) ( 11,640 ) Net deferred tax assets (liabilities) $ ( 2,477 ) $ ( 3,973 ) As of December 31, 2021, our federal, state, and foreign net operating loss carryforwards for income tax purposes were approximately $ 5.6 billion, $ 4.6 billion, and $ 1.7 billion respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in 2023, foreign net operating loss carryforwards will begin to expire in 2025 and the state net operating loss carryforwards will begin to expire in 2028. It is more likely than not that certain net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions. As of December 31, 2021, our California RD carryforwards for income tax purposes were approximately $ 5.0 billion that can be carried over indefinitely. We believe the state tax credit is not likely to be realized. As of December 31, 2021, our investment tax credit carryforwards for state income tax purposes were approximately $ 700 million and will begin to expire in 2025. We use the flow-through method of accounting for investment tax credits. We believe this tax credit is not likely to be realized. As of December 31, 2021, we maintained a valuation allowance with respect to California deferred tax assets, certain federal net operating losses, certain state tax credits, net deferred tax assets relating to certain Other Bets, and certain foreign net operating losses that we believe are not likely to be realized. We continue to reassess the remaining valuation allowance quarterly, and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly. Alphabet Inc. Uncertain Tax Positions The following table summarizes the activity related to our gross unrecognized tax benefits (in millions): Year Ended December 31,  2019 2020 2021 Beginning gross unrecognized tax benefits $ 4,652  $ 3,377  $ 3,837  Increases related to prior year tax positions 938  372  529  Decreases related to prior year tax positions ( 143 ) ( 557 ) ( 263 ) Decreases related to settlement with tax authorities ( 2,886 ) ( 45 ) ( 329 ) Increases related to current year tax positions 816  690  1,384  Ending gross unrecognized tax benefits $ 3,377  $ 3,837  $ 5,158  The total amount of gross unrecognized tax benefits was $ 3.4 billion, $ 3.8 billion, and $ 5.2 billion as of December 31, 2019, 2020, and 2021, respectively, of which $ 2.3 billion, $ 2.6 billion, and $ 3.7 billion, if recognized, would affect our effective tax rate, respectively. As of December 31, 2020 and 2021, we accrued $ 222 million and $ 270 million in interest and penalties in provision for income taxes, respectively. We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. Our two major tax jurisdictions are the U.S. federal and Ireland. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. The IRS is currently examining our 2016 through 2018 tax returns. We have also received tax assessments in multiple foreign jurisdictions asserting transfer pricing adjustments or permanent establishment. We continue to defend any and all such claims as presented. The tax years 2014 through 2020 remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are other ongoing audits in various other jurisdictions that are not material to our financial statements. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. Although the timing of resolution, settlement, and closure of audits is not certain, it is reasonably possible that our unrecognized tax benefits from certain U.S. federal, state and non U.S. tax positions could decrease by approximately $ 2.0 billion in the next 12 months. Positions that may be resolved include various U.S. and non-U.S. matters. Note 15. Information about Segments and Geographic Areas We report our segment results as Google Services, Google Cloud, and Other Bets:  Google Services includes products and services such as ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube. Google Services generates revenues primarily from advertising; sales of apps and in-app purchases, digital content products, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.  Google Cloud includes Googles infrastructure and platform services, collaboration tools, and other services for enterprise customers. Google Cloud generates revenues from fees received for Google Cloud Platform services, Google Workspace collaboration tools and other enterprise services.  Other Bets is a combination of multiple operating segments that are not individually material. Revenues from Other Bets are generated primarily from the sale of health technology and internet services. Revenues, certain costs, such as costs associated with content and traffic acquisition, certain engineering activities, and hardware, as well as certain operating expenses are directly attributable to our segments. Due to the integrated nature of Alphabet, other costs and expenses, such as technical infrastructure and office facilities, are managed centrally at a consolidated level. The associated costs, including depreciation and impairment, are allocated to operating segments as a service cost generally based on usage or headcount. Alphabet Inc. Unallocated corporate costs primarily include corporate initiatives, corporate shared costs, such as finance and legal, including certain fines and settlements, as well as costs associated with certain shared RD activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs. Our operating segments are not evaluated using asset information. Information about segments during the periods presented were as follows (in millions). For comparative purposes, amounts in prior periods have been recast: Year Ended December 31, 2019 2020 2021 Revenues: Google Services $ 151,825  $ 168,635  $ 237,529  Google Cloud 8,918  13,059  19,206  Other Bets 659  657  753  Hedging gains (losses) 455  176  149  Total revenues $ 161,857  $ 182,527  $ 257,637  Operating income (loss): Google Services $ 48,999  $ 54,606  $ 91,855  Google Cloud ( 4,645 ) ( 5,607 ) ( 3,099 ) Other Bets ( 4,824 ) ( 4,476 ) ( 5,281 ) Corporate costs, unallocated (1) ( 5,299 ) ( 3,299 ) ( 4,761 ) Total income from operations $ 34,231  $ 41,224  $ 78,714  (1) Corporate costs, unallocated includes a fine and legal settlement totaling $ 2.3 billion for the year ended December 31, 2019. For revenues by geography, see Note 2. The following table presents long-lived assets by geographic area, which includes property and equipment, net and operating lease assets (in millions): As of December 31,  2020 2021 Long-lived assets: United States $ 69,315  $ 80,207  International 27,645  30,351  Total long-lived assets $ 96,960  $ 110,558  Alphabet Inc. "," ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2021, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting We rely extensively on information systems to manage our business and summarize and report operating results. In 2019, we began a multi-year implementation of a new global ERP system, which will replace much of our existing core financial systems. The ERP system is designed to accurately maintain our financial records, enhance the flow of financial information, improve data management and provide timely information to our management team. The implementation is expected to continue in phases over the next few years. We completed the implementation of certain of our subledgers, which included changes to our processes, procedures and internal controls over financial reporting during the second quarter of 2021. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as the phased implementation of the new ERP system continues, we will change our processes and procedures, which in turn, could result in changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting. As a result of COVID-19, our global workforce continued to operate primarily in a work from home environment for the quarter ended December 31, 2021. While we continue to evolve our work model in response to the uneven effects of the ongoing pandemic around the world, we believe that our internal controls over financial reporting continue to be eff ective. We have continued to re-evaluate and refine our financial reporting process to provide reasonable assurance that we could report our financial results accurately and in a timely manner. Managements Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021. Management reviewed the results of its assessment with our Audit and Compliance Committee. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Ernst  Young LLP , an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Annual Report on Form 10-K. Limitations on Effectiveness of Controls and Procedures In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. "
1,goog,20201231," ITEM 1. BUSINESS Overview As our founders Larry and Sergey wrote in the original founders' letter, ""Google is not a conventional company. We do not intend to become one."" That unconventional spirit has been a driving force throughout our history, inspiring us to tackle big problems, and invest in moonshots like artificial intelligence (""AI"") research and quantum computing. We continue this work under the leadership of Sundar Pichai, who has served as CEO of Google since 2015 and as CEO of Alphabet since 2019. Alphabet is a collection of businesses  the largest of which is Google  which we report as two segments: Google Services and Google Cloud. We report all non-Google businesses collectively as Other Bets. Our Other Bets include earlier stage technologies that are further afield from our core Google business. We take a long term view and manage the portfolio of Other Bets with the discipline and rigor needed to deliver long-term returns. Our Alphabet structure is about helping each of our businesses prosper through strong leaders and independence. Access and technology for everyone The Internet is one of the worlds most powerful equalizers, capable of propelling new ideas and people forward. Our mission to organize the worlds information and make it universally accessible and useful is as relevant today as it was when we were founded in 1998. Since then, weve evolved from a company that helps people find answers to a company that helps you get things done. Were focused on building an even more helpful Google for everyone, and we aspire to give everyone the tools they need to increase their knowledge, health, happiness and success. Across Alphabet, we're focused on continually innovating in areas where technology can have an impact on peoples lives. Every year, there are trillions of searches on Google, and we continue to invest deeply in AI and other technologies to ensure the most helpful Search experience possible. People come to YouTube for entertainment, information and opportunities to learn something new. And Google Assistant offers the best way to get things done seamlessly across different devices, providing intelligent help throughout your day, no matter where you are. Since the pandemic began, our teams have built new features to help users go about their daily lives, and to support businesses working to serve their customers during an uncertain time. In conjunction with Apple, we launched Exposure Notification apps that are being used by local governments globally. Our COVID-19 Community Mobility Reports are used by public health agencies and researchers around the globe, and weve committed hundreds of millions of dollars to help small businesses through a combination of small business loans, grants and ad credits. Importantly, we've made authoritative content a key focus area across both Google Search and YouTube to help users search for trusted public health information. Our Other Bets are also pursuing initiatives with similar goals. For instance, as a part of our efforts in the Metro Phoenix area, Waymo is working toward our goal of making transportation safer and easier for everyone while Verily is developing tools and platforms to improve health outcomes. Moonshots Many companies get comfortable doing what they have always done, making only incremental changes. This incrementalism leads to irrelevance over time, especially in technology, where change tends to be revolutionary, not evolutionary. People thought we were crazy when we acquired YouTube and Android and when we launched Chrome, but those efforts have matured into major platforms for digital video and mobile devices and a safer, popular browser. We continue to look toward the future and continue to invest for the long-term. As we said in the original founders' letter, we will not shy away from high-risk, high-reward projects that we believe in because they are the key to our long-term success. The power of machine learning Across the company, machine learning and AI are increasingly driving many of our latest innovations. Our investments in machine learning over the past decade have enabled us to build products that are smarter and more helpful. For example, a huge breakthrough in natural language understanding, called BERT, now improves results for almost every English language search query. DeepMind made a significant AI-powered breakthrough, solving a 50-year-old protein folding challenge, which will help us better understand one of lifes fundamental building blocks, and will enable researchers to tackle new and difficult problems, from fighting diseases to environmental sustainability. Alphabet Inc. Google For reporting purposes, Google comprises two segments: Google Services and Google Cloud. Google Services Serving our users We have always been a company committed to building helpful products that can improve the lives of millions of people. Our product innovations have made our services widely used, and our brand one of the most recognized in the world. Google Services' core products and platforms include Android, Chrome, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube, each with broad and growing adoption by users around the world. Our products and services have come a long way since the company was founded more than two decades ago. Rather than the ten blue links in our early search results, users can now get direct answers to their questions using their computer, mobile device, or their own voice, making it quicker, easier and more natural to find what you're looking for. This drive to make information more accessible and helpful has led us over the years to improve the discovery and creation of digital content, on the web and through platforms like Google Play and YouTube. With the migration to mobile, people are consuming more digital content by watching more videos, playing more games, listening to more music, reading more books, and using more apps than ever before. Working with content creators and partners, we continue to build new ways for people around the world to find great digital content. Fueling all of these great digital experiences are powerful platforms and hardware. Thats why we continue to invest in platforms like our Android mobile operating system, Chrome browser, Chrome operating system, as well as growing our family of great hardware devices. We see tremendous potential for devices to be helpful, make your life easier, and get better over time, by combining the best of our AI, software, and hardware. This is reflected in our latest generation of hardware products like Pixel 4a, Pixel 4a 5G and Pixel 5 phones, Chromecast with Google TV and the Google Nest Hub smart display. Creating beautiful products that people rely on every day is a journey that we are investing in for the long run. Key to building helpful products for users is our commitment to privacy, security and user choice. As the Internet evolves, we continue to invest in keeping data safe, including enhanced malware features in Chrome and improvements to auto-delete controls that will automatically delete web and app searches after 18 months. How we make money Our advertising products deliver relevant ads at just the right time, to give people useful commercial information, regardless of the device theyre using. We also provide advertisers with tools that help them better attribute and measure their advertising campaigns. Our advertising solutions help millions of companies grow their businesses, and we offer a wide range of products across devices and formats. Google Services generates revenues primarily by delivering both performance advertising and brand advertising.  Performance advertising creates and delivers relevant ads that users will click on, leading to direct engagement with advertisers. Most of our performance advertisers pay us when a user engages in their ads. Performance advertising lets our advertisers connect with users while driving measurable results. Our ads tools allow performance advertisers to create simple text-based ads that appear on Google Search  other properties, YouTube and the properties of Google Network Members. In addition, Google Network Members use our platforms to display relevant ads on their properties, generating revenues when site visitors view or click on the ads. We continue to invest in our advertising programs and make significant upgrades.  Brand advertising helps enhance users' awareness of and affinity with advertisers' products and services, through videos, text, images, and other interactive ads that run across various devices. We help brand advertisers deliver digital videos and other types of ads to specific audiences for their brand-building marketing campaigns. We have built a world-class ad technology platform for advertisers, agencies, and publishers to power their digital marketing businesses. We aim to ensure great user experiences by serving the right ads at the right time and by building deep partnerships with brands and agencies. We also seek to improve the measurability of advertising so advertisers know when their campaigns are effective. We have allocated substantial resources to stopping bad advertising practices and protecting users on the web. We focus on creating the best advertising experiences for our users and advertisers in many ways, ranging Alphabet Inc. from filtering out invalid traffic, removing billions of bad ads from our systems every year to closely monitoring the sites, apps, and videos where ads appear and blocklisting them when necessary to ensure that ads do not fund bad content. We continue to look to the future and are making long-term investments that will grow revenues beyond advertising, including Google Play, hardware, and YouTube. We are also investing in research efforts in AI and quantum computing to foster innovation across our businesses and create new opportunities. Google Cloud Google was a company built in the cloud. We continue to invest in infrastructure, security, data management, analytics and AI. We see significant opportunity in helping businesses utilize these strengths with features like data migration, modern development environments and machine learning tools to provide enterprise-ready cloud services, including Google Cloud Platform and Google Workspace (formerly known as G Suite). Google Cloud Platform enables developers to build, test, and deploy applications on its highly scalable and reliable infrastructure. Our Google Workspace collaboration tools  which include apps like Gmail, Docs, Drive, Calendar, Meet and more  are designed with real-time collaboration and machine intelligence to help people work smarter. Because more and more of todays great digital experiences are being built in the cloud, our Google Cloud products help businesses of all sizes take advantage of the latest technology advances to operate more efficiently. Google Cloud generates revenues primarily from fees received for Google Cloud Platform services and Google Workspace collaboration tools. Other Bets Throughout Alphabet, we are also using technology to try and solve big problems across many industries. Alphabets investment in our portfolio of Other Bets include emerging businesses at various stages of development, ranging from those in the research and development phase to those that are in the beginning stages of commercialization, and our goal is for them to become thriving, successful businesses in the medium to long term. While these early-stage businesses naturally come with considerable uncertainty, some of them are already generating revenue and making important strides in their industries. Revenues are primarily generated from internet and TV services, as well as licensing and RD services. Other Bets operate as independent companies and some of them have their own boards with independent members and outside investors. We are investing in our portfolio of Other Bets and being very deliberate about the focus, scale, and pace of investments. Competition Our business is characterized by rapid change as well as new and disruptive technologies. We face formidable competition in every aspect of our business, particularly from companies that seek to connect people with online information and provide them with relevant advertising. We face competition from:  General purpose search engines and information services, such as Baidu, Microsoft's Bing, Naver, Seznam, Verizon's Yahoo, and Yandex.  Vertical search engines and e-commerce websites, such as Amazon and eBay (e-commerce), Booking's Kayak (travel queries), Microsoft's LinkedIn (job queries), and WebMD (health queries). Some users will navigate directly to such content, websites, and apps rather than go through Google.  Social networks, such as Facebook, Snapchat, and Twitter. Some users increasingly rely on social networks for product or service referrals, rather than seeking information through traditional search engines.  Other forms of advertising, such as billboards, magazines, newspapers, radio, and television. Our advertisers typically advertise in multiple media, both online and offline.  Other online advertising platforms and networks, including Amazon, AppNexus, Criteo, and Facebook, that compete for advertisers that use Google Ads, our primary auction-based advertising platform.  Providers of digital video services, such as Amazon, Apple, ATT, Disney, Facebook, Hulu, Netflix and TikTok. In businesses that are further afield from our advertising business, we compete with companies that have longer operating histories and more established relationships with customers and users. We face competition from:  Other digital content and application platform providers, such as Amazon and Apple. Alphabet Inc.  Companies that design, manufacture, and market consumer hardware products, including businesses that have developed proprietary platforms.  Providers of enterprise cloud services, including Alibaba, Amazon, and Microsoft.  Digital assistant providers, such as Amazon and Apple. Competing successfully depends heavily on our ability to deliver and distribute innovative products and technologies to the marketplace across our businesses. Specifically, for advertising, competing successfully depends on attracting and retaining:  Users, for whom other products and services are literally one click away, largely on the basis of the relevance of our advertising, as well as the general usefulness, security and availability of our products and services.  Advertisers, primarily based on our ability to generate sales leads, and ultimately customers, and to deliver their advertisements in an efficient and effective manner across a variety of distribution channels.  Content providers, primarily based on the quality of our advertiser base, our ability to help these partners generate revenues from advertising, and the terms of our agreements with them. Ongoing Commitment to Sustainability At Google, we build technology that helps people do more for the planet. We strive to build sustainability into everything we do, including designing and operating efficient data centers, advancing carbon-free energy, creating sustainable workplaces, building better devices and services, empowering users with technology, and enabling a responsible supply chain. Google has been carbon neutral since 2007, and in 2019, for the third consecutive year, we matched 100% of our electricity consumption with renewable energy purchases. We are the largest annual corporate purchaser of renewable energy in the world, based on renewable electricity purchased in megawatt-hour (MWh). In 2020, we neutralized our entire legacy carbon footprint since our founding (covering all our operational emissions before we became carbon neutral in 2007), making Google the first major company to achieve carbon neutrality for its entire operating history. In our third decade of climate action, weve set our most ambitious goal yet: to run our business on carbon-free energy everywhere, at all times, by 2030. We're also investing in technologies to help our partners and people all over the world make sustainable choices. For example, we intend to enable 5 GW of new carbon-free energy across our key manufacturing regions by 2030 through investment. We anticipate this will spur more than $5 billion in clean energy investments, avoid the amount of emissions equal to taking more than 1 million cars off the road each year, and create more than 8,000 clean energy jobs. With the Environmental Insights Explorer, we're also working to help more than 500 cities and local governments globally reduce a total of 1 gigaton of carbon emissions annually by 2030  thats the equivalent of the annual carbon emissions of a country the size of Japan. Googles products are already helping people make more sustainable choices in their daily lives, whether its using Google Maps to find bike-shares and electric vehicle charging stations, or in many European countries, using Google Flights to sort the least carbon-intensive option flights. There are more tools and information we can provide, and our goal is to find new ways that our products can help 1 billion people make more sustainable choices by 2022. Climate change is one of the most significant global challenges of our time. In 2017, we developed a climate resilience strategy, which included conducting a climate scenario analysis. We've earned a spot on the CDP (formerly the Carbon Disclosure Project) Climate Change A List for seven consecutive years. We believe our CDP climate change response reflects the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In 2020, we issued $5.75 billion in sustainability bonds, the largest sustainability or green bond issuance by any company in history. The net proceeds from the issuance are used to fund environmentally and socially responsible projects in the following eight areas: energy efficiency, clean energy, green buildings, clean transportation, circular economy and design, affordable housing, commitment to racial equity, and support for small businesses and COVID-19 crisis response. More information on our approach to sustainability can be found in our annual sustainability reports, including Googles environmental report. The content of our sustainability reports are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. Alphabet Inc. Culture and Workforce Were a company of curious, talented and passionate people. We embrace collaboration and creativity, and encourage the iteration of ideas to address complex challenges in technology and society. Our people are critical for our continued success. We work hard to provide an environment where Googlers can have fulfilling careers, and be happy, healthy and productive. We offer industry-leading benefits and programs to take care of the diverse needs of our employees and their families, including access to excellent healthcare choices, opportunities for career growth and development, and resources to support their financial health. Our competitive compensation programs help us to attract and retain top candidates, and we will continue to invest in recruiting talented people to technical and non-technical roles and rewarding them well. Alphabet is committed to making diversity, equity, and inclusion part of everything we do and were committed to growing a workforce thats representative of the users we serve. More information on Googles approach to diversity can be found in our annual diversity reports, available publicly at diversity.google. The content of our diversity reports is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. We have work councils and statutory employee representation obligations in certain countries and we are committed to supporting protected labor rights, maintaining an open culture and listening to all Googlers. Supporting healthy and open dialogue is central to how we work, and we communicate information about the company through multiple internal channels to our employees. As of December 31, 2020, Alphabet had 135,301 employees. When necessary, we contract with businesses around the world to provide specialized services where we dont have appropriate in-house expertise or resources, often in fields that require specialized training like cafe operations, customer support, content moderation and physical security. We also contract with temporary staffing agencies when we need to cover short-term leaves, when we have spikes in business needs, or when we need to quickly incubate special projects. We choose our partners and staffing agencies carefully, and review their compliance with Googles Supplier Code of Conduct. We continually make improvements to promote a respectful and positive working environment for everyone  employees, vendors and temporary staff alike. Government Regulation We are subject to numerous U.S. federal, state, and foreign laws and regulations covering a wide variety of subject matters. Like other companies in the technology industry, we face heightened scrutiny from both U.S. and foreign governments with respect to our compliance with laws and regulations. Our compliance with these laws and regulations may be onerous and could, individually or in the aggregate, increase our cost of doing business, impact our competitive position relative to our peers, and/or otherwise have an adverse impact on our business, reputation, financial condition, and operating results. For additional information about government regulation applicable to our business, see Risk Factors in Part I, Item 1A, Trends in Our Business in Part II, Item 7, and Legal Matters in Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K. Intellectual Property We rely on various intellectual property laws, confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We have registered, and applied for the registration of, U.S. and international trademarks, service marks, domain names and copyrights. We have also filed patent applications in the U.S. and foreign countries covering certain of our technology, and acquired patent assets to supplement our portfolio. We have licensed in the past, and expect that we may license in the future, certain of our rights to other parties. Seasonality Our business is affected by seasonal fluctuations in internet usage, advertising expenditures, and underlying business trends such as traditional retail seasonality (including developments and volatility arising from COVID-19). Available Information Our website is located at www.abc.xyz, and our investor relations website is located at www.abc.xyz/investor. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, are available through our investor relations website, free of charge, after we file them with the SEC. We also provide a link to the section of the SEC's website at www.sec.gov that has all of the reports that we file or furnish with the SEC. We webcast via our investor relations website our earnings calls and certain events we participate in or host with members of the investment community. Our investor relations website also provides notifications of news or Alphabet Inc. announcements regarding our financial performance and other items that may be material or of interest to our investors, including SEC filings, investor events, press and earnings releases, and blogs. We also share Google news and product updates on Google's Keyword blog at https://www.blog.google/, that may be material or of interest to our investors. Further, corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading ""Other."" The content of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. "," ITEM 1A. RISK FACTORS Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could harm our business, reputation, financial condition, and operating results. Risks Specific to our Company We generate a significant portion of our revenues from advertising, and reduced spending by advertisers, a loss of partners, or new and existing technologies that block ads online and/or affect our ability to customize ads could harm our business. We generate d over 80% o f total revenues from the display of ads online in 2020. Many of our advertisers, companies that distribute our products and services, digital publishers, and content providers can terminate their contracts with us at any time. These partners may not continue to do business with us if we do not create more value (such as increased numbers of users or customers, new sales leads, increased brand awareness, or more effective monetization) than their available alternatives. Changes to our advertising policies and data privacy practices, as well as changes to other companies advertising and/or data privacy practices may affect the advertising that we are able to provide, which could harm our business. In addition, technologies have been developed that make customized ads more difficult or that block the display of ads altogether and some providers of online services have integrated technologies that could potentially impair the availability and functionality of third-party digital advertising. Failing to provide superior value or deliver advertisements effectively and competitively could harm our reputation, financial condition, and operating results. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions, including COVID-19 and its effects on the global economy (as discussed in greater detail in our COVID-19 risk factor under General Risks below), have impacted the demand for advertising and resulted in fluctuations in the amounts our advertisers spend on advertising, and could have an adverse impact on such demand and spend, which could harm our financial condition and operating results. We face intense competition. If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, which could harm our business and operating results. Our business environment is rapidly evolving and intensely competitive. Our businesses face changing technologies, shifting user needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant and useful products, services, and technologies in a timely manner. As our businesses evolve, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in research and development, including through acquisitions, in order to enhance our technology and new and existing products and services. We have many competitors in different industries. Our current and potential domestic and international competitors range from large and established companies to emerging start-ups. Some competitors have longer operating histories and well established relationships in various sectors. They can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, continuing to invest heavily in research and development and in talent, aggressively initiating intellectual property claims (whether or not meritorious), and continuing to compete aggressively for users, advertisers, customers, and content providers. Further, discrepancies in enforcement of existing laws may enable our lesser known competitors to aggressively interpret those laws without commensurate scrutiny, thereby affording them competitive advantages. Our competitors may also be able to innovate and provide products and services faster than we can or may foresee the need for products and services before us. Our operating results may also suffer if our products and services are not responsive to the needs of our users, advertisers, publishers, customers, and content providers. As technologies continue to develop, our competitors may be able to offer experiences that are, or that are seen to be, substantially similar to or better than ours. This Alphabet Inc. may force us to compete in different ways and expend significant resources in order to remain competitive. If our competitors are more successful than we are in developing compelling products or in attracting and retaining users, advertisers, publishers, customers, and content providers, our operating results could be harmed. Our ongoing investment in new businesses, products, services, and technologies is inherently risky, and could disrupt our current operations and harm our financial condition and operating results. We have invested and expect to continue to invest in new businesses, products, services, and technologies. The investments that we are making across Google Services, Google Cloud and Other Bets reflect our ongoing efforts to innovate and provide products and services that are useful to users, advertisers, publishers, customers, and content providers. Our investments in Google Services, Google Cloud and Other Bets span a wide range of industries beyond online advertising. Such investments ultimately may not be commercially viable or may not result in an adequate return of capital and, in pursuing new strategies, we may incur unanticipated liabilities. These endeavors may involve significant risks and uncertainties, including diversion of management resources and, with respect to Other Bets, the use of alternative investment, governance, or compensation structures that may fail to adequately align incentives across the company or otherwise accomplish their objectives. Within Google Services, we continue to invest heavily in hardware, including our smartphones and home devices, which is a highly competitive market with frequent introduction of new products and services, rapid adoption of technological advancements by competitors, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, and price and feature sensitivity on the part of consumers and businesses. There can be no assurance we will be able to provide hardware that competes effectively. Within Google Cloud, we devote significant resources to develop and deploy our enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. We are incurring costs to build and maintain infrastructure to support cloud computing services and hire talent, particularly to support and scale our salesforce. At the same time, our competitors are rapidly developing and deploying cloud-based services. Pricing and delivery models are competitive and evolving, and we may not attain sufficient scale and profitability to achieve our business objectives. Within Other Bets, we are investing significantly in the areas of health, life sciences, and transportation, among others. These investment areas face intense competition from large experienced and well-funded competitors and our offerings may not be able to compete effectively or to operate at sufficient levels of profitability. In addition, new and evolving products and services, including those that use artificial intelligence and machine learning, raise ethical, technological, legal, regulatory, and other challenges, which may negatively affect our brands and demand for our products and services. Because all of these new ventures are inherently risky, no assurance can be given that such strategies and offerings will be successful and will not harm our reputation, financial condition, and operating results. Our revenue growth rate could decline over time, and we anticipate downward pressure on our operating margin in the future. Our revenue growth rate could decline over time as a result of a number of factors, including increasing competition and the continued expansion of our business into a variety of new fields. Changes in device mix, geographic mix, ongoing product and policy changes, product mix, and property mix and an increasing competition for advertising may also affect our advertising revenue growth rate. We may also experience a decline in our revenue growth rate as our revenues increase to higher levels, if there is a decrease in the rate of adoption of our products, services, and technologies, or due to deceleration or decline in demand for devices used to access our services, among other factors. In addition, COVID-19 and its effects on the global economy has impacted and may continue to adversely impact our revenue growth rate (as discussed in greater detail in our COVID-19 risk factor under General Risks below). In addition to a decline in our revenue growth rate, we may also experience downward pressure on our operating margin resulting from a variety of factors, such as the continued expansion of our business into new fields, including products and services such as hardware, Google Cloud, and subscription products, as well as significant investments in Other Bets, all of which may have margins lower than those we generate from advertising. We may also experience downward pressure on our operating margins from increasing regulations, increasing competition and increased costs for many aspects of our business, including within advertising where changes such as device mix, property mix, and partner agreements can affect margin. The margin we earn on revenues generated from our Google Network Members could also decrease in the future if we pay a larger percentage of advertising fees to them. We may also pay increased TAC to our distribution partners as well as increased content acquisition Alphabet Inc. costs to content providers. We may also face an increase in infrastructure costs, supporting businesses such as Search, Google Cloud, and YouTube. Many of our expenses are less variable in nature and may not correlate to changes in revenues. Due to these factors and the evolving nature of our business, our historical revenue growth rate and historical operating margin may not be indicative of our future performance. Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brands as well as affect our ability to compete. Our patents, trademarks, trade secrets, copyrights, and other intellectual property rights are important assets for us. Various events outside of our control pose a threat to our intellectual property rights, as well as to our products, services, and technologies. For example, effective intellectual property protection may not be available in every country in which our products and services are distributed or made available through the Internet. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Although we seek to obtain patent protection for our innovations, it is possible we may not be able to protect some of these innovations. Moreover, we may not have adequate patent or copyright protection for certain innovations that later turn out to be important. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued patent may be deemed invalid or unenforceable. We also seek to maintain certain intellectual property as trade secrets. The secrecy of such trade secrets and other sensitive information could be compromised, which could cause us to lose the competitive advantage resulting from these trade secrets. We also face risks associated with our trademarks. For example, there is a risk that the word Google could become so commonly used that it becomes synonymous with the word search. Some courts have ruled that ""Google"" is a protectable trademark, but it is possible that other courts, particularly those outside of the United States, may reach a different determination. If this happens, we could lose protection for this trademark, which could result in other people using the word Google to refer to their own products, thus diminishing our brand. Any significant impairment of our intellectual property rights could harm our business and our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results. Our business depends on strong brands, and failing to maintain and enhance our brands would hurt our ability to expand our base of users, advertisers, customers, content providers, and other partners. Our strong brands have significantly contributed to the success of our business. Maintaining and enhancing the brands within Google Services, Google Cloud and Other Bets increases our ability to enter new categories and launch new and innovative products that better serve the needs of our users, advertisers, customers, content providers, and other partners. Our brands may be negatively affected by a number of factors, including, among others, reputational issues, third-party content shared on our platforms, data privacy and security issues and developments, and product or technical performance failures. For example, if we fail to appropriately respond to the sharing of misinformation or objectionable content on our services and/or products or objectionable practices by advertisers, or to otherwise adequately address user concerns, our users may lose confidence in our brands. Furthermore, failure to maintain and enhance equity in our brands may harm our business, financial condition, and operating results. Our success will depend largely on our ability to remain a technology leader and continue to provide high-quality, innovative products and services that are truly useful and play a valuable role in a range of settings. We face a number of manufacturing and supply chain risks that, if not properly managed, could harm our financial condition, operating results, and prospects. We face a number of risks related to manufacturing and supply chain management, which could affect our ability to supply both our products and our internet-based services. We rely on other companies to manufacture many of our finished products, to design certain of our components and parts, and to participate in the distribution of our products and services. Our business could be negatively affected if we are not able to engage these companies with the necessary capabilities or capacity on reasonable terms, or if those we engage fail to meet their obligations (whether due to financial difficulties or other reasons), or make adverse changes in the pricing or other material terms of our arrangements with them. We have experienced and/or may experience supply shortages and price increases driven by raw material, component or part availability, manufacturing capacity, labor shortages, industry allocations, tariffs, trade disputes Alphabet Inc. and barriers, natural disasters or pandemics (including COVID-19), the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), and significant changes in the financial or business condition of our suppliers. We have experienced and/or may in the future, experience shortages or other supply chain disruptions that could negatively affect our operations. In addition, some of the components we use in our technical infrastructure and products are available from only one or limited sources, and we may not be able to find replacement vendors on favorable terms in the event of a supply chain disruption. In addition, a significant supply interruption could delay critical data center upgrades or expansions and delay product availability. We may enter into long term contracts for materials and products that commit us to significant terms and conditions. We may be liable for materials and products that are not consumed due to market acceptance, technological change, obsolescences, quality, product recalls, and warranty issues. For instance, because certain of our hardware supply contracts have volume-based pricing or minimum purchase requirements, if the volume of our hardware sales decreases or does not reach projected targets, we could face increased materials and manufacturing costs or other financial liabilities that could make our products more costly per unit to manufacture and negatively affect our financial results. Furthermore, certain of our competitors may negotiate more favorable contractual terms based on volume and other commitments that may provide them with competitive advantages and may affect our supply. Our products and services may have quality issues resulting from design, manufacturing, or operations. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers. If the quality of our products and services does not meet expectations or our products or services are defective, it could harm our reputation, financial condition, and operating results. We require our suppliers and business partners to comply with laws and, where applicable, our company policies, such as the Google Supplier Code of Conduct, regarding workplace and employment practices, data security, environmental compliance and intellectual property licensing, but we do not control them or their practices. Violations of law or unethical business practices could result in supply chain disruptions, canceled orders, harm to key relationships, and damage to our reputation. Their failure to procure necessary license rights to intellectual property, could affect our ability to sell our products or services and expose us to litigation or financial claims. Interruption, interference with, or failure of our complex information technology and communications systems could hurt our ability to effectively provide our products and services, which could harm our reputation, financial condition, and operating results. In addition, complications with the design or implementation of our new global enterprise resource planning system could harm our business and operations. The availability of our products and services and fulfillment of our customer contracts depend on the continuing operation of our information technology and communications systems. Our systems are vulnerable to damage, interference, or interruption from modifications or upgrades, terrorist attacks, natural disasters or pandemics (including COVID-19), the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), power loss, telecommunications failures, computer viruses, ransomware attacks, computer denial of service attacks, phishing schemes, or other attempts to harm or access our systems. Some of our data centers are located in areas with a high risk of major earthquakes or other natural disasters. Our data centers are also subject to break-ins, sabotage, and intentional acts of vandalism, and, in some cases, to potential disruptions resulting from problems experienced by facility operators. Some of our systems are not fully redundant, and disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster or pandemic (including COVID-19), closure of a facility, or other unanticipated problems at, or impacting, our data centers could result in lengthy interruptions in our service. In addition, our products and services are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in or failure of our services or systems. In addition, we rely extensively on information systems and technology to manage our business and summarize operating results. We are in the process of a multi-year implementation of a new ERP system, which will replace much of our existing core financial systems. The ERP system is designed to accurately maintain our financial records, enhance the flow of financial information, improve data management, and provide timely information to our management team. We may not be able to successfully implement the ERP system without experiencing delays, increased costs, and other difficulties. Failure to successfully design and implement the new ERP system as planned could harm our business, financial condition, and operating results. Additionally, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively affected. Alphabet Inc. Our international operations expose us to additional risks that could harm our business, our financial condition, and operating results. Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. International revenues accounted for approximately 53% of our consolidated revenues in 2020. In addition to risks described elsewhere in this section, our international operations expose us to other risks, including the following:  Restrictions on foreign ownership and investments, and stringent foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S.  Import and export requirements, tariffs and other market access barriers that may prevent or impede us from offering products or providing services to a particular market, or that could limit our ability to source assemblies and finished products from a particular market, and may increase our operating costs.  Longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud.  Evolving foreign events, including the effect of the United Kingdom's withdrawal from the European Union, may adversely affect our revenues and could subject us to new regulatory costs and challenges (including the transfer of personal data between the EU and the United Kingdom and new customer requirements), in addition to other adverse effects that we are unable to effectively anticipate.  Anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, and other local laws prohibiting certain payments to government officials, violations of which could result in civil and criminal penalties.  Uncertainty regarding liability for services and content, including uncertainty as a result of local laws and lack of legal precedent.  Different employee/employer relationships, existence of works councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions. Because we conduct business in currencies other than U.S. dollars but report our financial results in U.S. dollars, we face exposure to fluctuations in foreign currency exchange rates. Although we hedge a portion of our international currency exposure, significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings, particularly in light of market volatilities due to COVID-19. Hedging programs are also inherently risky and could expose us to additional risks that could harm our financial condition and operating results. Risks Related to our Industry People access the Internet through a variety of platforms and devices that continue to evolve with the advancement of technology and user preferences. If manufacturers and users do not widely adopt versions of our products and services developed for these interfaces, our business could be harmed. People access the Internet through a growing variety of devices such as desktop computers, mobile phones, smartphones, laptops and tablets, video game consoles, voice-activated speakers, wearables, automobiles, and television-streaming devices. Our products and services may be less popular on some interfaces. Each manufacturer or distributor may establish unique technical standards for its devices, and our products and services may not be available or may only be available with limited functionality for our users or our advertisers on these devices as a result. Some manufacturers may also elect not to include our products on their devices. In addition, search queries are increasingly being undertaken via voice-activated speakers, apps, social media or other platforms, which could harm our business. It is hard to predict the challenges we may encounter in adapting our products and services and developing competitive new products and services. We expect to continue to devote significant resources to creating and supporting products and services across multiple platforms and devices. Failing to attract and retain a substantial number of new device manufacturers, suppliers, distributors, developers, and users, or failing to develop products and technologies that work well on new devices and platforms, could harm our business, financial condition, and operating results and ability to capture future business opportunities. Data privacy and security concerns relating to our technology and our practices could damage our reputation, cause us to incur significant liability, and deter current and potential users or customers from using our products and services. Software bugs or defects, security breaches, and attacks on our systems could result in the improper disclosure and use of user data and interference with our users and customers ability to use our products and services, harming our business operations and reputation. Alphabet Inc. Concerns about our practices with regard to the collection, use, disclosure, or security of personal information or other data-privacy-related matters, even if unfounded, could harm our reputation, financial condition, and operating results. Our policies and practices may change over time as expectations regarding privacy and data change. Our products and services involve the storage and transmission of proprietary and other sensitive information, and bugs, theft, misuse, defects, vulnerabilities in our products and services, and security breaches expose us to a risk of loss of this information, improper use and disclosure of such information, litigation, and other potential liability. Systems and control failures, security breaches, failure to comply with our privacy policies, and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm our reputation and brand and, therefore, our business, and impair our ability to attract and retain users or customers. We expect to continue to expend significant resources to maintain security protections that shield against bugs, theft, misuse, or security vulnerabilities or breaches. We experience cyber attacks and other attempts to gain unauthorized access to our systems on a regular basis. We may experience future security issues, whether due to employee error or malfeasance or system errors or vulnerabilities in our or other parties systems, which could result in significant legal and financial exposure. Government inquiries and enforcement actions, litigation, and adverse press coverage could harm our business. We may be unable to anticipate or detect attacks or vulnerabilities or implement adequate preventative measures. Attacks and security issues could also compromise trade secrets and other sensitive information, harming our business. While we have dedicated significant resources to privacy and security incident response capabilities, including dedicated worldwide incident response teams, our response process, particularly during times of a natural disaster or pandemic (including COVID-19), may not be adequate, may fail to accurately assess the severity of an incident, may not respond quickly enough, or may fail to sufficiently remediate an incident. As a result, we may suffer significant legal, reputational, or financial exposure, which could harm our business, financial condition, and operating results. Our ongoing investments in safety, security, and content review will likely continue to identify abuse of our platforms and misuse of user data. In addition to our efforts to mitigate cyber attacks, we are making significant investments in safety, security, and content review efforts to combat misuse of our services and unauthorized access to user data by third parties, including investigations and review of platform applications that could access the information of users of our services. As a result of these efforts, we could discover incidents of unnecessary access to or misuse of user data or other undesirable activity by third parties. We may not discover all such incidents or activity, whether as a result of our data limitations, including our lack of visibility over our encrypted services, the scale of activity on our platform, or other factors, including factors outside of our control such as a natural disaster or pandemic (including COVID-19), and we may be notified of such incidents or activity via third parties. Such incidents and activities may include the use of user data or our systems in a manner inconsistent with our terms, contracts or policies, the existence of false or undesirable user accounts, election interference, improper ad purchases, activities that threaten peoples safety on- or offline, or instances of spamming, scraping, or spreading disinformation. We may also be unsuccessful in our efforts to enforce our policies or otherwise remediate any such incidents. Any of the foregoing developments may negatively affect user trust and engagement, harm our reputation and brands, require us to change our business practices in a manner adverse to our business, and adversely affect our business and financial results. Any such developments may also subject us to additional litigation and regulatory inquiries, which could result in monetary penalties and damages, divert managements time and attention, and lead to enhanced regulatory oversight. Problematic content on our platforms, including low-quality user-generated content, web spam, content farms, and other violations of our guidelines could affect the quality of our services, which could damage our reputation and deter our current and potential users from using our products and services. We, like others in the industry, face violations of our content guidelines across our platforms, including sophisticated attempts by bad actors to manipulate our hosting and advertising systems to fraudulently generate revenues, or to otherwise generate traffic that does not represent genuine user interest or intent. While we invest significantly in efforts to promote high-quality and relevant results and to detect and prevent low-quality content and invalid traffic, we may be unable to adequately detect and prevent such abuses or promote high-quality content, particularly during times of a natural disaster or pandemic (including COVID-19). Many websites violate or attempt to violate our guidelines, including by seeking to inappropriately rank higher in search results than our search engine's assessment of their relevance and utility would rank them. Such efforts Alphabet Inc. (known as web spam) may affect the quality of content on our platforms and lead them to display false, misleading or undesirable content. Although English-language web spam in our search results has been reduced, and web spam in most other languages is limited, we expect web spammers will continue to seek inappropriate ways to improve their rankings. We continuously combat web spam in our search results, including through indexing technology that makes it harder for spam-like, less useful web content to rank highly. We also continue to invest in and deploy proprietary technology to detect and prevent web spam from abusing our platforms. We also face other challenges from low-quality and irrelevant content websites, including content farms, which are websites that generate large quantities of low-quality content to help them improve their search rankings. We are continually launching algorithmic changes focused on detecting and preventing abuse from low-quality websites. We also face other challenges on our platforms, including violations of our content guidelines involving incidents such as attempted election interference, activities that threaten the safety and/or well-being of our users on- or offline, and the spreading of disinformation, among other challenges. If we fail to either detect and prevent an increase in problematic content or effectively promote high-quality content, it could hurt our reputation for delivering relevant information or reduce use of our platforms, harming our financial condition or operating results. It may also subject us to litigation and regulatory inquiries, which could result in monetary penalties and damages, divert managements time and attention, and lead to enhanced regulatory oversight. Our business depends on continued and unimpeded access to the Internet by us and our users. Internet access providers may be able to restrict, block, degrade, or charge for access to certain of our products and services, which could lead to additional expenses and the loss of users and advertisers. Our products and services depend on the ability of our users to access the Internet, and certain of our products require significant bandwidth to work effectively. Currently, this access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, and government-owned service providers. Some of these providers have taken, or have stated that they may take measures that could degrade, disrupt, or increase the cost of user access to certain of our products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, by charging increased fees to us or our users to provide our offerings, or by providing our competitors preferential access. Some jurisdictions have adopted regulations prohibiting certain forms of discrimination by internet access providers; however, substantial uncertainty exists in the United States and elsewhere regarding such protections. For example, in 2018 the United States Federal Communications Commission repealed net neutrality rules, which could permit internet access providers to restrict, block, degrade, or charge for access to certain of our products and services. In addition, in some jurisdictions, our products and services have been subject to government-initiated restrictions or blockages. COVID-19 has also resulted in quarantines, shelter in place orders, and work from home directives, all of which have increased demands for internet access and may create access challenges. These could result in a loss of existing users, customers and advertisers, goodwill, and increased costs, and could impair our ability to attract new users, customers and advertisers, thereby harming our business. Risks Related to Laws and Regulations We face increased regulatory scrutiny as well as changes in regulatory conditions, laws and policies governing a wide range of topics that may negatively affect our business. We and other companies in the technology industry face increased regulatory scrutiny, enforcement action, and other proceedings. For instance, the U.S. Department of Justice, joined by a number of state Attorneys General, filed an antitrust complaint against Google on October 20, 2020, alleging that Google violated U.S. antitrust laws relating to Search and Search advertising. Separately, on December 16, 2020, a number of state Attorneys General filed an antitrust complaint against Google in the United States District Court for the Eastern District of Texas, alleging that Google violated U.S. antitrust laws as well as state deceptive trade laws relating to its advertising technology. Various other regulatory agencies in the United States and around the world, including competition enforcers, consumer protection agencies, data protection authorities, grand juries, inter-agency consultative groups, and a range of other governmental bodies have and continue to review our products and services and their compliance with laws and regulations around the world. We continue to cooperate with these investigations. Various laws, regulations, investigations, enforcement lawsuits, and regulatory actions have in the past and may in the future result in substantial fines and penalties, injunctive relief, ongoing auditing and monitoring Alphabet Inc. obligations, changes to our products and services, alterations to our business models and operations, and collateral litigation, all of which could harm our business, reputation, financial condition, and operating results. Changes in international and local social, political, economic, tax, and regulatory conditions or in laws and policies governing a wide range of topics may increase our cost of doing business, limit our ability to pursue certain business models, offer products or services in certain jurisdictions, or cause us to change our business practices. We have in the past had to alter or withdraw certain products and services as a result of laws or regulations that made them unfeasible, and new laws or regulations, such as the News Media Bargaining Code drafted by the Australian Competition and Consumer Commission currently tabled in parliament, could result in our having to alter or withdraw products and services in the future. These additional costs of doing business, new limitations or changes to our business model or practices could harm our business, reputation, financial condition, and operating results. A variety of new and existing laws and/or interpretations could harm our business. We are subject to numerous U.S. and foreign laws and regulations covering a wide variety of subject matters. New laws and regulations (or new interpretations or applications of existing laws and regulations in a manner inconsistent with our practices) may make our products and services less useful, limit our ability to pursue certain business models or offer certain products and services, require us to incur substantial costs, expose us to civil or criminal liability, or cause us to change our business practices. These laws and regulations are evolving and involve matters central to our business, including, among others:  New competition laws and related regulations around the world, that can limit certain business practices, and in some cases, create the risk of significant penalties.  Privacy laws, such as the California Consumer Privacy Act of 2018 that came into effect in January of 2020 and the California Privacy Rights Act which will go into effect in 2023, both of which give new data privacy rights to California residents, and SB-327 in California, which regulates the security of data in connection with internet connected devices.  Data protection laws passed by many states within the U.S. and by certain countries regarding notification to data subjects and/or regulators when there is a security breach of personal data.  New laws further restricting the collection, processing and/or sharing of advertising-related data.  Copyright or similar laws around the world, including the EU Directive on Copyright in the Digital Single Market (EUCD) of April 17, 2019, which EU Member States must implement by June 7, 2021; and the News Media Bargaining Code drafted by the Australian Competition and Consumer Commission. These and similar laws that have been adopted or proposed introduce new constraining licensing regimes that could affect our ability to operate. The EUCD and similar laws could increase the liability of some content-sharing services with respect to content uploaded by their users. Some of these laws, as well as follow-on administrative or judicial actions, have also created or may create a new property right in news publications that limits the ability of some online services to interact with or present such content. They may also impose compensation negotiations with news agencies and publishers for the use of such content, which may result in payment obligations that significantly exceed the value that such content provides to Google and its users.  Data localization laws, which generally mandate that certain types of data collected in a particular country be stored and/or processed within that country.  Various U.S. and international laws that govern the distribution of certain materials to children and regulate the ability of online services to collect information from minors.  Various laws with regard to content removal and disclosure obligations, such as the Network Enforcement Act in Germany, which may affect our businesses and operations and may subject us to significant fines if such laws are interpreted and applied in a manner inconsistent with our practices or when we may not proactively discover such content due to the scale of third-party content and the limitations of existing technologies. Other countries, including Singapore, Australia, and the United Kingdom, have implemented or are considering similar legislation imposing penalties for failure to remove certain types of content.  Various legislative, litigation, and regulatory activity regarding our Google Play billing policies and business model, which could result in monetary penalties, damages and/or prohibition. In addition, the applicability and scope of these laws, as interpreted by the courts, remain uncertain and could harm our business. For example: Alphabet Inc.  We rely on statutory safe harbors, as set forth in the Digital Millennium Copyright Act and Section 230 of the Communications Decency Act in the United States and the E-Commerce Directive in Europe, against liability for various linking, caching, and hosting activities. Any legislation or court rulings affecting these safe harbors may adversely affect us. There are legislative proposals in both the US and EU that could reduce our safe harbor protection.  Court decisions such as the judgment of the Court of Justice of the European Union (CJEU) on May 13, 2014 on the right to be forgotten, which allows individuals to demand that Google remove search results about them in certain instances, may limit the content we can show to our users and impose significant operational burdens. The introduction of new businesses, products, services, and technologies, our activities in certain jurisdictions, or other actions we take may subject us to additional laws and regulations. Our investment in a variety of new fields, such as healthcare and payment services, may expand the scope of regulations that apply to our business. The costs of compliance with these laws and regulations are high and are likely to increase in the future. Any failure on our part to comply with laws and regulations can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties. We are subject to claims, suits, government investigations, and other proceedings that may harm our business, financial condition, and operating results. We are subject to claims, suits, and government investigations involving competition, intellectual property, data privacy and security, consumer protection, tax, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, and other matters. Due to our manufacturing and sale of an expanded suite of products, including hardware as well as Google Cloud offerings, we also are subject to a variety of claims including product warranty, product liability, and consumer protection claims related to product defects, among other litigation. We may also be subject to claims involving health and safety, hazardous materials usage, other environmental impacts, or service disruptions or failures. Any of these types of legal proceedings can have an adverse effect on us because of legal costs, diversion of management resources, negative publicity and other factors. Determining reserves for our pending litigation is a complex, fact-intensive process that requires significant judgment. The resolution of one or more such proceedings has resulted in, and may in the future result in, additional substantial fines, penalties, injunctions, and other sanctions that could harm our business, financial condition, and operating results. We may be subject to legal liability associated with providing online services or content. Our products and services let users exchange information, advertise products and services, conduct business, and engage in various online activities. We also place advertisements displayed on other companies websites, and we offer third-party products, services, and/or content. The law relating to the liability of online service providers for others activities on their services is still somewhat unsettled around the world. Claims have been brought against us for defamation, negligence, breaches of contract, copyright and trademark infringement, unfair competition, unlawful activity, torts, fraud, or other legal theories based on the nature and content of information available on or via our services. We may be subject to claims by virtue of our involvement in hosting, transmitting, marketing, branding, or providing access to content created by third parties. Defense of any such actions could be costly and involve significant time and attention of our management and other resources, may result in monetary liabilities or penalties, and may require us to change our business in an adverse manner. Privacy and data protection regulations are complex and rapidly evolving areas. Adverse interpretations of these laws could harm our business, reputation, financial condition, and operating results. Authorities around the world have adopted and are considering a number of legislative and regulatory proposals concerning data protection and limits on encryption of user data. Adverse legal rulings, legislation, or regulation could result in fines and orders requiring that we change our data practices, which could have an adverse effect on our ability to provide services, harming our business operations. Complying with these evolving laws could result in substantial costs and harm the quality of our products and services, negatively affecting our business, and may be particularly challenging during certain times, such as a natural disaster or pandemic (including COVID-19). Recent legal developments in Europe have created compliance uncertainty regarding transfers of personal data from Europe to the United States. For example, the General Data Protection Regulation (GDPR) applies to all of our activities conducted from an establishment in the EU or related to products and services that we offer to EU Alphabet Inc. users or customers, or the monitoring of their behavior in the EU. The GDPR creates a range of new compliance obligations. Ensuring compliance with the GDPR is an ongoing commitment that involves substantial costs, and despite our efforts, governmental authorities or others have asserted and may continue to assert that our business practices fail to comply with its requirements. If our operations are found to violate GDPR requirements, we may incur substantial fines, have to change our business practices, and face reputational harm, any of which could have an adverse effect on our business. In particular, serious breaches of the GDPR can result in administrative fines of up to 4% of annual worldwide revenues. Fines of up to 2% of annual worldwide revenues can be levied for other specified violations. The EU-U.S. and the Swiss-U.S. Privacy Shield frameworks allow U.S. companies that self-certify to the U.S. Department of Commerce and publicly commit to comply with specified requirements to import personal data from the EU and Switzerland. Recently, the CJEU ruled that the EU-U.S. Privacy Shield is an invalid transfer mechanism, but upheld Standard Contractual Clauses as a valid transfer mechanism, provided they meet certain requirements. The validity of data transfer mechanisms remains subject to legal, regulatory, and political developments in both Europe and the U.S., such as recent recommendations from the European Data Protection Board, the invalidation of the EU-U.S. Privacy Shield and potential invalidation of other data transfer mechanisms, which could have a significant adverse impact on our ability to process and transfer personal data outside of the EEA. These developments create some uncertainty, and compliance obligations could cause us to incur costs or harm the operations of our products and services in ways that harm our business. We face, and may continue to face intellectual property and other claims that could be costly to defend, result in significant damage awards or other costs (including indemnification awards), and limit our ability to use certain technologies in the future. We, like other internet, technology and media companies, are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. In addition, patent-holding companies may frequently seek to generate income from patents they have obtained by bringing claims against us. As we have grown, the number of intellectual property claims against us has increased and may continue to increase as we develop new products, services, and technologies. We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe the intellectual property rights of others. Other parties have also sought broad injunctive relief against us by filing claims in U.S. and international courts and the U.S. International Trade Commission (ITC) for exclusion and cease-and-desist orders, which could limit our ability to sell our products or services in the U.S. or elsewhere if our products or services or those of our customers or suppliers are found to infringe the intellectual property subject to the claims. Adverse results in any of these lawsuits may include awards of monetary damages, costly royalty or licensing agreements (if licenses are available at all), or orders preventing us from offering certain features, functionalities, products, or services. They may also cause us to change our business practices and require development of non-infringing products, services, or technologies, which could result in a loss of revenues for us and otherwise harm our business. Many of our agreements with our customers and partners, including certain suppliers, require us to defend against certain intellectual property infringement claims and in some cases indemnify them for certain intellectual property infringement claims against them, which could result in increased costs for defending such claims or significant damages if there were an adverse ruling in any such claims. Such customers and partners may also discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. Moreover, intellectual property indemnities provided to us by our suppliers, when obtainable, may not cover all damages and losses suffered by us and our customers arising from intellectual property infringement claims. Furthermore, in connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, including those associated with intellectual property claims. Regardless of their merits, intellectual property claims are often time consuming and expensive to litigate or settle. To the extent such claims are successful, they may harm our business, including our product and service offerings, financial condition, or operating results. Risks Related to Ownership of our Stock We cannot guarantee that any share repurchase program will be fully consummated or will enhance long-term stockholder value, and share repurchases could increase the volatility of our stock prices and could diminish our cash reserves . Alphabet Inc. We engage in share repurchases of our Class C capital stock from time to time in accordance with authorizations from the Board of Directors of Alphabet. Our repurchase program does not have an expiration date and does not obligate Alphabet to repurchase any specific dollar amount or to acquire any specific number of shares. Further, our share repurchases could affect our share trading prices, increase their volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in the trading prices of our stock. The concentration of our stock ownership limits our stockholders ability to influence corporate matters. Our Class B common stock has 10 votes per share, our Class A common stock has one vote per share, and our Class C capital stock has no voting rights. As of December 31, 2020, Larry Page and Sergey Brin beneficially owned approximate ly 85.3% of our outstanding Class B common stock, which represented approximate ly 51.5% o f the voting power of our outstanding common stock. Through their stock ownership, Larry and Sergey have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. In addition, because our Class C capital stock carries no voting rights (except as required by applicable law), the issuance of the Class C capital stock, including in future stock-based acquisition transactions and to fund employee equity incentive programs, could continue Larry and Sergeys current relative voting power and their ability to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders. This concentrated control limits or severely restricts other stockholders ability to influence corporate matters and we may take actions that some of our stockholders do not view as beneficial, which could reduce the market price of our Class A common stock and our Class C capital stock. Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable. Provisions in Alphabets certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:  Our certificate of incorporation provides for a tri-class capital stock structure. As a result of this structure, Larry and Sergey have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets. This concentrated control could discourage others from initiating any potential merger, takeover, or other change of control transaction that other stockholders may view as beneficial. As noted above, the issuance of the Class C capital stock could have the effect of continuing the influence of Larry and Sergey.  Our Board of Directors has the right to elect directors to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors.  Our stockholders may not act by written consent. As a result, a holder, or holders, controlling a majority of our capital stock would not be able to take certain actions without holding a stockholders' meeting.  Our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates.  Stockholders must provide advance notice to nominate individuals for election to the Board of Directors or to propose matters that can be acted upon at a stockholders meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.  Our Board of Directors may issue, without stockholder approval, shares of undesignated preferred stock. The ability to issue undesignated preferred stock makes it possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its outstanding voting stock unless the holder has held the stock for three years or, among other things, the Board of Directors has approved the transaction. Our Board of Directors could rely on Delaware law to prevent or delay an acquisition of us. Alphabet Inc. General Risks The continuing impacts of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on our business, operations and our future financial performance. Since COVID-19 was declared a global pandemic by the World Health Organization, governments and municipalities around the world have instituted measures in an effort to control the spread of COVID-19, including quarantines, shelter-in-place orders, school closings, travel restrictions, and closure of non-essential businesses. The macroeconomic impacts on our business continue to evolve and be unpredictable and may continue to adversely affect our business, operations and financial performance. As a result of the scale of the ongoing pandemic and the speed at which the global community has been impacted, our revenue growth rate and expense as a percentage of our revenues in future periods may differ significantly from our historical rate, and our future operating results may fall below expectations. The future impacts of the ongoing pandemic on our business, operations and future financial performance could include, but are not limited to:  Significant decline in advertising revenues as advertiser spending slows due to an economic downturn. This decline in advertising revenues could persist through and beyond a recessionary period. In addition, we may experience a significant and prolonged shift in user behavior such as a shift in interests to less commercial topics.  Significant decline in other revenues due to a decline or shifts in customer demand. For example, if consumer demand for electronics significantly declines, our hardware revenues could be significantly impacted.  Adverse impacts to our operating income, operating margin, net income, EPS and respective growth rates - particularly if expenses do not decrease across Alphabet at the same pace as revenue declines. Many of our expenses are less variable in nature and/or may not correlate to changes in revenues, including costs associated with our data centers and facilities as well as employee compensation. As such, we may not be able to decrease them significantly in the short-term, or we may choose not to significantly reduce them in an effort to remain focused on long-term outlook and investment opportunities.  Significant decline in our operating cash flows as a result of decreased advertiser spending and deterioration in the credit quality and liquidity of our customers, which could adversely affect our accounts receivable. Investing cash flows could decrease due to slowing spend on data center and facilities construction projects due to a slowing or stopping of construction or significant restrictions placed on construction.  The prolonged and broad-based shift to a remote working environment continues to create inherent productivity, connectivity, and oversight challenges and could affect our ability to enhance, develop and support existing products and services, detect and prevent spam and problematic content, hold product sales and marketing events, and generate new sales leads, among others. In addition, the changed environment under which we are operating could have an effect on our internal controls over financial reporting as well as our ability to meet a number of our compliance requirements in a timely or quality manner. Additional and/or extended, governmental lockdowns, restrictions or new regulations could significantly impact the ability of our employees and vendors to work productively. Governmental restrictions have been globally inconsistent and it remains unclear when a return to worksite locations or travel will be permitted or what restrictions will be in place in those environments. As we prepare to return our workforce in more locations back to the office in 2021, we may experience increased costs as we prepare our facilities for a safe return to work environment and experiment with hybrid work models, in addition to potential effects on our ability to compete effectively and maintain our corporate culture. Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations. Our operating results may fluctuate as a result of a number of factors, many outside of our control. As a result, comparing our operating results (including our expenses as a percentage of our revenues) on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed under this Item 1A in addition to the following factors may affect our operating results:  Our ability to attract user and/or customer adoption of, and generate significant revenues from, new products, services, and technologies in which we have invested considerable time and resources. Alphabet Inc.  Our ability to monetize traffic on Google Search  other properties, YouTube and our Google Network Members' properties across various devices.  The amount and timing of operating costs and expenses and capital expenditures related to the maintenance and expansion of our businesses, operations, and infrastructure.  Our focus on long-term goals over short-term results.  The results of our acquisitions, divestitures, and our investments in risky projects, including new businesses, products, services, and technologies.  Our ability to keep our products and services operational at a reasonable cost and without service interruptions.  The seasonal fluctuations in internet usage, advertising spending, and underlying business trends such as traditional retail seasonality. Our rapid growth has tended to mask the cyclicality and seasonality of our business. As our growth rate has slowed, the cyclicality and seasonality in our business has become more pronounced and caused our operating results to fluctuate.  Geopolitical events, including trade disputes.  Changes in global business or macroeconomic conditions. Acquisitions, joint ventures, investments, and divestitures could result in operating difficulties, dilution, and other consequences that may harm our business, financial condition, and operating results. Acquisitions, joint ventures, investments and divestitures are important elements of our overall corporate strategy and use of capital, and these transactions could be material to our financial condition and operating results. We expect to continue to evaluate and enter into discussions regarding a wide array of such potential strategic transactions, which could create unforeseen operating difficulties and expenditures. Some of the areas where we face risks include:  Diversion of management time and focus from operating our business to challenges related to acquisitions and other strategic transactions.  Failure to successfully integrate and further develop the acquired business or technology.  Implementation or remediation of controls, procedures, and policies at the acquired company.  Integration of the acquired companys accounting, human resource, and other administrative systems, and coordination of product, engineering, and sales and marketing functions.  Transition of operations, users, and customers onto our existing platforms.  Failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of a transaction.  In the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries.  Cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire.  Liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, data privacy and security issues, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities.  Litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders, or other third parties. Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities, and harm our business generally. Our acquisitions and other strategic transactions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, or impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or operating results. Alphabet Inc. Also, the anticipated benefits or value of our acquisitions and other strategic transactions may not materialize. In connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, which may harm our financial condition or operating results. If we were to lose the services of key personnel, we may not be able to execute our business strategy. Our future success depends in large part upon the continued service of key members of our senior management team. For instance, Sundar Pichai is critical to the overall management of Alphabet and its subsidiaries and plays an important role in the development of our technology, maintaining our culture and setting our strategic direction. All of our executive officers and key employees are at-will employees, and we do not maintain any key-person life insurance policies. The loss of key personnel could seriously harm our business. We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel, hire qualified personnel, or maintain our corporate culture, we may not be able to grow effectively. Our performance largely depends on the talents and efforts of highly skilled individuals. Our ability to compete effectively and our future success depends on our continuing to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense, and certain of our competitors have directly targeted our employees. In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. Restrictive immigration policy and regulatory changes may also impact our ability to hire, mobilize or retain some of our global talent. In addition, we believe that our corporate culture fosters innovation, creativity, and teamwork. As our organization grows and evolves, we may need to implement more complex organizational management structures or adapt our corporate culture and work environments to ever-changing circumstances, such as during times of a natural disaster or pandemic (including COVID-19), and these changes could impact our ability to compete effectively or have an adverse impact on our corporate culture. We are exposed to fluctuations in the market values of our investments and, in some instances, our financial statements incorporate valuation methodologies that are subjective in nature resulting in fluctuations over time. The market value of our investments can be negatively affected by liquidity, credit deterioration or losses, performance and financial results of the underlying entities, foreign exchange rates, changes in interest rates, including changes that may result from the implementation of new benchmark rates, the effect of new or changing regulations, the stock market in general, or other factors. The effect of COVID-19 on our impairment assessment for non-marketable investments requires significant judgment due to the uncertainty around the duration and severity of the impact. We measure certain of our non-marketable equity and debt investments, certain other instruments including stock-based compensation awards settled in the stock of certain Other Bets, and certain assets and liabilities acquired in a business combination, at fair value on a nonrecurring basis. The determination of fair value involves use of appropriate valuation methods and certain unobservable inputs, require management judgment and estimation, and may change over time. We adjust the carrying value of our non-marketable equity investments to fair value for observable transactions of identical or similar investments of the same issuer or for impairments. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), which increases the volatility of our other income (expense). The unrealized gains and losses we record on our non-marketable equity securities in any particular period may differ significantly from the realized gains or losses we ultimately experience on such investments. As a result of these factors, the value or liquidity of our cash equivalents, as well as our marketable and non-marketable securities could decline and result in a material impairment, which could adversely affect our financial condition and operating results. We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. Our future income taxes could be negatively affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, the net gains and losses recognized by legal entities on certain hedges and related hedged intercompany and other transactions under our foreign exchange risk management program, changes in the valuation of our deferred tax Alphabet Inc. assets or liabilities, the application of different provisions of tax laws or changes in tax laws, regulations, or accounting principles (including changes in the interpretation of existing laws), as well as certain discrete items. In addition, we are subject to regular review and audit by both domestic and foreign tax authorities. As a result, we have received, and may in the future receive, assessments in multiple jurisdictions, including in Europe, on various tax-related assertions, such as transfer-pricing adjustments or permanent-establishment claims. Any adverse outcome of such a review or audit could have a negative effect on our operating results and financial condition and could require us to change our business practices in a manner adverse to our business. It may also subject us to additional litigation and regulatory inquiries, resulting in the diversion of managements time and attention. In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations for which the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may affect our financial results in the period or periods for which such determination is made. Furthermore, due to shifting economic and political conditions, tax policies, laws, or rates in various jurisdictions may be subject to significant changes in ways that impair our financial results. Various jurisdictions around the world have enacted or are considering digital services taxes, which could lead to inconsistent and potentially overlapp ing international tax regimes. The Organization for Economic Cooperation and Development (OECD) recently released proposals relating to its initiative for modernizing international tax rules, with the goal of having different countries implement a modernized and aligned international tax framework, but there can be no guarantee that this will occur. In addition, in response to significant market volatility and disruptions to business operations resulting from the global spread of COVID-19, legislatures and taxing authorities in many jurisdictions in which we operate may propose changes to their tax rules. These changes could include modifications that have temporary effect, and more permanent changes. The impact of these potential new rules on us, our long-term tax planning, and our effective tax rate could be material. The trading price for our Class A common stock and non-voting Class C capital stock may continue to be volatile. The trading price of our stock has at times experienced substantial price volatility and may continue to be volatile. In addition to the factors discussed in this report, the trading price of our Class A common stock and Class C capital stock may fluctuate widely in response to various factors, many of which are beyond our control, including, among others announcements by us or our competitors of acquisitions, divestitures, investments, new products, significant contracts, commercial relationships, or capital commitments; recommendations by securities analysts or changes in their earnings estimates; announcements about our or our competitors' earnings that are not in line with analyst expectations, the risk of which is enhanced, in our case, because it is our policy not to give guidance on earnings; commentary by industry and market professionals about our products, strategies, and other matters affecting our business and results, regardless of its accuracy; the volume of shares of Class A common stock and Class C capital stock available for public sale; sales of Class A common stock and Class C capital stock by us or by our stockholders (including sales by our directors, executive officers, and other employees); short sales, hedging, and other derivative transactions on shares of our Class A common stock and Class C capital stock; the size, timing and share class of any share repurchase program; and the perceived values of Class A common stock and Class C capital stock relative to one another. In addition, the stock market in general, which can be affected by various factors, including overall economic and political conditions, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may harm the market price of our Class A common stock and our Class C capital stock, regardless of our actual operating performance. ", ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. Alphabet Inc. ," ITEM 2. PROPERTIES Our headquarters are located in Mountain View, California. We also own and lease office and building space in the surrounding areas near our headquarters, which we believe is sufficient to accommodate anticipated future growth. In addition, we own and lease office/building space and research and development sites around the world, primarily in North America, Europe, South America, and Asia. We own and operate data centers in the U.S., Europe, South America, and Asia. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business. "," ITEM 3. LEGAL PROCEEDINGS For a description of our material pending legal proceedings, please see Legal Matters in Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. "," ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of October 2, 2015, Alphabet Inc. became the successor issuer of Google Inc. pursuant to Rule 12g-3(a) under the Exchange Act. Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol GOOG since August 19, 2004 and under the symbol ""GOOGL"" since April 3, 2014. Prior to August 19, 2004, there was no public market for our stock. Our Class B common stock is neither listed nor traded. Our Class C capital stock has been listed on the Nasdaq Global Select Market under the symbol GOOG since April 3, 2014. Holders of Record As of December 31, 2020, there were approximately 4,337 and 1,942 stockholders of record of our Class A common stock and Class C capital stock, respectively. Because many of our shares of Class A common stock and Class C capital stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2020, there were approximately 64 stockholders of record of our Class B common stock. Dividend Policy We have never declared or paid any cash dividend on our common or capital stock. The primary use of capital continues to be to invest for the long term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace and form of capital return to stockholders. Issuer Purchases of Equity Securities The following table presents information with respect to Alphabet's repurchases of Class C capital stock during the quarter ended December 31, 2020: Period Total Number of Shares Purchased (in thousands) (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Programs (in thousands) (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) October 1 - 31 1,869 $ 1,540.84 1,869 $ 22,667 November 1 - 30 1,640 $ 1,748.65 1,640 $ 19,799 December 1 - 31 1,205 $ 1,787.62 1,205 $ 17,645 Total 4,714 4,714 (1)  The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. Please refer to Note 11 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to share repurchases. (2)  Average price paid per share includes costs associated with the repurchases. Alphabet Inc. Stock Performance Graphs The graph below matches Alphabet Inc. Class A's cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the SP 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2015 to December 31, 2020. The returns shown are based on historical results and are not intended to suggest future performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* ALPHABET INC. CLASS A COMMON STOCK Among Alphabet Inc., the SP 500 Index, the NASDAQ Composite Index, and the RDG Internet Composite Index *$100 invested on December 31, 2015 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright  2020 SP, a division of The McGraw-Hill Companies Inc. All rights reserved. Alphabet Inc. The graph below matches Alphabet Inc. Class C's cumulative 5-Year total shareholder return on capital stock with the cumulative total returns of the SP 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our Class C capital stock and in each index (with the reinvestment of all dividends) from December 31, 2015 to December 31, 2020. The returns shown are based on historical results and are not intended to suggest future performance. COMPARISON OF CUMULATIVE TOTAL RETURN* ALPHABET INC. CLASS C CAPITAL STOCK Among Alphabet Inc., the SP 500 Index, the NASDAQ Composite Index, and the RDG Internet Composite Index *$100 invested on December 31, 2015 in stock or in index, including reinvestment of dividends. Fiscal year ending December 31. Copyright  2020 SP, a division of The McGraw-Hill Companies Inc. All rights reserved. Alphabet Inc. "," ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Part II, Item 8 of this Annual Report on Form 10-K. We have omitted discussion of 2018 results where it would be redundant to the discussion previously included in Part II, Item 7 of our 2019 Annual Report on Form 10-K. Trends in Our Business The following long-term trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results:  Users' behaviors and advertising continue to shift online as the digital economy evolves. The continuing shift from an offline to online world has contributed to the growth of our business since inception, contributing to revenue growth, and we expect that this online shift will continue to benefit our business.  Users are increasingly using diverse devices and modalities to access our products and services, and our advertising revenues are increasingly coming from new formats. Our users are accessing the Internet via diverse devices and modalities, such as smartphones, wearables and smart home devices, and want to feel connected no matter where they are or what they are doing. We seek to expand our products and services to stay in front of these trends in order to maintain and grow our business. We generate our advertising revenues increasingly from different channels, including mobile, and newer advertising formats, and the margins from the advertising revenues from these channels and newer products have generally been lower than those from traditional desktop search. Additionally, as the market for a particular device type or modality matures, our revenues may be affected. For example, growth in the global smartphone market has slowed due to various factors, including increased market saturation in developed countries, which can affect our mobile advertising revenue growth rates. We expect TAC paid to our distribution partners and Google Network Members to increase as our revenues grow and to be affected by changes in device mix; geographic mix; partner mix; partner agreement terms; the percentage of queries channeled through paid access points; product mix; the relative revenue growth rates of advertising revenues from different channels; and revenue share terms. We expect these trends to continue to affect our revenue growth rates and put pressure on our overall margins.  As online advertising evolves, we continue to expand our product offerings which may affect our monetization. As interactions between users and advertisers change and as online user behavior evolves, we continue to expand and evolve our product offerings to serve their changing needs. Over time, we expect our monetization trends to fluctuate. For example, we have seen an increase in YouTube ads and Google Play ads, which monetize at a lower rate than our traditional search ads.  As users in developing economies increasingly come online, our revenues from international markets continue to increase and movements in foreign exchange rates affect such revenues. The shift to online, as well as the advent of the multi-device world, has brought opportunities outside of the U.S., including in emerging markets, such as India, where we continue to invest heavily and develop localized versions of our products and relevant advertising programs useful to our users in these markets. This has led to a trend of increased revenues from international markets over time, as regions with emerging markets, such as APAC, have demonstrated higher revenue growth rates. We expect that our results will continue to be affected by our performance in these markets, particularly as low-cost mobile devices become more available. This trend could impact our margins as developing markets initially monetize at a lower rate than more mature markets. Our international revenues represent a significant portion of our revenues and are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. While we have a foreign exchange risk management program designed to reduce our exposure to these fluctuations, this program does not fully offset their effect on our revenues and earnings. Alphabet Inc.  The portion of our revenues that we derive from non-advertising revenues is increasing and may affect margins. Non-advertising revenues have grown over time. We expect this trend to continue as we focus on expanding our offerings to our users through products and services like Google Cloud, Google Play, hardware products, and YouTube subscriptions. Across these initiatives, we currently derive non-advertising revenues primarily from sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud services and subscription and other services. The margins on these revenues vary significantly and may be lower than the margins on our advertising revenues. A number of our Other Bets initiatives are in their initial development stages, and as such, the sources of revenues from these businesses could change over time and the revenues could be volatile.  As we continue to serve our users and expand our businesses, we will invest heavily in operating and capital expenditures. We continue to make significant RD investments in areas of strategic focus such as advertising, cloud, machine learning, and search, as well as in new products and services. In addition, we expect to continue to invest in land and buildings for data centers and offices, and information technology assets, which includes servers and network equipment, to support the long-term growth of our business. In addition, acquisitions and strategic investments are an important part of our strategy and use of capital, contributing to the breadth and depth of our offerings, expanding our expertise in engineering and other functional areas, and building strong partnerships around strategic initiatives. For example, in 2020 we announced our Google for India Digitization Fund to invest approximately $10 billion into India over the next 5-7 years through a mix of equity investments, partnerships, and operational, infrastructure and ecosystem investments.  We face continuing changes in regulatory conditions, laws and public policies, which could impact our business practices and financial results. Changes in social, political, economic, tax, and regulatory conditions or in laws and policies governing a wide range of topics and related legal matters have resulted in fines and caused us to change our business practices. As these global trends continue, for example the recent antitrust complaints filed by the U.S. Department of Justice and a number of state Attorneys General as well as the News Media Bargaining Code drafted by the Australian Competition and Consumer Commission, our cost of doing business may increase and our ability to pursue certain business models or offer certain products or services may be limited.  Our employees are critical to our success and we expect to continue investing in them. Our employees are among our best assets and are critical for our continued success. We expect to continue hiring talented employees around the globe and to provide competitive compensation programs to our employees. The Impact of COVID-19 on our Results and Operations In late 2019, an outbreak of COVID-19 emerged and by March 11, 2020 was declared a global pandemic by the World Health Organization. Across the United States and the world, governments and municipalities instituted measures in an effort to control the spread of COVID-19, including quarantines, shelter-in-place orders, school closings, travel restrictions and the closure of non-essential businesses. The macroeconomic impacts of COVID-19 are significant and continue to evolve, as exhibited by, among other things, a rise in unemployment, changes in consumer behavior, and market volatility. We began to observe the impact of COVID-19 and the related reductions in global economic activity on our financial results in March 2020 when, despite an increase in users' search activity, our advertising revenues declined compared to the prior year due to a shift of user search activity to less commercial topics and reduced spending by our advertisers. During the course of the quarter ended June 30, 2020, we observed a gradual return in user search activity to more commercial topics, followed by increased spending by our advertisers that continued throughout the second half of 2020. We continue to assess the realized and potential credit deterioration of our customers due to changes in the macroeconomic environment, which has been reflected in our allowance for credit losses for accounts receivable. Additionally, over the course of the year we experienced variability in our margins as many of our expenses are less variable in nature and/or may not correlate to changes in revenues, including costs associated with our data centers and facilities as well as employee compensation. Also, market volatility has contributed to fluctuations in the valuation of our equity investments. Alphabet Inc. While we continued to make investments in land and buildings for data centers, offices and information technology, in 2020 we slowed the pace of our investments, primarily as it relates to office facilities, as a result of COVID-19. The ongoing impact of COVID-19 on our business continues to evolve and be unpredictable. For example, to the extent the pandemic disrupts economic activity globally we, like other businesses, are not immune to continued adverse impacts to our business, operations and financial results from volatility in advertising spending, changes in user behavior and preferences, credit deterioration and liquidity of our customers, depressed economic activity, or volatility in capital markets. The ongoing impact will depend on a number of factors, including the duration and severity of the pandemic; the uneven impact to certain industries; advances in testing, treatment and prevention including vaccines; and the macroeconomic impact of government measures to contain the spread of the virus and related government stimulus measures. To address the potential impact to our business, over the near-term, we continue to evaluate the pace of our investment plans, including, but not limited to, our hiring, investments in data centers, servers, network equipment, real estate and facilities, marketing and travel spending, as well as taking certain measures to support our customers, our overall workforce, and communities we operate in. As we look to return our workforce in more locations back to the office in 2021, we may experience increased costs as we prepare our facilities for a safe return to work environment and experiment with hybrid work models. At the same time, we believe the current environment is accelerating digital transformation and we remain focused on innovating and investing in the services we offer to consumers and businesses. For example, as it relates to Google Cloud, we continue to invest aggressively around the globe in our go-to-market capabilities, product development and technical infrastructure to support long term growth. The ongoing impact of COVID-19 and the extent of these measures we have taken and the additional measures that we may implement could have a material impact on our financial results. Our past results may not be indicative of our future performance, and historical trends in our financial results may differ materially. Executive Overview The following table summarizes our consolidated financial results for the years ended December 31, 2019 and 2020 (in millions, except for per share information and percentages). Year Ended December 31, 2019 2020 Revenues $161,857 $182,527 Increase in revenues year over year 18 % 13 % Increase in constant currency revenues year over year 20 % 14 % Operating income (1) $ 34,231 $ 41,224 Operating margin (1) 21 % 23 % Other income (expense), net $ 5,394 $ 6,858 Net Income (1) $ 34,343 $ 40,269 Diluted EPS (1) $ 49.16 $ 58.61 (1)  Results for 2019 include the effect of the $1.7 billion EC fine. See Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.  Total revenues were $182.5 billion, an increase of 13% year over year, primarily driven by an increase in Google Services segment revenues of $16.8 billion or 11% and an increase in Google Cloud segment revenues of $4.1 billion or 46%. Revenues from the United States, EMEA, APAC, and Other Americas were $85.0 billion, $55.4 billion, $32.6 billion, and $9.4 billion, respectively.  Total cost of revenues was $84.7 billion, an increase of 18% year over year. TAC was $32.8 billion, an increase of 9% year over year, primarily driven by an increase in revenues subject to TAC. Other cost of revenues were $51.9 billion, an increase of 24% year over year, primarily driven by an increase in data centers and other operations costs and content acquisition costs. Alphabet Inc.  Operating expenses were $56.6 billion, an increase of 5% year over year primarily driven by headcount growth and partially offset by declines in advertising and promotional expenses and travel and entertainment expenses. Other information:  Operating cash flow was $65.1 billion.  Capital expenditures, which primarily included investments in technical infrastructure, were $22.3 billion.  Number of employees was 135,301 as of December 31, 2020. The majority of new hires during the year were engineers and product managers. Our Segments Beginning in the fourth quarter of 2020, we report our segment results as Google Services, Google Cloud, and Other Bets:  Google Services includes products and services such as ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube. Google Services generates revenues primarily from advertising; sales of apps, in-app purchases, digital content products, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.  Google Cloud includes Googles infrastructure and data analytics platforms, collaboration tools, and other services for enterprise customers. Google Cloud generates revenues primarily from fees received for Google Cloud Platform (""GCP"") services and Google Workspace (formerly known as G Suite) collaboration tools.  Other Bets is a combination of multiple operating segments that are not individually material. Revenues from the Other Bets are derived primarily through the sale of internet services as well as licensing and RD services. Unallocated corporate costs primarily include corporate initiatives, corporate shared costs, such as finance and legal, including fines and settlements, as well as costs associated with certain shared research and development activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs. Financial Results Revenues The following table presents our revenues by type (in millions). Year Ended December 31, 2019 2020 Google Search  other $ 98,115 $ 104,062 YouTube ads 15,149 19,772 Google Network Members' properties 21,547 23,090 Google advertising 134,811 146,924 Google other 17,014 21,711 Google Services total 151,825 168,635 Google Cloud 8,918 13,059 Other Bets 659 657 Hedging gains (losses) 455 176 Total revenues $ 161,857 $ 182,527 Google Services Google advertising revenues Our advertising revenue growth, as well as the change in paid clicks and cost-per-click on Google Search  other properties and the change in impressions and cost-per-impression on Google Network Members' properties and the correlation between these items, have been affected and may continue to be affected by various factors, including:  advertiser competition for keywords;  changes in advertising quality, formats, delivery or policy; Alphabet Inc.  changes in device mix;  changes in foreign currency exchange rates;  fees advertisers are willing to pay based on how they manage their advertising costs;  general economic conditions including the impact of COVID-19;  seasonality; and  traffic growth in emerging markets compared to more mature markets and across various advertising verticals and channels. Our advertising revenue growth rate has been affected over time as a result of a number of factors, including challenges in maintaining our growth rate as revenues increase to higher levels; changes in our product mix; changes in advertising quality or formats and delivery; the evolution of the online advertising market; increasing competition; our investments in new business strategies; query growth rates; and shifts in the geographic mix of our revenues. We also expect that our revenue growth rate will continue to be affected by evolving user preferences, the acceptance by users of our products and services as they are delivered on diverse devices and modalities, our ability to create a seamless experience for both users and advertisers, and movements in foreign currency exchange rates. Google advertising revenues consist primarily of the following:  Google Search  other consists of revenues generated on Google search properties (including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.) and other Google owned and operated properties like Gmail, Google Maps, and Google Play;  YouTube ads consists of revenues generated on YouTube properties; and  Google Network Members' properties consist of revenues generated on Google Network Members' properties participating in AdMob, AdSense, and Google Ad Manager. Google Search  other Google Search  other revenues increased $5,947 million from 2019 to 2020. The overall growth was primarily driven by interrelated factors including increases in search queries resulting from ongoing growth in user adoption and usage, primarily on mobile devices, growth in advertiser spending primarily in the second half of the year, and improvements we have made in ad formats and delivery. This increase was partially offset by a decline in advertiser spending primarily in the first half of the year driven by the impact of COVID-19. YouTube ads YouTube ads revenues increased $4,623 million from 2019 to 2020. Growth was primarily driven by our direct response advertising products, which benefited from improvements to ad formats and delivery and increased advertiser spending. Brand advertising products also contributed to growth despite revenues being adversely impacted by a decline in advertiser spending primarily in the first half of the year driven by the impact of COVID-19. Google Network Members' properties Google Network Members' properties revenues increased $1,543 million from 2019 to 2020. The growth was primarily driven by strength in AdMob and Google Ad Manager. Use of Monetization Metrics Paid clicks for our Google Search  other properties represent engagement by users and include clicks on advertisements by end-users on Google search properties and other owned and operated properties including Gmail, Google Maps, and Google Play. Historically, we included certain viewed YouTube engagement ads and the related revenues in our paid clicks and cost-per-click monetization metrics. Over time, advertising on YouTube has expanded to multiple advertising formats and the type of viewed engagement ads historically included in paid clicks and cost-per-click metrics have increasingly covered a smaller portion of YouTube advertising revenues. As a result, we removed these ads and the related revenues from the paid clicks and cost-per-click metrics for the current and historical periods presented. The revised metrics provide a better understanding of monetization trends on the properties included within Google Search  other, as they now more closely correlate with the related changes in revenues. Impressions for our Google Network Members' properties include impressions displayed to users served on Google Network Members' properties participating primarily in AdMob, AdSense and Google Ad Manager. Cost-per-click is defined as click-driven revenues divided by our total number of paid clicks and represents the average amount we charge advertisers for each engagement by users. Alphabet Inc. Cost-per-impression is defined as impression-based and click-based revenues divided by our total number of impressions and represents the average amount we charge advertisers for each impression displayed to users. As our business evolves, we periodically review, refine and update our methodologies for monitoring, gathering, and counting the number of paid clicks on our Google Search  other properties and the number of impressions on Google Network Members properties and for identifying the revenues generated by click activity on our Google Search  other properties and the revenues generated by impression activity on Google Network Members properties. Paid clicks and cost-per-click The following table presents changes in our paid clicks and cost-per-click (expressed as a percentage):  Year Ended December 31,  2019 2020 Paid clicks change 23 % 19 % Cost-per-click change (6) % (10) % Paid clicks increased from 2019 to 2020 primarily due to an increase in clicks due to interrelated factors, resulting from ongoing growth in user adoption and usage, primarily on mobile devices; continued growth in advertiser activity; and improvements we have made in ad formats and delivery. Growth was also driven by an increase in clicks relating to ads on Google Play. The positive effect on our revenues from an increase in paid clicks was partially offset by a decrease in the cost-per-click paid by our advertisers. The decrease in cost-per-click was primarily driven by reduced advertiser spending in response to COVID-19 primarily during the first half of the year. The decrease in cost-per-click was also affected by changes in device mix, geographic mix, ongoing product changes, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign currencies. Paid clicks increased from 2018 to 2019 primarily due to an increase in clicks due to interrelated factors, including an increase in search queries resulting from ongoing growth in user adoption and usage, primarily on mobile devices; continued growth in advertiser activity; and improvements we have made in ad formats and delivery. Growth was also driven by an increase in clicks relating to ads on Google Play. The positive effect on our revenues from an increase in paid clicks was partially offset by a decrease in the cost-per-click paid by our advertisers. The decrease in cost-per-click was driven by changes in device mix, geographic mix, ongoing product changes, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign currencies. Impressions and cost-per-impression The following table presents changes in our impressions and cost-per-impression (expressed as a percentage):  Year Ended December 31,  2020 Impressions change 15 % Cost-per-impression change (8) % Impressions increased from 2019 to 2020 primarily due to growth in Google Ad Manager. The positive effect on our revenues from an increase in impressions was partially offset by a decrease in the cost-per-impression paid by our advertisers which was driven by a reduction in advertiser spending in response to COVID-19, primarily during the first half of the year, as well as the effect of a combination of factors including ongoing product and policy changes and improvements we have made in ad formats and delivery, changes in device mix, geographic mix, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign currencies. Google other revenues Google other revenues consist primarily of revenues from:  Google Play, which includes revenues from sales of apps and in-app purchases (which we recognize net of payout to developers) and digital content sold in the Google Play store;  hardware, including Google Nest home products, Pixelbooks, Pixel phones and other devices;  YouTube non-advertising, including YouTube Premium and YouTube TV subscriptions and other services; and  other products and services. Alphabet Inc. Google other revenues increased $4,697 million from 2019 to 2020. The growth was primarily driven by Google Play and YouTube non-advertising. Growth for Google Play was primarily driven by sales of apps and in-app purchases, which benefited from elevated user engagement partially due to the impact of COVID-19. Growth for YouTube non-advertising was primarily driven by an increase in paid subscribers. Over time, our growth rate for Google other revenues may be affected by the seasonality associated with new product and service launches as well as market dynamics. Google Cloud Our Google Cloud revenues increased $4,141 million from 2019 to 2020. The growth was primarily driven by GCP followed by our Google Workspace offerings. Our infrastructure and our data and analytics platform products were the largest drivers of growth in GCP. Over time, our growth rate for Google Cloud revenues may be affected by customer usage, market dynamics, as well as new product and service launches. Revenues by Geography The following table presents our revenues by geography as a percentage of revenues, determined based on the addresses of our customers:  Year Ended December 31,  2019 2020 United States 46 % 47 % EMEA 31 % 30 % APAC 17 % 18 % Other Americas 6 % 5 % For further details on revenues by geography, see Note 2 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Use of Constant Currency Revenues and Constant Currency Revenue Percentage Change The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. Our international revenues are favorably affected as the U.S. dollar weakens relative to other foreign currencies, and unfavorably affected as the U.S. dollar strengthens relative to other foreign currencies. Our revenues are also favorably affected by net hedging gains and unfavorably affected by net hedging losses. We use non-GAAP constant currency revenues and non-GAAP percentage change in constant currency revenues for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of results on a constant currency basis in addition to U.S. Generally Accepted Accounting Principles (""GAAP"") results helps improve the ability to understand our performance because they exclude the effects of foreign currency volatility that are not indicative of our core operating results. Constant currency information compares results between periods as if exchange rates had remained constant period over period. We define constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and use it to determine the constant currency revenue percentage change on a year-on-year basis. Constant currency revenues are calculated by translating current period revenues using prior period exchange rates, as well as excluding any hedging effects realized in the current period. Constant currency revenue percentage change is calculated by determining the change in period revenues over prior period revenues where current period foreign currency revenues are translated using prior period exchange rates and hedging effects are excluded from revenues of both periods. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP. Alphabet Inc. The following table presents the foreign exchange effect on our international revenues and total revenues (in millions, except percentages):  Year Ended December 31, 2019 2020 EMEA revenues $ 50,645 $ 55,370 Exclude foreign exchange effect on current period revenues using prior year rates 2,397 (111) EMEA constant currency revenues $ 53,042 $ 55,259 Prior period EMEA revenues $ 44,739 $ 50,645 EMEA revenue percentage change 13 % 9 % EMEA constant currency revenue percentage change 19 % 9 % APAC revenues $ 26,928 $ 32,550 Exclude foreign exchange effect on current period revenues using prior year rates 388 11 APAC constant currency revenues $ 27,316 $ 32,561 Prior period APAC revenues $ 21,341 $ 26,928 APAC revenue percentage change 26 % 21 % APAC constant currency revenue percentage change 28 % 21 % Other Americas revenues $ 8,986 $ 9,417 Exclude foreign exchange effect on current period revenues using prior year rates 541 964 Other Americas constant currency revenues $ 9,527 $ 10,381 Prior period Other Americas revenues $ 7,608 $ 8,986 Other Americas revenue percentage change 18 % 5 % Other Americas constant currency revenue percentage change 25 % 16 % United States revenues $ 74,843 $ 85,014 United States revenue percentage change 18 % 14 % Hedging gains (losses) 455 176 Total revenues $ 161,857 $ 182,527 Total constant currency revenues $ 164,728 $ 183,215 Prior period revenues, excluding hedging effect (1) $ 136,957 $ 161,402 Total revenue percentage change 18 % 13 % Total constant currency revenue percentage change 20 % 14 % (1) Total revenues and hedging gains (losses) for the year ended December 31, 2018 were $136,819 million and $(138) million, respectively. EMEA revenue percentage change from 2019 to 2020 was not significantly affected by foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Euro offset by the U.S. dollar strengthening relative to the Turkish lira and Russian ruble. APAC revenue percentage change from 2019 to 2020 was not significantly affected by foreign currency exchange rates, primarily due to the U.S. dollar strengthening relative to the Indian rupee, partially offset by the U.S. dollar weakening relative to the Japanese yen. Other Americas revenue percentage change from 2019 to 2020 was unfavorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar strengthening relative to the Brazilian real and Argentine peso. Alphabet Inc. Costs and Operating Expenses Cost of Revenues Cost of revenues includes TAC which are paid to our distribution partners who make available our search access points and services, and amounts paid to Google Network Members primarily for ads displayed on their properties. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers. The cost of revenues as a percentage of revenues generated from ads placed on Google Network Members' properties are significantly higher than the cost of revenues as a percentage of revenues generated from ads placed on Google properties (which includes Google Search  other and YouTube ads), because most of the advertiser revenues from ads served on Google Network Members properties are paid as TAC to our Google Network Members. Additionally, other cost of revenues (which is the cost of revenues excluding TAC) includes the following:  Content acquisition costs primarily related to payments to content providers from whom we license video and other content for distribution on YouTube advertising and subscription services and Google Play (we pay fees to these content providers based on revenues generated or a flat fee);  Expenses associated with our data centers (including bandwidth, compensation expenses including stock-based compensation (""SBC""), depreciation, energy, and other equipment costs) as well as other operations costs (such as content review and customer support costs). These costs are generally less variable in nature and may not correlate with related changes in revenues; and  Inventory related costs for hardware we sell. The following tables present our cost of revenues, including TAC (in millions, except percentages):  Year Ended December 31,  2019 2020 TAC $ 30,089 $ 32,778 Other cost of revenues 41,807 51,954 Total cost of revenues $ 71,896 $ 84,732 Total cost of revenues as a percentage of revenues 44.4 % 46.4 % Cost of revenues increased $12,836 million from 2019 to 2020. The increase was due to increases in other cost of revenues and TAC of $10,147 million and $2,689 million, respectively. The increase in other cost of revenues from 2019 to 2020 was due to an increase in data center and other operations costs and an increase in content acquisition costs primarily for YouTube. This increase was partially offset by a decline in hardware costs. The increase in TAC from 2019 to 2020 was due to increases in TAC paid to distribution partners and to Google Network Members, driven by growth in revenues subject to TAC. The TAC rate was 22.3% in both 2019 and 2020. The TAC rate on Google properties revenues and the TAC rate on Google Network revenues were both substantially consistent from 2019 to 2020. Over time, cost of revenues as a percentage of total revenues may be affected by a number of factors, including the following:  The amount of TAC paid to distribution partners, which is affected by changes in device mix, geographic mix, partner mix, partner agreement terms such as revenue share arrangements, and the percentage of queries channeled through paid access points;  The amount of TAC paid to Google Network Members, which is affected by a combination of factors such as geographic mix, product mix, and revenue share terms;  Relative revenue growth rates of Google properties and Google Network Members' properties;  Certain costs that are less variable in nature and may not correlate with the related revenues;  Costs associated with our data centers and other operations to support ads, Google Cloud, Search, YouTube and other products;  Content acquisition costs, which are primarily affected by the relative growth rates in our YouTube advertising and subscription revenues;  Costs related to hardware sales; and  Increased proportion of non-advertising revenues, which generally have higher costs of revenues, relative to our advertising revenues. Alphabet Inc. Research and Development The following table presents our RD expenses (in millions, except percentages):  Year Ended December 31,  2019 2020 Research and development expenses $ 26,018 $ 27,573 Research and development expenses as a percentage of revenues 16.1 % 15.1 % RD expenses consist primarily of:  Compensation expenses (including SBC) for engineering and technical employees responsible for RD of our existing and new products and services;  Depreciation expenses;  Equipment-related expenses; and  Professional services fees primarily related to consulting and outsourcing services. RD expenses increased $1,555 million from 2019 to 2020. The increase was primarily due to an increase in compensation expenses of $1,619 million, largely resulting from a 11% increase in headcount and partially offset by higher compensation charges in certain Other Bets in 2019. Additionally, the increase in RD expenses was partially offset by a decrease in travel and entertainment expenses of $383 million. Over time, RD expenses as a percentage of revenues may fluctuate due to certain expenses that are generally less variable in nature and may not correlate to the changes in revenues. In addition, RD expenses may be affected by a number of factors including continued investment in ads, Android, Chrome, Google Cloud, Google Play, hardware, machine learning, Other Bets, Search and YouTube. Sales and Marketing The following table presents our sales and marketing expenses (in millions, except percentages):  Year Ended December 31,  2019 2020 Sales and marketing expenses $ 18,464 $ 17,946 Sales and marketing expenses as a percentage of revenues 11.4 % 9.8 % Sales and marketing expenses consist primarily of:  Advertising and promotional expenditures related to our products and services; and  Compensation expenses (including SBC) for employees engaged in sales and marketing, sales support, and certain customer service functions. Sales and marketing expenses decreased $518 million from 2019 to 2020. The decrease was primarily due to a decrease in advertising and promotional expenses of $1,395 million, as we reduced spending and paused or rescheduled campaigns and changed some events to digital-only formats as a result of COVID-19, and a decrease in travel and entertainment expenses of $371 million. The decrease was partially offset by an increase in compensation expenses of $1,347 million, largely resulting from an 8% increase in headcount. Over time, sales and marketing expenses as a percentage of revenues may fluctuate due to certain expenses that are generally less variable in nature and may not correlate to the changes in revenues. In addition, sales and marketing expenses may be affected by a number of factors including the seasonality associated with new product and service launches and strategic decisions regarding the timing and extent of our spending. General and Administrative The following table presents our general and administrative expenses (in millions, except percentages):  Year Ended December 31,  2019 2020 General and administrative expenses $ 9,551 $ 11,052 General and administrative expenses as a percentage of revenues 5.9 % 6.1 % General and administrative expenses consist primarily of:  Compensation expenses (including SBC) for employees in our finance, human resources, information technology, and legal organizations;  Depreciation; Alphabet Inc.  Equipment-related expenses;  Legal-related expenses; and  Professional services fees primarily related to audit, information technology consulting, outside legal, and outsourcing services. General and administrative expenses increased $1,501 million from 2019 to 2020. The increase was primarily due to an increase in compensation expenses of $887 million, largely resulting from a 16% increase in headcount. In addition, there was an increase of $440 million related to allowance for credit losses for accounts receivable. The increase was partially offset by a $554 million charge recognized in 2019 relating to a legal settlement. Over time, general and administrative expenses as a percentage of revenues may fluctuate due to certain expenses that are generally less variable in nature and may not correlate to the changes in revenues, the effect of discrete items such as legal settlements, or allowances for credit losses for accounts receivable. European Commission Fines In March 2019, the EC announced its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law. The EC decision imposed a 1.5 billion ( $1.7 billion as of March 20, 2019) fine, which was accrued in the first quarter of 2019. Please refer to Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. Segment Profitability The following table presents our segment operating income (loss) (in millions). For comparative purposes, amounts in prior periods have been recast. Year Ended December 31, 2018 2019 2020 Operating income (loss): Google Services $ 43,137 $ 48,999 $ 54,606 Google Cloud (4,348) (4,645) (5,607) Other Bets (3,358) (4,824) (4,476) Corporate costs, unallocated (1) (7,907) (5,299) (3,299) Total income from operations $ 27,524 $ 34,231 $ 41,224 (1) Corporate costs, unallocated includes a fine of $5.1 billion for the year ended December 31, 2018 and a fine and legal settlement totaling $2.3 billion for the year ended December 31, 2019. Google Services Google services operating income increased $5,607 million from 2019 to 2020. The increase was primarily driven by an increase in revenues partially offset by increases in content acquisition costs primarily for YouTube, data center and other operations costs, and TAC. Additionally, there was an increase in operating expenses primarily driven by an increase in compensation expenses (including SBC) largely due to increases in headcount. Operating income benefited from a decline in hardware costs. Google services operating income increased $5,862 million from 2018 to 2019. The increase was primarily driven by an increase in revenues partially offset by increases in TAC, data center and other operations costs, and content acquisition costs primarily for YouTube. Additionally, there was an increase in operating expenses primarily driven by an increase in compensation expenses (including SBC) largely due to an increase in headcount. Google Cloud Google Cloud operating loss increased $962 million from 2019 to 2020 and increased $297 million from 2018 to 2019. The increase in operating loss in both periods was driven by an increase in total expenses of $5,103 million from 2019 to 2020 and $3,377 million from 2018 to 2019. Operating expenses increased primarily due to compensation expenses (including SBC), largely driven by an increase in headcount. Additionally, data center and other operating costs increased in both periods. Other Bets Other Bets operating loss decreased $348 million from 2019 to 2020 and increased $1,466 million from 2018 to 2019. The fluctuations were primarily driven by compensation expenses (including SBC). Alphabet Inc. Other Income (Expense), Net The following table presents other income (expense), net, (in millions):  Year Ended December 31,  2019 2020 Other income (expense), net $ 5,394 $ 6,858 Other income (expense), net, increased $1,464 million from 2019 to 2020. The change was primarily driven by an increase in net gains on equity and debt securities of $3,519 million, partially offset by a $902 million loss resulting from our equity derivatives, which hedged the changes in fair value of certain marketable equity securities, and a decrease in interest income of $562 million. Over time, other income (expense), net, may be affected by market dynamics and other factors. Equity values generally change daily for marketable equity securities and upon the occurrence of observable price changes or upon impairment of non-marketable equity securities. In addition, volatility in the global economic climate and financial markets, including the effects of COVID-19, could result in a significant change in the value of our investments. Fluctuations in the value of these investments has, and we expect will continue to, contribute to volatility of OIE in future periods. For additional information about our investments, see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Provision for Income Taxes The following table presents our provision for income taxes (in millions, except for effective tax rate):  Year Ended December 31,  2019 2020 Provision for income taxes $ 5,282 $ 7,813 Effective tax rate 13.3 % 16.2 % Our provision for income taxes and our effective tax rate increased from 2019 to 2020. The increase in the provision for income taxes and our effective tax rate is primarily due to benefits related to the resolution of multi-year audits in 2019 that did not recur in 2020, higher earnings in countries that have higher statutory rates resulting from the change in our corporate legal entity structure implemented as of December 31, 2019, and an increase in valuation allowance for net deferred tax assets that are not likely to be realized relating to certain of our Other Bets, partially offset by an increase in the U.S. federal Foreign-Derived Intangible Income tax deduction benefits. See Note 14 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. We expect our future effective tax rate to be affected by the geographic mix of earnings in countries with different statutory rates. Additionally, our future effective tax rate may be affected by changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items. Alphabet Inc. Quarterly Results of Operations The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report on Form 10-K. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. Our operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year. The following table presents our unaudited quarterly results of operations for the eight quarters ended December 31, 2020. This table includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of our consolidated financial position and operating results for the quarters presented. Seasonal fluctuations in internet usage and advertiser expenditures, underlying business trends such as traditional retail seasonality and macroeconomic conditions have affected, and are likely to continue to affect, our business (including developments and volatility arising from COVID-19). Commercial queries typically increase significantly in the fourth quarter of each year. These seasonal trends have caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.  Quarter Ended  Mar 31, 2019 Jun 30, 2019 Sept 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 Sept 30, 2020 Dec 31, 2020 (In millions, except per share amounts) (unaudited) Consolidated Statements of Income Data: Revenues $ 36,339 $ 38,944 $ 40,499 $ 46,075 $ 41,159 $ 38,297 $ 46,173 56,898 Costs and expenses: Cost of revenues 16,012 17,296 17,568 21,020 18,982 18,553 21,117 26,080 Research and development 6,029 6,213 6,554 7,222 6,820 6,875 6,856 7,022 Sales and marketing 3,905 4,212 4,609 5,738 4,500 3,901 4,231 5,314 General and administrative 2,088 2,043 2,591 2,829 2,880 2,585 2,756 2,831 European Commission fines 1,697 0 0 0 0 0 0 0 Total costs and expenses 29,731 29,764 31,322 36,809 33,182 31,914 34,960 41,247 Income from operations 6,608 9,180 9,177 9,266 7,977 6,383 11,213 15,651 Other income (expense), net 1,538 2,967 (549) 1,438 (220) 1,894 2,146 3,038 Income before income taxes 8,146 12,147 8,628 10,704 7,757 8,277 13,359 18,689 Provision for income taxes 1,489 2,200 1,560 33 921 1,318 2,112 3,462 Net income $ 6,657 $ 9,947 $ 7,068 $ 10,671 $ 6,836 $ 6,959 $ 11,247 15,227 Basic net income per share of Class A and B common stock and Class C capital stock $ 9.58 $ 14.33 $ 10.20 $ 15.49 $ 9.96 $ 10.21 $ 16.55 $ 22.54 Diluted net income per share of Class A and B common stock and Class C capital stock $ 9.50 $ 14.21 $ 10.12 $ 15.35 $ 9.87 $ 10.13 $ 16.40 $ 22.30 Financial Condition Cash, Cash Equivalents, and Marketable Securities As of December 31, 2020, we had $136.7 billion in cash, cash equivalents, and short-term marketable securities. Ca sh equivalents and marketable securities a re comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities and marketable equity securities. Sources, Uses of Cash and Related Trends Our principal sources of liquidity are our cash, cash equivalents, and marketable securities, as well as the cash flow that we generate from our operations. The primary use of capital continues to be to invest for the long term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace and form of capital return to stockholders. Alphabet Inc. The following table presents our cash flows (in millions):  Year Ended December 31,  2019 2020 Net cash provided by operating activities $ 54,520 $ 65,124 Net cash used in investing activities $ (29,491) $ (32,773) Net cash used in financing activities $ (23,209) $ (24,408) Cash Provided by Operating Activities Our largest source of cash provided by our operations are advertising revenues generated by Google Search  other properties, Google Network Members' properties and YouTube ads. Additionally, we generate cash through sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees including fees received for Google Cloud offerings and subscription-based products. Our primary uses of cash from our operating activities include compensation and related costs, payments to our distribution partners and Google Network Members, and payments for content acquisition costs. In addition, uses of cash from operating activities include hardware inventory costs, income taxes, and other general corporate expenditures. Net cash provided by operating activities increased from 2019 to 2020 primarily due to the net effect of increases in cash received from revenues and cash paid for cost of revenues and operating expenses, and changes in operating assets and liabilities. Cash Used in Investing Activities Cash provided by investing activities consists primarily of maturities and sales of our investments in marketable and non-marketable securities. Cash used in investing activities consists primarily of purchases of marketable and non-marketable securities, purchases of property and equipment, and payments for acquisitions. Net cash used in investing activities increased from 2019 to 2020 primarily due to a net increase in purchases of securities, partially offset by decreases in payments for acquisitions and purchases of property and equipment. The net decrease in purchases of property and equipment was driven by decreases in purchases of land and buildings for offices as well as data center construction, partially offset by increases in purchases of servers. Cash Used in Financing Activities Cash provided by financing activities consists primarily of proceeds from issuance of debt and proceeds from the sale of interest in consolidated entities. Cash used in financing activities consists primarily of repurchases of capital stock, net payments related to stock-based award activities, and repayments of debt. Net cash used in financing activities increased from 2019 to 2020 primarily due to an increase in cash payments for repurchases of capital stock, partially offset by increases in net proceeds from issuance of debt and proceeds from the sale of interest in consolidated entities. Liquidity and Material Cash Requirements We expect existing cash, cash equivalents, short-term marketable securities, cash flows from operations and financing activities to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future. As of December 31, 2020, we had long-term taxes payable of $6.5 billion related to a one-time transition tax payable incurred as a result of the U.S. Tax Cuts and Jobs Act (""Tax Act""). As permitted by the Tax Act, we will pay the transition tax in annual interest-free installments through 2025. In 2017, 2018 and 2019, the EC announced decisions that certain actions taken by Google infringed European competition law and imposed fines of 2.4 billion ($2.7 billion as of June 27, 2017), 4.3 billion ($5.1 billion as of June 30, 2018), and 1.5 billion ($1.7 billion as of March 20, 2019), respectively. While each EC decision is under appeal, we included the fines 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. In January 2021, we closed the acquisition of Fitbit, a leading wearables brand, for $2.1 billion. We have a short-term debt financing program of up to $5.0 billion through the issuance of commercial paper. Net proceeds from this program are used for general corporate purposes. As of December 31, 2020, we had no commercial paper outstanding. As of December 31, 2020, we have $4.0 billion of revolving credit facilities expiring Alphabet Inc. in July 2023 with no amounts outstanding. The interest rate for the credit facilities is determined based on a formula using certain market rates. In August 2020, we issued $10.0 billion of fixed-rate senior unsecured notes in six tranches: $1.0 billion due in 2025, $1.0 billion due in 2027, $2.25 billion due in 2030, $1.25 billion due in 2040, $2.5 billion due in 2050 and $2.0 billion due in 2060. The 2020 Notes had a weighted average duration of 21.5 years and weighted average coupon rate of 1.57%. Of the total issuance, $5.75 billion was designated as Sustainability Bonds, the net proceeds of which are used to fund environmentally and socially responsible projects in the following eight areas: energy efficiency, clean energy, green buildings, clean transportation, circular economy and design, affordable housing, commitment to racial equity, and support for small businesses and COVID-19 crisis response. The remaining net proceeds are used for general corporate purposes. As of December 31, 2020, we have senior unsecured notes outstanding with a total carrying value of $13.8 billion. Refer to Note 6 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information on the debts. In accordance with the authorizations of the Board of Directors of Alphabet, in 2020 we repurchased and subsequently retired 21.5 million shares of Alphabet Class C capital stock for an aggregate amount of $31.1 billion. As of December 31, 2020, $17.6 billion remains authorized and available for repurchase. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. Refer to Note 11 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Capital Expenditures and Leases We make investments in land and buildings for data centers and offices and information technology assets through purchases of property and equipment and lease arrangements to provide capacity for the growth of our services and products. Our capital investments in property and equipment consist primarily of the following major categories:  Technical infrastructure, which consists of our investments in servers and network equipment for compute, storage and networking requirements for ongoing business activities, including machine learning, (collectively referred to as our information technology assets) and data center land and building construction; and  Office facilities, ground up development projects and related building improvements. Due to the integrated nature of Alphabet, our technical infrastructure and office facilities are managed centrally at a consolidated level. The associated costs, including depreciation and impairment, are allocated to operating segments as a service cost generally based on usage or headcount. Our technical infrastructure investments are designed to support all of Alphabet, including primarily ads, Google Cloud, Search, and YouTube. Construction in progress consists primarily of technical infrastructure and office facilities which have not yet been placed in service for our intended use. The time frame from date of purchase to placement in service of these assets may extend to multiple periods. For example, our data center construction projects are generally multi-year projects with multiple phases, where we acquire qualified land and buildings, construct buildings, and secure and install information technology assets. During the years ended December 31, 2019 and 2020, we spent $23.5 billion and $22.3 billion on capital expenditures and recognized total operating lease assets of $4.4 billion and $2.8 billion, respectively. As of December 31, 2020, the amount of total future lease payments under operating leases, which had a weighted average remaining lease term of 9 years, was $15.1 billion. As of December 31, 2020, we have entered into leases that have not yet commenced with future lease payments of $8.0 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2021 and 2026 with non-cancelable lease terms of 1 to 25 years. Depreciation of our property and equipment commences when the deployment of such assets are completed and are ready for our intended use. Land is not depreciated. For the years ended December 31, 2019 and 2020, our depreciation and impairment expenses on property and equipment were $10.9 billion and $12.9 billion, respectively. For the years ended December 31, 2019 and 2020, our operating lease expenses (including variable lease costs), were $2.4 billion and $2.9 billion, respectively. Finance leases were not material for the years ended December 31, 2019 and 2020. Please refer to Note 4 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information on the leases. Alphabet Inc. Contractual Obligations as of December 31, 2020 The following summarizes our contractual obligations as of December 31, 2020 (in millions):  Payments Due By Period  Total Less than 1 year 1-3 years 3-5 years More than 5 years Operating lease obligations (1) $ 15,091 $ 2,198 $ 4,165 $ 3,127 $ 5,601 Obligations for leases that have not yet commenced (1) 8,049 370 1,198 1,469 5,012 Purchase obligations (2) 10,656 7,368 1,968 354 966 Long-term debt obligations (3) 19,840 1,357 634 2,587 15,262 Tax payable (4) 7,359 834 1,916 4,609 0 Other long-term liabilities reflected on our balance sheet (5) 1,421 532 616 185 88 Total contractual obligations $ 62,416 $ 12,659 $ 10,497 $ 12,331 $ 26,929 (1) For further information, refer to Note 4 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (2) Represents non-cancelable contractual obligations primarily related to data center operations and build-outs; information technology assets; purchases of inventory; and digital media content licensing arrangements. The amounts included above represent the non-cancelable portion of agreements or the minimum cancellation fee. For those agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of December 31, 2020. Excluded from the table above are open orders for purchases that support normal operations, which are generally cancelable. (3) Represents our principal and interest payments. For further information on long-term debt, refer to Note 6 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (4) Represents one-time transition tax payable incurred as a result of the Tax Act. For further information, refer to Note 14 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Excluded from the table above are long-term taxes payable of $2.3 billion as of December 31, 2020 primarily related to uncertain tax positions, for which we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing and outcomes of tax audits. (5) Represents cash obligations recorded on our Consolidated Balance Sheets, including the short-term portion of these long-term liabilities, primarily for certain commercial agreements. These amounts do not include the EC fines which are classified as current liabilities on our Consolidated Balance Sheets. For further information regarding the EC fines, refer to Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Off-Balance Sheet Arrangements As of December 31, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. See Note 10 included in Part II, Item 8 of this annual report on Form 10-K for more information on our commitments and contingencies. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, expenses, gains and losses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below. We have reviewed our critical accounting policies and estimates with the audit and compliance committee of our Board of Directors. Please see Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements. Alphabet Inc. Revenues For the sale of third-party goods and services, we evaluate whether we are the principal, and report revenues on a gross basis, or an agent, and report revenues on a net basis. In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price. Income Taxes We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Services (""IRS"") and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes. Loss Contingencies We are regularly subject to claims, suits, government investigations, and other proceedings involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury consumer protection, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in the Notes to the Consolidated Financial Statements. We evaluate, on a regular basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both the likelihood of there being, and the estimated amount of, a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material effect on our business, consolidated financial position, results of operations, or cash flows. Long-lived Assets Long-lived assets, including property and equipment, long-term prepayments, and intangible assets, excluding goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. An impairment loss would be recognized when estimated undiscounted future cash flows generated from the assets are less than their carrying amount. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair Value Measurements We measure certain of our non-marketable equity and debt investments, certain other instruments including stock-based compensation awards settled in the stock of certain Other Bets, and certain assets and liabilities acquired in a business combination, at fair value on a nonrecurring basis. The determination of fair value involves the use of appropriate valuation methods and relevant inputs into valuation models. The fair value hierarchy prioritizes the inputs used to measure fair value whereby it gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. We maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Our use of unobservable inputs reflects the assumptions that market participants would use and may include our own data adjusted based on reasonably available information. We apply judgment in assessing the relevance of observable market data to determine the priority of inputs under the fair value hierarchy, particularly in situations where there is very little or no market activity. Alphabet Inc. In determining the fair values of our non-marketable equity and debt investments, as well as assets acquired (especially with respect to intangible assets) and liabilities assumed in business combinations, we make significant estimates and assumptions, some of which include the use of unobservable inputs. Certain stock-based compensation awards may be settled in the stock of certain of our Other Bets or in cash. These awards are based on the equity values of the respective Other Bet, which requires use of unobservable inputs. We also have compensation arrangements with payouts based on realized investment returns, i.e. performance fees. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized, and may require the use of unobservable inputs. Non-marketable Equity Securities Our non-marketable equity securities not accounted for under the equity method are carried either at fair value or under the measurement alternative. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and obligations of the securities. Recording upward and downward adjustments to the carrying value of our equity securities as a result of observable price changes requires quantitative assessments of the fair value of our securities using various valuation methodologies and involves the use of estimates. Non-marketable equity securities are also subject to periodic impairment reviews. Our quarterly impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the investment's fair value. Qualitative factors considered include the companies' financial and liquidity position, access to capital resources and the time since the last adjustment to fair value, among others. When indicators of impairment exist, we prepare quantitative assessments of the fair value of our equity investments using both the market and income approaches which require judgment and the use of estimates, including discount rates, investee revenues and costs, and comparable market data of private and public companies, among others. When our assessment indicates that an impairment exists, we write down the investment to its fair value. Change in Accounting Estimate In January 2021, we completed an assessment of the useful lives of our servers and network equipment and determined we should adjust the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years. This change in accounting estimate will be effective beginning fiscal year 2021. For assets that are in-service as of December 31, 2020, we expect operating results to be favorably impacted by approximately $2.1 billion for the full fiscal year 2021. The effect of the change may be different due to our capital investments during the fiscal year 2021. "," ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to financial market risks, including changes in foreign currency exchange rates, interest rates, and equity investment risks. Foreign Currency Exchange Risk We transact business globally in multiple currencies. Our international revenues, as well as costs and expenses denominated in foreign currencies, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. Principal currencies hedged included the Australian dollar, British pound, Canadian dollar, Euro and Japanese yen. For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term. We use foreign exchange forward contracts to offset the foreign exchange risk on our assets and liabilities denominated in currencies other than the functional currency of the subsidiary. These forward contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements on our assets and liabilities. The foreign currency gains and losses on the assets and liabilities are recorded in other income (expense), net, which are offset by the gains and losses on the forward contracts. If an adverse 10% foreign currency exchange rate change was applied to total monetary assets, liabilities, and commitments denominated in currencies other than the functional currencies at the balance sheet date, it would have resulted in an adverse effect on income before income taxes of approximately $8 million and $497 million as of Alphabet Inc. December 31, 2019 and 2020, respectively, after consideration of the effect of foreign exchange contracts in place for the years ended December 31, 2019 and 2020. We use foreign currency forwards and option contracts, including collars (an option strategy comprised of a combination of purchased and written options) to protect our forecasted U.S. dollar-equivalent earnings from changes in foreign currency exchange rates. When the U.S. dollar strengthens, gains from foreign currency options and forwards reduce the foreign currency losses related to our earnings. When the U.S. dollar weakens, losses from foreign currency collars and forwards offset the foreign currency gains related to our earnings. These hedging contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements. We designate these contracts as cash flow hedges for accounting purposes. We reflect the gains or losses of foreign currency spot rate changes as a component of AOCI and subsequently reclassify them into revenues to offset the hedged exposures as they occur. If the U.S. dollar weakened by 10% as of December 31, 2019 and 2020, the amount recorded in AOCI related to our foreign exchange contracts before tax effect would have been approximately $1.1 billion and $912 million lower as of December 31, 2019 and 2020, respectively. The change in the value recorded in AOCI would be expected to offset a corresponding foreign currency change in forecasted hedged revenues when recognized. We use foreign exchange forward contracts designated as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. These forward contracts serve to offset the foreign currency translation risk from our foreign operations. If the U.S. dollar weakened by 10%, the amount recorded in cumulative translation adjustment (""CTA"") within AOCI related to our net investment hedge would have been approximately $936 million and $1 billion lower as of December 31, 2019 and 2020, respectively. The change in value recorded in CTA would be expected to offset a corresponding foreign currency translation gain or loss from our investment in foreign subsidiaries. Interest Rate Risk Our Corporate Treasury investment strategy is to achieve a return that will allow us to preserve capital and maintain liquidity. We invest primarily in debt securities including those of the U.S. government and its agencies, corporate debt securities, mortgage-backed securities, money market and other funds, municipal securities, time deposits, asset backed securities, and debt instruments issued by foreign governments. By policy, we limit the amount of credit exposure to any one issuer. Our investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Unrealized gains or losses on our marketable debt securities are primarily due to interest rate fluctuations as compared to interest rates at the time of purchase. For certain fixed and variable rate debt securities, we have elected the fair value option for which changes in fair value are recorded in other income (expense), net. We measure securities for which we have not elected the fair value option at fair value with gains and losses recorded in AOCI until the securities are sold, less any expected credit losses. We use value-at-risk (""VaR"") analysis to determine the potential effect of fluctuations in interest rates on the value of our marketable debt security portfolio. The VaR is the expected loss in fair value, for a given confidence interval, for our investment portfolio due to adverse movements in interest rates. We use a variance/covariance VaR model with 95% confidence interval. The estimated one-day loss in fair value of our marketable debt securities as of December 31, 2019 and 2020 are shown below (in millions):  As of December 31, 12-Month Average As of December 31,  2019 2020 2019 2020 Risk Category - Interest Rate $ 104 $ 144 $ 90 $ 145 Actual future gains and losses associated with our marketable debt security portfolio may differ materially from the sensitivity analyses performed as of December 31, 2019 and 2020 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates and our actual exposures and positions. VaR analysis is not intended to represent actual losses but is used as a risk estimation. Equity Investment Risk Our marketable and non-marketable equity securities are subject to a wide variety of market-related risks that could substantially reduce or increase the fair value of our holdings. Our marketable equity securities are publicly traded stocks or funds and our non-marketable equity securities are investments in privately held companies, some of which are in the startup or development stages. Alphabet Inc. We record our marketable equity securities not accounted for under the equity method at fair value based on readily determinable market values, of which publicly traded stocks and mutual funds are subject to market price volatility, and represent $3.3 billion and $5.9 billion of our investments as of December 31, 2019 and 2020, respectively. A hypothetical adverse price change of 30% on our December 31, 2020 balance, which could be experienced in the near term, would decrease the fair value of our marketable equity securities by $1.8 billion. From time to time, we may enter into derivatives to hedge the market price risk on certain of our marketable equity securities. Our non-marketable equity securities not accounted for under the equity method are adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). The fair value measured at the time of the observable transaction is not necessarily an indication of the current fair value as of the balance sheet date. These investments, especially those that are in the early stages, are inherently risky because the technologies or products these companies have under development are typically in the early phases and may never materialize and they may experience a decline in financial condition, which could result in a loss of a substantial part of our investment in these companies. The success of our investment in any private company is also typically dependent on the likelihood of our ability to realize appreciation in the value of our investments through liquidity events such as public offerings, acquisitions, private sales or other market events. As of December 31, 2019 and 2020, the carrying value of our non-marketable equity securities, which were accounted for under the measurement alternative, was $11.4 billion and $18.9 billion, respectively. Valuations of our equity investments in private companies are inherently more complex due to the lack of readily available market data. Volatility in the global economic climate and financial markets could result in a significant impairment charge relating to our non-marketable equity securities. Changes in valuation of non-marketable equity securities may not directly correlate with changes in valuation of marketable equity securities. Additionally, observable transactions at lower valuations could result in significant losses on our non-marketable equity securities. The effect of COVID-19 on our impairment assessment requires significant judgment due to the uncertainty around the duration and severity of the impact. The carrying values of our equity method investments, which totaled approximately $1.3 billion and $1.4 billion as of December 31, 2019 and 2020, respectively, generally do not fluctuate based on market price changes, however these investments could be impaired if the carrying value exceeds the fair value and is not expected to recover. For further information about our equity investments, please refer to Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Part II of this Annual Report on Form 10-K. Alphabet Inc. "," ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Alphabet Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  Page Reports of Ernst  Young LLP, Independent Registered Public Accounting Firm Financial Statements: Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements The supplementary financial information required by this Item 8 is included in Item 7 under the caption Quarterly Results of Operations. Alphabet Inc. REPORT OF ERNST  YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alphabet Inc. (the Company) as of December 31, 2019 and 2020, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 2, 2021 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Alphabet Inc. Loss Contingencies Description of the Matter The Company is regularly subject to claims, suits, and government investigations involving competition, intellectual property, privacy, consumer protection, tax, labor and employment, commercial disputes, content generated by its users, goods and services offered by advertisers or publishers using their platforms, and other matters. As described in Note 10 to the consolidated financial statements Commitments and Contingencies such claims could result in adverse consequences. Significant judgment is required to determine both the likelihood, and the estimated amount, of a loss related to such matters. Auditing managements accounting for and disclosure of loss contingencies from these matters involved challenging and subjective auditor judgment in assessing the Companys evaluation of the probability of a loss, and the estimated amount or range of loss. How We Addressed the Matter in Our Audit We tested relevant controls over the identified risks associated with managements accounting for and disclosure of these matters. This included controls over managements assessment of the probability of incurrence of a loss and whether the loss or range of loss was reasonably estimable and the development of related disclosures. Our audit procedures included gaining an understanding of previous rulings issued by regulators and the status of ongoing lawsuits, reviewing letters addressing the matters from internal and external legal counsel, meeting with internal legal counsel to discuss the allegations, and obtaining a representation letter from management on these matters. We also evaluated the Companys disclosures in relation to these matters. /s/ Ernst  Young LLP We have served as the Company's auditor since 1999. San Jose, California February 2, 2021 Alphabet Inc. REPORT OF ERNST  YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on Internal Control over Financial Reporting We have audited Alphabet Inc.s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Alphabet Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company and our report dated February 2, 2021 expressed an unqualified opinion thereon. Basis for Opinion The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst  Young LLP San Jose, California February 2, 2021 Alphabet Inc. Alphabet Inc. CONSOLIDATED BALANCE SHEETS (In millions, except share amounts which are reflected in thousands, and par value per share amounts) As of December 31, 2019 As of December 31, 2020 Assets Current assets: Cash and cash equivalents $ 18,498  $ 26,465  Marketable securities 101,177  110,229  Total cash, cash equivalents, and marketable securities 119,675  136,694  Accounts receivable, net 25,326  30,930  Income taxes receivable, net 2,166  454  Inventory 999  728  Other current assets 4,412  5,490  Total current assets 152,578  174,296  Non-marketable investments 13,078  20,703  Deferred income taxes 721  1,084  Property and equipment, net 73,646  84,749  Operating lease assets 10,941  12,211  Intangible assets, net 1,979  1,445  Goodwill 20,624  21,175  Other non-current assets 2,342  3,953  Total assets $ 275,909  $ 319,616  Liabilities and Stockholders Equity Current liabilities: Accounts payable $ 5,561  $ 5,589  Accrued compensation and benefits 8,495  11,086  Accrued expenses and other current liabilities 23,067  28,631  Accrued revenue share 5,916  7,500  Deferred revenue 1,908  2,543  Income taxes payable, net 274  1,485  Total current liabilities 45,221  56,834  Long-term debt 4,554  13,932  Deferred revenue, non-current 358  481  Income taxes payable, non-current 9,885  8,849  Deferred income taxes 1,701  3,561  Operating lease liabilities 10,214  11,146  Other long-term liabilities 2,534  2,269  Total liabilities 74,467  97,072  Commitments and Contingencies (Note 10) Stockholders equity: Convertible preferred stock, $ 0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding 0  0  Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $ 0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000 , Class B 3,000,000 , Class C 3,000,000 ); 688,335 (Class A 299,828 , Class B 46,441 , Class C 342,066 ) and 675,222 (Class A 300,730 , Class B 45,843 , Class C 328,649 ) shares issued and outstanding 50,552  58,510  Accumulated other comprehensive income (loss) ( 1,232 ) 633  Retained earnings 152,122  163,401  Total stockholders equity 201,442  222,544  Total liabilities and stockholders equity $ 275,909  $ 319,616  See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts)  Year Ended December 31,  2018 2019 2020 Revenues $ 136,819  $ 161,857  $ 182,527  Costs and expenses: Cost of revenues 59,549  71,896  84,732  Research and development 21,419  26,018  27,573  Sales and marketing 16,333  18,464  17,946  General and administrative 6,923  9,551  11,052  European Commission fines 5,071  1,697  0  Total costs and expenses 109,295  127,626  141,303  Income from operations 27,524  34,231  41,224  Other income (expense), net 7,389  5,394  6,858  Income before income taxes 34,913  39,625  48,082  Provision for income taxes 4,177  5,282  7,813  Net income $ 30,736  $ 34,343  $ 40,269  Basic net income per share of Class A and B common stock and Class C capital stock $ 44.22  $ 49.59  $ 59.15  Diluted net income per share of Class A and B common stock and Class C capital stock $ 43.70  $ 49.16  $ 58.61  See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions)  Year Ended December 31,  2018 2019 2020 Net income $ 30,736  $ 34,343  $ 40,269  Other comprehensive income (loss): Change in foreign currency translation adjustment ( 781 ) ( 119 ) 1,139  Available-for-sale investments: Change in net unrealized gains (losses) 88  1,611  1,313  Less: reclassification adjustment for net (gains) losses included in net income ( 911 ) ( 111 ) ( 513 ) Net change, net of tax benefit (expense) of $ 156 , $( 221 ), and $( 230 ) ( 823 ) 1,500  800  Cash flow hedges: Change in net unrealized gains (losses) 290  22  42  Less: reclassification adjustment for net (gains) losses included in net income 98  ( 299 ) ( 116 ) Net change, net of tax benefit (expense) of $( 103 ), $ 42 , and $ 11 388  ( 277 ) ( 74 ) Other comprehensive income (loss) ( 1,216 ) 1,104  1,865  Comprehensive income $ 29,520  $ 35,447  $ 42,134  See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (In millions, except share amounts which are reflected in thousands)  Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Stockholders Equity  Shares Amount Balance as of December 31, 2017 694,783  $ 40,247  $ ( 992 ) $ 113,247  $ 152,502  Cumulative effect of accounting change 0 0 ( 98 ) ( 599 ) ( 697 ) Common and capital stock issued 8,975  148  0 0 148  Stock-based compensation expense 0 9,353  0 0 9,353  Tax withholding related to vesting of restricted stock units 0 ( 4,782 ) 0 0 ( 4,782 ) Repurchases of capital stock ( 8,202 ) ( 576 ) 0 ( 8,499 ) ( 9,075 ) Sale of interest in consolidated entities 0 659  0 0 659  Net income 0 0 0 30,736  30,736  Other comprehensive income (loss) 0 0 ( 1,216 ) 0 ( 1,216 ) Balance as of December 31, 2018 695,556  45,049  ( 2,306 ) 134,885  177,628  Cumulative effect of accounting change 0 0 ( 30 ) ( 4 ) ( 34 ) Common and capital stock issued 8,120  202  0 0 202  Stock-based compensation expense 0 10,890  0 0 10,890  Tax withholding related to vesting of restricted stock units and other 0 ( 4,455 ) 0 0 ( 4,455 ) Repurchases of capital stock ( 15,341 ) ( 1,294 ) 0 ( 17,102 ) ( 18,396 ) Sale of interest in consolidated entities 0 160  0 0 160  Net income 0 0 0 34,343  34,343  Other comprehensive income (loss) 0 0 1,104  0 1,104  Balance as of December 31, 2019 688,335  50,552  ( 1,232 ) 152,122  201,442  Common and capital stock issued 8,398  168  0 0 168  Stock-based compensation expense 0 13,123  0 0 13,123  Tax withholding related to vesting of restricted stock units and other 0 ( 5,969 ) 0 0 ( 5,969 ) Repurchases of capital stock ( 21,511 ) ( 2,159 ) 0 ( 28,990 ) ( 31,149 ) Sale of interest in consolidated entities 0 2,795  0 0 2,795  Net income 0 0 0 40,269  40,269  Other comprehensive income (loss) 0 0 1,865  0 1,865  Balance as of December 31, 2020 675,222  $ 58,510  $ 633  $ 163,401  $ 222,544  See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)  Year Ended December 31,  2018 2019 2020 Operating activities Net income $ 30,736  $ 34,343  $ 40,269  Adjustments: Depreciation and impairment of property and equipment 8,164  10,856  12,905  Amortization and impairment of intangible assets 871  925  792  Stock-based compensation expense 9,353  10,794  12,991  Deferred income taxes 778  173  1,390  Gain on debt and equity securities, net ( 6,650 ) ( 2,798 ) ( 6,317 ) Other ( 189 ) ( 592 ) 1,267  Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable ( 2,169 ) ( 4,340 ) ( 6,524 ) Income taxes, net ( 2,251 ) ( 3,128 ) 1,209  Other assets ( 1,207 ) ( 621 ) ( 1,330 ) Accounts payable 1,067  428  694  Accrued expenses and other liabilities 8,614  7,170  5,504  Accrued revenue share 483  1,273  1,639  Deferred revenue 371  37  635  Net cash provided by operating activities 47,971  54,520  65,124  Investing activities Purchases of property and equipment ( 25,139 ) ( 23,548 ) ( 22,281 ) Purchases of marketable securities ( 50,158 ) ( 100,315 ) ( 136,576 ) Maturities and sales of marketable securities 48,507  97,825  132,906  Purchases of non-marketable investments ( 2,073 ) ( 1,932 ) ( 7,175 ) Maturities and sales of non-marketable investments 1,752  405  1,023  Acquisitions, net of cash acquired, and purchases of intangible assets ( 1,491 ) ( 2,515 ) ( 738 ) Other investing activities 98  589  68  Net cash used in investing activities ( 28,504 ) ( 29,491 ) ( 32,773 ) Financing activities Net payments related to stock-based award activities ( 4,993 ) ( 4,765 ) ( 5,720 ) Repurchases of capital stock ( 9,075 ) ( 18,396 ) ( 31,149 ) Proceeds from issuance of debt, net of costs 6,766  317  11,761  Repayments of debt ( 6,827 ) ( 585 ) ( 2,100 ) Proceeds from sale of interest in consolidated entities, net 950  220  2,800  Net cash used in financing activities ( 13,179 ) ( 23,209 ) ( 24,408 ) Effect of exchange rate changes on cash and cash equivalents ( 302 ) ( 23 ) 24  Net increase in cash and cash equivalents 5,986  1,797  7,967  Cash and cash equivalents at beginning of period 10,715  16,701  18,498  Cash and cash equivalents at end of period $ 16,701  $ 18,498  $ 26,465  Supplemental disclosures of cash flow information Cash paid for taxes, net of refunds $ 5,671  $ 8,203  $ 4,990  See accompanying notes. Alphabet Inc. Alphabet Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations 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 customers with platforms, collaboration tools and services, and sales of other products and services, such as apps and in-app purchases, digital content and subscriptions for digital content, and hardware. Basis of Consolidation The consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models. All intercompany balances and transactions have been eliminated. Use of Estimates Preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States (""GAAP"") requires us to make 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. On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses, fair values of financial instruments (including non-marketable equity securities), intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, and contingent liabilities, among others. We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. As of December 31, 2020 the impact of COVID-19 continues to unfold and the extent of the impact will depend on a number of factors, including the duration and severity of the pandemic; the uneven impact to certain industries; advances in testing, treatment and prevention; and the macroeconomic impact of government measures to contain the spread of the virus and related government stimulus measures. As a result, certain of our estimates and assumptions, including the allowance for credit losses for accounts receivable, the credit worthiness of customers entering into revenue arrangements, the valuation of non-marketable equity securities, including our impairment assessment, and the fair values of our financial instruments require increased judgment and carry a higher degree of variability and volatility that could result in material changes to our estimates in future periods. In January 2021, we completed an assessment of the useful lives of our servers and network equipment and determined we should adjust the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years . This change in accounting estimate will be effective beginning fiscal year 2021. Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to our customers and the collectibility of an amount that we expect in exchange for those goods or services is probable. Sales and other similar taxes are excluded from revenues. Advertising Revenues We generate advertising revenues primarily by delivering advertising on Google Search  other properties, including Google.com, the Google Search app, Google Play, Gmail and Google Maps; YouTube, and Google Network Members properties. Our customers generally purchase advertising inventory through Google Ads, Google Ad Manager and Google Marketing Platform, among others. We offer advertising by delivering both performance and brand advertising. We recognize revenues for performance advertising when a user engages with the advertisement, such as a click, a view, or a purchase. For brand advertising, we recognize revenues when the ad is displayed or a user views the ad. For ads placed on Google Network Members properties, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, we report advertising revenues Alphabet Inc. for ads placed on Google Network Members properties on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to Google Network Members are recorded as cost of revenues. Where we are the principal, we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers, and is further supported by us being primarily responsible to our customers and having a level of discretion in establishing pricing. Google Cloud Revenues Google Cloud revenues consist primarily of fees received for Google Cloud Platform services (which includes infrastructure and data analytics platform products and other services) and Google Workspace (formerly G Suite) collaboration tools and other enterprise services. Our cloud services are generally provided on either a consumption or subscription basis. Revenues related to cloud services provided on a consumption basis are recognized when the customer utilizes the services, based on the quantity of services consumed. Revenues related to cloud services provided on a subscription basis are recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services. Other Revenues Google other revenues and Other Bets revenues consist primarily of revenues from:  Google Play, which includes revenues from sale of apps and in-app purchases (which we recognize net of payout to developers) and digital content sold in the Google Play store;  hardware, including Google Nest home products, Pixelbooks, Pixel phones and other devices;  YouTube non-advertising services including, YouTube premium and YouTube TV subscriptions and other services; and  other products and services. As it relates to Google other revenues, the most significant judgment is determining whether we are the principal or agent for app sales and in-app purchases through the Google Play store. We report revenues from these transactions on a net basis because our performance obligation is to facilitate a transaction between app developers and end users, for which we earn a commission. Consequently, the portion of the gross amount billed to end users that is remitted to app developers is not reflected as revenues. Arrangements with Multiple Performance Obligations Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost plus margin. Customer Incentives and Credits Certain customers receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues. We believe that there will not be significant changes to our estimates of variable consideration. Sales Commissions We expense sales commissions when incurred when the amortization period is one year or less. We recognize an asset for certain sales commissions if we expect the period of benefit of these costs to exceed one year and amortize it over the period of expected benefit. These costs are recorded within sales and marketing expenses. Cost of Revenues Cost of revenues consists of TAC and other costs of revenues. TAC represents the amounts paid to our distribution partners who make available our search access points and services and amounts paid to Google Network Members primarily for ads displayed on their properties. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers. Other cost of revenues (which is the cost of revenues excluding TAC) includes the following:  Content acquisition costs primarily related to payments to content providers from whom we license video and other content for distribution on YouTube advertising and subscription services and Google Play. We pay fees to these content providers based on revenues generated or a flat fee; Alphabet Inc.  Expenses associated with our data centers and other operations (including bandwidth, compensation expense (including SBC), depreciation, energy, and other equipment costs); and  Inventory related costs for hardware we sell. Software Development Costs We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the criteria for capitalization were not material for the periods presented. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented. Stock-based Compensation Stock-based compensation primarily consists of Alphabet restricted stock units (""RSUs""). RSUs are equity classified and measured at the fair market value of the underlying stock at the grant date. We recognize RSU expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur. For RSUs, shares are issued on the vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued than the number of RSUs outstanding and the tax withholding is recorded as a reduction to additional paid-in capital. Additionally, stock-based compensation also includes other stock-based awards, such as performance stock units (""PSUs"") and awards that may be settled in cash or the stock of certain Other Bets. PSUs and certain Other Bet awards are equity classified and expense is recognized over the requisite service period. Certain Other Bet awards are liability classified and remeasured at fair value through settlement. The fair value of Other Bet awards is based on the equity valuation of the respective Other Bet. Advertising and Promotional Expenses We expense advertising and promotional costs in the period in which they are incurred. For the years ended December 31, 2018, 2019 and 2020, advertising and promotional expenses totaled approximately $ 6.4 billion, $ 6.8 billion, and $ 5.4 billion, respectively. Performance Fees Performance fees refer to compensation arrangements with payouts based on realized investment returns. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized. Performance fees, which are primarily related to gains on equity securities, are recorded as a component of other income (expense), net. Certain Risks and Concentrations Our revenues are primarily derived from online advertising, the market for which is highly competitive and rapidly changing. In addition, our revenues are generated from a multitude of markets in countries around the world. Significant changes in this industry or changes in customer buying or advertiser spending behavior could adversely affect our operating results. No individual customer or groups of affiliated customers represented more than 10% of our revenues in 2018, 2019, or 2020. In 2018, 2019, and 2020, we generated approximately 46 %, 46 %, and 47 % of our revenues, respectively, from customers based in the U.S. We are subject to concentrations of credit risk principally from cash and cash equivalents, marketable securities, foreign exchange contracts, and accounts receivable. We manage our credit risk exposure through timely assessment of our counterparty creditworthiness, credit limits and use of collateral management. Cash equivalents and marketable securities consist primarily of time deposits, money market and other funds, highly liquid debt instruments of the U.S. government and its agencies, debt instruments issued by foreign governments, debt instruments issued by municipalities in the U.S., corporate debt securities, mortgage-backed securities, and asset-backed securities. Foreign exchange contracts are transacted with various financial institutions with high credit standing. Accounts receivable are typically unsecured and are derived from revenues earned from Alphabet Inc. customers located around the world. We perform ongoing evaluations to determine customer credit and we limit the amount of credit we extend. We generally do not require collateral from our customers. Fair Value of Financial Instruments Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative contracts, and non-marketable debt securities. Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities, which are adjusted to fair value when observable price changes are identified or when the non-marketable equity securities are impaired (referred to as the measurement alternative) . Other financial assets and liabilities are carried at cost with fair value disclosed, if required. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings. Level 3 - Unobservable inputs that are supported by little or no market activities. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Cash, Cash Equivalents, and Marketable Securities We invest all excess cash primarily in government bonds, corporate debt securities, mortgage-backed and asset-backed securities, time deposits, and money market funds. We classify all marketable debt securities that have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities on our Consolidated Balance Sheets. We determine the appropriate classification of our investments in marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt securities as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities. As we view these securities as available to support current operations, we classify highly liquid securities with maturities beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders equity, except for the changes in allowance for expected credit losses, which are recorded in other income (expense), net. 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. We determine any realized gains or losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net. Our investments in marketable equity securities are measured at fair value with the related gains and losses, realized and unrealized, recognized in other income (expense), net. Accounts Receivable Our payment terms for accounts receivable vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customers, we require payment before the products or services are delivered to the customer. Alphabet Inc. We maintain an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the Consolidated Statements of Income. We assess collectibility by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectibility issues. In determining the amount of the allowance for credit losses, we consider historical collectibility based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. For the year ended December 31, 2020, our assessment considered the impact of COVID-19 and estimates of expected credit and collectibility trends. Volatility in market conditions and evolving credit trends are difficult to predict and may cause variability and volatility that may have a material impact on our allowance for credit losses in future periods. The allowance for credit losses on accounts receivable was $ 275 million and $ 789 million as of December 31, 2019 and 2020, respectively. Inventory Inventory consists primarily of finished goods and is stated at the lower of cost and net realizable value. Cost is computed using the first-in, first-out method. Non-Marketable Investments We account for non-marketable equity investments through which we exercise significant influence but do not have control over the investee under the equity method. Our non-marketable equity securities not accounted for under the equity method are primarily accounted for under the measurement alternative. Under the measurement alternative, the carrying value of our non-marketable equity investments is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment. Adjustments are determined primarily based on a market approach as of the transaction date and are recorded as a component of other income (expense), net. Non-marketable debt investments are classified as available-for-sale securities. Non-marketable investments that do not have stated contractual maturity dates are classified as non-current assets on the Consolidated Balance Sheets. Impairment of Investments We periodically review our debt and non-marketable equity investments for impairment. For debt securities in an unrealized loss position, we determine whether a credit loss exists. The credit loss is estimated by considering available information relevant to the collectibility of the security and information about past events, current conditions, and reasonable and supportable forecasts. Any credit loss is recorded as a charge to other income (expense), net, not to exceed the amount of the unrealized loss. Unrealized losses other than the credit loss are recognized in accumulated other comprehensive income (""AOCI""). If we have an intent to sell, or if it is more likely than not that we will be required to sell a debt security in an unrealized loss position before recovery of its amortized cost basis, we will write down the security to its fair value and record the corresponding charge as a component of other income (expense), net. For non-marketable equity securities we consider whether impairment indicators exist by evaluating the companies' financial and liquidity position, access to capital resources and the time since the last adjustment to fair value, among others. If the assessment indicates that the investment is impaired, we write down the investment to its fair value by recording the corresponding charge as a component of other income (expense), net. Fair value is estimated using the best information available, which may include cash flow projections or other available market data. Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a variable interest entity (""VIE""). We consolidate VIEs when we are the primary beneficiary. We are the primary beneficiary of a VIE when we have the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP. Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether we are the primary beneficiary. Alphabet Inc. Property and Equipment Property and equipment includes the following categories: land and buildings, information technology assets, construction in progress, leasehold improvements, and furniture and fixtures. Land and buildings include land, offices, data centers and related building improvements. Information technology assets include servers and network equipment. We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, which we regularly evaluate. We depreciate buildings over periods of seven to 25 years. We depreciate information technology assets generally over periods of three to five years (specifically, three years for servers and three to five years for network equipment). We depreciate leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. Construction in progress is the construction or development of property and equipment that have not yet been placed in service for our intended use. Depreciation for equipment, buildings, and leasehold improvements commences once they are ready for our intended use. Land is not depreciated. Leases We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments affected by the Consumer Price Index, payments contingent on wind or solar production for power purchase arrangements, and payments for maintenance and utilities. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments and lease incentives. Operating lease assets and liabilities are included on our Consolidated Balance Sheet beginning January 1, 2019. The current portion of our operating lease liabilities is included in accrued expenses and other current liabilities and the long term portion is included in operating lease liabilities. Finance lease assets are included in property and equipment, net. Finance lease liabilities are included in accrued expenses and other current liabilities or long-term debt. Operating lease expense (excluding variable lease costs) is recognized on a straight-line basis over the lease term. Long-Lived Assets, Goodwill and Other Acquired Intangible Assets We review property and equipment, long-term prepayments and intangible assets, excluding goodwill, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets or asset group are not recoverable, the impairment recognized is measured as the amount by which the carrying value exceeds its fair value. Impairments were not material for the periods presented. We allocate goodwill to reporting units based on the expected benefit from the business combination. We evaluate our reporting units periodically, as well as when changes in our operating segments occur. For changes in reporting units, we reassign goodwill using a relative fair value allocation approach. We test our goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill impairments were no t material for the periods presented. Intangible assets with definite lives are amortized over their estimated useful lives. We amortize intangible assets on a straight-line basis with definite lives generally over periods ranging from one to twelve years . Alphabet Inc. Income Taxes We account for income taxes using the asset and liability method, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized. We recognize the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority. In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision. Business Combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Foreign Currency Generally, the functional currency of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities, and average rates for the annual period derived from month-end exchange rates for revenues, costs, and expenses. We record translation gains and losses in accumulated other comprehensive income (AOCI) as a component of stockholders equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gain (loss) in other income (expense), net. Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update No. 2016-13 (""ASU 2016-13"") ""Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"", which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to certain available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes result in earlier recognition of credit losses. We adopted ASU 2016-13 using the modified retrospective approach as of January 1, 2020. The cumulative effect upon adoption was not material to our consolidated financial statements. See Impairment of Investments and ""Accounts Receivable"" above as well as Note 3 for the effect on our consolidated financial statements. Prior Period Reclassifications Certain amounts in prior periods have been reclassified to conform with current period presentation. See Note 15 for further details. Alphabet Inc. Note 2. Revenues Revenue Recognition The following table presents our revenues disaggregated by type (in millions). Year Ended December 31, 2018 2019 2020 Google Search  other $ 85,296  $ 98,115  $ 104,062  YouTube ads 11,155  15,149  19,772  Google Network Members' properties 20,010  21,547  23,090  Google advertising 116,461  134,811  146,924  Google other 14,063  17,014  21,711  Google Services total 130,524  151,825  168,635  Google Cloud 5,838  8,918  13,059  Other Bets 595  659  657  Hedging gains (losses) ( 138 ) 455  176  Total revenues $ 136,819  $ 161,857  $ 182,527  The following table presents our revenues disaggregated by geography, based on the addresses of our customers (in millions): Year Ended December 31,  2018 2019 2020 United States $ 63,269  46  % $ 74,843  46  % $ 85,014  47  % EMEA (1) 44,739  33  50,645  31  55,370  30  APAC (1) 21,341  15  26,928  17  32,550  18  Other Americas (1) 7,608  6  8,986  6  9,417  5  Hedging gains (losses) ( 138 ) 0 455  0 176  0 Total revenues $ 136,819  100  % $ 161,857  100  % $ 182,527  100  % (1)  Regions represent Europe, the Middle East, and Africa (""EMEA""); Asia-Pacific (""APAC""); and Canada and Latin America (""Other Americas""). Deferred Revenues and Remaining Performance Obligations 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. Our total deferred revenue as of December 31, 2019 was $ 2.3 billion, of which $ 1.8 billion was recognized as revenues for the year ending December 31, 2020. Additionally, we have performance obligations associated with commitments in customer contracts, primarily related to Google Cloud, for future services that have not yet been recognized as revenues, also referred to as remaining performance obligations. Remaining performance obligations include related deferred revenue currently recorded as well as amounts that will be invoiced in future periods, and excludes (i) contracts with an original expected term of one year or less, (ii) cancellable contracts, and (iii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. As of December 31, 2020, the amount not yet recognized as revenues from these commitments is $ 29.8 billion. We expect to recognize approximately half over the next 24 months with the remaining thereafter. However, the amount and timing of revenue recognition is largely driven by when the customer utilizes the services and our ability to deliver in accordance with relevant contract terms, which could impact our estimate of the remaining performance obligations and when we expect to recognize such as revenues. Alphabet Inc. Note 3. Financial Instruments Debt Securities We classify our marketable debt securities, which are accounted for as available-for-sale, 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. Unrealized net gains related to debt securities still held where we have elected the fair value option were $ 87 million as of December 31, 2020. As of December 31, 2020, the fair value of these debt securities was $ 2 billion. Balances as of December 31, 2019 were not material.  The following tables summarize our debt securities, for which we did not elect the fair value option, by significant investment categories as of December 31, 2019 and 2020 (in millions):  As of December 31, 2019  Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities Level 2: Time deposits (1) $ 2,294  $ 0  $ 0  $ 2,294  $ 2,294  $ 0  Government bonds 55,033  434  ( 30 ) 55,437  4,518  50,919  Corporate debt securities 27,164  337  ( 3 ) 27,498  44  27,454  Mortgage-backed and asset-backed securities 19,453  96  ( 41 ) 19,508  0  19,508  Total $ 103,944  $ 867  $ ( 74 ) $ 104,737  $ 6,856  $ 97,881   As of December 31, 2020  Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities Level 2: Time deposits (1) $ 3,564  $ 0  $ 0  $ 3,564  $ 3,564  $ 0  Government bonds 55,156  793  ( 9 ) 55,940  2,527  53,413  Corporate debt securities 31,521  704  ( 2 ) 32,223  8  32,215  Mortgage-backed and asset-backed securities 16,767  364  ( 7 ) 17,124  0  17,124  Total $ 107,008  $ 1,861  $ ( 18 ) $ 108,851  $ 6,099  $ 102,752  (1) The majority of our time deposits are domestic deposits. We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. We recognized gross realized gains of $ 1.3 billion, $ 292 million, and $ 899 million for the years ended December 31, 2018, 2019, and 2020, respectively. We recognized gross realized losses of $ 143 million, $ 143 million, and $ 184 million for the years ended December 31, 2018, 2019, and 2020, respectively. We reflect these gains and losses as a component of other income (expense), net. The following table summarizes the estimated fair value of our investments in marketable debt securities by stated contractual maturity dates (in millions): As of December 31, 2020 Due in 1 year or less $ 19,795  Due in 1 year through 5 years 69,228  Due in 5 years through 10 years 2,739  Due after 10 years 13,038  Total $ 104,800  Alphabet Inc. The following tables present fair values and gross unrealized losses recorded to AOCI as of December 31, 2019 and 2020, 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, 2019  Less than 12 Months 12 Months or Greater Total  Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Government bonds $ 6,752  $ ( 20 ) $ 4,590  $ ( 10 ) $ 11,342  $ ( 30 ) Corporate debt securities 1,665  ( 2 ) 978  ( 1 ) 2,643  ( 3 ) Mortgage-backed and asset-backed securities 4,536  ( 13 ) 2,835  ( 28 ) 7,371  ( 41 ) Total $ 12,953  $ ( 35 ) $ 8,403  $ ( 39 ) $ 21,356  $ ( 74 )  As of December 31, 2020  Less than 12 Months 12 Months or Greater Total  Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Government bonds $ 5,516  $ ( 9 ) $ 3  $ 0  $ 5,519  $ ( 9 ) Corporate debt securities 1,999  ( 1 ) 0  0  1,999  ( 1 ) Mortgage-backed and asset-backed securities 929  ( 5 ) 242  ( 2 ) 1,171  ( 7 ) Total $ 8,444  $ ( 15 ) $ 245  $ ( 2 ) $ 8,689  $ ( 17 ) During the years ended December 31, 2018, and 2019 we did no t recognize any significant other-than-temporary impairment losses. During the year ended December 31, 2020, with the adoption of ASU 2016-13, we did not recognize significant credit losses and the ending allowance for credit losses was immaterial. See Note 7 for further details on other income (expense), net. Equity Investments The following discusses our marketable equity securities, non-marketable equity securities, gains and losses on marketable and non-marketable equity securities, as well as our equity securities accounted for under the equity method. Our marketable equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 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. 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 for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). 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. Gains and losses on marketable and non-marketable equity securities Gains and losses reflected in other income (expense), net, for our marketable and non-marketable equity securities are summarized below (in millions): Year Ended December 31,  2019 2020 Net gain (loss) on equity securities sold during the period $ ( 301 ) $ 1,339  Net unrealized gain (loss) on equity securities held as of the end of the period 2,950  4,253  Total gain (loss) recognized in other income (expense), net $ 2,649  $ 5,592  Alphabet Inc. In the table above, 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. While these net gains may have been reflected in periods prior to the period of sale, we believe they are important supplemental information as they reflect the economic realized net gains on the securities sold during the period. Cumulative net gains 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 During the Year Ended December 31,  2019 2020 Total sale price $ 3,134  $ 4,767  Total initial cost 858  2,674  Cumulative net gains (losses) $ 2,276  $ 2,093  Carrying value of marketable and non-marketable equity securities The carrying value is measured as the total initial cost plus the cumulative net gain (loss). The carrying values for our marketable and non-marketable equity securities are summarized below (in millions): As of December 31, 2019 Marketable Equity Securities Non-Marketable Equity Securities Total Total initial cost $ 1,935  $ 8,297  $ 10,232  Cumulative net gain (loss) (1) 1,361  3,056  4,417  Carrying value $ 3,296  $ 11,353  $ 14,649  (1) Non-marketable equity securities cumulative net gain (loss) is comprised of $ 3.5 billion unrealized gains and $ 445 million unrealized losses (including impairment). As of December 31, 2020 Marketable Equity Securities Non-Marketable Equity Securities Total Total initial cost $ 2,227  $ 14,616  $ 16,843  Cumulative net gain (loss) (1) 3,631  4,277  7,908  Carrying value (2) $ 5,858  $ 18,893  $ 24,751  (1) Non-marketable equity securities cumulative net gain (loss) is comprised of $ 6.1 billion unrealized gains and $ 1.9 billion unrealized losses (including impairment). (2) The long-term portion of marketable equity securities of $ 429 million is included in other non-current assets. Alphabet Inc. Marketable equity securities The following table summarizes marketable equity securities measured at fair value by significant investment categories as of December 31, 2019 and 2020 (in millions):  As of December 31, 2019 As of December 31, 2020  Cash and Cash Equivalents Marketable Equity Securities Cash and Cash Equivalents Marketable Equity Securities Level 1: Money market funds $ 4,604  $ 0 $ 12,210  $ 0 Marketable equity securities (1)(2) 0 3,046  0 5,470  4,604  3,046  12,210  5,470  Level 2: Mutual funds 0 250  0 388  Total $ 4,604  $ 3,296  $ 12,210  $ 5,858  (1)  The balance as of December 31, 2019 and 2020 includes investments that were reclassified from non-marketable equity securities following the commencement of public market trading of the issuers or acquisition by public entities. As of December 31, 2020 certain investments are subject to short-term lock-up restrictions. (2)  As of December 31, 2020 the long-term portion of marketable equity securities of $ 429 million is included within other non-current assets. Non-marketable equity securities The following is a summary of unrealized gains and losses recorded in other income (expense), net, and included as adjustments to the carrying value of non-marketable equity securities (in millions): Year Ended December 31, 2019 2020 Unrealized gains $ 2,163  $ 3,020  Unrealized losses (including impairment) ( 372 ) ( 1,489 ) Total unrealized gain (loss) for non-marketable equity securities $ 1,791  $ 1,531  During the year ended December 31, 2020, included in the $ 18.9 billion of non-marketable equity securities, $ 9.7 billion were measured at fair value resulting in a net unrealized gain of $ 1.5 billion. Equity securities accounted for under the Equity Method As of December 31, 2019 and 2020, equity securities accounted for under the equity method had a carrying value of approximately $ 1.3 billion and $ 1.4 billion, respectively. Our share of gains and losses including impairment are included as a component of other income (expense), net, in the Consolidated Statements of Income. See Note 7 for further details on other income (expense), net. Derivative Financial Instruments We enter into derivative instruments to manage risks relating to our ongoing business operations. The primary risk managed with derivative instruments 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 as either assets or liabilities 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 where both the purchased and written options are with the same counterparty. For other derivative contracts, we present at gross fair values. We primarily record changes in the fair value in the Consolidated Statements of Income as either other income (expense), net, or revenues, or in the Consolidated Balance Sheets in AOCI, as discussed below. We enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. Further, we enter into collateral security arrangements that provide for collateral to be received or pledged when the net fair value of certain financial instruments fluctuates from contractually established thresholds. 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 Alphabet Inc. collateral pledged related to derivative instruments under our collateral security arrangements are included in other current assets. Cash Flow Hedges 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 the change in forward points and time value from our assessment of hedge effectiveness. The initial value of the excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI. If the hedged transactions become probable of not occurring, the corresponding amounts in AOCI are reclassified to other income (expense), net in the period of de-designation. As of December 31, 2020, the net accumulated loss on our foreign currency cash flow hedges before tax effect was $ 124 million, which is expected to be reclassified from AOCI into earnings within the next 12 months. Fair Value Hedges We designate foreign currency forward contracts as fair value hedges to hedge foreign currency risks for our investments 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 changes in forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net. Net Investment Hedges 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 changes in forward points from the assessment of hedge effectiveness and recognize changes in the excluded component in other income (expense), net. Other Derivatives Other derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use 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 contracts, as well as the related costs, are recognized 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, equity and commodity prices, credit exposures and to enhance investment returns. The gross notional amounts of our outstanding derivative instruments were as follows (in millions): As of December 31, 2019 As of December 31, 2020 Derivatives Designated as Hedging Instruments: Foreign exchange contracts Cash flow hedges $ 13,207  $ 10,187  Fair value hedges $ 455  $ 1,569  Net investment hedges $ 9,318  $ 9,965  Derivatives Not Designated as Hedging Instruments: Foreign exchange contracts $ 43,497  $ 39,861  Other contracts $ 117  $ 2,399  Alphabet Inc. The fair values of our outstanding derivative instruments were as follows (in millions):   As of December 31, 2019   Balance Sheet Location Fair Value of Derivatives Designated as Hedging Instruments Fair Value of Derivatives Not Designated as Hedging Instruments Total Fair Value Derivative Assets: Level 2: Foreign exchange contracts Other current and non-current assets $ 91  $ 253  $ 344  Other contracts Other current and non-current assets 0  1  1  Total $ 91  $ 254  $ 345  Derivative Liabilities: Level 2: Foreign exchange contracts Accrued expenses and other liabilities, current and non-current $ 173  $ 196  $ 369  Other contracts Accrued expenses and other liabilities, current and non-current 0  13  13  Total $ 173  $ 209  $ 382    As of December 31, 2020   Balance Sheet Location Fair Value of Derivatives Designated as Hedging Instruments Fair Value of Derivatives Not Designated as Hedging Instruments Total Fair Value Derivative Assets: Level 2: Foreign exchange contracts Other current and non-current assets $ 33  $ 316  $ 349  Other contracts Other current and non-current assets 0  16  16  Total $ 33  $ 332  $ 365  Derivative Liabilities: Level 2: Foreign exchange contracts Accrued expenses and other liabilities, current and non-current $ 395  $ 185  $ 580  Other contracts Accrued expenses and other liabilities, current and non-current 0  942  942  Total $ 395  $ 1,127  $ 1,522  Alphabet Inc. 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  Year Ended December 31, 2018 2019 2020 Derivatives in Cash Flow Hedging Relationship: Foreign exchange contracts Amount included in the assessment of effectiveness $ 332  $ 38  $ 102  Amount excluded from the assessment of effectiveness 26  ( 14 ) ( 37 ) Derivatives in Net Investment Hedging Relationship: Foreign exchange contracts Amount included in the assessment of effectiveness 136  131  ( 851 ) Total $ 494  $ 155  $ ( 786 )  Alphabet Inc. The effect of derivative instruments on income is summarized below (in millions):  Gains (Losses) Recognized in Income Year Ended December 31, 2018 2019 2020 Revenues Other income (expense), net Revenues Other income (expense), net Revenues Other income (expense), net Total amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded $ 136,819  $ 7,389  $ 161,857  $ 5,394  $ 182,527  $ 6,858  Gains (Losses) on Derivatives in Cash Flow Hedging Relationship: Foreign exchange contracts Amount of gains (losses) reclassified from AOCI to income $ ( 139 ) $ 0  $ 367  $ 0  $ 144  $ 0  Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach 1  0  88  0  33  0  Gains (Losses) on Derivatives in Fair Value Hedging Relationship: Foreign exchange contracts Hedged items 0  ( 96 ) 0  ( 19 ) 0  18  Derivatives designated as hedging instruments 0  96  0  19  0  ( 18 ) Amount excluded from the assessment of effectiveness 0  37  0  25  0  4  Gains (Losses) on Derivatives in Net Investment Hedging Relationship: Foreign exchange contracts Amount excluded from the assessment of effectiveness 0  78  0  243  0  151  Gains (Losses) on Derivatives Not Designated as Hedging Instruments: Foreign exchange contracts 0  54  0 ( 413 ) 0  718  Other Contracts 0  0  0  0  0  ( 906 ) Total gains (losses) $ ( 138 ) $ 169  $ 455  $ ( 145 ) $ 177  $ ( 33 ) Offsetting of Derivatives The gross amounts of our 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): Alphabet Inc. Offsetting of Assets As of December 31, 2019 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received Non-Cash Collateral Received Net Assets Exposed Derivatives $ 366  $ ( 21 ) $ 345  $ ( 88 ) (1) $ ( 234 ) $ 0  $ 23  As of December 31, 2020 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received Non-Cash Collateral Received Net Assets Exposed Derivatives $ 397  $ ( 32 ) $ 365  $ ( 295 ) (1) $ ( 16 ) $ 0  $ 54  (1) The balances as of December 31, 2019 and 2020 were related to derivative liabilities which are allowed to be net settled against derivative assets in accordance with our master netting agreements. Offsetting of Liabilities As of December 31, 2019 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Non-Cash Collateral Pledged Net Liabilities Derivatives $ 403  $ ( 21 ) $ 382  $ ( 88 ) (2) $ 0  $ 0  $ 294  As of December 31, 2020 Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Non-Cash Collateral Pledged Net Liabilities Derivatives $ 1,554  $ ( 32 ) $ 1,522  $ ( 295 ) (2) $ ( 1 ) $ ( 943 ) $ 283  (2) The balances as of December 31, 2019 and 2020 were related to derivative assets which are allowed to be net settled against derivative liabilities in accordance with our master netting agreements. Note 4. Leases We have entered into operating and finance lease agreements primarily for data centers, land and offices throughout the world with lease periods expiring between 2021 and 2063. Components of operating lease expense were as follows (in millions): Year Ended December 31, 2019 2020 Operating lease cost $ 1,820  $ 2,267  Variable lease cost 541  619  Total operating lease cost $ 2,361  $ 2,886  Alphabet Inc. Supplemental information related to operating leases is as follows (in millions): Year Ended December 31, 2019 2020 Cash payments for operating leases $ 1,661  $ 2,004  New operating lease assets obtained in exchange for operating lease liabilities $ 4,391  $ 2,765  As of December 31, 2020, our operating leases had a weighted average remaining lease term of 9 years and a weighted average discount rate of 2.6 %. Future lease payments under operating leases as of December 31, 2020 were as follows (in millions): 2021 $ 2,198  2022 2,170  2023 1,995  2024 1,738  2025 1,389  Thereafter 5,601  Total future lease payments 15,091  Less imputed interest ( 2,251 ) Total lease liability balance $ 12,840  As of December 31, 2020, we have entered into leases that have not yet commenced with future lease payments of $ 8.0 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2021 and 2026 with non-cancelable lease terms of 1 to 25 years. Note 5. Variable Interest Entities Consolidated VIEs 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, 2019 and 2020, assets that can only be used to settle obligations of these VIEs were $ 3.1 billion and $ 5.7 billion, respectively, and the liabilities for which creditors only have recourse to the VIEs were $ 1.2 billion and $ 2.3 billion, respectively. Total noncontrolling interests (""NCI""), including redeemable noncontrolling interests (""RNCI""), in our consolidated subsidiaries increased from $ 1.2 billion to $ 3.9 billion f rom December 31, 2019 to December 31, 2020, primarily due to external investments in Waymo. 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 other income (expense), net. Waymo Waymo is an autonomous driving technology development company with a mission to make it safe and easy for people and things to get where they're going. In the first half of 2020, Waymo completed an externally led investment round raising in total $ 3.2 billion, which includes investment from Alphabet. No gain or loss was recognized. The investments related to external parties were accounted for as equity transactions and resulted in recognition of noncontrolling interests. Unconsolidated VIEs We have investments in some 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 investments or equity method investments. Alphabet Inc. VIEs are 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 not material as of December 31, 2019 and 2020. Note 6. Debt Short-Term Debt We have a debt financing program of up to $ 5.0 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, 2019 and 2020. Our short-term debt balance also includes the current portion of certain long-term debt. Long-Term Debt In August 2020, Alphabet issued $ 10.0 billion of fixed-rate senior unsecured notes in six tranches (collectively, 2020 Notes): $ 1.0 billion due in 2025, $ 1.0 billion due in 2027, $ 2.25 billion due in 2030, $ 1.25 billion due in 2040, $ 2.5 billion due in 2050 and $ 2.0 billion due in 2060. The 2020 Notes had a weighted average duration of 21.5 years and weighted average coupon rate of 1.57 %. Of the total issuance, $ 5.75 billion was designated as Sustainability Bonds, the net proceeds of which are used to fund environmentally and socially responsible projects in the following eight areas: energy efficiency, clean energy, green buildings, clean transportation, circular economy and design, affordable housing, commitment to racial equity, and support for small businesses and COVID-19 crisis response. The remaining net proceeds are used for general corporate purposes. The total outstanding debt is summarized below (in millions, except percentages): Maturity Coupon Rate Effective Interest Rate As of December 31, 2019 As of December 31, 2020 Debt 2011-2016 Notes Issuances 2021 - 2026 2.00 % - 3.63 % 2.23 % - 3.73 % $ 4,000  $ 4,000  2020 Notes Issuance 2025 - 2060 0.45 % - 2.25 % 0.57 % - 2.33 % 0  10,000  Future finance lease payments, net (1) 711  1,201  Total debt 4,711  15,201  Unamortized discount and debt issuance costs ( 42 ) ( 169 ) Less: Current portion of Notes (2) 0  ( 999 ) Less: Current portion future finance lease payments, net (1)(2) ( 115 ) ( 101 ) Total long-term debt $ 4,554  $ 13,932  (1) Net of imputed interest. (2) Total current portion of long-term debt is included within other accrued expenses and current liabilities. See Note 7. The notes in the table above are comprised of 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, including the current portion, was approximately $ 4.1 billion and $ 14.0 billion as of December 31, 2019 and December 31, 2020, 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. Alphabet Inc. As of December 31, 2020, the aggregate future principal payments for long-term debt, including finance lease liabilities, for each of the next five years and thereafter are as follows (in millions): 2021 $ 1,104  2022 86 2023 86 2024 1,087 2025 1,088 Thereafter 11,868 Total $ 15,319  Credit Facility As of December 31, 2020, we have $ 4.0 billion of revolving credit facilities which expire in July 2023. The interest rate for the credit facilities is determined based on a formula using certain market rates. No amounts were outstanding under the credit facilities as of December 31, 2019 and 2020. Note 7. Supplemental Financial Statement Information Property and Equipment, Net Property and equipment, net, consisted of the following (in millions): As of December 31, 2019 As of December 31, 2020 Land and buildings $ 39,865  $ 49,732  Information technology assets 36,840  45,906  Construction in progress 21,036  23,111  Leasehold improvements 6,310  7,516  Furniture and fixtures 156  197  Property and equipment, gross 104,207  126,462  Less: accumulated depreciation ( 30,561 ) ( 41,713 ) Property and equipment, net $ 73,646  $ 84,749  Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following (in millions): As of December 31, 2019 As of December 31, 2020 European Commission fines (1) $ 9,405  $ 10,409  Accrued customer liabilities 2,245  3,118  Accrued purchases of property and equipment 2,411  2,197  Current operating lease liabilities 1,199  1,694  Other accrued expenses and current liabilities 7,807  11,213  Accrued expenses and other current liabilities $ 23,067  $ 28,631  (1) Includes the effects of foreign exchange and interest. See Note 10 for further details. Alphabet Inc. Accumulated Other Comprehensive Income (Loss) The components of AOCI, net of 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, 2017 $ ( 1,103 ) $ 233  $ ( 122 ) $ ( 992 ) Cumulative effect of accounting change 0  ( 98 ) 0  ( 98 ) Other comprehensive income (loss) before reclassifications ( 781 ) 88  264  ( 429 ) Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0  0  26  26  Amounts reclassified from AOCI 0  ( 911 ) 98  ( 813 ) Other comprehensive income (loss) ( 781 ) ( 823 ) 388  ( 1,216 ) Balance as of December 31, 2018 ( 1,884 ) ( 688 ) 266  ( 2,306 ) Cumulative effect of accounting change 0  0  ( 30 ) ( 30 ) Other comprehensive income (loss) before reclassifications ( 119 ) 1,611  36  1,528  Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0  0  ( 14 ) ( 14 ) Amounts reclassified from AOCI 0  ( 111 ) ( 299 ) ( 410 ) Other comprehensive income (loss) ( 119 ) 1,500  ( 277 ) 1,104  Balance as of December 31, 2019 ( 2,003 ) 812  ( 41 ) ( 1,232 ) Other comprehensive income (loss) before reclassifications 1,139  1,313  79  2,531  Amounts excluded from the assessment of hedge effectiveness recorded in AOCI 0  0  ( 37 ) ( 37 ) Amounts reclassified from AOCI 0  ( 513 ) ( 116 ) ( 629 ) Other comprehensive income (loss) 1,139  800  ( 74 ) 1,865  Balance as of December 31, 2020 $ ( 864 ) $ 1,612  $ ( 115 ) $ 633  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 Year Ended December 31, AOCI Components Location 2018 2019 2020 Unrealized gains (losses) on available-for-sale investments Other income (expense), net $ 1,190  $ 149  $ 650  Benefit (provision) for income taxes ( 279 ) ( 38 ) ( 137 ) Net of tax 911  111  513  Unrealized gains (losses) on cash flow hedges Foreign exchange contracts Revenue ( 139 ) 367  144  Interest rate contracts Other income (expense), net 6  6  6  Benefit (provision) for income taxes 35  ( 74 ) ( 34 ) Net of tax ( 98 ) 299  116  Total amount reclassified, net of tax $ 813  $ 410  $ 629  Alphabet Inc. Other Income (Expense), Net The components of other income (expense), net, were as follows (in millions):  Year Ended December 31,  2018 2019 2020 Interest income $ 1,878  $ 2,427  $ 1,865  Interest expense (1) ( 114 ) ( 100 ) ( 135 ) Foreign currency exchange gain (loss), net (2) ( 80 ) 103  ( 344 ) Gain (loss) on debt securities, net (3) 1,190  149  725  Gain (loss) on equity securities, net 5,460  2,649  5,592  Performance fees ( 1,203 ) ( 326 ) ( 609 ) Income (loss) and impairment from equity method investments, net ( 120 ) 390  401  Other (4) 378  102  ( 637 ) Other income (expense), net $ 7,389  $ 5,394  $ 6,858  (1) Interest expense is net of interest capitalized of $ 92 million, $ 167 million, and $ 218 million for the years ended December 31, 2018, 2019, and 2020, respectively. (2) Our foreign currency exchange gain (loss), net, is primarily related to the forward points for our foreign currency hedging contracts and foreign exchange transaction gains and losses from the conversion of the transaction currency to the functional currency, offset by the foreign currency hedging contracts' losses and gains. (3) During the year ended December 31, 2018, the terms of a non-marketable debt security were modified resulting in an unrealized $ 1.3 billion gain. (4) During the year ended December 31, 2020, we entered into derivatives that hedged the changes in fair value of certain marketable equity securities, which resulted in a $ 902 million loss. The offsetting recognized gains on the marketable equity securities are reflected in Gain (loss) on equity securities, net. Note 8. Acquisitions 2020 Acquisitions During the year ended December 31, 2020, we completed acquisitions and purchases of intangible assets for total consideration of approximately $ 744 million, net of cash acquired. In aggregate, $ 248 million was attributed to intangible assets, $ 446 million to goodwill and $ 50 million to net assets acquired. These acquisitions generally enhance the breadth and depth of our offerings and expand our expertise in engineering and other functional areas. Pro forma results of operations for these acquisitions have not been presented because they are not material to the consolidated results of operations, either individually or in the aggregate. For all intangible assets acquired and purchased during the year ended December 31, 2020, patents and developed technology have a weighted-average useful life of 4.1 years, customer relationships have a weighted-average useful life of 4.7 years, and trade names and other have a weighted-average useful life of 4.6 years. Acquisition of Fitbit In January 2021, we closed the acquisition of Fitbit, a leading wearables brand for $ 2.1 billion. Alphabet Inc. Note 9. Goodwill and Other Intangible Assets Goodwill Changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2020 were as follows (in millions): Google Google Services Google Cloud Other Bets Total Balance as of December 31, 2018 $ 17,521  $ 0  $ 0  $ 367  $ 17,888  Acquisitions 2,353  0  0  475  2,828  Transfers 9  0  0  ( 9 ) 0  Foreign currency translation and other adjustments 38  0  0  ( 130 ) ( 92 ) Balance as of December 31, 2019 19,921  0  0  703  20,624  Acquisitions 204  0  0  0  204  Foreign currency translation and other adjustments 46  0  0  ( 4 ) 42  Allocation in the fourth quarter of 2020 (1) ( 20,171 ) 18,408  1,763  0  0  Acquisitions 0  53  189  0  242  Foreign currency translation and other adjustments 0  56  5  2  63  Balance as of December 31, 2020 $ 0  $ 18,517  $ 1,957  $ 701  $ 21,175  (1) Represents reallocation of goodwill as a result of our change in segments in the fourth quarter of 2020. See Note 15 for further details Other Intangible Assets Information regarding purchased intangible assets were as follows (in millions):  As of December 31, 2019  Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents and developed technology $ 4,972  $ 3,570  $ 1,402  Customer relationships 254  30  224  Trade names and other 703  350  353  Total $ 5,929  $ 3,950  $ 1,979   As of December 31, 2020  Gross Carrying Amount Accumulated Amortization Net Carrying Value Patents and developed technology $ 4,639  $ 3,649  $ 990  Customer relationships 266  49  217  Trade names and other 699  461  238  Total $ 5,604  $ 4,159  $ 1,445  Patents and developed technology, customer relationships, and trade names and other have weighted-average remaining useful lives of 1.6 years, 4.9 years, and 2.1 years, respectively. Amortization expense relating to purchased intangible assets was $ 865 million, $ 795 million, and $ 774 million for the years ended December 31, 2018, 2019, and 2020, respectively. Alphabet Inc. As of December 31, 2020, expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter is as follows (in millions):  2021 $ 719  2022 375  2023 104  2024 78  2025 53  Thereafter 116  $ 1,445  Note 10. Commitments and Contingencies Purchase Obligations As of December 31, 2020, we had $ 10.7 billion of other non-cancelable contractual obligations, primarily related to data center operations and build-outs, digital media content licensing, information technology assets and purchases of inventory. Indemnifications In the normal course of business, to facilitate transactions in our services and products, we indemnify certain parties, including advertisers, Google Network Members, customers of Google Cloud offerings, and lessors with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents. It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of December 31, 2020, we did not have any material indemnification claims that were probable or reasonably possible. Legal Matters Antitrust Investigations On November 30, 2010, the EC's Directorate General for Competition opened an investigation into various antitrust-related complaints against us. On June 27, 2017, the EC announced its decision that certain actions taken by Google regarding its display and ranking of shopping search results and ads infringed European competition law. The EC decision imposed a  2.4 billion ($ 2.7 billion as of June 27, 2017) fine. On September 11, 2017, we appealed the EC decision and on September 27, 2017, we implemented product changes to bring shopping ads into compliance with the EC's decision. We recognized a charge of $ 2.7 billion for the fine in the second quarter of 2017. On July 18, 2018, the EC announced its decision that certain provisions in Googles Android-related distribution agreements infringed European competition law. The EC decision imposed a  4.3 billion ($ 5.1 billion as of June 30, 2018) fine and directed the termination of the conduct at issue. On October 9, 2018, we appealed the EC decision. On October 29, 2018, we implemented changes to certain of our Android distribution practices. We recognized a charge of $ 5.1 billion for the fine in the second quarter of 2018. On March 20, 2019, the EC announced its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law. The EC decision imposed a fine of  1.5 billion ($ 1.7 billion as of March 20, 2019) and directed actions related to AdSense for Search partners' agreements, which we implemented prior to the decision. On June 4, 2019, we appealed the EC decision. We recognized a charge of $ 1.7 billion for the fine in the first quarter of 2019. Alphabet Inc. While each EC decision is under appeal, we included the fines 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. From time to time we are subject to formal and informal inquiries and investigations on competition matters by regulatory authorities in the United States, Europe, and other jurisdictions. For example, in August 2019, we began receiving civil investigative demands from the U.S. Department of Justice (""DOJ"") requesting information and documents relating to our prior antitrust investigations and certain aspects of our business. The DOJ and a number of state Attorneys General filed a lawsuit on October 20, 2020 alleging that Google violated U.S. antitrust laws relating to Search and Search advertising. Separately, on December 16, 2020, a number of state Attorneys General filed an antitrust complaint against Google in the United States District Court for the Eastern District of Texas, alleging that Google violated U.S. antitrust laws as well as state deceptive trade laws relating to its advertising technology. We believe these complaints are without merit and will defend ourselves vigorously. The DOJ and state Attorneys General continue their investigations into certain aspects of our business. We continue to cooperate with federal and state regulators in the United States, and other regulators around the world. Patent and Intellectual Property Claims We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe others' intellectual property rights. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, functionalities, products, or services. As a result, we may have to change our business practices, and develop non-infringing products or technologies, which could result in a loss of revenues for us and otherwise harm our business. In addition, the U.S. International Trade Commission (""ITC"") has increasingly become an important forum to litigate intellectual property disputes because an ultimate loss in an ITC action can result in a prohibition on importing infringing products into the U.S. Because the U.S. is an important market, a prohibition on importation could have an adverse effect on us, including preventing us from importing many important products into the U.S. or necessitating workarounds that may limit certain features of our products. Furthermore, many of our agreements with our customers and partners require us to indemnify them against certain intellectual property infringement claims, which would increase our costs as a result of defending such claims, and may require that we pay significant damages if there were an adverse ruling in any such claims. In addition, our customers and partners may discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. In 2010, Oracle America, Inc. (""Oracle"") brought a copyright lawsuit against Google in the Northern District of California, alleging that Google's Android operating system infringes Oracle's copyrights related to certain Java application programming interfaces. After trial, final judgment was entered by the district court in favor of Google on June 8, 2016, and the court decided post-trial motions in favor of Google. Oracle appealed and on March 27, 2018, the appeals court reversed and remanded the case for a trial on damages. On May 29, 2018, we filed a petition for a rehearing at the Federal Circuit, and on August 28, 2018, the Federal Circuit denied the petition. On January 24, 2019, we filed a petition to the Supreme Court of the United States to review this case. On April 29, 2019, the Supreme Court requested the views of the Solicitor General regarding our petition. On September 27, 2019, the Solicitor General recommended denying our petition, and we provided our response on October 16, 2019. On November 15, 2019, the Supreme Court granted our petition and made a decision to review the case. The Supreme Court heard oral arguments in our case on October 7, 2020. If the Supreme Court does not rule in our favor, the case will be remanded to the district court for further determination of the remaining issues in the case, including damages, if any. We believe this lawsuit is without merit and are defending ourselves vigorously. Given the nature of this case, we are unable to estimate the reasonably possible loss or range of loss, if any, arising from this matter. Other We are also regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury, consumer protection, and other matters. Such claims, suits, regulatory and government investigations, and other proceedings could result in substantial fines and penalties, injunctive relief, ongoing auditing and monitoring obligations, changes to our products and services, alterations to our business models and operations, and collateral related civil litigation or other adverse consequences, all of which could harm our business, reputation, financial condition, and operating results. Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we Alphabet Inc. disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters. With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties. We expense legal fees in the period in which they are incurred. Non-Income Taxes We are under audit by various domestic and foreign tax authorities with regards to non-income tax matters. The subject matter of non-income tax audits primarily arises from disputes on the tax treatment and tax rate applied to the sale of our products and services in these jurisdictions and the tax treatment of certain employee benefits. We accrue non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from our expectations. For information regarding income tax contingencies, see Note 14. Note 11. Stockholders' Equity Convertible Preferred Stock Our Board of Directors has authorized 100 million shares of convertible preferred stock, $ 0.001 par value, issuable in series. As of December 31, 2019 and 2020, no shares were issued or outstanding. Class A and Class B Common Stock and Class C Capital Stock Our Board of Directors has authorized three classes of stock, Class A and Class B common stock, and Class C capital stock. The rights of the holders of each class of our common and capital stock are identical, except with respect to voting. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 10 votes per share. Class C capital stock has no voting rights, except as required by applicable law. Shares of Class B common stock may be converted at any time at the option of the stockholder and automatically convert upon sale or transfer to Class A common stock. Share Repurchases In July 2020, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $ 28.0 billion of its Class C capital stock. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. During the years ended December 31, 2019 and 2020, we repurchased and subsequently retired 15.3 million and 21.5 million shares of Alphabet Class C capital stock for an aggregate amount of $ 18.4 billion and $ 31.1 billion, respectively. Note 12. Net Income Per Share We compute net income per share of Class A and Class B common stock and Class C capital stock using the two-class method. Basic net income per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of restricted stock units and other contingently issuable shares. The dilutive effect of outstanding restricted stock units and other contingently issuable shares is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares. The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock and Class C capital stock are identical, except with respect to voting. Furthermore, there are a number of Alphabet Inc. safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our Board of Directors from declaring or paying unequal per share dividends on our Class A and Class B common stock and Class C capital stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock must be approved by the class of stock adversely affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our Board of Directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common shares and Class C capital stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. In the years ended December 31, 2018, 2019 and 2020, the net income per share amounts are the same for Class A and Class B common stock and Class C capital stock because the holders of each class are entitled to equal per share dividends or distributions in liquidation in accordance with the Amended and Restated Certificate of Incorporation of Alphabet Inc. The following tables set forth the computation of basic and diluted net income per share of Class A and Class B common stock and Class C capital stock (in millions, except share amounts which are reflected in thousands and per share amounts):  Year Ended December 31,  2018  Class A Class B Class C Basic net income per share: Numerator Allocation of undistributed earnings $ 13,200  $ 2,072  $ 15,464  Denominator Number of shares used in per share computation 298,548  46,864  349,728  Basic net income per share $ 44.22  $ 44.22  $ 44.22  Diluted net income per share: Numerator Allocation of undistributed earnings for basic computation $ 13,200  $ 2,072  $ 15,464  Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 2,072  0  0  Reallocation of undistributed earnings ( 146 ) ( 24 ) 146  Allocation of undistributed earnings $ 15,126  $ 2,048  $ 15,610  Denominator Number of shares used in basic computation 298,548  46,864  349,728  Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A common shares outstanding 46,864  0  0  Restricted stock units and other contingently issuable shares 689  0  7,456  Number of shares used in per share computation 346,101  46,864  357,184  Diluted net income per share $ 43.70  $ 43.70  $ 43.70  Alphabet Inc.  Year Ended December 31,  2019  Class A Class B Class C Basic net income per share: Numerator Allocation of undistributed earnings $ 14,846  $ 2,307  $ 17,190  Denominator Number of shares used in per share computation 299,402  46,527  346,667  Basic net income per share $ 49.59  $ 49.59  $ 49.59  Diluted net income per share: Numerator Allocation of undistributed earnings for basic computation $ 14,846  $ 2,307  $ 17,190  Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 2,307  0  0  Reallocation of undistributed earnings ( 126 ) ( 20 ) 126  Allocation of undistributed earnings $ 17,027  $ 2,287  $ 17,316  Denominator Number of shares used in basic computation 299,402  46,527  346,667  Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A common shares outstanding 46,527  0  0  Restricted stock units and other contingently issuable shares 413  0  5,547  Number of shares used in per share computation 346,342  46,527  352,214  Diluted net income per share $ 49.16  $ 49.16  $ 49.16   Year Ended December 31,  2020  Class A Class B Class C Basic net income per share: Numerator Allocation of undistributed earnings $ 17,733  $ 2,732  $ 19,804  Denominator Number of shares used in per share computation 299,815  46,182  334,819  Basic net income per share $ 59.15  $ 59.15  $ 59.15  Diluted net income per share: Numerator Allocation of undistributed earnings for basic computation $ 17,733  $ 2,732  $ 19,804  Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 2,732  0  0  Reallocation of undistributed earnings ( 180 ) ( 25 ) 180  Allocation of undistributed earnings $ 20,285  $ 2,707  $ 19,984  Denominator Number of shares used in basic computation 299,815  46,182  334,819  Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A common shares outstanding 46,182  0  0  Restricted stock units and other contingently issuable shares 87  0  6,125  Number of shares used in per share computation 346,084  46,182  340,944  Diluted net income per share $ 58.61  $ 58.61  $ 58.61  Alphabet Inc. Note 13. Compensation Plans Stock Plans Our stock plans include the Alphabet 2012 Stock Plan and Other Bet stock-based plans. Under our stock plans, RSUs and other types of awards may be granted. An RSU award is an agreement to issue shares of our publicly traded stock at the time the award vests. RSUs granted to participants under the Alphabet 2012 Stock Plan generally vest over four years contingent upon employment or service with us on the vesting date. As of December 31, 2020, there were 38,777,813 shares of stock reserved for future issuance under our Alphabet 2012 Stock Plan. Stock-Based Compensation For the years ended December 31, 2018, 2019 and 2020, total stock-based compensation expense was $ 10.0 billion, $ 11.7 billion and $ 13.4 billion, including amounts associated with awards we expect to settle in Alphabet stock of $ 9.4 billion, $ 10.8 billion, and $ 12.8 billion, respectively. For the years ended December 31, 2018, 2019 and 2020, we recognized tax benefits on total stock-based compensation expense, which are reflected in the provision for income taxes in the Consolidated Statements of Income, of $ 1.5 billion, $ 1.8 billion, and $ 2.7 billion, respectively. For the years ended December 31, 2018, 2019 and 2020, tax benefit realized related to awards vested or exercised during the period was $ 2.1 billion, $ 2.2 billion and $ 3.6 billion, respectively. These amounts do not include the indirect effects of stock-based awards, which primarily relate to the research and development tax credit. Stock-Based Award Activities The following table summarizes the activities for our unvested Alphabet RSUs for the year ended December 31, 2020: Unvested Restricted Stock Units  Number of Shares Weighted- Average Grant-Date Fair Value Unvested as of December 31, 2019 19,394,236  $ 1,055.22  Granted 12,647,562  1,407.97  Vested ( 11,643,670 ) 1,089.31  Forfeited/canceled ( 1,109,335 ) 1,160.01  Unvested as of December 31, 2020 19,288,793  $ 1,262.13  The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2018 and 2019, was $ 1,095.89 and $ 1,092.36 , respectively. Total fair value of RSUs, as of their respective vesting dates, during the years ended December 31, 2018, 2019, and 2020 were $ 14.1 billion, $ 15.2 billion, and $ 17.8 billion, respectively. As of December 31, 2020, there was $ 22.8 billion of unrecognized compensation cost related to unvested employee RSUs. This amount is expected to be recognized over a weighted-average period of 2.6 years. 401(k) Plans We have two 401(k) Savings Plans that qualify as deferred salary arrangements under Section 401(k) of the Internal Revenue Code. Under these 401(k) Plans, matching contributions are based upon the amount of the employees contributions subject to certain limitations. We recognized expense of approximately $ 691 million, $ 724 million, and $ 855 million for the years ended December 31, 2018, 2019, and 2020, respectively. Note 14. Income Taxes Income from continuing operations before income taxes consists of the following (in millions): Year Ended December 31,  2018 2019 2020 Domestic operations $ 15,779  $ 16,426  $ 37,576  Foreign operations 19,134  23,199  10,506  Total $ 34,913  $ 39,625  $ 48,082  Alphabet Inc. The provision for income taxes consists of the following (in millions): Year Ended December 31,  2018 2019 2020 Current: Federal and state $ 2,153  $ 2,424  $ 4,789  Foreign 1,251  2,713  1,687  Total 3,404  5,137  6,476  Deferred: Federal and state 907  286  1,552  Foreign ( 134 ) ( 141 ) ( 215 ) Total 773  145  1,337  Provision for income taxes $ 4,177  $ 5,282  $ 7,813  The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows: Year Ended December 31,  2018 2019 2020 U.S. federal statutory tax rate 21.0  % 21.0  % 21.0  % Foreign income taxed at different rates ( 4.4 ) ( 4.9 ) ( 0.3 ) Foreign-derived intangible income deduction ( 0.5 ) ( 0.7 ) ( 3.0 ) Stock-based compensation expense ( 2.2 ) ( 0.7 ) ( 1.7 ) Federal research credit ( 2.4 ) ( 2.5 ) ( 2.3 ) Impact of the Tax Cuts and Jobs Act ( 1.3 ) ( 0.6 ) 0.0  European Commission fines 3.1  1.0  0.0  Deferred tax asset valuation allowance ( 2.0 ) 0.0  1.4  State and local income taxes ( 0.4 ) 1.1  1.1  Other adjustments 1.1  ( 0.4 ) 0.0  Effective tax rate 12.0  % 13.3  % 16.2  % Our effective tax rate for 2018 and 2019 was affected significantly by earnings realized in foreign jurisdictions with statutory tax rates lower than the federal statutory tax rate because substantially all of the income from foreign operations was earned by an Irish subsidiary. As of December 31, 2019, we have simplified our corporate legal entity structure and now license intellectual property from the U.S. that was previously licensed from Bermuda resulting in an increase in the portion of our income earned in the U.S. On July 27, 2015, the United States Tax Court, in an opinion in Altera Corp. v. Commissioner, invalidated the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. The U.S. Tax Court issued the final decision on December 28, 2015. As a result of that decision, we recorded a tax benefit related to the anticipated reimbursement of cost share payment for previously shared stock-based compensation costs. On June 7, 2019, the United States Court of Appeals for the Ninth Circuit overturned the 2015 Tax Court decision in Altera Corp. v. Commissioner, and upheld the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. As a result of the Ninth Circuit court decision, our cumulative net tax benefit of $ 418 million related to previously shared stock-based compensation costs was reversed in the year ended December 31, 2019. In 2020, there was an increase in valuation allowance for net deferred tax assets that are not likely to be realized relating to certain of our Other Bets. Alphabet Inc. Deferred Income Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows (in millions): As of December 31, 2019 2020 Deferred tax assets: Stock-based compensation expense $ 421  $ 518  Accrued employee benefits 463  580  Accruals and reserves not currently deductible 1,047  1,049  Tax credits 3,264  3,723  Net operating losses 771  1,085  Operating leases 1,876  2,620  Intangible assets 164  1,525  Other 226  463  Total deferred tax assets 8,232  11,563  Valuation allowance ( 3,502 ) ( 4,823 ) Total deferred tax assets net of valuation allowance 4,730  6,740  Deferred tax liabilities: Property and equipment, net ( 1,798 ) ( 3,382 ) Renewable energy investments ( 466 ) ( 415 ) Foreign Earnings ( 373 ) ( 383 ) Net investment gains ( 1,074 ) ( 1,901 ) Operating leases ( 1,619 ) ( 2,354 ) Other ( 380 ) ( 782 ) Total deferred tax liabilities ( 5,710 ) ( 9,217 ) Net deferred tax assets (liabilities) $ ( 980 ) $ ( 2,477 ) As of December 31, 2020, our federal, state and foreign net operating loss carryforwards for income tax purposes were approximately $ 3.1 billion, $ 3.1 billion, and $ 1.4 billion respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in 2023, foreign net operating loss carryforwards will begin to expire in 2024 and the state net operating loss carryforwards will begin to expire in 2028. It is more likely than not that certain net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions. As of December 31, 2020, our California research and development credit carryforwards for income tax purposes were approximately $ 3.7 billion that can be carried over indefinitely. We believe the state tax credit is not likely to be realized. As of December 31, 2020, we maintained a valuation allowance with respect to California deferred tax assets, certain federal net operating losses, certain state tax credits, net deferred tax assets relating to certain of our Other Bets, and certain foreign net operating losses that we believe are not likely to be realized. We continue to reassess the remaining valuation allowance quarterly and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly. Alphabet Inc. Uncertain Tax Positions The following table summarizes the activity related to our gross unrecognized tax benefits (in millions): Year Ended December 31,  2018 2019 2020 Beginning gross unrecognized tax benefits $ 4,696  $ 4,652  $ 3,377  Increases related to prior year tax positions 321  938  372  Decreases related to prior year tax positions ( 623 ) ( 143 ) ( 557 ) Decreases related to settlement with tax authorities ( 191 ) ( 2,886 ) ( 45 ) Increases related to current year tax positions 449  816  690  Ending gross unrecognized tax benefits $ 4,652  $ 3,377  $ 3,837  The total amount of gross unrecognized tax benefits was $ 4.7 billion, $ 3.4 billion, and $ 3.8 billion as of December 31, 2018, 2019, and 2020, respectively, of which, $ 2.9 billion, $ 2.3 billion, and $ 2.6 billion, if recognized, would affect our effective tax rate, respectively. The decrease in gross unrecognized tax benefits in 2019 was primarily as a result of the resolution of multi-year audits. As of December 31, 2019 and 2020, we accrued $ 130 million and $ 222 million in interest and penalties in provision for income taxes, respectively. We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions, our two major tax jurisdictions are the U.S. federal and Ireland. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. The IRS is currently examining our 2016 through 2018 tax returns. We have also received tax assessments in multiple foreign jurisdictions asserting transfer pricing adjustments or permanent establishment. We continue to defend any and all such claims as presented. The tax years 2011 through 2019 remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are other ongoing audits in various other jurisdictions that are not material to our financial statements. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. Although the timing of resolution, settlement, and closure of audits is not certain, we do not believe it is reasonably possible that our unrecognized tax benefits will materially change in the next 12 months. Note 15. Information about Segments and Geographic Areas Beginning in the fourth quarter of 2020, we report our segment results as Google Services, Google Cloud, and Other Bets:  Google Services includes products and services such as ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube. Google Services generates revenues primarily from advertising; sales of apps, in-app purchases, digital content products, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.  Google Cloud includes Googles infrastructure and data analytics platforms, collaboration tools, and other services for enterprise customers. Google Cloud generates revenues primarily from fees received for Google Cloud Platform services and Google Workspace (formerly known as G Suite) collaboration tools.  Other Bets is a combination of multiple operating segments that are not individually material. Revenues from the Other Bets are derived primarily through the sale of internet services as well as licensing and RD services. Revenues and certain costs, such as costs associated with content and traffic acquisition, certain engineering, and hardware costs and other operating expenses, are directly attributable to our segments. Due to the integrated nature of Alphabet, other costs and expenses, such as technical infrastructure and office facilities, are managed Alphabet Inc. centrally at a consolidated level. The associated costs, including depreciation and impairment, are allocated to operating segments as a service cost generally based on usage or headcount. Unallocated corporate costs primarily include corporate initiatives, corporate shared costs, such as finance and legal, including fines and settlements, as well as costs associated with certain shared research and development activities. Additionally, hedging gains (losses) related to revenue are included in corporate costs. Our Chief Operating Decision Maker does not evaluate operating segments using asset information. Information about segments during the periods presented were as follows (in millions). For comparative purposes, amounts in prior periods have been recast: Year Ended December 31, 2018 2019 2020 Revenues: Google Services $ 130,524  $ 151,825  $ 168,635  Google Cloud 5,838  8,918  13,059  Other Bets 595  659  657  Hedging gains (losses) ( 138 ) 455  176  Total revenues $ 136,819  $ 161,857  $ 182,527  Operating income (loss): Google Services $ 43,137  $ 48,999  $ 54,606  Google Cloud ( 4,348 ) ( 4,645 ) ( 5,607 ) Other Bets ( 3,358 ) ( 4,824 ) ( 4,476 ) Corporate costs, unallocated (1) ( 7,907 ) ( 5,299 ) ( 3,299 ) Total income from operations $ 27,524  $ 34,231  $ 41,224  (1) Corporate costs, unallocated includes a fine of $ 5.1 billion for the year ended December 31, 2018 and a fine and legal settlement totaling $ 2.3 billion for the year ended December 31, 2019. For revenues by geography, see Note 2. The following table presents certain of our long-lived assets by geographic area, which includes property and equipment, net and operating lease assets (in millions).  As of December 31, 2019 As of December 31, 2020 Long-lived assets: United States $ 63,102  $ 69,315  International 21,485  27,645  Total long-lived assets $ 84,587  $ 96,960  Alphabet Inc. "," ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2020, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting We rely extensively on information systems to manage our business and summarize and report operating results. In 2019, we began a multi-year implementation of a new global ERP system, which will replace much of our existing core financial systems. The ERP system is designed to accurately maintain our financial records, enhance the flow of financial information, improve data management and provide timely information to our management team. The implementation is expected to occur in phases over the next several years. The initial phase, which included changes to our general ledger and consolidated financial reporting systems, was completed during the third quarter of 2020. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as the phased implementation of the new ERP system continues, we will change our processes and procedures, which in turn, could result in changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting. As a result of COVID-19, our global workforce continued to operate primarily in a work from home environment for the quarter ended December 31, 2020 . While pre-existing controls were not specifically designed to operate in our current work from home operating environment, we believe that our internal controls over financial reporting continue to be effective. We have continued to re-evaluate and refine our financial reporting process to provide reasonable assurance that we could report our financial results accurately and timely. Managements Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020. Management reviewed the results of its assessment with our Audit and Compliance Committee. The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Ernst  Young LLP, an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Annual Report on Form 10-K. Limitations on Effectiveness of Controls and Procedures In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. "
2,goog,10-k2019," ITEM 1. BUSINESS Overview As our founders Larry and Sergey wrote in the original founders' letter, ""Google is not a conventional company. We do not intend to become one."" That unconventional spirit has been a driving force throughout our history  inspiring us to do things like tackling deep computer science problems, such as our investments in artificial intelligence (AI) and quantum computing. Alphabet is a collection of businesses  the largest of which is Google. We report all non-Google businesses collectively as Other Bets. Our Other Bets include earlier stage technologies that are further afield from our core Google business. We take a long term view and manage the portfolio of Other Bets with the discipline and rigor needed to deliver long-term returns. Each of our businesses are designed to prosper through strong leaders and independence. Access and technology for everyone The Internet is one of the worlds most powerful equalizers, capable of propelling new ideas and people forward. Today, our mission to organize the worlds information and make it universally accessible and useful is as relevant as it was when we were founded in 1998. Since then, weve evolved from a company that helps people find answers to a company that helps you get things done. Were focused on building an even more helpful Google for everyone. We aspire to give everyone the tools they need to increase their knowledge, health, happiness, and success. Across Google, we're focused on continually innovating in areas where technology can have an impact on peoples lives. Our work in AI is helping to produce earlier and more precise flood warnings. Were also working hard to make sure that our products are accessible to the more than one billion individuals around the world with a disability. For example, Android 10 has automatic Live Captions for videos, podcasts and voicemails to make it easier to consume information on the phone. Our Other Bets are also pursuing initiatives with similar goals. For instance, as a part of our efforts in the Metro Phoenix area, Waymo is working toward our goal of making transportation safer and easier for everyone while Verily is developing tools and platforms to improve health outcomes. Moonshots Many companies get comfortable doing what they have always done, making only incremental changes. This incrementalism leads to irrelevance over time, especially in technology, where change tends to be revolutionary, not evolutionary. People thought we were crazy when we acquired YouTube and Android and when we launched Chrome, but those efforts have matured into major platforms for digital video and mobile devices and a safer, popular browser. We continue to look toward the future and continue to invest for the long-term. As we said in the original founders' letter, we will not shy away from high-risk, high-reward projects that we believe in because they are the key to our long-term success. The power of machine learning Across the company, machine learning and AI are increasingly driving many of our latest innovations. Within Google, our investments in machine learning over a decade have enabled us to build products that are smarter and more helpful. For example, our investments in AI are enabling doctors to detect cancer earlier. Machine learning powers the Google Assistant and many of our newer technologies. Google Serving our users We have always been a company committed to building products that have the potential to improve the lives of millions of people. Our product innovations have made our services widely used, and our brand one of the most recognized in the world. Google's core products and platforms, such as Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube each have over one billion monthly active users. As the majority of Alphabets big bets continue to reside within Google, an important benefit of the shift to Alphabet has been the tremendous focus that were able to have on Googles many extraordinary opportunities. Our products have come a long way since the company was founded more than two decades ago. Instead of just showing ten blue links in our search results, we are increasingly able to provide direct answers  even if you're speaking your question using Voice Search  which makes it quicker, easier and more natural to find what you're looking for. With Google Lens, you can use your phones camera to identify an unfamiliar landmark or find a trailer Alphabet Inc. from a movie poster. Over time, we have also added other services that let you access information quickly and easily  like Google Maps, which helps you navigate to a store while showing you current traffic conditions, or Google Photos, which helps you store and organize your photos. This drive to make information more accessible and helpful has led us over the years to improve the discovery and creation of digital content, on the web and through platforms like Google Play and YouTube. And with the migration to mobile, people are consuming more digital content by watching more videos, playing more games, listening to more music, reading more books, and using more apps than ever before. Working with content creators and partners, we continue to build new ways for people around the world to find great digital content. Fueling all of these great digital experiences are powerful platforms and hardware. Thats why we continue to invest in platforms like our Android mobile operating system, Chrome browser, Chrome operating system, and Daydream virtual reality platform, as well as growing our family of great hardware devices. We see tremendous potential for devices to be helpful, make your life easier, and get better over time, by combining the best of Google's AI, software, and hardware. This is reflected in our latest generation of hardware products like Pixel 4 phones and the Google Nest Hub smart display. Creating beautiful products that people rely on every day is a journey that we are investing in for the long run. Key to building helpful products for users is our commitment to keeping their data safe online. As the Internet evolves, we continue to invest in our industry-leading security technologies and privacy tools, such as the addition of auto-delete controls to enable users to automatically delete activity after 3 or 18 months and incognito mode in YouTube and Maps. Google was a company built in the cloud. We continue to invest in infrastructure, security, data management, analytics and AI. We see significant opportunity in helping businesses enhance these strengths with features like data migration, modern development environments and machine learning tools to provide enterprise-ready cloud services, including Google Cloud Platform and G Suite. Google Cloud Platform enables developers to build, test, and deploy applications on Googles highly scalable and reliable infrastructure. Our G Suite productivity tools  which include apps like Gmail, Docs, Drive, Calendar, and more  are designed with real-time collaboration and machine intelligence to help people work smarter. Because more and more of todays great digital experiences are being built in the cloud, our Google Cloud products help businesses of all sizes take advantage of the latest technology advances to operate more efficiently. How we make money The goal of our advertising products is to deliver relevant ads at just the right time and to give people useful commercial information, regardless of the device theyre using. We also provide advertisers with tools that help them better attribute and measure their advertising campaigns. Our advertising solutions help millions of companies grow their businesses, and we offer a wide range of products across devices and formats. We generate revenues primarily by delivering both performance advertising and brand advertising.  Performance advertising creates and delivers relevant ads that users will click on, leading to direct engagement with advertisers. Most of our performance advertisers pay us when a user engages in their ads. Performance advertising lets our advertisers connect with users while driving measurable results. Our ads tools allow performance advertisers to create simple text-based ads that appear on Google properties and the properties of Google Network Members. In addition, Google Network Members use our platforms to display relevant ads on their properties, generating revenues when site visitors view or click on the ads. We continue to invest in our advertising programs and make significant upgrades.  Brand advertising helps enhance users' awareness of and affinity with advertisers' products and services, through videos, text, images, and other interactive ads that run across various devices. We help brand advertisers deliver digital videos and other types of ads to specific audiences for their brand-building marketing campaigns. We have built a world-class ad technology platform for advertisers, agencies, and publishers to power their digital marketing businesses. We aim to ensure great user experiences by serving the right ads at the right time and by building deep partnerships with brands and agencies. We also seek to improve the measurability of advertising so advertisers know when their campaigns are effective. We have allocated substantial resources to stopping bad advertising practices and protecting users on the web. We focus on creating the best advertising experiences for our users and advertisers in many ways, ranging from filtering out invalid traffic, removing billions of bad ads from our systems every year to closely monitoring the sites, apps, and videos where ads appear and blacklisting them when necessary to ensure that ads do not fund bad content. Alphabet Inc. We continue to look to the future and are making long-term investments that will grow revenues beyond advertising, including Google Cloud, Google Play, hardware, and YouTube. We are also investing in research efforts in AI and quantum computing to foster innovation across our businesses and create new opportunities . Other Bets Throughout Alphabet, we are also using technology to try and solve big problems across many industries. Alphabets investment in our portfolio of Other Bets include emerging businesses at various stages of development, ranging from those in the research and development phase to those that are in the beginning stages of commercialization, and our goal is for them to become thriving, successful businesses in the medium to long term. While these early-stage businesses naturally come with considerable uncertainty, some of them are already generating revenue and making important strides in their industries. Revenues are primarily generated from internet and TV services, as well as licensing and RD services. Other Bets operate as independent companies and some of them have their own boards with independent members and outside investors. We are investing in our portfolio of Other Bets and being very deliberate about the focus, scale, and pace of investments. Competition Our business is characterized by rapid change as well as new and disruptive technologies. We face formidable competition in every aspect of our business, particularly from companies that seek to connect people with online information and provide them with relevant advertising. We face competition from:  General purpose search engines and information services, such as Baidu, Microsoft's Bing, Naver, Seznam, Verizon's Yahoo, and Yandex.  Vertical search engines and e-commerce websites, such as Amazon and eBay (e-commerce), Booking's Kayak (travel queries), Microsoft's LinkedIn (job queries), and WebMD (health queries). Some users will navigate directly to such content, websites, and apps rather than go through Google.  Social networks, such as Facebook, Snapchat, and Twitter. Some users increasingly rely on social networks for product or service referrals, rather than seeking information through traditional search engines.  Other forms of advertising, such as billboards, magazines, newspapers, radio, and television. Our advertisers typically advertise in multiple media, both online and offline.  Other online advertising platforms and networks, including Amazon, AppNexus, Criteo, and Facebook, that compete for advertisers that use Google Ads, our primary auction-based advertising platform.  Providers of digital video services, such as Amazon, Apple, ATT, Disney, Facebook, Hulu, Netflix and TikTok. In businesses that are further afield from our advertising business, we compete with companies that have longer operating histories and more established relationships with customers and users. We face competition from:  Other digital content and application platform providers, such as Amazon and Apple.  Companies that design, manufacture, and market consumer hardware products, including businesses that have developed proprietary platforms.  Providers of enterprise cloud services, including Alibaba, Amazon, and Microsoft.  Digital assistant providers, such as Amazon and Apple. Competing successfully depends heavily on our ability to deliver and distribute innovative products and technologies to the marketplace across our businesses. Specifically, for advertising, competing successfully depends on attracting and retaining:  Users, for whom other products and services are literally one click away, largely on the basis of the relevance of our advertising, as well as the general usefulness, security and availability of our products and services.  Advertisers, primarily based on our ability to generate sales leads, and ultimately customers, and to deliver their advertisements in an efficient and effective manner across a variety of distribution channels.  Content providers, primarily based on the quality of our advertiser base, our ability to help these partners generate revenues from advertising, and the terms of our agreements with them. Intellectual Property Alphabet Inc. We rely on various intellectual property laws, confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We have registered, and applied for the registration of, U.S. and international trademarks, service marks, domain names and copyrights. We have also filed patent applications in the U.S. and foreign countries covering certain of our technology, and acquired patent assets to supplement our portfolio. We have licensed in the past, and expect that we may license in the future, certain of our rights to other parties. Culture and Employees We take great pride in our culture. We embrace collaboration and creativity, and encourage the iteration of ideas to address complex technical challenges. Transparency and open dialogue are central to how we work, and we aim to ensure that company news reaches our employees first through internal channels. Despite our rapid growth, we still cherish our roots as a startup and wherever possible empower employees to act on great ideas regardless of their role or function within the company. We strive to hire great employees, with backgrounds and perspectives as diverse as those of our global users. We work to provide an environment where these talented people can have fulfilling careers addressing some of the biggest challenges in technology and society. Our employees are among our best assets and are critical for our continued success. We expect to continue investing in hiring talented employees and to provide competitive compensation programs to our employees. As of December 31, 2019 , we had 118,899 full-time employees. Although we have work councils and statutory employee representation obligations in certain countries, our U.S. employees are not represented by a labor union. Competition for qualified personnel in our industry is intense, particularly for software engineers, computer scientists, and other technical staff. Ongoing Commitment to Sustainability We strive to build sustainability into everything we do from designing and operating efficient data centers, advancing carbon-free energy, creating sustainable workplaces, building better devices and services, empowering users with technology, and enabling a responsible supply chain. Google has been carbon neutral since 2007 and we are the largest corporate purchaser of renewable energy in the world. In 2018, for the second consecutive year, we matched 100% of our electricity consumption with renewable energy purchases, as reported in our 2019 Environmental Report. Some other 2019 highlights and achievements include:  We made our largest corporate purchase of renewable energy: 18 new energy deals totaling 1,600 megawatts, which is anticipated to spur the construction of more than $2 billion in new energy infrastructure.  100% of Nest products launched in 2019 include recycled plastic content and we launched carbon neutral shipping for Googles direct customers who buy a product on Google Shopping or purchase Made by Google hardware.  The Environmental Insights Explorer is enabling municipalities  which represent more than 70% of global greenhouse gas emissions according to the 2016 United Nations Habitat World Cities Report  to estimate emissions and develop climate action plans. In 2019, we expanded this tool to more than 100 cities worldwide. We believe that climate change is one of the most significant global challenges of our time. In 2017, we developed a climate resilience strategy, which included conducting a climate scenario analysis. We have been on CDPs (formerly the Carbon Disclosure Project) Climate Change A list for five consecutive years. We believe our CDP report reflects the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). More information on Google's approach to sustainability can be found in our annual sustainability reports. The content of our sustainability reports are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. Seasonality Our business is affected by seasonal fluctuations in internet usage, advertising expenditures, and underlying business trends such as traditional retail seasonality. Available Information Our website is located at www.abc.xyz, and our investor relations website is located at www.abc.xyz/investor. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, are available through our investor relations website, free of charge, after we file them with the SEC. We also provide a link to the section of the SEC's website at www.sec.gov that has all of the reports that we file or furnish with the SEC. Alphabet Inc. We webcast via our investor relations website our earnings calls and certain events we participate in or host with members of the investment community. Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items of interest to our investors, including SEC filings, investor events, press and earnings releases, and blogs. We also share Google news and product updates on Google's Keyword blog at https://www.blog.google/, which may be of interest or material to our investors. Further, corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading ""Other."" The content of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. "," ITEM 1A. RISK FACTORS Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could harm our business, reputation, financial condition, and operating results. Risks Specific to our Company We generate a significant portion of our revenues from advertising, and reduced spending by advertisers, a loss of partners, or new and existing technologies that block ads online and/or affect our ability to customize ads could harm our business. We generated over 83% of total revenues from the display of ads online in 2019. Many of our advertisers, companies that distribute our products and services, digital publishers, and content providers can terminate their contracts with us at any time. These partners may not continue to do business with us if we do not create more value (such as increased numbers of users or customers, new sales leads, increased brand awareness, or more effective monetization) than their available alternatives. Changes to our advertising policies and data privacy practices, as well as changes to other companies advertising policies or practices may affect the advertising that we are able to provide, which could harm our business. In addition, technologies have been developed that make customized ads more difficult or that block the display of ads altogether and some providers of online services have integrated technologies that could potentially impair the availability and functionality of third-party digital advertising. Failing to provide superior value or deliver advertisements effectively and competitively could harm our reputation, financial condition, and operating results. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions can also have a material negative effect on the demand for advertising and cause our advertisers to reduce the amounts they spend on advertising, which could harm our financial condition and operating results. We face intense competition. If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, which could harm our business and operating results. Our business environment is rapidly evolving and intensely competitive. Our businesses face changing technologies, shifting user needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant and useful products, services, and technologies in a timely manner. As our businesses evolve, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in research and development, including through acquisitions, in order to enhance our technology and new and existing products and services. We have many competitors in different industries. Our current and potential domestic and international competitors range from large and established companies to emerging start-ups. Some competitors have longer operating histories in various sectors. They can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, continuing to invest heavily in research and development and in talent, aggressively initiating intellectual property claims (whether or not meritorious), and continuing to compete aggressively for users, advertisers, customers, and content providers. Our competitors may be able to innovate and provide products and services faster than we can or may foresee the need for products and services before us. For example, we are investing significantly in subscription-based products and services such as YouTube, which face intense competition from large experienced companies with well established relationships with users. Our operating results may also suffer if our products and services are not responsive to the needs of our users, advertisers, publishers, customers, and content providers. As technologies continue to develop, our competitors may be able to offer experiences that are, or that are seen to be, substantially similar to or better than ours. This may force us to compete in different ways and expend significant resources in order to remain competitive. If our competitors Alphabet Inc. are more successful than we are in developing compelling products or in attracting and retaining users, advertisers, publishers, customers, and content providers, our operating results could be harmed. Our ongoing investment in new businesses, products, services, and technologies is inherently risky, and could disrupt our current operations and harm our financial condition and operating results. We have invested and expect to continue to invest in new businesses, products, services, and technologies. The investments that we are making across Google and Other Bets reflect our ongoing efforts to innovate and provide products and services that are useful to users, advertisers, publishers, customers, and content providers. Our investments in Google and Other Bets span a wide range of industries beyond online advertising. Such investments ultimately may not be commercially viable or may not result in an adequate return of capital and, in pursuing new strategies, we may incur unanticipated liabilities. These endeavors may involve significant risks and uncertainties, including diversion of management resources and, with respect to Other Bets, the use of alternative investment, governance, or compensation structures that may fail to adequately align incentives across the company or otherwise accomplish their objectives. Within Google, we continue to invest heavily in hardware, including our smartphones and home devices, which is a highly competitive market with frequent introduction of new products and services, rapid adoption of technological advancements by competitors, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, and price and feature sensitivity on the part of consumers and businesses. There can be no assurance we will be able to provide hardware that competes effectively. We are also devoting significant resources to develop and deploy our enterprise-ready cloud services, including Google Cloud Platform and G Suite. We are incurring costs to build and maintain infrastructure to support cloud computing services and hire talent, particularly to support and scale the Cloud salesforce. At the same time, our competitors are rapidly developing and deploying cloud-based services. Pricing and delivery models are competitive and evolving, and we may not attain sufficient scale and profitability to achieve our business objectives. Within Other Bets, we are investing significantly in the areas of health, life sciences, and transportation, among others. These investment areas face intense competition from large experienced and well-funded competitors and our offerings may not be able to compete effectively or to operate at sufficient levels of profitability. In addition, new and evolving products and services, including those that use artificial intelligence and machine learning, raise ethical, technological, legal, regulatory, and other challenges, which may negatively affect our brands and demand for our products and services. Because all of these new ventures are inherently risky, no assurance can be given that such strategies and offerings will be successful and will not harm our reputation, financial condition , and operating results. Our revenue growth rate could decline over time, and we anticipate downward pressure on our operating margin in the future. Our revenue growth rate could decline over time as a result of a number of factors, including increasing competition and the continued expansion of our business into a variety of new fields. Changes in device mix, geographic mix, ongoing product and policy changes, product mix, and property mix and an increasing competition for advertising may also affect our advertising revenue growth rate. We may also experience a decline in our revenue growth rate as our revenues increase to higher levels, if there is a decrease in the rate of adoption of our products, services, and technologies, or due to deceleration or decline in demand for devices used to access our services, among other factors. In addition to a decline in our revenue growth rate, we may also experience downward pressure on our operating margin resulting from a variety of factors, such as the continued expansion of our business into new fields, including products and services such as hardware, Google Cloud, Google Play, gaming, and subscription products, as well as significant investments in Other Bets, all of which may have margins lower than those we generate from advertising. We may also experience downward pressure on our operating margins from increasing competition and increased costs for many aspects of our business, including within advertising where changes such as device mix, property mix, and partner agreements can affect margin. The margin we earn on revenues generated from our Google Network Members could also decrease in the future if we pay a larger percentage of advertising fees to them. We may also pay increased TAC to our distribution partners as well as increased content acquisition costs to content providers. We may also face an increase in infrastructure costs, supporting businesses such as Search, Google Cloud, and YouTube. Additionally, our spend to promote new products and services or distribute certain products and services or increased investment in our innovation efforts across Google and our Other Bets businesses may affect our operating margins. Due to these factors and the evolving nature of our business, our historical revenue growth rate and historical operating margin may not be indicative of our future performance. Alphabet Inc. Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand as well as affect our ability to compete. Our patents, trademarks, trade secrets, copyrights, and other intellectual property rights are important assets for us. Various events outside of our control pose a threat to our intellectual property rights, as well as to our products, services, and technologies. For example, effective intellectual property protection may not be available in every country in which our products and services are distributed or made available through the Internet. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Although we seek to obtain patent protection for our innovations, it is possible we may not be able to protect some of these innovations. Moreover, we may not have adequate patent or copyright protection for certain innovations that later turn out to be important. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued patent may be deemed invalid or unenforceable. We also seek to maintain certain intellectual property as trade secrets. The secrecy of such trade secrets and other sensitive information could be compromised, which could cause us to lose the competitive advantage resulting from these trade secrets. We also face risks associated with our trademarks. For example, there is a risk that the word Google could become so commonly used that it becomes synonymous with the word search. Some courts have ruled that ""Google"" is a protectable trademark, but it is possible that other courts, particularly those outside of the United States, may reach a different determination. If this happens, we could lose protection for this trademark, which could result in other people using the word Google to refer to their own products, thus diminishing our brand. Any significant impairment of our intellectual property rights could harm our business and our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results. Our business depends on strong brands, and failing to maintain and enhance our brands would hurt our ability to expand our base of users, advertisers, customers, content providers, and other partners. Our strong brands have significantly contributed to the success of our business. Maintaining and enhancing the brands within Google and Other Bets increases our ability to enter new categories and launch new and innovative products that better serve the needs of our users, advertisers, customers, content providers, and other partners. Our brands may be negatively affected by a number of factors, including, among others, reputational issues, third-party content shared on our platforms, data privacy and security issues and developments, and product or technical performance failures. For example, if we fail to appropriately respond to the sharing of misinformation or objectionable content on our services or objectionable practices by advertisers, or to otherwise adequately address user concerns, our users may lose confidence in our brands. Our brands may also be negatively affected by the use of our products or services to disseminate information that is deemed to be false or misleading. Furthermore, failure to maintain and enhance equity in our brands may harm our business, financial condition, and operating results. Our success will depend largely on our ability to remain a technology leader and continue to provide high-quality, innovative products and services that are truly useful and play a valuable role in a range of settings. We face a number of manufacturing and supply chain risks that, if not properly managed, could harm our financial condition, operating results, and prospects. We face a number of risks related to manufacturing and supply chain management, which could affect our ability to supply both our products and our internet-based services. We rely on other companies to manufacture many of our assemblies and finished products, to design certain of our components and parts, and to participate in the distribution of our products and services. Our business could be negatively affected if we are not able to engage these companies with the necessary capabilities or capacity on reasonable terms, or if those we engage fail to meet their obligations (whether due to financial difficulties or other reasons), or make adverse changes in the pricing or other material terms of our arrangements with them. We may experience supply shortages and price increases driven by raw material availability, manufacturing capacity, labor shortages, industry allocations, tariffs, trade disputes and barriers, natural disasters, the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), and significant changes in the financial or business condition of our suppliers. We may experience shortages or other supply chain disruptions that could negatively affect our operations. In addition, some of the components we use in our technical infrastructure and products are available only from a single source or limited sources, and we may not be able to find replacement vendors on favorable terms in the event of a supply chain disruption. In addition, a significant hardware supply interruption could delay critical data center upgrades or expansions. Alphabet Inc. We may enter into long term contracts for materials and products that commit us to significant terms and conditions. We may be liable for materials and products that are not consumed due to market acceptance, technological change, obsolescences, quality, product recalls, and warranty issues. For instance, because many of our hardware supply contracts have volume-based pricing or minimum purchase requirements, if the volume of our hardware sales decreases or does not reach projected targets, we could face increased materials and manufacturing costs or other financial liabilities that could make our products more costly per unit to manufacture and negatively affect our financial results. Furthermore, certain of our competitors may negotiate more favorable contractual terms based on volume and other commitments that may provide them with competitive advantages and may affect our supply. Our products and services may have quality issues resulting from design, manufacturing, or operations. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers. If the quality of our products and services does not meet expectations or our products or services are defective, it could harm our reputation, financial condition, and operating results. We require our suppliers and business partners to comply with laws and, where applicable, our company policies, such as the Google Supplier Code of Conduct, regarding workplace and employment practices, data security, environmental compliance and intellectual property licensing, but we do not control them or their practices. Violations of law or unethical business practices could result in supply chain disruptions, canceled orders, harm to key relationships, and damage to our reputation. Their failure to procure necessary license rights to intellectual property, could affect our ability to sell our products or services and expose us to litigation or financial claims. Interruption, interference with, or failure of our information technology and communications systems could hurt our ability to effectively provide our products and services, which could harm our reputation, financial condition, and operating results. In addition, complications with the design or implementation of our new global enterprise resource planning (ERP) system could harm our business and operations. The availability of our products and services and fulfillment of our customer contracts depend on the continuing operation of our information technology and communications systems. Our systems are vulnerable to damage, interference, or interruption from terrorist attacks, natural disasters, the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), power loss, telecommunications failures, computer viruses, ransomware attacks, computer denial of service attacks, phishing schemes, or other attempts to harm or access our systems. Some of our data centers are located in areas with a high risk of major earthquakes or other natural disasters. Our data centers are also subject to break-ins, sabotage, and intentional acts of vandalism, and, in some cases, to potential disruptions resulting from problems experienced by facility operators. Some of our systems are not fully redundant, and disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, closure of a facility, or other unanticipated problems at our data centers could result in lengthy interruptions in our service. In addition, our products and services are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in or failure of our services or systems. In addition, we rely extensively on information systems and technology to manage our business and summarize operating results. We are in the process of a multi-year implementation of a new ERP system, which will replace much of our existing core financial systems. The ERP system is designed to accurately maintain our financial records, enhance the flow of financial information, improve data management, and provide timely information to our management team. We may not be able to successfully implement the ERP system without experiencing delays, increased costs, and other difficulties. Failure to successfully design and implement the new ERP system as planned could harm our business, financial condition, and operating results. Additionally, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively affected. Our international operations expose us to additional risks that could harm our business, our financial condition, and operating results. Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. International revenues accounted for approximately 54% of our consolidated revenues in 2019. In addition to risks described elsewhere in this section, our international operations expose us to other risks, including the following:  Restrictions on foreign ownership and investments, and stringent foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S. Alphabet Inc.  Import and export requirements, tariffs, trade disputes and barriers, and customs classifications that may prevent us from offering products or providing services to a particular market, or that could limit our ability to source assemblies and finished products from a particular market, and may increase our operating costs.  Longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud.  Evolving foreign events, including Brexit, the United Kingdom's withdrawal from the European Union (EU). Brexit may adversely affect our revenues and could subject us to new regulatory costs and challenges (including the transfer of personal data between the EU and the United Kingdom), in addition to other adverse effects that we are unable to effectively anticipate.  Anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, and other local laws prohibiting certain payments to government officials, violations of which could result in civil and criminal penalties.  Uncertainty regarding liability for services and content, including uncertainty as a result of local laws and lack of legal precedent.  Different employee/employer relationships, existence of works councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions. Because we conduct business in currencies other than U.S. dollars but report our financial results in U.S. dollars, we face exposure to fluctuations in foreign currency exchange rates. Although we hedge a portion of our international currency exposure, significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings. Hedging programs are also inherently risky and could expose us to additional risks that could harm our financial condition and operating results. Risks Related to our Industry People access the Internet through a variety of platforms and devices that continue to evolve with the advancement of technology and user preferences. If manufacturers and users do not widely adopt versions of our products and services developed for these new interfaces, our business could be harmed. People access the Internet through a growing variety of devices such as desktop computers, mobile phones, smartphones, laptops and tablets, video game consoles, voice-activated speakers, wearables, automobiles, and television-streaming devices. Our products and services may be less popular on these new interfaces. Each manufacturer or distributor may establish unique technical standards for its devices, and our products and services may not be available on these devices as a result. Some manufacturers may also elect not to include our products on their devices. In addition, search queries are increasingly being undertaken via voice-activated speakers, apps, social media or other platforms, which could harm our business. It is hard to predict the challenges we may encounter in adapting our products and services and developing competitive new products and services. We expect to continue to devote significant resources to creating and supporting products and services across multiple platforms and devices. Failing to attract and retain a substantial number of new device manufacturers, suppliers, distributors, developers, and users, or failing to develop products and technologies that work well on new devices and platforms, could harm our business, financial condition, and operating results and ability to capture future business opportunities. Data privacy and security concerns relating to our technology and our practices could damage our reputation, cause us to incur significant liability, and deter current and potential users or customers from using our products and services. Software bugs or defects, security breaches, and attacks on our systems could result in the improper disclosure and use of user data and interference with our users and customers ability to use our products and services, harming our business operations and reputation. Concerns about our practices with regard to the collection, use, disclosure, or security of personal information or other data-privacy-related matters, even if unfounded, could harm our reputation, financial condition, and operating results. Our policies and practices may change over time as expectations regarding privacy and data change. Our products and services involve the storage and transmission of proprietary information, and bugs, theft, misuse, defects, vulnerabilities in our products and services, and security breaches expose us to a risk of loss of this information, improper use and disclosure of such information, litigation, and other potential liability. Systems and control failures, security breaches, failure to comply with our privacy policies, and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm our reputation and brand and, therefore, our business, and impair our ability to attract and retain users or customers. We expect to continue to expend significant resources to maintain security protections that shield against bugs, theft, misuse, or security vulnerabilities or breaches. We experience cyber attacks and other attempts to gain unauthorized access to our systems on a regular basis. We may experience future security issues, whether due to employee error or malfeasance or system errors or Alphabet Inc. vulnerabilities in our or other parties systems, which could result in significant legal and financial exposure. Government inquiries and enforcement actions, litigation, and adverse press coverage could harm our business. We may be unable to anticipate or detect attacks or vulnerabilities or implement adequate preventative measures. Attacks and security issues could also compromise trade secrets and other sensitive information, harming our business. While we have dedicated significant resources to privacy and security incident response capabilities, including dedicated worldwide incident response teams, our response process may not be adequate, may fail to accurately assess the severity of an incident, may not respond quickly enough, or may fail to sufficiently remediate an incident. As a result, we may suffer significant legal, reputational, or financial exposure, which could harm our business, financial condition, and operating results. Our ongoing investments in safety, security, and content review will likely continue to identify abuse of our platforms and misuse of user data. In addition to our efforts to mitigate cyber attacks, we are making significant investments in safety, security, and content review efforts to combat misuse of our services and unauthorized access to user data by third parties, including investigations and review of platform applications that could access the information of users of our services. As a result of these efforts, we could discover incidents of unnecessary access to or misuse of user data or other undesirable activity by third parties. We may not discover all such incidents or activity, whether as a result of our data limitations, including our lack of visibility over our encrypted services, the scale of activity on our platform, or other factors, and we may be notified of such incidents or activity via third parties. Such incidents and activities may include the use of user data or our systems in a manner inconsistent with our terms, contracts or policies, the existence of false or undesirable user accounts, election interference, improper ad purchases, activities that threaten peoples safety on- or offline, or instances of spamming, scraping, or spreading disinformation. We may also be unsuccessful in our efforts to enforce our policies or otherwise remediate any such incidents. Any of the foregoing developments may negatively affect user trust and engagement, harm our reputation and brands, require us to change our business practices in a manner adverse to our business, and adversely affect our business and financial results. Any such developments may also subject us to additional litigation and regulatory inquiries, which could result in monetary penalties and damages, divert managements time and attention, and lead to enhanced regulatory oversight. Problematic content, including low-quality user-generated content, web spam, content farms, and other violations of our guidelines could affect the quality of our services, which could damage our reputation and deter our current and potential users from using our products and services. We, like others in the industry, face violations of our content guidelines, including sophisticated attempts by bad actors to manipulate our hosting and advertising systems to fraudulently generate revenues, or to otherwise generate traffic that does not represent genuine user interest or intent. While we invest significantly in efforts to promote high-quality and relevant results and to detect and prevent low-quality content and invalid traffic, we may be unable to adequately detect and prevent such abuses. Many websites violate or attempt to violate our guidelines, including by seeking to inappropriately rank higher in search results than our search engine's assessment of their relevance and utility would rank them. Such efforts (known as web spam) may affect the quality of content on our platforms and lead them to display false, misleading or undesirable content. Although English-language web spam in our search results has been reduced, and web spam in most other languages is limited, we expect web spammers will continue to seek inappropriate ways to improve their rankings. We continuously combat web spam in our search results, including through indexing technology that makes it harder for spam-like, less useful web content to rank highly. We also continue to invest in and deploy proprietary technology to detect and prevent web spam from abusing our platforms. We also face other challenges from low-quality and irrelevant content websites, including content farms, which are websites that generate large quantities of low-quality content to help them improve their search rankings. We are continually launching algorithmic changes focused on low-quality websites. If we fail to detect and prevent an increase in problematic content, it could hurt our reputation for delivering relevant information or reduce use of our platforms, harming our financial condition or operating results. It may also subject us to litigation and regulatory inquiries, which could result in monetary penalties and damages, divert managements time and attention, and lead to enhanced regulatory oversight. Alphabet Inc. Our business depends on continued and unimpeded access to the Internet by us and our users. Internet access providers may be able to restrict, block, degrade, or charge for access to certain of our products and services, which could lead to additional expenses and the loss of users and advertisers. Our products and services depend on the ability of our users to access the Internet, and certain of our products require significant bandwidth to work effectively. Currently, this access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, and government-owned service providers. Some of these providers have taken, or have stated that they may take measures that could degrade, disrupt, or increase the cost of user access to certain of our products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, or by charging increased fees to us or our users to provide our offerings. Some jurisdictions have adopted regulations prohibiting certain forms of discrimination by internet access providers; however, substantial uncertainty exists in the United States and elsewhere regarding such protections. For example, in 2018 the United States Federal Communications Commission repealed net neutrality rules, which could lead internet access providers to restrict, block, degrade, or charge for access to certain of our products and services. In addition, in some jurisdictions, our products and services have been subject to government-initiated restrictions or blockages. Such interference could result in a loss of existing users, customers and advertisers, goodwill, and increased costs, and could impair our ability to attract new users, customers and advertisers, thereby harming our business. Risks Related to Laws and Regulations We are subject to increasing regulatory scrutiny as well as changes in public policies governing a wide range of topics that may negatively affect our business. We and other companies in the technology industry are experiencing increased regulatory scrutiny. For instance, various regulatory agencies, including competition, consumer protection, and privacy authorities, are reviewing aspects of our products and services. We continue to cooperate with these investigations. Prior, existing, and new investigations have in the past and may in the future result in substantial fines and penalties, changes to our products and services, alterations to our business operations, and civil litigation, all of which could harm our business, reputation, financial condition, and operating results. Changes in international and local social, political, economic, tax, and regulatory conditions or in laws and policies governing a wide range of topics may increase our cost of doing business, limit our ability to pursue certain business models or offer certain products or services, and cause us to change our business practices. Further, our investment in a variety of new fields, including the health industry and payment services, also raises a number of new regulatory issues. These factors could harm our business and operating results in material ways. A variety of new and existing laws and/or interpretations could harm our business. We are subject to numerous U.S. and foreign laws and regulations covering a wide variety of subject matters. New laws and regulations (or new interpretations or applications of existing laws and regulations in a manner inconsistent with our practices) may make our products and services less useful, limit our ability to pursue certain business models or offer certain products and services, require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices. These laws and regulations are evolving and involve matters central to our business, including, among others:  Competition laws and regulations around the world.  Privacy laws, such as the California Consumer Privacy Act of 2018 that came into effect in January of 2020, which gives new data privacy rights to California residents, and SB-327 in California, which regulates the security of data in connection with internet connected devices.  Data protection laws passed by many states within the U.S. and by certain countries regarding notification to data subjects and/or regulators when there is a security breach of personal data.  Copyright laws, such as the EU Directive on Copyright in the Digital Single Market (EUCD) of April 17, 2019, which increases the liability of content-sharing services with respect to content uploaded by their users. It has also created a new property right in news publications that will limit the ability of some online services to interact with or present such content. Each EU Member State must implement the EUCD by June 7, 2021. In addition, there are new constraining licensing regimes that limit our ability to operate with respect to copyright protected works.  Data localization laws, which generally mandate that certain types of data collected in a particular country be stored and/or processed within that country. Alphabet Inc.  Various U.S. and international laws that govern the distribution of certain materials to children and regulate the ability of online services to collect information from minors.  Various laws with regard to content removal and disclosure obligations, such as the Network Enforcement Act in Germany, which may affect our businesses and operations and may subject us to significant fines if such laws are interpreted and applied in a manner inconsistent with our practices or when we may not proactively discover such content due to the scale of third-party content and the limitations of existing technologies. Other countries, including Singapore, Australia, and the United Kingdom, have implemented or are considering similar legislation imposing penalties for failure to remove certain types of content. In addition, the applicability and scope of these laws, as interpreted by the courts, remain uncertain and could harm our business. For example:  We rely on statutory safe harbors, as set forth in the Digital Millennium Copyright Act in the United States and the E-Commerce Directive in Europe, against copyright liability for various linking, caching, and hosting activities. Any legislation or court rulings affecting these safe harbors may adversely affect us.  Court decisions such as the judgment of the Court of Justice of the European Union (CJEU) on May 13, 2014 on the right to be forgotten, which allows individuals to demand that Google remove search results about them in certain instances, may limit the content we can show to our users and impose significant operational burdens.  Court decisions that require Google to remove links not just in the jurisdiction of the issuing court, but for all versions of the search engine worldwide, including in locations where the content at issue is lawful, may limit the content we can show to our users and impose significant operational burdens. The Supreme Court of Canada issued such a decision against Google in June 2017, and others could treat its decision as persuasive. With respect to the right to be forgotten, a follow-up case of the CJEU on September 24, 2019 ruled that a search engine operator is not required to remove links from all versions of the search engine worldwide, but the court also noted in some cases, removal of links from all versions of the search engine available from the EU (including non-EU specific versions) may be required. The introduction of new businesses, products, services, and technologies, our activities in certain jurisdictions, or other actions we take may subject us to additional laws and regulations. The costs of compliance with these laws and regulations are high and are likely to increase in the future. Any failure on our part to comply with laws and regulations can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties. We are subject to claims, suits, government investigations, and other proceedings that may harm our business, financial condition, and operating results. We are subject to claims, suits, and government investigations involving competition, intellectual property, data privacy and security, consumer protection, tax, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, and other matters. Due to our manufacturing and sale of an expanded suite of products, including hardware as well as Google Cloud offerings, we may also be subject to a variety of claims including product warranty, product liability, and consumer protection claims related to product defects, among other litigation. We may also be subject to claims involving health and safety, hazardous materials usage, other environmental impacts, or service disruptions or failures. Any of these types of legal proceedings can have an adverse effect on us because of legal costs, diversion of management resources, negative publicity and other factors. Determining reserves for our pending litigation is a complex, fact-intensive process that requires significant judgment. The resolution of one or more such proceedings has resulted in, and may in the future result in, additional substantial fines, penalties, injunctions, and other sanctions that could harm our business, financial condition, and operating results. We may be subject to legal liability associated with providing online services or content. Our products and services let users exchange information, advertise products and services, conduct business, and engage in various online activities. We also place advertisements displayed on other companies websites, and we offer third-party products, services, and/or content. The law relating to the liability of online service providers for others activities on their services is still somewhat unsettled both within the U.S. and internationally. Claims have been brought against us for defamation, negligence, breaches of contract, copyright and trademark infringement, unfair competition, unlawful activity, torts, fraud, or other legal theories based on the nature and content of information available on or via our services. Alphabet Inc. We may be subject to claims by virtue of our involvement in hosting, transmitting, marketing, branding, or providing access to content created by third parties. Defense of any such actions could be costly and involve significant time and attention of our management and other resources, may result in monetary liabilities or penalties, and may require us to change our business in an adverse manner. Privacy and data protection regulations are complex and rapidly evolving areas. Adverse interpretations of these laws could harm our business, reputation, financial condition, and operating results. Authorities around the world have adopted and are considering a number of legislative and regulatory proposals concerning data protection and limits on encryption of user data. Adverse legal rulings, legislation, or regulation could result in fines and orders requiring that we change our data practices, which could have an adverse effect on our ability to provide services, harming our business operations. Complying with these evolving laws could result in substantial costs and harm the quality of our products and services, negatively affecting our business. Recent legal developments in Europe have created compliance uncertainty regarding transfers of personal data from Europe to the United States. For example, the General Data Protection Regulation (GDPR) applies to all of our activities conducted from an establishment in the EU or related to products and services that we offer to EU users or customers, or the monitoring of their behavior in the EU. The GDPR creates a range of new compliance obligations. Ensuring compliance with the GDPR is an ongoing commitment that involves substantial costs, and despite our efforts, governmental authorities or others have asserted and may continue to assert that our business practices fail to comply with its requirements. If our operations are found to violate GDPR requirements, we may incur substantial fines, have to change our business practices, and face reputational harm, any of which could have a material adverse effect on our business. In particular, serious breaches of the GDPR can result in administrative fines of up to 4% of annual worldwide revenues. Fines of up to 2% of annual worldwide revenues can be levied for other specified violations. The EU-U.S. and the Swiss-U.S. Privacy Shield frameworks allow U.S. companies that self-certify to the U.S. Department of Commerce and publicly commit to comply with specified requirements to import personal data from the EU and Switzerland. However, these frameworks face a number of legal challenges and their validity remains subject to legal, regulatory, and political developments in both Europe and the U.S. The potential invalidation of data transfer mechanisms could have a significant adverse impact on our ability to process and transfer personal data outside of the EEA. These developments create some uncertainty, and compliance obligations could cause us to incur costs or harm the operations of our products and services in ways that harm our business. We face, and may continue to face intellectual property and other claims that could be costly to defend, result in significant damage awards or other costs (including indemnification awards), and limit our ability to use certain technologies in the future. We, like other internet, technology and media companies, hold large numbers of patents, copyrights, trademarks, and trade secrets and are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. In addition, patent-holding companies may frequently seek to generate income from patents they have obtained by bringing claims against us. As we have grown, the number of intellectual property claims against us has increased and may continue to increase as we develop new products, services, and technologies. We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe the intellectual property rights of others. Other parties have also sought broad injunctive relief against us by filing claims in U.S. and international courts and the U.S. International Trade Commission (ITC) for exclusion and cease-and-desist orders, which could limit our ability to sell our products or services in the U.S. or elsewhere if our products or services or those of our customers or suppliers are found to infringe the intellectual property subject to the claims. Adverse results in any of these lawsuits may include awards of monetary damages, costly royalty or licensing agreements (if licenses are available at all), or orders preventing us from offering certain features, functionalities, products, or services. They may also cause us to change our business practices and require development of non-infringing products, services, or technologies, which could result in a loss of revenues for us and otherwise harm our business. Many of our agreements with our customers and partners, including certain suppliers, require us to defend against certain intellectual property infringement claims and in some cases indemnify them for certain intellectual property infringement claims against them, which could result in increased costs for defending such claims or significant damages if there were an adverse ruling in any such claims. Such customers and partners may also discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. Moreover, intellectual property indemnities provided to us by our suppliers, when obtainable, may not cover all damages and losses suffered by us and our customers arising from intellectual property Alphabet Inc. infringement claims. Furthermore, in connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, including those associated with intellectual property claims. Regardless of their merits, intellectual property claims are often time consuming and expensive to litigate or settle. To the extent such claims are successful, they may harm our business, including our product and service offerings, financial condition, or operating results. Risks Related to Ownership of our Stock We cannot guarantee that any share repurchase program will be fully consummated or that any share repurchase program will enhance long-term stockholder value, and share repurchases could increase the volatility of the price of our stock and could diminish our cash reserves. In January 2018, January 2019, and July 2019, the board of directors of Alphabet authorized the company to repurchase up to $8.6 billion , $12.5 billion , and $25.0 billion of its Class C capital stock, respectively. Share repurchases pursuant to the January 2018 and January 2019 authorizations were completed in 2019. As of December 31, 2019, $20.8 billion remains available for repurchase. Our repurchase program does not have an expiration date and does not obligate Alphabet to repurchase any specific dollar amount or to acquire any specific number of shares. Our share repurchase program could affect the price of our stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our stock. The concentration of our stock ownership limits our stockholders ability to influence corporate matters. Our Class B common stock has 10 votes per share, our Class A common stock has one vote per share, and our Class C capital stock has no voting rights. As of December 31, 2019, Larry Page and Sergey Brin beneficially owned approximately 84.3% of our outstanding Class B common stock, which represented approximately 51.2% of the voting power of our outstanding common stock. Through their stock ownership, Larry and Sergey have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. In addition, because our Class C capital stock carries no voting rights (except as required by applicable law), the issuance of the Class C capital stock, including in future stock-based acquisition transactions and to fund employee equity incentive programs, could continue Larry and Sergeys current relative voting power and their ability to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders. This concentrated control limits or severely restricts other stockholders ability to influence corporate matters and we may take actions that some of our stockholders do not view as beneficial, which could reduce the market price of our Class A common stock and our Class C capital stock. Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable. Provisions in Alphabets certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:  Our certificate of incorporation provides for a tri-class capital stock structure. As a result of this structure, Larry and Sergey have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets. This concentrated control could discourage others from initiating any potential merger, takeover, or other change of control transaction that other stockholders may view as beneficial. As noted above, the issuance of the Class C capital stock could have the effect of continuing the influence of Larry and Sergey.  Our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors.  Our stockholders may not act by written consent. As a result, a holder, or holders, controlling a majority of our capital stock would not be able to take certain actions without holding a stockholders' meeting.  Our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates.  Stockholders must provide advance notice to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company. Alphabet Inc.  Our board of directors may issue, without stockholder approval, shares of undesignated preferred stock. The ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its outstanding voting stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us. General Risks Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations. Our operating results may fluctuate as a result of a number of factors, many outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date, and annual expenses as a percentage of our revenues may differ significantly from our historical rates. Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed in this section in addition to the following factors may affect our operating results:  Our ability to continue to attract and retain users and customers to our products and services.  Our ability to attract user and/or customer adoption of, and generate significant revenues from, new products, services, and technologies in which we have invested considerable time and resources.  Our ability to monetize traffic on Google properties and our Google Network Members' properties across various devices.  Revenue fluctuations caused by changes in device mix, geographic mix, ongoing product and policy changes, product mix, and property mix.  The amount of revenues and expenses generated and incurred in currencies other than U.S. dollars, and our ability to manage the resulting risk through our foreign exchange risk management program.  The amount and timing of operating costs and expenses and capital expenditures related to the maintenance and expansion of our businesses, operations, and infrastructure.  Our focus on long-term goals over short-term results.  The results of our acquisitions, divestitures, and our investments in risky projects, including new businesses, products, services, and technologies.  Our ability to keep our products and services operational at a reasonable cost and without service interruptions.  The seasonal fluctuations in internet usage, advertising spending, and underlying business trends such as traditional retail seasonality. Our rapid growth has tended to mask the cyclicality and seasonality of our business. As our growth rate has slowed, the cyclicality and seasonality in our business has become more pronounced and caused our operating results to fluctuate.  Geopolitical events, including trade disputes.  Changes in global business or macroeconomic conditions. Because our businesses are changing and evolving, our historical operating results may not be useful to you in predicting our future operating results. Acquisitions, joint ventures, investments, and divestitures could result in operating difficulties, dilution, and other consequences that may harm our business, financial condition, and operating results. Acquisitions, joint ventures, investments and divestitures are important elements of our overall corporate strategy and use of capital, and these transactions could be material to our financial condition and operating results. We expect to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions, which could create unforeseen operating difficulties and expenditures. Some of the areas where we face risks include:  Diversion of management time and focus from operating our business to challenges related to acquisitions and other strategic transactions.  Failure to successfully integrate and further develop the acquired business or technology. Alphabet Inc.  Implementation or remediation of controls, procedures, and policies at the acquired company.  Integration of the acquired companys accounting, human resource, and other administrative systems, and coordination of product, engineering, and sales and marketing functions.  Transition of operations, users, and customers onto our existing platforms.  Failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of a transaction.  In the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries.  Cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire.  Liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, data privacy and security issues, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities.  Litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders, or other third parties. Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities, and harm our business generally. Our acquisitions and other strategic transactions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, or impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or operating results. Also, the anticipated benefits or value of our acquisitions and other strategic transactions may not materialize. In connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, which may harm our financial condition or operating results. If we were to lose the services of key personnel, we may not be able to execute our business strategy. Our future success depends in large part upon the continued service of key members of our senior management team. For instance, Sundar Pichai is critical to the overall management of Alphabet and its subsidiaries and plays an important role in the development of our technology. He also plays a key role in maintaining our culture and setting our strategic direction. All of our executive officers and key employees are at-will employees, and we do not maintain any key-person life insurance policies. The loss of key personnel could seriously harm our business. We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel, hire qualified personnel, or maintain our corporate culture, we may not be able to grow effectively. Our performance largely depends on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense, and certain of our competitors have directly targeted our employees. In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees. In addition, we believe that our corporate culture fosters innovation, creativity, and teamwork. As our organization grows, and we are required to implement more complex organizational management structures, particularly in light of our holding company structure, adverse changes to our corporate culture could harm our business operations. In preparing our financial statements, we incorporate valuation methodologies that are subjective in nature and valuations may fluctuate over time. We measure certain of our non-marketable equity and debt investments, certain other instruments including stock-based compensation awards settled in the stock of certain Other Bets, and certain assets and liabilities acquired in a business combination, at fair value on a nonrecurring basis. The determination of fair value involves use of appropriate valuation methods and certain unobservable inputs, require management judgment and estimation, and may change over time. Alphabet Inc. As it relates to our non-marketable investments, the market values can be negatively affected by liquidity, credit deterioration or losses, performance and financial results of the underlying companies, foreign exchange rates, changes in interest rates, including changes that may result from the implementation of new benchmark rates that replace LIBOR, the effect of new or changing regulations, the stock market in general, or other factors. Since January 2018, we adjust the carrying value of our non-marketable equity investments to fair value for observable transactions of identical or similar investments of the same issuer or for impairments. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), which increases the volatility of our other income (expense). As a result of these factors, the value or liquidity of our cash equivalents, as well as our marketable and non-marketable securities could decline and result in a material impairment, which could materially adversely affect our financial condition and operating results. We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. Our future income taxes could be negatively affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, the net gains and losses recognized by legal entities on certain hedges and related hedged intercompany and other transactions under our foreign exchange risk management program, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles (including changes in the interpretation of existing laws), as well as certain discrete items. In addition, we are subject to regular review and audit by both domestic and foreign tax authorities. As a result, we have received, and may in the future receive, assessments in multiple jurisdictions, including in Europe, on various tax-related assertions, such as transfer-pricing adjustments or permanent-establishment claims. Any adverse outcome of such a review or audit could have a negative effect on our operating results and financial condition and could require us to change our business practices in a manner adverse to our business. It may also subject us to additional litigation and regulatory inquiries, resulting in the diversion of managements time and attention. In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations for which the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made. Furthermore, due to shifting economic and political conditions, tax policies, laws, or rates in various jurisdictions may be subject to significant changes in ways that impair our financial results. In particular, France, Italy, and other countries have enacted or are considering digital services taxes, which could lead to inconsistent and potentially overlapping international tax regimes. The Organization for Economic Cooperation and Development recently released a proposal relating to its initiative for modernizing international tax rules, with the goal of having different countries enact legislation to implement a modernized and aligned international tax framework, but there can be no guarantee that this will occur. The trading price for our Class A common stock and non-voting Class C capital stock may continue to be volatile. The trading price of our stock has at times experienced substantial price volatility and may continue to be volatile. For example, from January 1, 2019 through December 31, 2019, the closing price of our Class A common stock ranged from $1,025.47 per share to $1,362.47 per share, and the closing price of our Class C capital stock ranged from $1,016.06 to $1,361.17 per share. In addition to the factors discussed in this report, the trading price of our Class A common stock and Class C capital stock may fluctuate widely in response to various factors, many of which are beyond our control, including, among others:  Quarterly variations in our operating results or those of our competitors.  Announcements by us or our competitors of acquisitions, divestitures, investments, new products, significant contracts, commercial relationships, or capital commitments.  Recommendations by securities analysts or changes in earnings estimates.  Announcements about our earnings that are not in line with analyst expectations, the risk of which is enhanced because it is our policy not to give guidance on earnings.  Announcements by our competitors of their earnings that are not in line with analyst expectations. Alphabet Inc.  Commentary by industry and market professionals about our products, strategies, and other matters affecting our business and results, regardless of its accuracy.  The volume of shares of Class A common stock and Class C capital stock available for public sale.  Sales of Class A common stock and Class C capital stock by us or by our stockholders (including sales by our directors, executive officers, and other employees).  Short sales, hedging, and other derivative transactions on shares of our Class A common stock and Class C capital stock.  The perceived values of Class A common stock and Class C capital stock relative to one another.  Any share repurchase program. In addition, the stock market in general, which can be affected by various factors, including overall economic and political conditions, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may harm the market price of our Class A common stock and our Class C capital stock, regardless of our actual operating performance. ", ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ," ITEM 2. PROPERTIES Our headquarters are located in Mountain View, California. We also own and lease office and building space in the surrounding areas near our headquarters, which we believe is sufficient to accommodate anticipated future growth. In addition, we own and lease office/building space and research and development sites around the world, primarily in North America, Europe, South America, and Asia. We own and operate data centers in the U.S., Europe, South America, and Asia. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business. "," ITEM 3. LEGAL PROCEEDINGS For a description of our material pending legal proceedings, please see Note 10 Commitments and Contingencies - Legal Matters of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. "," ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of October 2, 2015, Alphabet Inc. became the successor issuer of Google Inc. pursuant to Rule 12g-3(a) under the Exchange Act. Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol GOOG since August 19, 2004 and under the symbol ""GOOGL"" since April 3, 2014. Prior to August 19, 2004, there was no public market for our stock. Our Class B common stock is neither listed nor traded. Our Class C capital stock has been listed on the Nasdaq Global Select Market under the symbol GOOG since April 3, 2014. Holders of Record As of December 31, 2019 , there were approximately 2,455 and 2,030 stockholders of record of our Class A common stock and Class C capital stock, respectively. Because many of our shares of Class A common stock and Class C capital stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2019 , there were approximately 66 stockholders of record of our Class B common stock. Dividend Policy We have never declared or paid any cash dividend on our common or capital stock. The primary use of capital continues to be to invest for the long term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace and form of capital return to stockholders. Issuer Purchases of Equity Securities The following table presents information with respect to Alphabet's repurchases of Class C capital stock during the quarter ended December 31, 2019 : Period  Total Number of Shares Purchased (in thousands) (1)  Average Price Paid per Share (2)  Total Number of Shares Purchased as Part of Publicly Announced Programs (in thousands) (1)  Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) October 1 - 31  1,970  $ 1,229.02  1,970  $ 24,470 November 1 - 30  1,626  $ 1,304.00  1,626  $ 22,350 December 1 - 31  1,164  $ 1,337.16  1,164  $ 20,793 Total  4,760   4,760   (1)  In January and July 2019, the board of directors of Alphabet authorized the company to repurchase up to an additional $12.5 billion and $25.0 billion of its Class C capital stock, respectively. Share repurchases pursuant to the January 2019 authorization were completed during the fourth quarter of 2019. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. Please refer to Note 11 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to share repurchases. (2)  Average price paid per share includes costs associated with the repurchases. Alphabet Inc. Stock Performance Graphs The graph below matches Alphabet Inc. Class A's cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the SP 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2014 to December 31, 2019 . The returns shown are based on historical results and are not intended to suggest future performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* ALPHABET INC. CLASS A COMMON STOCK Among Alphabet Inc., the SP 500 Index, the NASDAQ Composite Index, and the RDG Internet Composite Index *$100 invested on December 31, 2014 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright  2020 SP, a division of The McGraw-Hill Companies Inc. All rights reserved. Alphabet Inc. The graph below matches Alphabet Inc. Class C's cumulative 5-Year total shareholder return on capital stock with the cumulative total returns of the SP 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our Class C capital stock and in each index (with the reinvestment of all dividends) from December 31, 2014 to December 31, 2019 . The returns shown are based on historical results and are not intended to suggest future performance. COMPARISON OF CUMULATIVE TOTAL RETURN* ALPHABET INC. CLASS C CAPITAL STOCK Among Alphabet Inc., the SP 500 Index, the NASDAQ Composite Index, and the RDG Internet Composite Index *$100 invested on December 31, 2014 in stock or in index, including reinvestment of dividends. Fiscal year ending December 31. Copyright  2020 SP, a division of The McGraw-Hill Companies Inc. All rights reserved. Alphabet Inc. "," ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Part II, Item 8 of this Annual Report on Form 10-K. We have omitted discussion of 2017 results where it would be redundant to the discussion previously included in Part II, Item 7 of our 2018 Annual Report on Form 10-K, as amended. Trends in Our Business The following trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results:  Users' behaviors and advertising continue to shift online as the digital economy evolves. The continuing shift from an offline to online world has contributed to the growth of our business since inception, contributing to revenue growth, and we expect that this online shift will continue to benefit our business.  Users are increasingly using diverse devices and modalities to access our products and services, and our advertising revenues are increasingly coming from new formats. Our users are accessing the Internet via diverse devices and modalities, such as smartphones, wearables and smart home devices, and want to feel connected no matter where they are or what they are doing. We seek to expand our products and services to stay in front of these trends in order to maintain and grow our business. We generate our advertising revenues increasingly from different channels, including mobile, and newer advertising formats, and the margins from the advertising revenues from these channels and newer products have generally been lower than those from traditional desktop search. Additionally, as the market for a particular device type or modality matures our revenues may be affected. For example, growth in the global smartphone market has slowed due to various factors, including increased market saturation in developed countries, which can affect our mobile advertising revenue growth rates. We expect TAC paid to our distribution partners to increase as our revenues grow and to be affected by changes in device mix; geographic mix; partner mix; partner agreement terms; and the percentage of queries channeled through paid access points. We expect these trends to continue to put pressure on our overall margins and affect our revenue growth rates.  As online advertising evolves, we continue to expand our product offerings which may affect our monetization. As interactions between users and advertisers change and as online user behavior evolves, we continue to expand and evolve our product offerings to serve their changing needs. Over time, we expect our monetization trends to fluctuate. For example, we have seen an increase in YouTube engagement ads, which monetize at a lower rate than traditional search ads.  As users in developing economies increasingly come online, our revenues from international markets continue to increase and movements in foreign exchange rates affect such revenues. The shift to online, as well as the advent of the multi-device world, has brought opportunities outside of the U.S., including in emerging markets, and we continue to develop localized versions of our products and relevant advertising programs useful to our users in these markets. This has led to a trend of increased revenues from international markets over time and we expect that our results will continue to be affected by our performance in these markets, particularly as low-cost mobile devices become more available. This trend could impact our margins as developing markets initially monetize at a lower rate than more mature markets. Our international revenues represent a significant portion of our revenues and are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. While we have a foreign exchange risk management program designed to reduce our exposure to these fluctuations, this program does not fully offset their effect on our revenues and earnings. Alphabet Inc.  The portion of our revenues that we derive from non-advertising revenues is increasing and may affect margins. Non-advertising revenues have grown over time. We expect this trend to continue as we focus on expanding our offerings to our users through products and services like Google Cloud, Google Play, hardware products, and YouTube subscriptions. Across these initiatives, we currently derive non-advertising revenues primarily from sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud offerings and subscription and other services. The margins on these revenues vary significantly and may be lower than the margins on our advertising revenues. A number of our Other Bets initiatives are in their initial development stages, and as such, the sources of revenues from these businesses could change over time and the revenues could be volatile.  As we continue to serve our users and expand our businesses, we will invest heavily in operating and capital expenditures. We continue to make significant RD investments in areas of strategic focus such as advertising, cloud, machine learning, and search, as well as in new products and services. In addition, our capital expenditures have grown over the last several years. We expect this trend to continue in the long term as we invest heavily in land and buildings for data centers and offices, and information technology infrastructure, which includes servers and network equipment . In addition, acquisitions remain an important part of our strategy and use of capital, and we expect to continue to spend cash on acquisitions and other investments. These acquisitions generally enhance the breadth and depth of our offerings, as well as expand our expertise in engineering and other functional areas.  Our employees are critical to our success and we expect to continue investing in them. Our employees are among our best assets and are critical for our continued success. We expect to continue hiring talented employees around the globe and to provide competitive compensation programs to our employees. Executive Overview of Results Below are our key financial results for the fiscal year ended December 31, 2019 (consolidated unless otherwise noted):  Revenues of $161.9 billion and revenue growth of 18% year over year, constant currency revenue growth of 20% year over year.  Google segment revenues of $160.7 billion with revenue growth of 18% year over year and Other Bets revenues of $659 million with revenue growth of 11% year over year.  Revenues from the United States , EMEA , APAC , and Other Americas were $74.8 billion , $50.6 billion , $26.9 billion , and $9.0 billion , respectively.  Cost of revenues was $71.9 billion , consisting of TAC of $30.1 billion and other cost of revenues of $41.8 billion . Our TAC as a percentage of advertising revenues (TAC rate) was 22.3% .  Operating expenses (excluding cost of revenues) were $55.7 billion .  Income from operations was $34.2 billion .  Other income (expense), net, was $5.4 billion .  Effective tax rate was 13% .  Net income was $34.3 billion with diluted net income per share of $49.16 .  Operating cash flow was $54.5 billion .  Capital expenditures were $23.5 billion .  Number of employees was 118,899 as of December 31, 2019 . The majority of new hires during the year were engineers and product managers. By product area, the largest headcount additions were in Google Cloud and Search. Information about Segments We operate our business in multiple operating segments. Google is our only reportable segment. None of our other segments meet the quantitative thresholds to qualify as reportable segments; therefore, the other operating segments are combined and disclosed as Other Bets. Alphabet Inc. Our reported segments are:  Google  Google includes our main products such as ads, Android, Chrome, hardware, Google Cloud, Google Maps, Google Play, Search, and YouTube. Our technical infrastructure is also included in Google. Google generates revenues primarily from advertising; sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud offerings and subscription-based products.  Other Bets  Other Bets is a combination of multiple operating segments that are not individually material. Other Bets includes Access, Calico, CapitalG, GV, Verily, Waymo, and X, among others. Revenues from the Other Bets are derived primarily through the sales of internet and TV services through Access as well as licensing and RD services through Verily. Revenues The following table presents our revenues by segment and revenue source (in millions). Certain amounts in prior periods have been reclassified to conform with current period presentation.  Year Ended December 31,    Google Search  other $ 69,811  $ 85,296  $ 98,115 YouTube ads (1) 8,150  11,155  15,149 Google properties 77,961 96,451 113,264 Google Network Members' properties 17,616  20,010  21,547 Google advertising 95,577  116,461  134,811 Google Cloud 4,056  5,838  8,918 Google other (1) 10,914  14,063  17,014 Google revenues 110,547  136,362  160,743 Other Bets revenues   Hedging gains (losses) (169 )  (138 )  Total revenues $ 110,855  $ 136,819  $ 161,857 (1)  YouTube non-advertising revenues are included in Google other revenues. Google advertising revenues Our advertising revenue growth, as well as the change in paid clicks and cost-per-click on Google properties and the change in impressions and cost-per-impression on Google Network Members' properties and the correlation between these items, have been affected and may continue to be affected by various factors, including:  advertiser competition for keywords;  changes in advertising quality, formats, delivery or policy;  changes in device mix;  changes in foreign currency exchange rates;  fees advertisers are willing to pay based on how they manage their advertising costs;  general economic conditions;  seasonality; and  traffic growth in emerging markets compared to more mature markets and across various advertising verticals and channels. Our advertising revenue growth rate has been affected over time as a result of a number of factors, including challenges in maintaining our growth rate as revenues increase to higher levels; changes in our product mix; changes in advertising quality or formats and delivery; the evolution of the online advertising market; increasing competition; our investments in new business strategies; query growth rates; and shifts in the geographic mix of our revenues. We also expect that our revenue growth rate will continue to be affected by evolving user preferences, the acceptance by users of our products and services as they are delivered on diverse devices and modalities, our ability to create a seamless experience for both users and advertisers, and movements in foreign currency exchange rates. Alphabet Inc. The following table presents our Google advertising revenues (in millions):  Year Ended December 31,    Google Search  other $ 69,811  $ 85,296  $ 98,115 YouTube ads (1) 8,150  11,155  15,149 Google Network Members' properties 17,616  20,010  21,547 Google advertising $ 95,577  $ 116,461  $ 134,811 Google advertising revenues as a percentage of Google segment revenues 86.5 %  85.4 %  83.9 % (1) YouTube non-advertising revenues are included in Google other revenues. Google advertising revenues are generated on our Google properties (including Google Search  other properties and YouTube) and Google Network Members properties. Google advertising revenues consist primarily of the following:  Google Search  other consists of revenues generated on Google search properties (including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.) and other Google owned and operated properties like Gmail, Google Maps, and Google Play;  YouTube ads consists of revenues generated primarily on YouTube properties; and  Google Network Members' properties consist of revenues generated primarily on Google Network Members' properties participating in AdMob, AdSense, and Google Ad Manager. Google Search  other Our Google Search  other revenues increased $12,819 million from 2018 to 2019. The growth was primarily driven by interrelated factors including increases in search queries resulting from ongoing growth in user adoption and usage, primarily on mobile devices, continued growth in advertiser activity, and improvements we have made in ad formats and delivery. Revenue growth was partially offset by the general strengthening of the U.S. dollar compared to certain foreign currencies. Our Google Search  other revenues increased $15,485 million from 2017 to 2018. The growth was primarily driven by increases in mobile search resulting from ongoing growth in user adoption and usage, as well as continued growth in advertiser activity. Growth was also driven by improvements in ad formats and delivery, primarily on desktop. Additionally, revenue growth was favorably affected by the general weakening of the U.S. dollar compared to certain foreign currencies. YouTube ads YouTube ads revenues increased $3,994 million from 2018 to 2019 and increased $3,005 million from 2017 to 2018. The largest contributors to the growth during both periods were our direct response and brand advertising products, both of which benefited from improvements to ad formats and delivery and increased advertiser spending. Google Network Members' properties Our Google Network Members' properties revenues increased $1,537 million from 2018 to 2019. The growth was primarily driven by strength in both AdManager (included in what was previously referred to as programmatic advertising buying) and AdMob, partially offset by the general strengthening of the U.S. dollar compared to certain foreign currencies. Our Google Network Members' properties revenues increased $2,394 million from 2017 to 2018, primarily driven by strength in both AdMob and AdManager, offset by a decline in our traditional AdSense businesses. Additionally, the growth was favorably affected by the general weakening of the U.S. dollar compared to certain foreign currencies. Use of Monetization Metrics Paid clicks for our Google properties represent engagement by users and include clicks on advertisements by end-users related to searches on Google.com and other owned and operated properties including Gmail, Google Maps, and Google Play; and viewed YouTube engagement ads (certain YouTube ad formats are not included in our click or impression based metrics). Impressions for our Google Network Members' properties include impressions displayed to users served on Google Network Members' properties participating primarily in AdMob, AdSense and Google Ad Manager. Cost-per-click is defined as click-driven revenues divided by our total number of paid clicks and represents the average amount we charge advertisers for each engagement by users. Alphabet Inc. Cost-per-impression is defined as impression-based and click-based revenues divided by our total number of impressions and represents the average amount we charge advertisers for each impression displayed to users. As our business evolves, we periodically review, refine and update our methodologies for monitoring, gathering, and counting the number of paid clicks on our Google properties and the number of impressions on Google Network Members properties and for identifying the revenues generated by click activity on our Google properties and the revenues generated by impression activity on Google Network Members properties. Google properties The following table presents changes in our paid clicks and cost-per-click (expressed as a percentage):  Year Ended December 31,   Paid clicks change %  % Cost-per-click change (25 )%  (7 )% The number of paid clicks through our advertising programs on Google properties increased from 2018 to 2019 due to growth in views of YouTube engagement ads; increase in clicks due to interrelated factors, including an increase in search queries resulting from ongoing growth in user adoption and usage, primarily on mobile devices; continued growth in advertiser activity; and improvements we have made in ad formats and delivery. The positive effect on our revenues from an increase in paid clicks was partially offset by a decrease in the cost-per-click paid by our advertisers. The decrease in cost-per-click was primarily driven by continued growth in YouTube engagement ads where cost-per-click remains lower than on our other advertising platforms. Cost-per-click was also affected by changes in device mix, geographic mix, ongoing product changes, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign currencies. Google Network Members' properties The following table presents changes in our impressions and cost-per-impression (expressed as a percentage):  Year Ended December 31,   Impressions change %  % Cost-per-impression change %  % Impressions increased from 2018 to 2019 primarily due to growth in AdManager. The cost-per-impression was relatively unchanged due to a combination of factors including ongoing product and policy changes and improvements we have made in ad formats and delivery, changes in device mix, geographic mix, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign currencies. Google Cloud The following table presents our Google Cloud revenues (in millions):  Year Ended December 31,    Google Cloud $ 4,056  $ 5,838  $ 8,918 Google Cloud revenues as a percentage of Google segment revenues 3.7 %  4.3 %  5.5 % Google Cloud revenues consist primarily of revenues from Cloud offerings, including  Google Cloud Platform (GCP), which includes infrastructure, data and analytics, and other services  G Suite productivity tools; and  other enterprise cloud services. Our Google Cloud revenues increased $3,080 million from 2018 to 2019 and increased $1,782 million from 2017 to 2018. The growth during both periods was primarily driven by continued strength in our GCP and G Suite offerings. Our infrastructure and our data and analytics platform products have been the largest drivers of growth in GCP. Alphabet Inc. Google other revenues The following table presents our Google other revenues (in millions):  Year Ended December 31,    Google other 10,914  14,063  17,014 Google other revenues as a percentage of Google segment revenues 9.9 %  10.3 %  10.6 % Google other revenues consist primarily of revenues from:  Google Play, which includes revenues from sales of apps and in-app purchases (which we recognize net of payout to developers) and digital content sold in the Google Play store;  hardware, including Google Nest home products, Pixelbooks, Pixel phones and other devices;  YouTube non-advertising, including YouTube Premium and YouTube TV subscriptions and other services; and  other products and services. Our Google other revenues increased $2,951 million from 2018 to 2019. The growth was primarily driven by Google Play and YouTube subscriptions. Our Google other revenues increased $3,149 million from 2017 to 2018. The growth was primarily driven by Google Play and hardware. Over time, our growth rate for Google Cloud and Google other revenues may be affected by the seasonality associated with new product and service launches and market dynamics. Other Bets The following table presents our Other Bets revenues (in millions):  Year Ended December 31,    Other Bets revenues $  $  $ Other Bets revenues as a percentage of total revenues 0.4 %  0.4 %  0.4 % Other Bets revenues consist primarily of revenues from sales of Access internet and TV services and Verily licensing and RD services. Revenues by Geography The following table presents our revenues by geography as a percentage of revenues, determined based on the addresses of our customers:  Year Ended December 31,   United States %  % EMEA %  % APAC %  % Other Americas %  % For further details on revenues by geography, see Note 2 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Use of Constant Currency Revenues and Constant Currency Revenue Growth The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. Our international revenues are favorably affected as the U.S. dollar weakens relative to other foreign currencies, and unfavorably affected as the U.S. dollar strengthens relative to other foreign currencies. Our revenues are also favorably affected by net hedging gains and unfavorably affected by net hedging losses. We use non-GAAP constant currency revenues and constant currency revenue growth for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of results on a constant currency basis in addition to U.S. Generally Accepted Accounting Principles (GAAP) results helps improve Alphabet Inc. the ability to understand our performance because they exclude the effects of foreign currency volatility that are not indicative of our core operating results. Constant currency information compares results between periods as if exchange rates had remained constant period over period. We define constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and use it to determine the constant currency revenue growth on a year-on-year basis. Constant currency revenues are calculated by translating current period revenues using prior period exchange rates, as well as excluding any hedging effects realized in the current period. Constant currency revenue growth (expressed as a percentage) is calculated by determining the increase in current period revenues over prior period revenues where current period foreign currency revenues are translated using prior period exchange rates and hedging effects are excluded from revenues of both periods. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP. Alphabet Inc. The following table presents the foreign exchange effect on our international revenues and total revenues (in millions):  Year Ended December 31,   EMEA revenues $ 44,739  $ 50,645 Exclude foreign exchange effect on current period revenues using prior year rates (1,325 )  2,397 EMEA constant currency revenues $ 43,414  $ 53,042 Prior period EMEA revenues $ 36,236  $ 44,739 EMEA revenue growth %  % EMEA constant currency revenue growth %  %     APAC revenues $ 21,341  $ 26,928 Exclude foreign exchange effect on current period revenues using prior year rates (49 )  APAC constant currency revenues $ 21,292  $ 27,316 Prior period APAC revenues $ 16,192  $ 21,341 APAC revenue growth %  % APAC constant currency revenue growth %  %     Other Americas revenues $ 7,608  $ 8,986 Exclude foreign exchange effect on current period revenues using prior year rates  Other Americas constant currency revenues $ 8,012  $ 9,527 Prior period Other Americas revenues $ 6,147  $ 7,608 Other Americas revenue growth %  % Other Americas constant currency revenue growth %  %     United States revenues $ 63,269  $ 74,843 United States revenue growth %  %     Hedging gains (losses) (138 )  Total revenues $ 136,819  $ 161,857 Total constant currency revenues $ 135,987  $ 164,728 Prior period revenues, excluding hedging effect (1) $ 111,024  $ 136,957 Total revenue growth %  % Total constant currency revenue growth %  % (1)  Total revenues and hedging gains (losses) for the year ended December 31, 2017 were $110,855 million and $(169) million, respectively. Our EMEA revenue growth from 2018 to 2019 was unfavorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar strengthening relative to the Euro and British pound. Our APAC revenue growth from 2018 to 2019 was unfavorably affected by changes in foreign currency exchange rates primarily due to the U.S. dollar strengthening relative to the Australian dollar and South Korean won, partially offset by the U.S. dollar weakening relative to the Japanese yen. Our Other Americas revenue growth from 2018 to 2019 was unfavorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar strengthening relative to the Brazilian real and Argentine peso. Alphabet Inc. Costs and Expenses Cost of Revenues Cost of revenues consists of TAC which are paid to Google Network Members primarily for ads displayed on their properties and amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers. The cost of revenues as a percentage of revenues generated from ads placed on Google Network Members' properties are significantly higher than the cost of revenues as a percentage of revenues generated from ads placed on Google properties because most of the advertiser revenues from ads served on Google Network Members properties are paid as TAC to our Google Network Members. Additionally, other cost of revenues (which is the cost of revenues excluding TAC) includes the following:  Content acquisition costs primarily related to payments to content providers from whom we license video and other content for distribution on YouTube advertising and subscription services and Google Play (we pay fees to these content providers based on revenues generated or a flat fee);  Expenses associated with our data centers and other operations (including bandwidth, compensation expenses (including stock-based compensation (SBC)), depreciation, energy, and other equipment costs); and  Inventory related costs for hardware we sell. The following tables present our cost of revenues, including TAC (in millions):  Year Ended December 31,   TAC $ 26,726  $ 30,089 Other cost of revenues 32,823  41,807 Total cost of revenues $ 59,549  $ 71,896 Total cost of revenues as a percentage of revenues 43.5 %  44.4 % Cost of revenues increased $12,347 million from 2018 to 2019 . The increase was due to increases in other cost of revenues and TAC of $8,984 million and $3,363 million , respectively. The increase in other cost of revenues from 2018 to 2019 was due to an increase in data center and other operations costs. Additionally, there was an increase in content acquisition costs for YouTube consistent with the growth in YouTube revenues. The increase in TAC from 2018 to 2019 was due to increases in TAC paid to distribution partners and to Google Network Members, primarily driven by growth in revenues subject to TAC. The TAC rate decreased from 22.9% to 22.3% , primarily due to the favorable revenue mix shift from Google Network Members' properties to Google properties. The TAC rate on Google properties revenues increased primarily due to the ongoing shift to mobile, which carries higher TAC because more mobile searches are channeled through paid access points. The TAC rate on Google Network revenues decreased primarily due to changes in product mix to products that carry a lower TAC rate. Over time, cost of revenues as a percentage of total revenues may be affected by a number of factors, including the following:  The amount of TAC paid to Google Network Members, which is affected by a combination of factors such as geographic mix, product mix, revenue share terms, and fluctuations of the U.S. dollar compared to certain foreign currencies ;  The amount of TAC paid to distribution partners, which is affected by changes in device mix, geographic mix, partner mix, partner agreement terms such as revenue share arrangements, and the percentage of queries channeled through paid access points;  Relative revenue growth rates of Google properties and Google Network Members' properties;  Costs associated with our data centers and other operations to support ads, Google Cloud, Search, YouTube and other products ;  Content acquisition costs, which are primarily affected by the relative growth rates in our YouTube advertising and subscription revenues;  Costs related to hardware sales; and  Increased proportion of non-advertising revenues, which generally have higher costs of revenues, relative to our advertising revenues. Alphabet Inc. Research and Development The following table presents our RD expenses (in millions):  Year Ended December 31,   Research and development expenses $ 21,419  $ 26,018 Research and development expenses as a percentage of revenues 15.7 %  16.1 % RD expenses consist primarily of:  Compensation expenses (including SBC) and facilities-related costs for engineering and technical employees responsible for RD of our existing and new products and services;  Depreciation expenses;  Equipment-related expenses; and  Professional services fees primarily related to consulting and outsourcing services. RD expenses increased $4,599 million from 2018 to 2019 . The increase was primarily due to an increase in compensation expenses (including SBC) and facilities-related costs of $3,519 million, largely resulting from a 23% increase in headcount. Over time, RD expenses as a percentage of revenues may be affected by a number of factors including continued investment in ads, Android, Chrome, Google Cloud, Google Play, hardware, machine learning, Other Bets, and Search. Sales and Marketing The following table presents our sales and marketing expenses (in millions):  Year Ended December 31,   Sales and marketing expenses $ 16,333  $ 18,464 Sales and marketing expenses as a percentage of revenues 11.9 %  11.4 % Sales and marketing expenses consist primarily of:  Advertising and promotional expenditures related to our products and services; and  Compensation expenses (including SBC) and facilities-related costs for employees engaged in sales and marketing, sales support, and certain customer service functions. Sales and marketing expenses increased $2,131 million from 2018 to 2019 . The increase was primarily due to an increase in compensation expenses (including SBC) and facilities-related costs of $1,371 million , largely resulting from a 15% increase in headcount. In addition, there was an increase in advertising and promotional expenses of $402 million . Over time, sales and marketing expenses as a percentage of revenues may be affected by a number of factors including the seasonality associated with new product and service launches. General and Administrative The following table presents our general and administrative expenses (in millions):  Year Ended December 31,   General and administrative expenses $ 6,923  $ 9,551 General and administrative expenses as a percentage of revenues 5.1 %  5.9 % General and administrative expenses consist primarily of:  Compensation expenses (including SBC) and facilities-related costs for employees in our finance, human resources, information technology, and legal organizations;  Depreciation expenses;  Equipment-related expenses;  Legal-related expenses; and Alphabet Inc.  Professional services fees primarily related to audit, information technology consulting, outside legal, and outsourcing services. General and administrative expenses increased $2,628 million from 2018 to 2019 . The increase was primarily due to an increase in legal-related expenses of $1,157 million , including a charge of $554 million from a legal settlement in 2019 and the effect of a legal settlement gain recorded in 2018. Additionally, there was an increase in compensation expenses (including SBC) and facilities-related costs of $687 million , largely resulting from a 19% increase in headcount. Performance fees of $1,203 million have been reclassified from general and administrative expenses to other income (expense), net, for 2018 to conform with current period presentation. See Note 7 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details. Over time, general and administrative expenses as a percentage of revenues may be affected by discrete items such as legal settlements. European Commission Fines In July 2018, the EC announced its decision that certain provisions in Google's Android-related distribution agreements infringed European competition law. The EC decision imposed a 4.3 billion ( $5.1 billion as of June 30, 2018) fine, which was accrued in the second quarter of 2018. In March 2019, the EC announced its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law. The EC decision imposed a 1.5 billion ( $1.7 billion as of March 20, 2019) fine, which was accrued in the first quarter of 2019. Please refer to Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. Other Income (Expense), Net The following table presents other income (expense), net, (in millions):  Year Ended December 31,   Other income (expense), net $ 7,389  $ 5,394 Other income (expense), net, as a percentage of revenues 5.4 %  3.3 % Other income (expense), net, decreased $1,995 million from 2018 to 2019 . This decrease was primarily driven by a decrease in gains on equity securities, which were $2,649 million in 2019 as compared to $5,460 million in 2018. The majority of the gains in both periods were unrealized. The effect of the decrease in gains on equity securities was partially offset by a decrease in performance fees. The decrease in other income (expense) was also driven by a decrease in gains on debt securities primarily due to an unrealized gain recognized in 2018 resulting from the modification of the terms of a non-marketable debt security. Performance fees of $1,203 million have been reclassified from general and administrative expenses to other income (expense), net, for 2018 to conform with current period presentation. See Note 7 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details. Over time, other income (expense), net, as a percentage of revenues may be affected by market dynamics and other factors. Equity values generally change daily for marketable equity securities and upon the occurrence of observable price changes or upon impairment of non-marketable equity securities. In addition, volatility in the global economic climate and financial markets could result in a significant change in the value of our equity securities. Fluctuations in the value of these investments has, and we expect will continue to, contribute to volatility of OIE in future periods. For additional information about equity investments, see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Alphabet Inc. Provision for Income Taxes The following table presents our provision for income taxes (in millions) and effective tax rate:  Year Ended December 31,   Provision for income taxes $ 4,177  $ 5,282 Effective tax rate 12.0 %  13.3 % Our provision for income taxes and our effective tax rate increased from 2018 to 2019 , due to discrete events in 2018 and 2019. In 2018, we released our deferred tax asset valuation allowance related to gains on equity securities and recognized the benefits of the U.S. Tax Cuts and Jobs Act (""Tax Act""). In 2019, we recognized an increase in discrete benefits related to the resolution of multi-year audits, partially offset by the reversal of Altera tax benefit as a result of the U.S. Court of Appeals decision. See Note 14 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. As of December 31, 2019, we have simplified our corporate legal entity structure and now license intellectual property from the U.S. that was previously licensed from Bermuda. This will affect our geographic mix of earnings . We expect our future effective tax rate to be affected by the geographic mix of earnings in countries with different statutory rates. Additionally, our future effective tax rate may be affected by changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items. Alphabet Inc. Quarterly Results of Operations The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report on Form 10-K. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. Our operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year. The following table presents our unaudited quarterly results of operations for the eight quarters ended December 31, 2019 . This table includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of our consolidated financial position and operating results for the quarters presented. Seasonal fluctuations in internet usage and advertiser expenditures, underlying business trends such as traditional retail seasonality and macroeconomic conditions have affected, and are likely to continue to affect, our business. Commercial queries typically increase significantly in the fourth quarter of each year. These seasonal trends have caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.  Quarter Ended  Mar 31, 2018 Jun 30, 2018 Sept 30, 2018 Dec 31, 2018  Mar 31, 2019  Jun 30, 2019  Sept 30, 2019  Dec 31, 2019                  (In millions, except per share amounts) (unaudited) Consolidated Statements of Income Data:         Revenues $ 31,146  $ 32,657  $ 33,740  $ 39,276  $ 36,339  $ 38,944  $ 40,499  $ 46,075 Costs and expenses:                Cost of revenues 13,467  13,883  14,281  17,918  16,012  17,296  17,568  21,020 Research and development 5,039  5,114  5,232  6,034  6,029  6,213  6,554  7,222 Sales and marketing 3,604  3,780  3,849  5,100  3,905  4,212  4,609  5,738 General and administrative 1,403  1,764  1,753  2,003  2,088  2,043  2,591  2,829 European Commission fines  5,071    1,697    Total costs and expenses 23,513  29,612  25,115  31,055  29,731  29,764  31,322  36,809 Income from operations 7,633  3,045  8,625  8,221  6,608  9,180  9,177  9,266 Other income (expense), net 2,910  1,170  1,458  1,851  1,538  2,967  (549 )  1,438 Income from continuing operations before income taxes 10,543  4,215  10,083  10,072  8,146  12,147  8,628  10,704 Provision for income taxes 1,142  1,020   1,124  1,489  2,200  1,560  Net income $ 9,401  $ 3,195  $ 9,192  $ 8,948  $ 6,657  $ 9,947  $ 7,068  $ 10,671                 Basic net income per share of Class A and B common stock and Class C capital stock $ 13.53  $ 4.60  $ 13.21  $ 12.87  $ 9.58  $ 14.33  $ 10.20  $ 15.49 Diluted net income per share of Class A and B common stock and Class C capital stock $ 13.33  $ 4.54  $ 13.06  $ 12.77  $ 9.50  $ 14.21  $ 10.12  $ 15.35 Capital Resources and Liquidity As of December 31, 2019 , we had $119.7 billion in cash, cash equivalents, and marketable securities. Ca sh equivalents and marketable securities a re comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities and marketable equity securities. As of December 31, 2019 , we had long-term taxes payable of $7.3 billion related to a one-time transition tax payable incurred as a result of the Tax Act. As permitted by the Tax Act, we will pay the transition tax in annual interest-free installments through 2025. In 2017, 2018 and 2019, the EC announced decisions that certain actions taken by Google infringed European competition law and imposed fines of 2.4 billion ( $2.7 billion as of June 27, 2017), 4.3 billion ( $5.1 billion as of June 30, 2018), and 1.5 billion ( $1.7 billion as of March 20, 2019), respectively. While each EC decision is under appeal, we included the fines 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. Alphabet Inc. In November 2019, we entered into an agreement to acquire Fitbit, a leading wearables brand, for $7.35 per share, representing a total purchase price of approximately $2.1 billion as of the date of the agreement. The acquisition of Fitbit is expected to be completed in 2020, subject to customary closing conditions, including the receipt of regulatory approvals. Our principal sources of liquidity are our cash, cash equivalents, and marketable securities, as well as the cash flow that we generate from our operations. The primary use of capital continues to be to invest for the long term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace and form of capital return to stockholders. We have a short-term debt financing program of up to $5.0 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, 2019 . We have $4.0 billion of revolving credit facilities expiring in July 2023 with no amounts outstanding as of December 31, 2019 . The interest rate for the credit facilities is determined based on a formula using certain market rates. We believe that our sources of funding will be sufficient to satisfy our currently anticipated cash requirements including capital expenditures, working capital requirements, potential acquisitions and other liquidity requirements through at least the next 12 months. As of December 31, 2019 , we have senior unsecured notes outstanding due in 2021, 2024, and 2026 with a total carrying value of $4.0 billion . As of December 31, 2019 , we had remaining authorization of $20.8 billion for repurchase of Class C capital stock. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. Please refer to Note 11 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to share repurchases. We continue to make significant investments in land and buildings for data centers and offices and information technology infrastructure through purchases of property and equipment and lease arrangements to provide capacity for the growth of our business. During the year ended December 31, 2019, we spent $23.5 billion on capital expenditures and recognized total operating lease assets of $4.4 billion . As of December 31, 2019, the amount of total future lease payments under operating leases, which had a weighted average remaining lease term of 10 years , was $13.9 billion . Finance leases were not material for the year ended December 31, 2019. Please refer to Note 4 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information on the leases. The following table presents our cash flows (in millions):  Year Ended December 31,   Net cash provided by operating activities $ 47,971  $ 54,520 Net cash used in investing activities $ (28,504 )  $ (29,491 ) Net cash used in financing activities $ (13,179 )  $ (23,209 ) Cash Provided by Operating Activities Our largest source of cash provided by our operations are advertising revenues generated by Google properties and Google Network Members' properties. Additionally, we generate cash through sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud offerings and subscription-based products. Our primary uses of cash from our operating activities include payments to our Google Network Members and distribution partners, and payments for content acquisition costs. In addition, uses of cash from operating activities include compensation and related costs, hardware inventory costs, other general corporate expenditures, and income taxes. Net cash provided by operating activities increased from 2018 to 2019 primarily due to increases in cash received from revenues, offset by increases in cash paid for cost of revenues and operating expenses. Cash Used in Investing Activities Cash provided by investing activities consists primarily of maturities and sales of our investments in marketable and non-marketable securities. Cash used in investing activities consists primarily of purchases of property and Alphabet Inc. equipment, which primarily includes our investments in land and buildings for data centers and offices and information technology infrastructure to provide capacity for the growth of our businesses; purchases of marketable and non-marketable securities; and payments for acquisitions. Net cash used in investing activities increased from 2018 to 2019 primarily due to a net increase in purchases of securities and an increase in payments for acquisitions, partially offset by a decrease in payments for purchases of property and equipment. The decrease in purchases of property and equipment was driven by decreases in purchases of servers as well as land and buildings for offices, partially offset by an increase in data center construction. Cash Used in Financing Activities Cash provided by financing activities consists primarily of proceeds from issuance of debt and proceeds from sale of interest in consolidated entities. Cash used in financing activities consists primarily of net payments related to stock-based award activities, repurchases of capital stock, and repayments of debt. Net cash used in financing activities increased from 2018 to 2019 primarily due to an increase in cash payments for repurchases of capital stock and a decrease in proceeds from sale of interest in consolidated entities. Contractual Obligations as of December 31, 2019 The following summarizes our contractual obligations as of December 31, 2019 (in millions):  Payments Due By Period  Total  Less than 1 year  1-3 years  3-5 years  More than 5 years Operating lease obligations (1) $ 13,854  $ 1,757  $ 3,525  $ 2,809  $ 5,763 Obligations for leases that have not yet commenced (1) 7,418    1,314  5,005 Purchase obligations (2) 5,660  4,212    Long-term debt obligations (3) 5,288   1,258  1,224  2,579 Tax payable (4) 7,315   1,166  3,661  2,488 Other long-term liabilities reflected on our balance sheet (5) 1,484     Total contractual obligations $ 41,019  $ 6,690  $ 8,375  $ 9,577  $ 16,377 (1)  For further information, refer to Note 4 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (2)  Represents non-cancelable contractual obligations primarily related to information technology assets and data center operation costs; purchases of inventory; and digital media content licensing arrangements. The amounts included above represent the non-cancelable portion of agreements or the minimum cancellation fee. For those agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of December 31, 2019 . Excluded from the table above are open orders for purchases that support normal operations. (3)  Represents our principal and interest payments. For further information on long-term debt, refer to Note 6 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (4)  Represents one-time transition tax payable incurred as a result of the Tax Act. For further information, refer to Note 14 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Excluded from the table above are long-term taxes payable of $2.6 billion as of December 31, 2019 primarily related to uncertain tax positions, for which we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes. (5)  Represents cash obligations recorded on our Consolidated Balance Sheets, including the short-term portion of these long-term liabilities, primarily for the construction of offices and certain commercial agreements. These amounts do not include the EC fines which are classified as current liabilities on our Consolidated Balance Sheets. For further information regarding the EC fines, refer to Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Off-Balance Sheet Arrangements As of December 31, 2019 , we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Alphabet Inc. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, expenses, gains and losses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below. We have reviewed our critical accounting policies and estimates with the audit committee of our board of directors. Please see Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements. Revenues For the sale of third-party goods and services, we evaluate whether we are the principal, and report revenues on a gross basis, or an agent, and report revenues on a net basis. In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price. Income Taxes We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Services (IRS) and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes. Loss Contingencies We are regularly subject to claims, suits, government investigations, and other proceedings involving competition and antitrust, intellectual property, privacy, consumer protection, non-income taxes, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in the Notes to the Consolidated Financial Statements. We evaluate, on a regular basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both the likelihood of there being, and the estimated amount of, a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material effect on our business, consolidated financial position, results of operations, or cash flows. Long-lived Assets Long-lived assets, including property and equipment, long-term prepayments, and intangible assets, excluding goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. An impairment loss would be recognized when estimated undiscounted future cash flows generated Alphabet Inc. from the assets are less than their carrying amount. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair Value Measurements We measure certain of our non-marketable equity and debt investments, certain other instruments including stock-based compensation awards settled in the stock of certain Other Bets, and certain assets and liabilities acquired in a business combination, at fair value on a nonrecurring basis. The determination of fair value involves the use of appropriate valuation methods and relevant inputs into valuation models. The fair value hierarchy prioritizes the inputs used to measure fair value whereby it gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. We maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Our use of unobservable inputs reflects the assumptions that market participants would use and may include our own data adjusted based on reasonably available information. We apply judgment in assessing the relevance of observable market data to determine the priority of inputs under the fair value hierarchy, particularly in situations where there is very little or no market activity. In determining the fair values of our non-marketable equity and debt investments, as well as assets acquired (especially with respect to intangible assets) and liabilities assumed in business combinations, we make significant estimates and assumptions, some of which include the use of unobservable inputs. Certain stock-based compensation awards may be settled in the stock of certain of our Other Bets or in cash. These awards are based on the equity values of the respective Other Bet, which requires use of unobservable inputs. We also have compensation arrangements with payouts based on realized investment returns, i.e. performance fees. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized, and may require the use of unobservable inputs. Non-marketable Equity Securities Our non-marketable equity securities not accounted for under the equity method are carried either at fair value or under the measurement alternative. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and obligations of the securities. Recording upward and downward adjustments to the carrying value of our equity securities as a result of observable price changes requires quantitative assessments of the fair value of our securities using various valuation methodologies and involves the use of estimates. Non-marketable equity securities are also subject to periodic impairment reviews. Our quarterly impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the investment's fair value. Qualitative factors considered include industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, we prepare quantitative assessments of the fair value of our equity investments using both the market and income approaches which require judgment and the use of estimates, including discount rates, investee revenues and costs, and comparable market data of private and public companies, among others. When our assessment indicates that an impairment exists, we measure our non-marketable securities at fair value. "," ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to financial market risks, including changes in foreign currency exchange rates, interest rates, and equity investment risks. Foreign Currency Exchange Risk We transact business globally in multiple currencies. Our international revenues, as well as costs and expenses denominated in foreign currencies, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. Principal currencies hedged included the Australian dollar, British pound, Canadian dollar, Euro and Japanese yen. For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term. We use foreign exchange forward contracts to offset the foreign exchange risk on our assets and liabilities denominated in currencies other than the local currency of the subsidiary. These forward contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements on our assets and liabilities. The foreign Alphabet Inc. currency gains and losses on the assets and liabilities are recorded in other income (expense), net, which are offset by the gains and losses on the forward contracts. If an adverse 10% foreign currency exchange rate change was applied to total monetary assets and liabilities denominated in currencies other than the local currencies at the balance sheet dates, it would have resulted in an adverse effect on income before income taxes of approximately $1 million and $8 million as of December 31, 2018 and 2019 , respectively. The adverse effect as of December 31, 2018 and 2019 is after consideration of the offsetting effect of approximately $374 million and $662 million , respectively, from foreign exchange contracts in place for the years ended December 31, 2018 and 2019 . We use foreign currency forwards and option contracts, including collars (an option strategy comprised of a combination of purchased and written options) to protect our forecasted U.S. dollar-equivalent earnings from changes in foreign currency exchange rates. When the U.S. dollar strengthens, gains from foreign currency options and forwards reduce the foreign currency losses related to our earnings. When the U.S. dollar weakens, losses from foreign currency collars and forwards offset the foreign currency gains related to our earnings. These hedging contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements. We designate these contracts as cash flow hedges for accounting purposes. We reflect the gains or losses of foreign currency spot rate changes as a component of AOCI and subsequently reclassify them into revenues to offset the hedged exposures as they occur. If the U.S. dollar weakened by 10% as of December 31, 2018 and 2019 , the amount recorded in AOCI related to our foreign exchange contracts before tax effect would have been approximately $772 million and $1.1 billion lower as of December 31, 2018 and 2019 , respectively. The change in the value recorded in AOCI would be expected to offset a corresponding foreign currency change in forecasted hedged revenues when recognized. We use foreign exchange forward contracts designated as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. These forward contracts serve to offset the foreign currency translation risk from our foreign operations. If the U.S. dollar weakened by 10%, the amount recorded in cumulative translation adjustment (CTA) within AOCI related to our net investment hedge would have been approximately $635 million and $936 million lower as of December 31, 2018 and 2019 , respectively. The change in value recorded in CTA would be expected to offset a corresponding foreign currency translation gain or loss from our investment in foreign subsidiaries. Interest Rate Risk Our Corporate Treasury investment strategy is to achieve a return that will allow us to preserve capital and maintain liquidity. We invest primarily in debt securities including those of the U.S. government and its agencies, corporate debt securities, mortgage-backed securities, money market and other funds, municipal securities, time deposits, asset backed securities, and debt instruments issued by foreign governments. By policy, we limit the amount of credit exposure to any one issuer. Our investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Unrealized gains or losses on our marketable debt securities are primarily due to interest rate fluctuations as a result of higher market interest rates compared to interest rates at the time of purchase. We account for both fixed and variable rate securities at fair value with gains and losses recorded in AOCI until the securities are sold. We use value-at-risk (VaR) analysis to determine the potential effect of fluctuations in interest rates on the value of our marketable debt security portfolio. The VaR is the expected loss in fair value, for a given confidence interval, for our investment portfolio due to adverse movements in interest rates. We use a variance/covariance VaR model with 95% confidence interval. The estimated one-day loss in fair value of our marketable debt securities as of December 31, 2018 and 2019 are shown below (in millions):  As of December 31,  12-Month Average As of December 31,     Risk Category - Interest Rate $  $  $  $ Actual future gains and losses associated with our marketable debt security portfolio may differ materially from the sensitivity analyses performed as of December 31, 2018 and 2019 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates and our actual exposures and positions. VaR analysis is not intended to represent actual losses but is used as a risk estimation. Alphabet Inc. Equity Investment Risk Our marketable and non-marketable equity securities are subject to a wide variety of market-related risks that could substantially reduce or increase the fair value of our holdings. Our marketable equity securities are publicly traded stocks or funds and our non-marketable equity securities are investments in privately held companies, some of which are in the startup or development stages. We record our marketable equity securities not accounted for under the equity method at fair value based on readily determinable market values, of which publicly traded stocks and mutual funds are subject to market price volatility, and represent $3.3 billion of our investments as of December 31, 2019 . A hypothetical adverse price change of 10%, which could be experienced in the near term, would decrease the fair value of our marketable equity securities by $330 million . Our non-marketable equity securities not accounted for under the equity method are adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). The fair value is measured at the time of the observable transaction, which is not necessarily an indication of the current fair value as of the balance sheet date. These investments, especially those that are in the early stages, are inherently risky because the technologies or products these companies have under development are typically in the early phases and may never materialize and they may experience a decline in financial condition, which could result in a loss of a substantial part of our investment in these companies. The success of our investment in any private company is also typically dependent on the likelihood of our ability to realize appreciation in the value of our investments through liquidity events such as public offerings, acquisitions, private sales or other favorable market events. As of December 31, 2019 , the carrying value of our non-marketable equity securities, which were accounted for under the measurement alternative, was $11.4 billion . Valuations of our equity investments in private companies are inherently more complex due to the lack of readily available market data. Volatility in the global economic climate and financial markets could result in a significant impairment charge on our non-marketable equity securities. The carrying values of our equity method investments generally do not fluctuate based on market price changes, however these investments could be impaired if the carrying value exceeds the fair value. For further information about our equity investments, please refer to Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Part II of this Annual Report on Form 10-K. Alphabet Inc. "," ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Alphabet Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS    Page Reports of Ernst  Young LLP, Independent Registered Public Accounting Firm Financial Statements:  Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements The supplementary financial information required by this Item 8 is included in Item 7 under the caption Quarterly Results of Operations. Alphabet Inc. REPORT OF ERNST  YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alphabet Inc. (the Company) as of December 31, 2018 and 2019, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 3, 2020 expressed an unqualified opinion thereon. Adoption of New Accounting Standard As discussed in Note 1 to the financial statements, the Company changed its method for accounting for the recognition, measurement, presentation and disclosure of certain equity securities in the year ended December 31, 2018. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Alphabet Inc. Loss Contingencies Description of the Matter The Company is regularly subject to claims, suits, and government investigations involving competition, intellectual property, privacy, consumer protection, tax, labor and employment, commercial disputes, content generated by its users, goods and services offered by advertisers or publishers using their platforms, and other matters. As described in Note 10 to the financial statements Commitments and Contingencies such claims could result in adverse consequences. Significant judgment is required to determine both the likelihood, and the estimated amount, of a loss related to such matters. Auditing managements accounting for and disclosure of loss contingencies from these matters involved challenging and subjective auditor judgement in assessing the Companys evaluation of the probability of a loss, and the estimated amount or range of loss. How We Addressed the Matter in Our Audit We tested relevant controls over the identified risks associated with managements accounting for and disclosure of these matters. This included controls over managements assessment of the probability of incurrence of a loss and whether the loss or range of loss was reasonably estimable and the development of related disclosures. Our audit procedures included gaining an understanding of previous rulings issued by regulators and the status of ongoing lawsuits, reviewing letters addressing the matters from internal and external legal counsel, meeting with internal legal counsel to discuss the allegations, and obtaining a representation letter from management on these matters. We also evaluated the Companys disclosures in relation to these matters. /s/ Ernst  Young LLP    We have served as the Company's auditor since 1999.    San Jose, California  February 3, 2020  Alphabet Inc. REPORT OF ERNST  YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on Internal Control over Financial Reporting We have audited Alphabet Inc.s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Alphabet Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements of the Company and our report dated February 3, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst  Young LLP    San Jose, California  February 3, 2020  Alphabet Inc. Alphabet Inc. CONSOLIDATED BALANCE SHEETS (In millions, except share amounts which are reflected in thousands, and par value per share amounts)  As of December 31, 2018  As of December 31, 2019 Assets    Current assets:    Cash and cash equivalents $ 16,701  $ 18,498 Marketable securities 92,439  101,177 Total cash, cash equivalents, and marketable securities 109,140  119,675 Accounts receivable, net of allowance of $729 and $753 20,838  25,326 Income taxes receivable, net  2,166 Inventory 1,107  Other current assets 4,236  4,412 Total current assets 135,676  152,578 Non-marketable investments 13,859  13,078 Deferred income taxes  Property and equipment, net 59,719  73,646 Operating lease assets  10,941 Intangible assets, net 2,220  1,979 Goodwill 17,888  20,624 Other non-current assets 2,693  2,342 Total assets $ 232,792  $ 275,909 Liabilities and Stockholders Equity    Current liabilities:    Accounts payable $ 4,378  $ 5,561 Accrued compensation and benefits 6,839  8,495 Accrued expenses and other current liabilities 16,958  23,067 Accrued revenue share 4,592  5,916 Deferred revenue 1,784  1,908 Income taxes payable, net  Total current liabilities 34,620  45,221 Long-term debt 4,012  4,554 Deferred revenue, non-current  Income taxes payable, non-current 11,327  9,885 Deferred income taxes 1,264  1,701 Operating lease liabilities  10,214 Other long-term liabilities 3,545  2,534 Total liabilities 55,164  74,467 Commitments and Contingencies (Note 10)  Stockholders equity:    Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding  Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000); 695,556 (Class A 299,242, Class B 46,636, Class C 349,678) and 688,335 (Class A 299,828, Class B 46,441, Class C 342,066) shares issued and outstanding 45,049  50,552 Accumulated other comprehensive loss ( 2,306 )  ( 1,232 ) Retained earnings 134,885  152,122 Total stockholders equity 177,628  201,442 Total liabilities and stockholders equity $ 232,792  $ 275,909 See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts)  Year Ended December 31,    Revenues $ 110,855  $ 136,819  $ 161,857 Costs and expenses:      Cost of revenues 45,583  59,549  71,896 Research and development 16,625  21,419  26,018 Sales and marketing 12,893  16,333  18,464 General and administrative 6,840  6,923  9,551 European Commission fines 2,736  5,071  1,697 Total costs and expenses 84,677  109,295  127,626 Income from operations 26,178  27,524  34,231 Other income (expense), net 1,015  7,389  5,394 Income before income taxes 27,193  34,913  39,625 Provision for income taxes 14,531  4,177  5,282 Net income $ 12,662  $ 30,736  $ 34,343       Basic net income per share of Class A and B common stock and Class C capital stock $ 18.27  $ 44.22  $ 49.59 Diluted net income per share of Class A and B common stock and Class C capital stock $ 18.00  $ 43.70  $ 49.16 See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions)  Year Ended December 31,    Net income $ 12,662  $ 30,736  $ 34,343 Other comprehensive income (loss):      Change in foreign currency translation adjustment 1,543  ( 781 )  ( 119 ) Available-for-sale investments:      Change in net unrealized gains (losses)   1,611 Less: reclassification adjustment for net (gains) losses included in net income  ( 911 )  ( 111 ) Net change (net of tax effect of $0, $156, and $221)  ( 823 )  1,500 Cash flow hedges:      Change in net unrealized gains (losses) ( 638 )   Less: reclassification adjustment for net (gains) losses included in net income   ( 299 ) Net change (net of tax effect of $247, $103, and $42) ( 545 )  ( 277 ) Other comprehensive income (loss) 1,410  ( 1,216 )  1,104 Comprehensive income $ 14,072  $ 29,520  $ 35,447 See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (In millions, except share amounts which are reflected in thousands)  Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital  Accumulated Other Comprehensive Income (Loss)  Retained Earnings  Total Stockholders Equity  Shares  Amount  Balance as of December 31, 2016 691,293  $ 36,307  $ ( 2,402 )  $ 105,131  $ 139,036 Cumulative effect of accounting change    ( 15 )  ( 15 ) Common and capital stock issued 8,652     Stock-based compensation expense  7,694    7,694 Tax withholding related to vesting of restricted stock units  ( 4,373 )    ( 4,373 ) Repurchases of capital stock ( 5,162 )  ( 315 )   ( 4,531 )  ( 4,846 ) Sale of interest in consolidated entities     Net income    12,662  12,662 Other comprehensive income (loss)   1,410   1,410 Balance as of December 31, 2017 694,783  40,247  ( 992 )  113,247  152,502 Cumulative effect of accounting change   ( 98 )  ( 599 )  ( 697 ) Common and capital stock issued 8,975     Stock-based compensation expense  9,353    9,353 Tax withholding related to vesting of restricted stock units and other  ( 4,782 )    ( 4,782 ) Repurchases of capital stock ( 8,202 )  ( 576 )   ( 8,499 )  ( 9,075 ) Sale of interest in consolidated entities     Net income    30,736  30,736 Other comprehensive income (loss)   ( 1,216 )   ( 1,216 ) Balance as of December 31, 2018 695,556  45,049  ( 2,306 )  134,885  177,628 Cumulative effect of accounting change   ( 30 )  ( 4 )  ( 34 ) Common and capital stock issued 8,120     Stock-based compensation expense  10,890    10,890 Tax withholding related to vesting of restricted stock units and other  ( 4,455 )    ( 4,455 ) Repurchases of capital stock ( 15,341 )  ( 1,294 )   ( 17,102 )  ( 18,396 ) Sale of interest in consolidated entities     Net income    34,343  34,343 Other comprehensive income (loss)   1,104   1,104 Balance as of December 31, 2019 688,335  $ 50,552  $ ( 1,232 )  $ 152,122  $ 201,442 See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)  Year Ended December 31,    Operating activities      Net income $ 12,662  $ 30,736  $ 34,343 Adjustments:      Depreciation and impairment of property and equipment 6,103  8,164  10,856 Amortization and impairment of intangible assets   Stock-based compensation expense 7,679  9,353  10,794 Deferred income taxes   (Gain) loss on debt and equity securities, net  ( 6,650 )  ( 2,798 ) Other  ( 189 )  ( 592 ) Changes in assets and liabilities, net of effects of acquisitions:      Accounts receivable ( 3,768 )  ( 2,169 )  ( 4,340 ) Income taxes, net 8,211  ( 2,251 )  ( 3,128 ) Other assets ( 2,164 )  ( 1,207 )  ( 621 ) Accounts payable  1,067  Accrued expenses and other liabilities 4,891  8,614  7,170 Accrued revenue share   1,273 Deferred revenue   Net cash provided by operating activities 37,091  47,971  54,520 Investing activities      Purchases of property and equipment ( 13,184 )  ( 25,139 )  ( 23,548 ) Purchases of marketable securities ( 92,195 )  ( 50,158 )  ( 100,315 ) Maturities and sales of marketable securities 73,959  48,507  97,825 Purchases of non-marketable investments ( 1,745 )  ( 2,073 )  ( 1,932 ) Maturities and sales of non-marketable investments  1,752  Acquisitions, net of cash acquired, and purchases of intangible assets ( 287 )  ( 1,491 )  ( 2,515 ) Proceeds from collection of notes receivable 1,419   Other investing activities   Net cash used in investing activities ( 31,401 ) ( 28,504 )  ( 29,491 ) Financing activities      Net payments related to stock-based award activities ( 4,166 )  ( 4,993 )  ( 4,765 ) Repurchases of capital stock ( 4,846 )  ( 9,075 )  ( 18,396 ) Proceeds from issuance of debt, net of costs 4,291  6,766  Repayments of debt ( 4,377 )  ( 6,827 )  ( 585 ) Proceeds from sale of interest in consolidated entities   Net cash used in financing activities ( 8,298 )  ( 13,179 )  ( 23,209 ) Effect of exchange rate changes on cash and cash equivalents  ( 302 )  ( 23 ) Net increase (decrease) in cash and cash equivalents ( 2,203 )  5,986  1,797 Cash and cash equivalents at beginning of period 12,918  10,715  16,701 Cash and cash equivalents at end of period $ 10,715  $ 16,701  $ 18,498       Supplemental disclosures of cash flow information      Cash paid for taxes, net of refunds $ 6,191  $ 5,671  $ 8,203 See accompanying notes. Alphabet Inc. Alphabet Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations 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 primarily by delivering relevant, cost-effective online advertising. Basis of Consolidation The consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models. Noncontrolling interests are not presented separately as the amounts are not material. All intercompany balances and transactions have been eliminated. Use of Estimates Preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires us to make 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. On an ongoing basis, we evaluate our estimates, including those related to the bad debt allowance, sales allowances, fair values of financial instruments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, and contingent liabilities, among others. We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Revenue Recognition We recognize revenues when we transfer control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services. See Note 2 for further discussion on Revenues. Cost of Revenues Cost of revenues consists of TAC and other costs of revenues. TAC represents the amounts paid to Google Network Members primarily for ads displayed on their properties and amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers. Other cost of revenues (which is the cost of revenues excluding TAC) includes the following:  Content acquisition costs primarily related to payments to content providers from whom we license video and other content for distribution on YouTube and Google Play (we pay fees to these content providers based on revenues generated or a flat fee);  Expenses associated with our data centers and other operations (including bandwidth, compensation expense (including SBC), depreciation, energy, and other equipment costs); and  Inventory related costs for hardware we sell. Stock-based Compensation Stock-based compensation primarily consists of Alphabet restricted stock units (RSUs). RSUs are equity classified and measured at the fair market value of the underlying stock at the grant date. We recognize RSU expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur. For RSUs, shares are issued on the vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued than the number of RSUs outstanding and the tax withholding is recorded as a reduction to additional paid-in capital. Additionally, stock-based compensation includes stock-based awards, such as performance stock units (PSUs) and awards that may be settled in cash or the stock of certain of our Other Bets. PSUs are equity classified and expense is recognized over the requisite service period. Awards that are liability classified are remeasured at fair value through Alphabet Inc. settlement or maturity (six months and one day after vesting). The fair value of such awards is based on the equity valuation of the respective Other Bet. Performance Fees We have compensation arrangements with payouts based on realized investment returns. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized. Performance fees, which are primarily related to gains on equity securities, are recorded as a component of other income (expense), net. Certain Risks and Concentrations Our revenues are primarily derived from online advertising, the market for which is highly competitive and rapidly changing. In addition, our revenues are generated from a multitude of markets in countries around the world. Significant changes in this industry or changes in customer buying or advertiser spending behavior could adversely affect our operating results. No individual customer or groups of affiliated customers represented more than 10% of our revenues in 2017 , 2018 , or 2019 . In 2017 , 2018 , and 2019 , we generated approximately 47 % , 46 % , and 46 % of our revenues, respectively, from customers based in the U.S. We are subject to concentrations of credit risk principally from cash and cash equivalents, marketable securities, foreign exchange contracts, and accounts receivable. We manage our credit risk exposure through timely assessment of our counterparty creditworthiness, credit limits and use of collateral management. Cash equivalents and marketable securities consist primarily of time deposits, money market and other funds, highly liquid debt instruments of the U.S. government and its agencies, debt instruments issued by foreign governments, debt instruments issued by municipalities in the U.S., corporate debt securities, mortgage-backed securities, and asset-backed securities. Foreign exchange contracts are transacted with various financial institutions with high credit standing. Accounts receivable are typically unsecured and are derived from revenues earned from customers located around the world. We perform ongoing evaluations to determine customer credit and we limit the amount of credit we extend. We generally do not require collateral from our customers. We maintain reserves for estimated credit losses and these losses have generally been within our expectations. Fair Value of Financial Instruments Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative contracts, and non-marketable debt securities. Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities, which are adjusted to fair value when observable price changes are identified or when the non-marketable equity securities are impaired (referred to as the measurement alternative) . Other financial assets and liabilities are carried at cost with fair value disclosed, if required. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings. Level 3 - Unobservable inputs that are supported by little or no market activities. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Cash, Cash Equivalents, and Marketable Securities We invest all excess cash primarily in government bonds, corporate debt securities, mortgage-backed and asset-backed securities, time deposits, and money market funds. Alphabet Inc. We classify all marketable investments that have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities. We determine the appropriate classification of our investments in marketable securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt securities as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities. As we view these securities as available to support current operations, we classify highly liquid securities with maturities beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders equity, except for unrealized losses determined to be other-than-temporary, which we record within other income (expense), net. We determine any realized gains or losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net. Non-Marketable Investments We account for non-marketable equity investments through which we exercise significant influence but do not have control over the investee under the equity method. Our non-marketable equity securities not accounted for under the equity method are primarily accounted for under the measurement alternative in accordance with Accounting Standards Update No. 2016-01, which we adopted on January 1, 2018. Under the measurement alternative, the carrying value of our non-marketable equity investments is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment. Adjustments are determined primarily based on a market approach as of the transaction date. We account for our non-marketable investments that meet the definition of a debt security as available-for-sale securities. We classify our non-marketable investments that do not have stated contractual maturity dates, as non-current assets on the Consolidated Balance Sheets. Impairment of Investments We periodically review our debt and equity investments for impairment. For debt securities we consider the duration, severity and the reason for the decline in security value; whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or if the amortized cost basis cannot be recovered as a result of credit losses. If any impairment is considered other-than-temporary, we will write down the security to its fair value and record the corresponding charge as other income (expense), net. For equity securities we consider impairment indicators such as negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors. If indicators exist and the fair value of the security is below the carrying amount, we write down the security to fair value. Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests in is considered a variable interest entity (VIE). We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP. Accounts Receivable We record accounts receivable at the invoiced amount. We maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables. We review the accounts receivable by amounts due from customers that are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, we make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer. Alphabet Inc. Leases We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments affected by the Consumer Price Index, payments contingent on wind or solar production for power purchase arrangements, and payments for maintenance and utilities. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments and lease incentives. Operating lease assets and liabilities are included on our Consolidated Balance Sheet beginning January 1, 2019. The current portion of our operating lease liabilities is included in accrued expenses and other current liabilities and the long term portion is included in operating lease liabilities. Finance lease assets are included in property and equipment, net. Finance lease liabilities are included in accrued expenses and other current liabilities or long-term debt. Operating lease expense is recognized on a straight-line basis over the lease term. Property and Equipment Property and equipment includes the following categories: land and buildings, information technology assets, construction in progress, leasehold improvements, and furniture and fixtures. Land and buildings include land, offices, data centers and related building improvements. Information technology assets include servers and network equipment. We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets. We depreciate buildings over periods of seven to 25 years. We depreciate information technology assets generally over periods of three to five years (specifically, three years for servers and three to five years for network equipment). We depreciate leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. Construction in progress is the construction or development of property and equipment that have not yet been placed in service for our intended use. Depreciation for equipment, buildings, and leasehold improvements commences once they are ready for our intended use. Land is not depreciated. Inventory Inventory consists primarily of finished goods and is stated at the lower of cost and net realizable value. Cost is computed using the first-in, first-out method. Software Development Costs We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the criteria for capitalization were not material for the periods presented. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented. Business Combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair Alphabet Inc. values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Long-Lived Assets, Goodwill and Other Acquired Intangible Assets We review property and equipment, long-term prepayments and intangible assets, excluding goodwill, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value. Impairments were not material for the periods presented. We allocate goodwill to reporting units based on the expected benefit from the business combination. We evaluate our reporting units when changes in our operating structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach. We test our goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill impairments were not material for the periods presented. Intangible assets with definite lives are amortized over their estimated useful lives. We amortize intangible assets on a straight-line basis with definite lives generally over periods ranging from one to twelve years . Income Taxes We account for income taxes using the asset and liability method, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized. We recognize the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority. In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision. Foreign Currency Generally, the functional currency of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities, and average rates for the annual period derived from month-end exchange rates for revenues, costs, and expenses. We record translation gains and losses in accumulated other comprehensive income (AOCI) as a component of stockholders equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gain (loss) in other income (expense), net. Advertising and Promotional Expenses We expense advertising and promotional costs in the period in which they are incurred. For the years ended December 31, 2017 , 2018 and 2019 , advertising and promotional expenses totaled approximately $ 5.1 billion , $ 6.4 billion , and $ 6.8 billion , respectively. Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-13 (ASU 2016-13) ""Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"", which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. We will adopt ASU 2016-13 effective January 1, 2020 with the cumulative effect of adoption recorded as an adjustment to retained earnings. The effect on our consolidated financial statements and related disclosures is not expected to be material. Alphabet Inc. Recently adopted accounting pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (Topic 842) ""Leases."" Topic 842 supersedes the lease requirements in Accounting Standards Codification Topic 840, ""Leases."" Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases continue to be classified as either finance or operating. We adopted Topic 842 effective January 1, 2019. The most significant effects of Topic 842 were the recognition of $ 8.0 billion of operating lease assets and $ 8.4 billion of operating lease liabilities and the de-recognition of $ 1.5 billion of build-to-suit assets and liabilities upon adoption. We applied Topic 842 to all leases as of January 1, 2019 with comparative periods continuing to be reported under Topic 840. In the adoption of Topic 842, we carried forward the assessment from Topic 840 of whether our contracts contain or are leases, the classification of our leases, and remaining lease terms. Our accounting for finance leases remains substantially unchanged. The standard did not have a significant effect on our consolidated results of operations or cash flows. See Note 4 for further details. Prior Period Reclassifications Certain amounts in prior periods have been reclassified to conform with current period presentation. Hedging gains (losses), which were previously included in Google revenues, are now reported separately as a component of total revenues for all periods presented. See Note 2 for further details. Additionally, performance fees have been reclassified for all periods from general and administrative expenses to other income (expense), net to align with the presentation of the investment gains and losses on which the performance fees are based. See Note 7 for further details. Note 2. Revenues Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that we expect in exchange for those goods or services. Sales and other similar taxes are excluded from revenues. The following table presents our revenues disaggregated by type (in millions). Certain amounts in prior periods have been reclassified to conform with current period presentation.  Year Ended December 31,    Google Search  other $ 69,811  $ 85,296  $ 98,115 YouTube ads (1) 8,150  11,155  15,149 Google properties 77,961  96,451  113,264 Google Network Members' properties 17,616  20,010  21,547 Google advertising 95,577  116,461  134,811 Google Cloud 4,056  5,838  8,918 Google other (1) 10,914  14,063  17,014 Google revenues 110,547  136,362  160,743 Other Bets revenues   Hedging gains (losses) ( 169 )  ( 138 )  Total revenues $ 110,855  $ 136,819  $ 161,857 (1)  YouTube non-advertising revenues are included in Google other revenues. Alphabet Inc. The following table presents our revenues disaggregated by geography, based on the addresses of our customers (in millions):  Year Ended December 31,    United States $ 52,449  %  $ 63,269  %  $ 74,843  % EMEA (1) 36,236   44,739   50,645  APAC (1) 16,192   21,341   26,928  Other Americas (1) 6,147   7,608   8,986  Hedging gains (losses) ( 169 )   ( 138 )    Total revenues $ 110,855  %  $ 136,819  %  $ 161,857  % (1)  Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific (APAC); and Canada and Latin America (Other Americas). Advertising Revenues We generate advertising revenues primarily by delivering advertising on Google properties, including Google.com, the Google Search app, YouTube, Google Play, Gmail and Google Maps; and Google Network Members properties. Our customers generally purchase advertising inventory through Google Ads, Google Ad Manager as part of the Authorized Buyers marketplace, and Google Marketing Platform, among others. We offer advertising on a click, impression or view basis. We recognize revenue each time a user clicks on the ad, when the ad is displayed or a user views the ad. For ads placed on Google Network Members properties, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, we report advertising revenues for ads placed on Google Network Members properties on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to Google Network Members are recorded as cost of revenues. Where we are the principal, we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers, and is further supported by us being primarily responsible to our customers and having a level of discretion in establishing pricing. Google Cloud Revenues Google Cloud revenues consist primarily of revenues from Google Cloud Platform (which includes infrastructure and data and analytics platform products, and other services), G Suite productivity tools and other enterprise cloud services. Our cloud revenues are provided on either a consumption or subscription basis. Revenue related to cloud services provided on a consumption basis is recognized when the customer utilizes the services, based on the quantity of services consumed. Revenue related to cloud services provided on a subscription basis is recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services. Other Revenues Google other revenues and Other Bets revenues consist primarily of revenues from:  Google Play, which includes revenues from sale of apps and in-app purchases (which we recognize net of payout to developers) and digital content sold in the Google Play store;  hardware, including Google Nest home products, Pixelbooks, Pixel phones and other devices;  YouTube non-advertising including, YouTube premium and YouTube TV subscriptions and other services; and  other products and services. As it relates to Google other revenues, the most significant judgment is determining whether we are the principal or agent for app sales and in-app purchases through the Google Play store. We report revenues from these transactions on a net basis because our performance obligation is to facilitate a transaction between app developers and end users, for which we earn a commission. Consequently, the portion of the gross amount billed to end users that is remitted to app developers is not reflected as revenues. Arrangements with Multiple Performance Obligations Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost plus margin. Alphabet Inc. Customer Incentives and Credits Certain customers receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues. We believe that there will not be significant changes to our estimates of variable consideration. Deferred Revenues We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. The increase in the deferred revenue balance for the year ended December 31, 2019 was primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $ 1.7 billion of revenues recognized that were included in the deferred revenue balance as of December 31, 2018 . Additionally, we have performance obligations associated with commitments in customer contracts, primarily related to Google Cloud, for future services that have not yet been recognized in revenue. This includes related deferred revenue currently recorded and amounts that will be invoiced in future periods. As of December 31, 2019 , the amount not yet recognized in revenue from these commitments is $ 11.4 billion , which reflects our assessment of relevant contract terms. This amount excludes contracts (i) with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. We expect to recognize approximately two thirds over the next 24 months with the remaining thereafter. However, the amount and timing of revenue recognition is largely driven by customer utilization, which could impact our estimate of the remaining amount of commitments and when we expect to recognize such revenues. Sales Commissions We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. Note 3. Financial Instruments Debt Securities We classify our marketable debt securities 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.  The following tables summarize our debt securities by significant investment categories as of December 31, 2018 and 2019 (in millions):  As of December 31, 2018  Adjusted Cost  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value  Cash and Cash Equivalents  Marketable Securities Level 2:            Time deposits (1) $ 2,202  $  $  $ 2,202  $ 2,202  $ Government bonds 53,634   ( 414 )  53,291  3,717  49,574 Corporate debt securities 25,383   ( 316 )  25,082   25,038 Mortgage-backed and asset-backed securities 16,918   ( 324 )  16,605   16,605 Total $ 98,137  $  $ ( 1,054 )  $ 97,180  $ 5,963  $ 91,217 Alphabet Inc.  As of December 31, 2019  Adjusted Cost  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value  Cash and Cash Equivalents  Marketable Securities Level 2:            Time deposits (1) $ 2,294  $  $  $ 2,294  $ 2,294  $ Government bonds 55,033   ( 30 )  55,437  4,518  50,919 Corporate debt securities 27,164   ( 3 )  27,498   27,454 Mortgage-backed and asset-backed securities 19,453   ( 41 )  19,508   19,508 Total $ 103,944  $  $ ( 74 )  $ 104,737  $ 6,856  $ 97,881 (1)  The majority of our time deposits are domestic deposits. We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. We recognized gross realized gains of $ 185 million , $ 1.3 billion , and $ 292 million for the years ended December 31, 2017 , 2018 , and 2019 , respectively. We recognized gross realized losses of $ 295 million , $ 143 million , and $ 143 million for the years ended December 31, 2017 , 2018 , and 2019 , respectively. We reflect these gains and losses as a component of other income (expense), net, in the Consolidated Statements of Income. The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities (in millions):  As of December 31, 2019 Due in 1 year $ 20,392 Due in 1 year through 5 years 63,151 Due in 5 years through 10 years 2,671 Due after 10 years 11,667 Total $ 97,881 The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 2018 and 2019 , 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, 2018  Less than 12 Months  12 Months or Greater  Total  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss Government bonds $ 12,019  $ ( 85 )  $ 23,877  $ ( 329 )  $ 35,896  $ ( 414 ) Corporate debt securities 10,171  ( 107 )  11,545  ( 209 )  21,716  ( 316 ) Mortgage-backed and asset-backed securities 5,534  ( 75 )  8,519  ( 249 )  14,053  ( 324 ) Total $ 27,724  $ ( 267 )  $ 43,941  $ ( 787 )  $ 71,665  $ ( 1,054 )  As of December 31, 2019  Less than 12 Months  12 Months or Greater  Total  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss Government bonds $ 6,752  $ ( 20 )  $ 4,590  $ ( 10 )  $ 11,342  $ ( 30 ) Corporate debt securities 1,665  ( 2 )   ( 1 )  2,643  ( 3 ) Mortgage-backed and asset-backed securities 4,536  ( 13 )  2,835  ( 28 )  7,371  ( 41 ) Total $ 12,953  $ ( 35 )  $ 8,403  $ ( 39 )  $ 21,356  $ ( 74 ) Alphabet Inc. During the years ended December 31, 2017 , 2018 and 2019 , we did not recognize any significant other-than-temporary impairment losses. Equity Investments The following discusses our marketable equity securities, non-marketable equity securities, gains and losses on marketable and non-marketable equity securities, as well as our equity securities accounted for under the equity method. Our marketable equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 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. All gains and losses on marketable equity securities, realized and unrealized, are recognized in other income (expense), net. 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 for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), net. Non-marketable equity securities that have been remeasured during the period are classified within Level 2 or Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities we hold. Gains and losses on marketable and non-marketable equity securities Gains and losses reflected in other income (expense), net, for our marketable and non-marketable equity securities are summarized below (in millions):  Year Ended December 31,   Net gain (loss) on equity securities sold during the period $ 1,458  $ ( 301 ) Net unrealized gain (loss) on equity securities held as of the end of the period (1) 4,002  2,950 Total gain (loss) recognized in other income (expense), net $ 5,460  $ 2,649 (1)  Includes net gains of $ 4.1 billion and $ 1.8 billion related to non-marketable equity securities for the years ended December 31, 2018 and 2019 , respectively. In the table above, 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 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. While these net gains may have been reflected in periods prior to the period of sale, we believe they are important supplemental information as they reflect the economic realized gain on the securities sold during the period. Cumulative net gains is calculated as the difference between the sale price and the initial purchase price for the equity security sold during the period.  Equity Securities Sold During the Year Ended December 31,   Total sale price $ 1,965  $ 3,134 Total initial cost  Cumulative net gains $ 1,450  $ 2,276 Alphabet Inc. Carrying value of marketable and non-marketable equity securities The carrying value is measured as the total initial cost plus the cumulative net gain (loss). The carrying values for our marketable and non-marketable equity securities are summarized below (in millions):  As of December 31, 2018  Marketable Securities  Non-Marketable Securities  Total Total initial cost $ 1,168  $ 8,168  $ 9,336 Cumulative net gain (1)  4,107  4,161 Carrying value $ 1,222  $ 12,275  $ 13,497 (1)  Non-marketable securities cumulative net gain is comprised of $ 4.3 billion unrealized gains and $ 178 million unrealized losses (including impairment).  As of December 31, 2019  Marketable Securities  Non-Marketable Securities  Total Total initial cost $ 1,935  $ 8,297  $ 10,232 Cumulative net gain (1) 1,361  3,056  4,417 Carrying value $ 3,296  $ 11,353  $ 14,649 (1)  Non-marketable securities cumulative net gain is comprised of $ 3.5 billion unrealized gains and $ 445 million unrealized losses (including impairment). Marketable equity securities The following table summarizes marketable equity securities measured at fair value by significant investment categories as of December 31, 2018 and 2019 (in millions):   As of December 31, 2018  As of December 31, 2019   Cash and Cash Equivalents  Marketable Securities  Cash and Cash Equivalents  Marketable Securities Level 1:         Money market funds  $ 3,493  $  $ 4,604  $ Marketable equity securities (1)     3,046   3,493   4,604  3,046 Level 2:         Mutual funds     Total  $ 3,493  $ 1,222  $ 4,604  $ 3,296 (1)  The balance a s of December 31, 2019 includes investments that were reclassified from non-marketable equity securities following the initial public offering of the issuers. Non-marketable equity securities The following is a summary of unrealized gains and losses recorded in other income (expense), net, and included as adjustments to the carrying value of non-marketable equity securities (in millions):  Year Ended December 31,   Unrealized gains $ 4,285  $ 2,163 Unrealized losses (including impairment) ( 178 )  ( 372 ) Total unrealized gain (loss) for non-marketable equity securities $ 4,107  $ 1,791 During the year ended December 31, 2019 , included in the $ 11.4 billion of non-marketable equity securities, $ 7.6 billion were measured at fair value primarily based on observable market transactions, resulting in a net unrealized gain of $ 1.8 billion . Alphabet Inc. Equity securities accounted for under the Equity Method Equity securities accounted for under the equity method had a carrying value of approximately $ 1.3 billion as of December 31, 2018 and 2019 . Our share of gains and losses including impairment are included as a component of other income (expense), net, in the Consolidated Statements of Income. See Note 7 for further details on other income (expense), net. Derivative Financial Instruments We classify our foreign currency and interest rate derivative contracts primarily within Level 2 in the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments. We recognize derivative instruments as either assets or liabilities in the Consolidated Balance Sheets at fair value. We record changes in the fair value (i.e., gains or losses) of the derivatives in the Consolidated Statements of Income as either other income (expense), net, or revenues, or in the Consolidated Balance Sheets in AOCI, as discussed below. Any components excluded from the assessment of hedge effectiveness are recognized in the same income statement line as the hedged item. We enter into foreign currency contracts with financial institutions 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 use interest rate derivative contracts to hedge interest rate exposures on our fixed income securities and debt issuances. Our program is not used for trading or speculative purposes. We enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. To further reduce credit risk, we enter into collateral security arrangements under which the counterparty is required to provide collateral when the net fair value of certain financial instruments fluctuates from contractually established thresholds. We can take possession of the collateral in the event of counterparty default. As of December 31, 2018 and 2019 , we received cash collateral related to the derivative instruments under our collateral security arrangements of $ 327 million and $ 252 million , respectively, which was included in other current assets. Cash Flow Hedges We use foreign currency forwards and option contracts, including collars (an option strategy comprised of a combination of purchased and written options), designated as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the U.S. dollar. The notional principal of these contracts was approximately $ 11.8 billion and $ 13.2 billion as of December 31, 2018 and 2019 , respectively. These contracts have maturities of 24 months or less. For forwards and option contracts, we exclude the change in the forward points and time value from our assessment of hedge effectiveness. The initial value of the excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI. We reflect the gains or losses of a cash flow hedge included in our hedge effective assessment as a component of AOCI and subsequently reclassify these gains and losses to revenues when the hedged transactions are recorded. If the hedged transactions become probable of not occurring, the corresponding amounts in AOCI are immediately reclassified to other income (expense), net. As of December 31, 2019 , the net accumulated loss on our foreign currency cash flow hedges before tax effect was $ 82 million , of which $ 82 million is expected to be reclassified from AOCI into earnings within the next 12 months. Fair Value Hedges We use forward contracts designated as fair value hedges to hedge foreign currency risks for our investments denominated in currencies other than the U.S. dollar. We exclude changes in forward points for the forward contracts from the assessment of hedge effectiveness. We recognize changes in the excluded component in other income (expense), net. The notional principal of these contracts was $ 2.0 billion and $ 455 million as of December 31, 2018 and 2019 , respectively. Gains and losses on these forward contracts are recognized in other income (expense), net, along with the offsetting gains and losses of the related hedged items. Net Investment Hedges We use forward contracts designated as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. We exclude changes in forward points for the forward contracts from the assessment of hedge effectiveness. We recognize changes in the excluded component in other income (expense), Alphabet Inc. net. The notional principal of these contracts was $ 6.7 billion and $ 9.3 billion as of December 31, 2018 and 2019 , respectively. Gains and losses on these forward contracts are recognized in AOCI as part of the foreign currency translation adjustment. Other Derivatives Other derivatives not designated as hedging instruments consist of foreign currency forward contracts that we use to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the local currency of a subsidiary. We recognize gains and losses on these contracts, as well as the related costs in other income (expense), net, along with the foreign currency gains and losses on monetary assets and liabilities. The notional principal of the outstanding foreign exchange contracts was $ 20.1 billion and $ 43.5 billion as of December 31, 2018 and 2019 , respectively. The fair values of our outstanding derivative instruments were as follows (in millions):     As of December 31, 2018    Balance Sheet Location  Fair Value of Derivatives Designated as Hedging Instruments  Fair Value of Derivatives Not Designated as Hedging Instruments  Total Fair Value Derivative Assets:         Level 2:         Foreign exchange contracts  Other current and non-current assets  $  $  $ Total    $  $  $ Derivative Liabilities:         Level 2:         Foreign exchange contracts  Accrued expenses and other liabilities, current and non-current  $  $  $ Total    $  $  $     As of December 31, 2019    Balance Sheet Location  Fair Value of Derivatives Designated as Hedging Instruments  Fair Value of Derivatives Not Designated as Hedging Instruments  Total Fair Value Derivative Assets:         Level 2:         Foreign exchange contracts  Other current and non-current assets  $  $  $ Total    $  $  $ Derivative Liabilities:         Level 2:         Foreign exchange contracts  Accrued expenses and other liabilities, current and non-current  $  $  $ Total    $  $  $ 67 Alphabet Inc. 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   Year Ended December 31,     Derivatives in Cash Flow Hedging Relationship:       Foreign exchange contracts       Amount included in the assessment of effectiveness  $ ( 955 )  $  $ Amount excluded from the assessment of effectiveness    ( 14 ) Derivatives in Net Investment Hedging Relationship:       Foreign exchange contracts       Amount included in the assessment of effectiveness    Total  $ ( 955 )  $  $  Alphabet Inc. The effect of derivative instruments on income is summarized below (in millions):  Gains (Losses) Recognized in Income  Year Ended December 31,     Revenues  Other income (expense), net  Revenues  Other income (expense), net  Revenues  Other income (expense), net Total amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded $ 110,855  $ 1,015  $ 136,819  $ 7,389  $ 161,857  $ 5,394             Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:            Foreign exchange contracts            Amount of gains (losses) reclassified from AOCI to income $ ( 169 )  $  $ ( 139 )  $  $  $ Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach      Amount excluded from the assessment of effectiveness      Gains (Losses) on Derivatives in Fair Value Hedging Relationship:            Foreign exchange contracts            Hedged items    ( 96 )   ( 19 ) Derivatives designated as hedging instruments  ( 197 )     Amount excluded from the assessment of effectiveness      Gains (Losses) on Derivatives in Net Investment Hedging Relationship:            Foreign exchange contracts            Amount excluded from the assessment of effectiveness      Gains (Losses) on Derivatives Not Designated as Hedging Instruments:            Foreign exchange contracts            Derivatives not designated as hedging instruments  ( 230 )     ( 413 ) Total gains (losses) $ ( 169 )  $ ( 124 )  $ ( 138 )  $  $  $ ( 145 ) Offsetting of Derivatives We present our forwards and purchased options at gross fair values in the Consolidated Balance Sheets. For foreign currency collars, we present at net fair values where both purchased and written options are with the same counterparty. Our master netting and other similar arrangements allow net settlements under certain conditions. As of December 31, 2018 and 2019 , information related to these offsetting arrangements were as follows (in millions): Alphabet Inc. Offsetting of Assets  As of December 31, 2018        Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset    Gross Amounts of Recognized Assets  Gross Amounts Offset in the Consolidated Balance Sheets  Net Presented in the Consolidated Balance Sheets  Financial Instruments  Cash Collateral Received  Non-Cash Collateral Received  Net Assets Exposed Derivatives $  $ ( 56 )  $  $ ( 90 ) (1)  $ ( 307 )  $ ( 14 )  $                As of December 31, 2019        Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset    Gross Amounts of Recognized Assets  Gross Amounts Offset in the Consolidated Balance Sheets  Net Presented in the Consolidated Balance Sheets  Financial Instruments  Cash Collateral Received  Non-Cash Collateral Received  Net Assets Exposed Derivatives $  $ ( 21 )  $  $ ( 88 ) (1)  $ ( 234 )  $  $ (1)  The balances as of December 31, 2018 and 2019 were related to derivative liabilities which are allowed to be net settled against derivative assets in accordance with our master netting agreements. Offsetting of Liabilities  As of December 31, 2018        Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset    Gross Amounts of Recognized Liabilities  Gross Amounts Offset in the Consolidated Balance Sheets  Net Presented in the Consolidated Balance Sheets  Financial Instruments  Cash Collateral Pledged  Non-Cash Collateral Pledged  Net Liabilities Derivatives $  $ ( 56 )  $  $ ( 90 ) (2)  $  $  $                As of December 31, 2019        Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset   Gross Amounts of Recognized Liabilities  Gross Amounts Offset in the Consolidated Balance Sheets  Net Presented in the Consolidated Balance Sheets  Financial Instruments  Cash Collateral Pledged  Non-Cash Collateral Pledged  Net Liabilities Derivatives $  $ ( 21 )  $  $ ( 88 ) (2)  $  $  $ (2)  The balances as of December 31, 2018 and 2019 were related to derivative assets which are allowed to be net settled against derivative liabilities in accordance with our master netting agreements. Note 4. Leases We have entered into operating and finance lease agreements primarily for data centers, land and offices throughout the world with lease periods expiring between 2020 and 2063 . Components of operating lease expense were as follows (in millions):  Year Ended  December 31, 2019 Operating lease cost $ 1,820 Variable lease cost Total operating lease cost $ 2,361 Alphabet Inc. Supplemental information related to operating leases was as follows (in millions):  Year Ended  December 31, 2019 Cash payments for operating leases $ 1,661 New operating lease assets obtained in exchange for operating lease liabilities $ 4,391 As of December 31, 2019 , our operating leases had a weighted average remaining lease term of 10 years and a weighted average discount rate of 2.8 % . Future lease payments under operating leases as of December 31, 2019 were as follows (in millions): $ 1,757 1,845 1,680 1,508 1,301 Thereafter 5,763 Total future lease payments 13,854 Less imputed interest ( 2,441 ) Total lease liability balance $ 11,413 As of December 31, 2019 , we have entered into leases that have not yet commenced with future lease payments of $ 7.4 billion , excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets. These leases will commence between 2020 and 2026 with non-cancelable lease terms of 1 to 25 years. Supplemental Information for Comparative Periods As of December 31, 2018, prior to the adoption of Topic 842, future minimum payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year, net of sublease income amounts, were as follows (in millions):  Operating Leases (1)  Sub-lease Income  Net Operating Leases $ 1,319  $  $ 1,303 1,397   1,384 1,337   1,327 1,153   1,145 980   Thereafter 3,916   3,911 Total minimum payments $ 10,102  $  $ 10,047 (1)  Includes future minimum payments for leases which have not yet commenced. Rent expense under operating leases was $ 1.1 billion and $ 1.3 billion for the years ended December 31, 2017, and 2018, respectively. Note 5. Variable Interest Entities (VIEs) Consolidated VIEs We consolidate VIEs in which we hold a variable interest and are the primary beneficiary. We are the primary beneficiary because we have the power to direct activities that most significantly affect their economic performance and have the obligation to absorb the majority of their losses or benefits. 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, 2018 and 2019 , assets that can only be used to settle obligations of these VIEs were $ 2.4 billion and $ 3.1 billion , respectively, and the liabilities for which creditors only have recourse to the VIEs were $ 909 million and $ 1.2 billion , respectively. Alphabet Inc. Calico Calico is a life science company with a mission to harness advanced technologies to increase our understanding of the biology that controls lifespan. In September 2014, AbbVie Inc. (AbbVie) and Calico entered into a research and development collaboration agreement intended to help both companies discover, develop, and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer. In the second quarter of 2018, AbbVie and Calico amended the collaboration agreement resulting in an increase in total commitments. As of December 31, 2019 , AbbVie has contributed $ 1,250 million to fund the collaboration pursuant to the agreement. As of December 31, 2019 , Calico has contributed $ 500 million and has committed up to an additional $ 750 million . Calico has used its scientific expertise to establish a world-class research and development facility, with a focus on drug discovery and early drug development; and AbbVie provides scientific and clinical development support and its commercial expertise to bring new discoveries to market. Both companies share costs and profits for projects covered under this agreement equally. AbbVie's contribution has been recorded as a liability on Calico's financial statements, which is reduced and reflected as a reduction to research and development expense as eligible research and development costs are incurred by Calico. As of December 31, 2019 , we have contributed $ 480 million to Calico in exchange for Calico convertible preferred units and are committed to fund up to an additional $ 750 million on an as-needed basis and subject to certain conditions. Verily Verily is a life science and healthcare company with a mission to make the world's health data useful so that people enjoy healthier lives. In December 2018, Verily received $ 900 million in cash from a $ 1.0 billion investment round. The remaining $ 100 million was received in the first quarter of 2019. As of December 31, 2019 , Verily has received an aggregate amount of $ 1.8 billion from sales of equity securities to external investors. These transactions were accounted for as equity transactions and no gain or loss was recognized. In the fourth quarter of 2019, Verily obtained a controlling financial interest in Onduo, an existing equity method investment. The transaction resulted in a $ 357 million gain from the revaluation of the previously held economic interest, which was recognized in other income (expense), net. Unconsolidated VIEs Certain of our non-marketable investments, including certain renewable energy investments accounted for under the equity method and certain other investments in private companies, are VIEs. The renewable energy entities' activities involve power generation using renewable sources. Private companies that we invest in are primarily early stage companies. 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 do not consolidate these VIEs in our consolidated financial statements. 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 not material as of December 31, 2018 and 2019 . Note 6. Debt Short-Term Debt We have a debt financing program of up to $ 5.0 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, 2018 and 2019 . Long-Term Debt Google issued $ 3.0 billion of senior unsecured notes in three tranches (collectively, 2011 Notes) in May 2011, due in 2014, 2016, and 2021, as well as $ 1.0 billion of senior unsecured notes (2014 Notes) in February 2014 due in 2024. In April 2016, we completed an exchange offer with eligible holders of Googles 2011 Notes due 2021 and 2014 Notes due 2024 (collectively, the Google Notes). An aggregate principal amount of approximately $ 1.7 billion of the Google Notes was exchanged for approximately $ 1.7 billion of Alphabet notes with identical interest rate and maturity. Alphabet Inc. Because the exchange was between a parent and the subsidiary company and for substantially identical notes, the change was treated as a debt modification for accounting purposes with no gain or loss recognized. In August 2016, Alphabet issued $ 2.0 billion of senior unsecured notes (2016 Notes) due 2026. The net proceeds from the issuance of the 2016 Notes were used for general corporate purposes, including the repayment of outstanding commercial paper. The Alphabet notes due in 2021, 2024, and 2026 rank equally with each other and are structurally subordinate to the outstanding Google Notes. The total outstanding long-term debt is summarized below (in millions):  As of December 31, 2018  As of December 31, 2019 3.625% Notes due on May 19, 2021 $ 1,000  $ 1,000 3.375% Notes due on February 25, 2024 1,000  1,000 1.998% Notes due on August 15, 2026 2,000  2,000 Unamortized discount for the Notes above ( 50 )  ( 42 ) Subtotal (1) 3,950  3,958 Total future finance lease payments  Less: imputed interest for finance leases  ( 89 ) Total long-term debt $ 4,012  $ 4,554 (1)  Includes the outstanding (and unexchanged) Google Notes issued in 2011 and 2014 and the Alphabet notes exchanged in 2016. The effective interest yields based on proceeds received from the outstanding notes due in 2021, 2024, and 2026 were 3.734 % , 3.377 % , and 2.231 % , respectively, with interest payable semi-annually. We may redeem these notes at any time in whole or in part at specified redemption prices. The total estimated fair value of all outstanding notes was approximately $ 3.9 billion and $ 4.1 billion as of December 31, 2018 and 2019 , 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 December 31, 2019 , the aggregate future principal payments for long-term debt including long-term finance leases for each of the next five years and thereafter are as follows (in millions):  $ 2021  1,046  2023  2024  1,047 Thereafter  2,500 Total  $ 4,685 Credit Facility As of December 31, 2019 , we have $ 4.0 billion of revolving credit facilities which expire in July 2023. The interest rate for the credit facilities is determined based on a formula using certain market rates. No amounts were outstanding under the credit facilities as of December 31, 2018 and 2019 . Alphabet Inc. Note 7. Supplemental Financial Statement Information Property and Equipment, Net Property and equipment, net, consisted of the following (in millions):  As of December 31, 2018  As of December 31, 2019 Land and buildings $ 30,179  $ 39,865 Information technology assets 30,119  36,840 Construction in progress 16,838  21,036 Leasehold improvements 5,310  6,310 Furniture and fixtures  Property and equipment, gross 82,507  104,207 Less: accumulated depreciation ( 22,788 )  ( 30,561 ) Property and equipment, net $ 59,719  $ 73,646 As of December 31, 2018 and 2019, information technology assets and land and buildings under finance leases with a cost basis of $ 648 million and $ 1.6 billion , respectively, were included in property and equipment. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in millions):  As of December 31, 2018  As of December 31, 2019 European Commission fines (1) $ 7,754  $ 9,405 Accrued customer liabilities 1,810  2,245 Accrued purchases of property and equipment 1,603  2,411 Current operating lease liabilities  1,199 Other accrued expenses and current liabilities 5,791  7,807 Accrued expenses and other current liabilities $ 16,958  $ 23,067 (1)  Includes the effects of foreign exchange and interest. See Note 10 for further details. Alphabet Inc. Accumulated Other Comprehensive Income (Loss) The components of AOCI, net of 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, 2016 $ ( 2,646 )  $ ( 179 )  $  $ ( 2,402 ) Other comprehensive income (loss) before reclassifications 1,543   ( 638 )  1,212 Amounts reclassified from AOCI    Other comprehensive income (loss) 1,543   ( 545 )  1,410 Balance as of December 31, 2017 ( 1,103 )   ( 122 )  ( 992 ) Cumulative effect of accounting change  ( 98 )   ( 98 ) Other comprehensive income (loss) before reclassifications ( 781 )    ( 429 ) Amounts excluded from the assessment of hedge effectiveness recorded in AOCI    Amounts reclassified from AOCI  ( 911 )   ( 813 ) Other comprehensive income (loss) ( 781 )  ( 823 )   ( 1,216 ) Balance as of December 31, 2018 ( 1,884 )  ( 688 )   ( 2,306 ) Cumulative effect of accounting change   ( 30 )  ( 30 ) Other comprehensive income (loss) before reclassifications ( 119 )  1,611   1,528 Amounts excluded from the assessment of hedge effectiveness recorded in AOCI   ( 14 )  ( 14 ) Amounts reclassified from AOCI  ( 111 )  ( 299 )  ( 410 ) Other comprehensive income (loss) ( 119 )  1,500  ( 277 )  1,104 Balance as of December 31, 2019 $ ( 2,003 )  $  $ ( 41 )  $ ( 1,232 ) 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     Year Ended December 31, AOCI Components  Location    Unrealized gains (losses) on available-for-sale investments         Other income (expense), net  $ ( 105 )  $ 1,190  $   Benefit (provision) for income taxes   ( 279 )  ( 38 )   Net of tax  ( 105 )   Unrealized gains (losses) on cash flow hedges       Foreign exchange contracts  Revenue  ( 169 )  ( 139 )  Interest rate contracts  Other income (expense), net      Benefit (provision) for income taxes    ( 74 )   Net of tax  ( 93 )  ( 98 )  Total amount reclassified, net of tax    $ ( 198 )  $  $ 75 Alphabet Inc. Other Income (Expense), Net The components of other income (expense), net, were as follows (in millions):  Year Ended December 31,    Interest income $ 1,312  $ 1,878  $ 2,427 Interest expense (1) ( 109 )  ( 114 )  ( 100 ) Foreign currency exchange gain (loss), net (2) ( 121 )  ( 80 )  Gain (loss) on debt securities, net (3) ( 110 )  1,190  Gain (loss) on equity securities, net  5,460  2,649 Performance fees (4) ( 32 )  ( 1,203 )  ( 326 ) Gain (loss) and impairment from equity method investments, net ( 156 )  ( 120 )  Other   Other income (expense), net $ 1,015  $ 7,389  $ 5,394 (1)  Interest expense is net of interest capitalized of $ 48 million , $ 92 million , and $ 167 million for the years ended December 31, 2017 , 2018 , and 2019 , respectively. (2)  Our foreign currency exchange gain (loss), net, are related to the option premium costs and forwards points for our foreign currency hedging contracts, our foreign exchange transaction gains and losses from the conversion of the transaction currency to the functional currency, offset by the foreign currency hedging contract losses and gains. The net foreign currency transaction losses were $ 226 million , $ 195 million , and $ 166 million for the years ended December 31, 2017 , 2018 , and 2019 , respectively. (3)  During the year ended December 31, 2018, the terms of a non-marketable debt security were modified resulting in an unrealized $ 1.3 billion gain. (4)  Performance fees were reclassified for prior periods from general and administrative expenses to other income (expense), net to conform with current period presentation. Note 8. Acquisitions 2019 Acquisitions Looker In December 2019, we obtained all regulatory clearances necessary to close the acquisition of Looker, a unified platform for business intelligence, data applications and embedded analytics for $ 2.4 billion , with integration pending approval from a UK regulatory review. The addition of Looker to Google Cloud is expected to help customers accelerate how they analyze data, deliver business intelligence, and build data-driven applications. The fair value of assets acquired and liabilities assumed was recorded based on a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. The $ 2.4 billion purchase price includes our previously held equity interest and excludes post acquisition compensation arrangements. In aggregate, $ 91 million was cash acquired, $ 290 million was attributed to intangible assets, $ 1.9 billion to goodwill and $ 48 million to net assets acquired . Goodwill was recorded in the Google segment and primarily attributable to synergies expected to arise after the acquisition. Goodwill is not expected to be deductible for tax purposes. Other Acquisitions During the year ended December 31, 2019 , we completed other acquisitions and purchases of intangible assets for total consideration of approximately $ 1.0 billion . In aggregate, $ 28 million was cash acquired, $ 282 million was attributed to intangible assets, $ 904 million to goodwill and $ 185 million to net liabilities assumed . These acquisitions generally enhance the breadth and depth of our offerings and expand our expertise in engineering and other functional areas. Pro forma results of operations for these acquisitions, including Looker, have not been presented because they are not material to the consolidated results of operations, either individually or in the aggregate. For all intangible assets acquired and purchased during the year ended December 31, 2019 , patents and developed technology have a weighted-average useful life of 3.5 years, customer relationships have a weighted-average useful life of 6.3 years, and trade names and other have a weighted-average useful life of 4.5 years. Pending Acquisition of Fitbit In November 2019, we entered into an agreement to acquire Fitbit, a leading wearables brand, for $ 7.35 per share, representing a total purchase price of approximately $ 2.1 billion as of the date of the agreement. The acquisition Alphabet Inc. of Fitbit is expected to be completed in 2020, subject to customary closing conditions, including the receipt of regulatory approvals. Upon the close of the acquisition, Fitbit will be part of Google segment. Note 9. Goodwill and Other Intangible Assets Goodwill Changes in the carrying amount of goodwill for the years ended December 31, 2018 and 2019 were as follows (in millions):  Google  Other Bets  Total Consolidated Balance as of December 31, 2017 $ 16,295  $  $ 16,747 Acquisitions 1,227   1,227 Transfers  ( 80 )  Foreign currency translation and other adjustments ( 81 )  ( 5 )  ( 86 ) Balance as of December 31, 2018 17,521   17,888 Acquisitions 2,353   2,828 Transfers  ( 9 )  Foreign currency translation and other adjustments  ( 130 )  ( 92 ) Balance as of December 31, 2019 $ 19,921  $  $ 20,624 Other Intangible Assets Information regarding purchased intangible assets were as follows (in millions):  As of December 31, 2018  Gross Carrying Amount  Accumulated Amortization  Net Carrying Amount Patents and developed technology $ 5,125  $ 3,394  $ 1,731 Customer relationships   Trade names and other   Total $ 6,177  $ 3,957  $ 2,220  As of December 31, 2019  Gross Carrying Amount  Accumulated Amortization  Net Carrying Value Patents and developed technology $ 4,972  $ 3,570  $ 1,402 Customer relationships   Trade names and other   Total $ 5,929  $ 3,950  $ 1,979 Patents and developed technology, customer relationships, and trade names and other have weighted-average remaining useful lives of 2.3 years, 5.6 years, and 3.0 years, respectively. Amortization expense relating to purchased intangible assets was $ 796 million , $ 865 million , and $ 795 million for the years ended December 31, 2017 , 2018 , and 2019 , respectively. Alphabet Inc. As of December 31, 2019 , expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter is as follows (in millions):  $ 2021 2022 2023 2024 Thereafter  $ 1,979 Note 10. Commitments and Contingencies Purchase Obligations As of December 31, 2019 , we had $ 5.7 billion of other non-cancelable contractual obligations, primarily related to data center operations and build-outs, digital media content licensing, and purchases of inventory. Indemnifications In the normal course of business, to facilitate transactions in our services and products, we indemnify certain parties, including advertisers, Google Network Members, customers of Google Cloud offerings, and lessors with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents. It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of December 31, 2019 , we did not have any material indemnification claims that were probable or reasonably possible. Legal Matters Antitrust Investigations On November 30, 2010, the EC's Directorate General for Competition opened an investigation into various antitrust-related complaints against us. On June 27, 2017, the EC announced its decision that certain actions taken by Google regarding its display and ranking of shopping search results and ads infringed European competition law. The EC decision imposed a  2.4 billion ( $ 2.7 billion as of June 27, 2017) fine. On September 11, 2017, we appealed the EC decision and on September 27, 2017, we implemented product changes to bring shopping ads into compliance with the EC's decision. We recognized a charge of $ 2.7 billion for the fine in the second quarter of 2017. On July 18, 2018, the EC announced its decision that certain provisions in Googles Android-related distribution agreements infringed European competition law. The EC decision imposed a  4.3 billion ( $ 5.1 billion as of June 30, 2018) fine and directed the termination of the conduct at issue. On October 9, 2018, we appealed the EC decision. On October 29, 2018, we implemented changes to certain of our Android distribution practices. We recognized a charge of $ 5.1 billion for the fine in the second quarter of 2018. On March 20, 2019, the EC announced its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law. The EC decision imposed a fine of  1.5 billion ( $ 1.7 billion as of March 20, 2019) and directed actions related to AdSense for Search agreements, which we implemented prior to the decision. On June 4, 2019, we appealed the EC decision. We recognized a charge of $ 1.7 billion for the fine in the first quarter of 2019. Alphabet Inc. While each EC decision is under appeal, we included the fines 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. From time to time we are subject to formal and informal inquiries and investigations by competition authorities in the United States, Europe, and other jurisdictions. For example, in August 2019, we began receiving civil investigative demands from the U.S. Department of Justice requesting information and documents relating to our prior antitrust investigations and certain of our business practices. Attorneys general from 51 U.S. states and territories have also opened antitrust investigations into certain of our business practices. We continue to cooperate with federal and state regulators in the United States, and other regulators around the world. Patent and Intellectual Property Claims We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe others' intellectual property rights. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, functionalities, products, or services. As a result, we may have to change our business practices, and develop non-infringing products or technologies, which could result in a loss of revenues for us and otherwise harm our business. In addition, the U.S. International Trade Commission (ITC) has increasingly become an important forum to litigate intellectual property disputes because an ultimate loss in an ITC action can result in a prohibition on importing infringing products into the U.S. Because the U.S. is an important market, a prohibition on importation could have an adverse effect on us, including preventing us from importing many important products into the U.S. or necessitating workarounds that may limit certain features of our products. Furthermore, many of our agreements with our customers and partners require us to indemnify them against certain intellectual property infringement claims, which would increase our costs as a result of defending such claims, and may require that we pay significant damages if there were an adverse ruling in any such claims. In addition, our customers and partners may discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. In 2010, Oracle America, Inc. (Oracle) brought a copyright lawsuit against Google in the Northern District of California, alleging that Google's Android operating system infringes Oracle's copyrights related to certain Java application programming interfaces. After trial, final judgment was entered by the district court in favor of Google on June 8, 2016, and the court decided post-trial motions in favor of Google. Oracle appealed and on March 27, 2018, the appeals court reversed and remanded the case for a trial on damages. On May 29, 2018, we filed a petition for a rehearing at the Federal Circuit, and on August 28, 2018, the Federal Circuit denied the petition. On January 24, 2019, we filed a petition to the Supreme Court of the United States to review this case. On April 29, 2019, the Supreme Court requested the views of the Solicitor General regarding our petition. On September 27, 2019, the Solicitor General recommended denying our petition, and we provided our response on October 16, 2019. On November 15, 2019, the Supreme Court granted our petition and made a decision to review the case. If the Supreme Court does not rule in our favor, the case will be remanded to the district court for further determination of the remaining issues in the case, including damages, if any. We believe this lawsuit is without merit and are defending ourselves vigorously. Given the nature of this case, we are unable to estimate the reasonably possible loss or range of loss, if any, arising from this matter. Other We are also regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury, consumer protection, and other matters. Such claims, suits, regulatory and government investigations, and other proceedings could result in fines, civil or criminal penalties, or other adverse consequences. Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters. With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on our business, Alphabet Inc. consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties. We expense legal fees in the period in which they are incurred. Non-Income Taxes We are under audit by various domestic and foreign tax authorities with regards to non-income tax matters. The subject matter of non-income tax audits primarily arises from disputes on the tax treatment and tax rate applied to the sale of our products and services in these jurisdictions and the tax treatment of certain employee benefits. We accrue non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We believe these matters are without merit and we are defending ourselves vigorously. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from our expectations. For information regarding income tax contingencies, see Note 14 . Note 11. Stockholders' Equity Convertible Preferred Stock Our board of directors has authorized 100 million shares of convertible preferred stock, $ 0.001 par value, issuable in series. As of December 31, 2018 and 2019 , no shares were issued or outstanding. Class A and Class B Common Stock and Class C Capital Stock Our board of directors has authorized three classes of stock, Class A and Class B common stock, and Class C capital stock. The rights of the holders of each class of our common and capital stock are identical, except with respect to voting. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 10 votes per share. Class C capital stock has no voting rights, except as required by applicable law. Shares of Class B common stock may be converted at any time at the option of the stockholder and automatically convert upon sale or transfer to Class A common stock. Share Repurchases In January 2018, the board of directors of Alphabet authorized the company to repurchase up to $ 8.6 billion of its Class C capital stock. In January and July 2019, the board of directors of Alphabet authorized the company to repurchase up to an additional $ 12.5 billion and $ 25.0 billion of its Class C capital stock, respectively. Share repurchases pursuant to the January 2018 and January 2019 authorizations were completed in 2019. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. During the years ended December 31, 2018 and 2019 , we repurchased and subsequently retired 8.2 million shares of Alphabet Class C capital stock for an aggregate amount of $ 9.1 billion and 15.3 million shares of Alphabet Class C capital stock for an aggregate amount of $ 18.4 billion , respectively. Note 12. Net Income Per Share We compute net income per share of Class A and Class B common stock and Class C capital stock using the two-class method. Basic net income per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of restricted stock units and other contingently issuable shares. The dilutive effect of outstanding restricted stock units and other contingently issuable shares is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares. The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock and Class C capital stock are identical, except with respect to voting. Furthermore, there are a number of safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our board of directors from declaring or paying unequal per share dividends on our Class A and Class B common stock and Class C capital stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock must be approved by the class of stock adversely Alphabet Inc. affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our board of directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common shares and Class C capital stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. In the years ended December 31, 2017 , 2018 and 2019 , the net income per share amounts are the same for Class A and Class B common stock and Class C capital stock because the holders of each class are entitled to equal per share dividends or distributions in liquidation in accordance with the Amended and Restated Certificate of Incorporation of Alphabet Inc. The following tables set forth the computation of basic and diluted net income per share of Class A and Class B common stock and Class C capital stock (in millions, except share amounts which are reflected in thousands and per share amounts):  Year Ended December 31,   Class A  Class B  Class C Basic net income per share:      Numerator      Allocation of undistributed earnings $ 5,438  $  $ 6,362 Denominator      Number of shares used in per share computation 297,604  47,146  348,151 Basic net income per share $ 18.27  $ 18.27  $ 18.27 Diluted net income per share:      Numerator      Allocation of undistributed earnings for basic computation $ 5,438  $  $ 6,362 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares   Reallocation of undistributed earnings ( 74 )  ( 14 )  Allocation of undistributed earnings $ 6,226  $  $ 6,436 Denominator      Number of shares used in basic computation 297,604  47,146  348,151 Weighted-average effect of dilutive securities      Add:      Conversion of Class B to Class A common shares outstanding 47,146   Restricted stock units and other contingently issuable shares 1,192   9,491 Number of shares used in per share computation 345,942  47,146  357,642 Diluted net income per share $ 18.00  $ 18.00  $ 18.00 Alphabet Inc.  Year Ended December 31,   Class A  Class B  Class C Basic net income per share:      Numerator      Allocation of undistributed earnings $ 13,200  $ 2,072  $ 15,464 Denominator      Number of shares used in per share computation 298,548  46,864  349,728 Basic net income per share $ 44.22  $ 44.22  $ 44.22 Diluted net income per share:      Numerator      Allocation of undistributed earnings for basic computation $ 13,200  $ 2,072  $ 15,464 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 2,072   Reallocation of undistributed earnings ( 146 )  ( 24 )  Allocation of undistributed earnings $ 15,126  $ 2,048  $ 15,610 Denominator      Number of shares used in basic computation 298,548  46,864  349,728 Weighted-average effect of dilutive securities      Add:      Conversion of Class B to Class A common shares outstanding 46,864   Restricted stock units and other contingently issuable shares   7,456 Number of shares used in per share computation 346,101  46,864  357,184 Diluted net income per share $ 43.70  $ 43.70  $ 43.70  Year Ended December 31,   Class A  Class B  Class C Basic net income per share:      Numerator      Allocation of undistributed earnings $ 14,846  $ 2,307  $ 17,190 Denominator      Number of shares used in per share computation 299,402  46,527  346,667 Basic net income per share $ 49.59  $ 49.59  $ 49.59 Diluted net income per share:      Numerator      Allocation of undistributed earnings for basic computation $ 14,846  $ 2,307  $ 17,190 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 2,307   Reallocation of undistributed earnings ( 126 )  ( 20 )  Allocation of undistributed earnings $ 17,027  $ 2,287  $ 17,316 Denominator      Number of shares used in basic computation 299,402  46,527  346,667 Weighted-average effect of dilutive securities      Add:      Conversion of Class B to Class A common shares outstanding 46,527   Restricted stock units and other contingently issuable shares   5,547 Number of shares used in per share computation 346,342  46,527  352,214 Diluted net income per share $ 49.16  $ 49.16  $ 49.16 Alphabet Inc. Note 13. Compensation Plans Stock Plans Under our 2012 Stock Plan, RSUs or stock options may be granted. An RSU award is an agreement to issue shares of our publicly traded stock at the time the award vests. Incentive and non-qualified stock options, or rights to purchase common stock, are generally granted for a term of 10 years. RSUs granted to participants under the 2012 Stock Plan generally vest over four years contingent upon employment or service with us on the vesting date. As of December 31, 2019 , there were 37,982,435 shares of stock reserved for future issuance under our Stock Plan. Additionally, we have stock-based awards that may be settled in the stock of certain of our Other Bets. Stock-Based Compensation For the years ended December 31, 2017 , 2018 and 2019 , total stock-based compensation expense was $ 7.9 billion , $ 10.0 billion and $ 11.7 billion , including amounts associated with awards we expect to settle in Alphabet stock of $ 7.7 billion , $ 9.4 billion , and $ 10.8 billion , respectively. For the years ended December 31, 2017 , 2018 and 2019 , we recognized tax benefits on total stock-based compensation expense, which are reflected in the provision for income taxes in the Consolidated Statements of Income, of $ 1.6 billion , $ 1.5 billion , and $ 1.8 billion , respectively. For the years ended December 31, 2017 , 2018 and 2019 , tax benefit realized related to awards vested or exercised during the period was $ 2.7 billion , $ 2.1 billion and $ 2.2 billion , respectively. These amounts do not include the indirect effects of stock-based awards, which primarily relate to the research and development tax credit. Stock-Based Award Activities The following table summarizes the activities for our unvested RSUs in Alphabet stock for the year ended December 31, 2019 :  Unvested Restricted Stock Units  Number of Shares  Weighted- Average Grant-Date Fair Value Unvested as of December 31, 2018 18,467,678  $ 936.96 Granted 13,934,041  $ 1,092.36 Vested ( 11,576,766 )  $ 919.28 Forfeited/canceled ( 1,430,717 )  $ 990.56 Unvested as of December 31, 2019 19,394,236  $ 1,055.22 The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2017 and 2018 , was $ 845.06 and $ 1,095.89 , respectively. Total fair value of RSUs, as of their respective vesting dates, during the years ended December 31, 2017 , 2018 , and 2019 were $ 11.3 billion , $ 14.1 billion , and $ 15.2 billion , respectively. As of December 31, 2019 , there was $ 19.1 billion of unrecognized compensation cost related to unvested employee RSUs. This amount is expected to be recognized over a weighted-average period of 2.6 years . 401(k) Plans We have two 401(k) Savings Plans that qualify as deferred salary arrangements under Section 401(k) of the Internal Revenue Code. Under these 401(k) Plans, matching contributions are based upon the amount of the employees contributions subject to certain limitations. We recognized expense of approximately $ 448 million , $ 691 million , and $ 724 million for the years ended December 31, 2017 , 2018 , and 2019 , respectively. Alphabet Inc. Note 14. Income Taxes Income from continuing operations before income taxes consists of the following (in millions):  Year Ended December 31,    Domestic operations $ 10,680  $ 15,779  $ 16,426 Foreign operations 16,513  19,134  23,199 Total $ 27,193  $ 34,913  $ 39,625 The provision for income taxes consists of the following (in millions): Year Ended December 31,  2018 Current:      Federal and state $ 12,608  $ 2,153  $ 2,424 Foreign 1,746  1,251  2,713 Total 14,354  3,404  5,137 Deferred:      Federal and state   Foreign ( 43 )  ( 134 )  ( 141 ) Total   Provision for income taxes $ 14,531  $ 4,177  $ 5,282 The Tax Act enacted on December 22, 2017 introduced significant changes to U.S. income tax law. Effective 2018, the Tax Act reduced the U.S. statutory tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings and certain related-party payments. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our consolidated financial statements as of December 31, 2017. As we collected and prepared necessary data, and interpreted the additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we made adjustments, over the course of 2018, to the provisional amounts including refinements to deferred taxes. The accounting for the tax effects of the Tax Act was completed as of December 31, 2018. Transition tax The Tax Act required us to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets and 8% on the remaining earnings. We recorded a provisional amount for our transitional tax liability and income tax expense of $ 10.2 billion as of December 31, 2017. Subsequent adjustments in 2018 and 2019 were not material. Deferred tax effects Due to the change in the statutory tax rate from the Tax Act, we remeasured our deferred taxes as of December 31, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. We recognized a deferred tax benefit of $ 376 million to reflect the reduced U.S. tax rate and other effects of the Tax Act as of December 31, 2017. Alphabet Inc. The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows:  Year Ended December 31,    U.S. federal statutory tax rate 35.0 %  21.0 %  21.0 % Foreign income taxed at different rates ( 14.2 )  ( 4.9 )  ( 5.6 ) Effect of the Tax Act   Transition tax 37.6  ( 0.1 )  ( 0.6 ) Deferred tax effects ( 1.4 )  ( 1.2 )  0.0 Federal research credit ( 1.8 )  ( 2.4 )  ( 2.5 ) Stock-based compensation expense ( 4.5 )  ( 2.2 )  ( 0.7 ) European Commission fines 3.5  3.1  1.0 Deferred tax asset valuation allowance 0.9  ( 2.0 )  0.0 State and local income taxes 0.1  ( 0.4 )  1.1 Other adjustments ( 1.8 )  1.1  ( 0.4 ) Effective tax rate 53.4 %  12.0 %  13.3 % Our effective tax rate for each of the years presented was affected by earnings realized in foreign jurisdictions with statutory tax rates lower than the federal statutory tax rate. Substantially all of the income from foreign operations was earned by an Irish subsidiary. Beginning in 2018, earnings realized in foreign jurisdictions are subject to U.S. tax in accordance with the Tax Act. On July 27, 2015, the United States Tax Court, in an opinion in Altera Corp. v. Commissioner, invalidated the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. The U.S. Tax Court issued the final decision on December 28, 2015. As a result of that decision, we recorded a tax benefit related to the anticipated reimbursement of cost share payment for previously shared stock-based compensation costs. On June 7, 2019, the United States Court of Appeals for the Ninth Circuit overturned the 2015 Tax Court decision in Altera Corp. v. Commissioner, and upheld the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. As a result of the Ninth Circuit court decision, our cumulative net tax benefit of $ 418 million related to previously shared stock-based compensation costs was reversed in the year ended December 31, 2019. Alphabet Inc. Deferred Income Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows (in millions):  As of December 31,   Deferred tax assets:    Stock-based compensation expense $  $ Accrued employee benefits  Accruals and reserves not currently deductible  1,047 Tax credits 1,979  3,264 Basis difference in investment in Arris  Prepaid cost sharing  Net operating losses  Operating leases  1,876 Other  Total deferred tax assets 5,551  8,232 Valuation allowance ( 2,817 )  ( 3,502 ) Total deferred tax assets net of valuation allowance 2,734  4,730 Deferred tax liabilities:    Property and equipment, net ( 1,382 )  ( 1,798 ) Renewable energy investments ( 500 )  ( 466 ) Foreign Earnings ( 111 )  ( 373 ) Net investment gains ( 1,143 )  ( 1,074 ) Operating leases  ( 1,619 ) Other ( 125 )  ( 380 ) Total deferred tax liabilities ( 3,261 )  ( 5,710 ) Net deferred tax assets (liabilities) $ ( 527 )  $ ( 980 ) As of December 31, 2019 , our federal, state and foreign net operating loss carryforwards for income tax purposes were approximately $ 1.8 billion , $ 3.1 billion , and $ 1.9 billion respectively. If not utilized, the federal and foreign net operating loss carryforwards will begin to expire in 2021 and the state net operating loss carryforwards will begin to expire in 2020. It is more likely than not that certain net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions. As of December 31, 2019 , our California research and development credit carryforwards for income tax purposes were approximately $ 3.0 billion that can be carried over indefinitely. We believe the state tax credit is not likely to be realized. As of December 31, 2019 , we maintained a valuation allowance with respect to California deferred tax assets, certain federal net operating losses, certain state tax credits and certain foreign net operating losses that we believe are not likely to be realized. Due to gains from equity securities recognized, we released the valuation allowance in 2018 against the deferred tax asset for the book-to-tax basis difference in our investments in Arris shares received from the sale of the Motorola Home business to Arris in 2013. We continue to reassess the remaining valuation allowance quarterly and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly. Alphabet Inc. Uncertain Tax Positions The following table summarizes the activity related to our gross unrecognized tax benefits (in millions):  Year Ended December 31,    Beginning gross unrecognized tax benefits $ 5,393  $ 4,696  $ 4,652 Increases related to prior year tax positions   Decreases related to prior year tax positions ( 257 )  ( 623 )  ( 143 ) Decreases related to settlement with tax authorities ( 1,875 )  ( 191 )  ( 2,886 ) Increases related to current year tax positions   Ending gross unrecognized tax benefits $ 4,696  $ 4,652  $ 3,377 The total amount of gross unrecognized tax benefits was $ 4.7 billion , $ 4.7 billion , and $ 3.4 billion as of December 31, 2017 , 2018 , and 2019 , respectively, of which, $ 3.0 billion , $ 2.9 billion , and $ 2.3 billion , if recognized, would affect our effective tax rate, respectively. The decrease in gross unrecognized tax benefits in 2017 and 2019 was primarily as a result of the resolution of multi-year audits. As of December 31, 2018 and 2019 , we had accrued $ 490 million and $ 130 million in interest and penalties in provision for income taxes, respectively. We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions, our two major tax jurisdictions are the U.S. federal and Ireland. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. The IRS completed its examination through our 2015 tax years; all issues have been concluded and the IRS will commence its examination of our 2016 through 2018 tax returns. We have also received tax assessments in multiple foreign jurisdictions asserting transfer pricing adjustments or permanent establishment. We continue to defend any and all such claims as presented. The tax years 2011 through 2018 remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are other ongoing audits in various other jurisdictions that are not material to our financial statements. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. Although the timing of resolution, settlement, and closure of audits is not certain, we do not believe it is reasonably possible that our unrecognized tax benefits will materially change in the next 12 months. Note 15. Information about Segments and Geographic Areas We operate our business in multiple operating segments. Google is our only reportable segment. None of our other segments meet the quantitative thresholds to qualify as reportable segments; therefore, the other operating segments are combined and disclosed as Other Bets. Our reported segments are:  Google  Google includes our main products such as ads, Android, Chrome, hardware, Google Cloud, Google Maps, Google Play, Search, and YouTube. Our technical infrastructure is also included in Google. Google generates revenues primarily from advertising; sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud offerings and subscription-based products.  Other Bets  Other Bets is a combination of multiple operating segments that are not individually material. Other Bets includes Access, Calico, CapitalG, GV, Verily, Waymo, and X, among others. Revenues from the Other Bets are derived primarily through the sales of internet and TV services through Access as well as licensing and RD services through Verily. Alphabet Inc. Revenues, cost of revenues, and operating expenses are generally directly attributed to our segments. Inter-segment revenues are not presented separately, as these amounts are immaterial. Our Chief Operating Decision Maker does not evaluate operating segments using asset information. Information about segments during the periods presented were as follows (in millions):  Year Ended December 31,    Revenues:      Google $ 110,547  $ 136,362  $ 160,743 Other Bets   Hedging gains (losses) ( 169 )  ( 138 )  Total revenues $ 110,855  $ 136,819  $ 161,857  Year Ended December 31,    Operating income (loss):      Google $ 32,456  $ 36,655  $ 41,673 Other Bets ( 2,734 )  ( 3,358 )  ( 4,824 ) Reconciling items (1) ( 3,544 )  ( 5,773 )  ( 2,618 ) Total income from operations $ 26,178  $ 27,524  $ 34,231 (1)  Reconciling items are generally comprised of corporate administrative costs, hedging gains (losses) and other miscellaneous items that are not allocated to individual segments. Reconciling items include t he European Commission fines for the years ended December 31, 2017, 2018 and 2019, and a charge from a legal settlement for the year ended December 31, 2019. Performance fees previously included in reconciling items were reclassified for the years ended December 31, 2017 and 2018 from general and administrative expenses to other income (expense), net to conform with current period presentation. For further information on the reclassification, see Note 1.  Year Ended December 31,    Capital expenditures:      Google $ 12,619  $ 25,460  $ 25,251 Other Bets   Reconciling items (2)  ( 502 )  ( 1,984 ) Total capital expenditures as presented on the Consolidated Statements of Cash Flows $ 13,184  $ 25,139  $ 23,548 (2)  Reconciling items are related to timing differences of payments as segment capital expenditures are on accrual basis while total capital expenditures shown on the Consolidated Statements of Cash Flow are on cash basis and other miscellaneous differences. Alphabet Inc. Stock-based compensation (SBC) and depreciation, amortization, and impairment are included in segment operating income (loss) as shown below (in millions):  Year Ended December 31,    Stock-based compensation:      Google $ 7,168  $ 8,755  $ 10,185 Other Bets   Reconciling items (3)   Total stock-based compensation (4) $ 7,679  $ 9,353  $ 10,794       Depreciation, amortization, and impairment:      Google $ 6,608  $ 8,708  $ 11,158 Other Bets   Reconciling items (3)   Total depreciation, amortization, and impairment $ 6,915  $ 9,035  $ 11,781 (3)  Reconciling items relate to corporate administrative and other costs that are not allocated to individual segments. (4)  For purposes of segment reporting, SBC represents awards that we expect to settle in Alphabet stock. The following table presents our long-lived assets by geographic area (in millions):  As of December 31, 2018  As of December 31, 2019 Long-lived assets:    United States $ 74,882  $ 94,907 International 22,234  28,424 Total long-lived assets $ 97,116  $ 123,331 For revenues by geography, see Note 2 . Alphabet Inc. "," ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2019 , our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting We rely extensively on information systems to manage our business and summarize and report operating results. In 2019, we began a multi-year implementation of a new global enterprise resource planning (ERP) system, which will replace much of our existing core financial systems. The ERP system is designed to accurately maintain the Companys financial records, enhance the flow of financial information, improve data management and provide timely information to the Companys management team. The implementation is expected to occur in phases over the next several years, with initial changes to our general ledger and consolidated financial reporting to take place in 2020. There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as the phased implementation of the new ERP system continues, we will change our processes and procedures which, in turn, could result in changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting. Managements Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2019 . Management reviewed the results of its assessment with our Audit Committee. The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by Ernst  Young LLP, an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Annual Report on Form 10-K. Limitations on Effectiveness of Controls and Procedures In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. "
3,goog,-kq42017," ITEM 1. BUSINESS Overview As our founders Larry and Sergey wrote in the original founders' letter, ""Google is not a conventional company. We do not intend to become one."" That unconventional spirit has been a driving force throughout our history -- inspiring us to do things like rethink the mobile device ecosystem with Android and map the world with Google Maps. As part of that, our founders also explained that you could expect us to make ""smaller bets in areas that might seem very speculative or even strange when compared to our current businesses."" From the start, the company has always strived to do more, and to do important and meaningful things with the resources we have. Alphabet is a collection of businesses -- the largest of which is Google. It also includes businesses that are generally pretty far afield of our main internet products in areas such as self-driving cars, life sciences, internet access and TV services. We report all non-Google businesses collectively as Other Bets. Our Alphabet structure is about helping each of our businesses prosper through strong leaders and independence. Access and technology for everyone The Internet is one of the worlds most powerful equalizers, capable of propelling new ideas and people forward. At Google, our mission is to make sure that information serves everyone, not just a few. So whether you're a child in a rural village or a professor at an elite university, you can access the same information. We are helping people get online by tailoring digital experiences to the needs of emerging markets. For instance, our digital payments app in India, now called Google Pay, helps tens of millions of people and businesses easily pay with just a few taps. We're also making sure our core Google products are fast and useful, especially for users in areas where speed and connectivity are central concerns. Other Alphabet companies are also pursuing initiatives with similar goals. For instance, Loon announced that it will bring its balloon-powered internet to regions of central Kenya, starting in 2019. Moonshots Many companies get comfortable doing what they have always done, making only incremental changes. This incrementalism leads to irrelevance over time, especially in technology, where change tends to be revolutionary, not evolutionary. People thought we were crazy when we acquired YouTube and Android and when we launched Chrome, but those efforts have matured into major platforms for digital video and mobile devices and a safer, popular browser. We continue to look toward the future and continue to invest for the long-term. As we said in the original founders' letter, we will not shy away from high-risk, high-reward projects that we believe in because they are the key to our long-term success. The power of machine learning Across the company, machine learning and artificial intelligence (AI) are increasingly driving many of our latest innovations. Within Google, our investments in machine learning over a decade have enabled us to build products that are smarter and more useful -- it's what allows you to use your voice to ask the Google Assistant for information, to translate the web from one language to another, to see better YouTube recommendations, and to search for people and events in Google Photos. Our advertising tools also use machine learning to help marketers find the right audience, deliver the right creative, and optimize their campaigns through better auto-bidding and measurement tools. Machine learning is also showing great promise in helping us tackle big issues, like dramatically improving the energy efficiency of our data centers. Across Other Bets, machine learning helps self-driving cars better detect and respond to others on the road, assists delivery drones in determining whether a location is safe for drop off, and can also help clinicians more accurately detect sight-threatening eye diseases. Google Serving our users We have always been a company committed to building products that have the potential to improve the lives of millions of people. Our product innovations have made our services widely used, and our brand one of the most recognized in the world. Google's core products and platforms such as Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube each have over one billion monthly active users. But most important, we believe we are just beginning to scratch the surface. Our vision is to remain a place of incredible creativity and innovation Alphabet Inc. that uses our technical expertise to tackle big problems. As the majority of Alphabets big bets continue to reside within Google, an important benefit of the shift to Alphabet has been the tremendous focus that were able to have on Googles many extraordinary opportunities. Googles mission to organize the worlds information and make it universally accessible and useful has always been our North Star, and our products have come a long way since the company was founded two decades ago. Instead of just showing ten blue links in our search results, we are increasingly able to provide direct answers -- even if you're speaking your question using Voice Search -- which makes it quicker, easier and more natural to find what you're looking for. You can also type or talk with the Google Assistant in a conversational way across multiple devices like phones, speakers, headphones, televisions and more. And with Google Lens, you can use your phones camera to identify an unfamiliar landmark or find a trailer from a movie poster. Over time, we have also added other services that let you access information quickly and easily -- like Google Maps, which helps you navigate to a store while showing you current traffic conditions, or Google Photos, which helps you store and organize your photos. This drive to make information more accessible has led us over the years to improve the discovery and creation of digital content, on the web and through platforms like Google Play and YouTube. And with the migration to mobile, people are consuming more digital content by watching more videos, playing more games, listening to more music, reading more books, and using more apps than ever before. Working with content creators and partners, we continue to build new ways for people around the world to find great digital content. Fueling all of these great digital experiences are powerful platforms and hardware. Thats why we continue to invest in platforms like our Android mobile operating system, Chrome browser, Chrome operating system, and Daydream virtual reality platform, as well as growing our family of great hardware devices. We see tremendous potential for devices to be helpful, make your life easier, and get better over time, by combining the best of Google's AI, software, and hardware. This is reflected in our latest generation of hardware products like Pixel 3 phones and the Google Home Hub smart display. Creating beautiful products that people rely on every day is a journey that we are investing in for the long run. Google was a company built in the cloud and has been investing in infrastructure, security, data management, analytics, and AI from the very beginning. We have continued to enhance these strengths with features like data migration, modern development environments and machine learning tools to provide enterprise-ready cloud services, including Google Cloud Platform and G Suite, to our customers. Google Cloud Platform enables developers to build, test, and deploy applications on Googles highly scalable and reliable infrastructure. Our G Suite productivity tools -- which include apps like Gmail, Docs, Drive, Calendar, Hangouts, and more -- are designed with real-time collaboration and machine intelligence to help people work smarter. Because more and more of todays great digital experiences are being built in the cloud, our Google Cloud products help businesses of all sizes take advantage of the latest technology advances to operate more efficiently. Key to building helpful products for users is our commitment to keeping their data safe online. As the Internet evolves, we continue to invest in our industry-leading security technologies and privacy tools. How we make money The goal of our advertising business is to deliver relevant ads at just the right time and to give people useful commercial information, regardless of the device theyre using. We also provide advertisers with tools that help them better attribute and measure their advertising campaigns across screens. Our advertising solutions help millions of companies grow their businesses, and we offer a wide range of products across screens and formats. We generate revenues primarily by delivering both performance advertising and brand advertising.  Perf ormance advertising creates and delivers relevant ads that users will click on, leading to direct engagement with advertisers. Most of our performance advertisers pay us when a user engages in their ads. Performance advertising lets our advertisers connect with users while driving measurable results.  Our ads tools allow performance advertisers to create simple text-based ads that appear on Google properties and the properties of Google Network Members. In addition, Google Network Members use our platforms to display relevant ads on their properties, generating revenues when site visitors view or click on the ads. We continue to invest in our advertising programs and make significant upgrades.  Brand advertising helps enhance users' awareness of and affinity with advertisers' products and services, through v ideos, text, images, and other interactive ads that run across various devices. We help brand advertisers deliver digital videos and other types of ads to specific audiences for their brand-building marketing campaigns.  Alphabet Inc. We have built a world-class ad technology platform for brand advertisers, agencies, and publishers to power their digital marketing businesses. We aim to ensure great user experiences by serving the right ads at the right time and by building deep partnerships with brands and agencies. We also seek to improve the measurability of brand advertising so advertisers know when their campaigns are effective. We have allocated substantial resources to stopping bad advertising practices and protecting users on the web. We focus on creating the best advertising experiences for our users and advertisers in many ways, ranging from filtering out invalid traffic, removing billions of bad ads from our systems every year to closely monitoring the sites, apps, and videos where ads appear and blacklisting them when necessary to ensure that ads do not fund bad content. Beyond our advertising business, we also generate revenues in other areas. For instance, we generate revenue when users purchase digital content like apps, movies and music through Google Play or when they purchase our Made by Google hardware devices. Businesses also pay for the use of our cloud services like Google Cloud Platform and G Suite. Other Bets Throughout Alphabet, we are also using technology to try and solve big problems across many industries. Alphabets Other Bets are emerging businesses at various stages of development, ranging from those in the research and development phase to those that are in the beginning stages of commercialization, and our goal is for them to become thriving, successful businesses in the medium to long term. To do this, we make sure we have a strong CEO to run each company while also rigorously handling capital allocation and working to make sure each business is executing well. While these early-stage businesses naturally come with considerable uncertainty, some of them are already generating revenue and making important strides in their industries. We continue to build these businesses thoughtfully and systematically to capitalize on the opportunities ahead. We are investing for the long term while being very deliberate about the focus, scale and pace of investments. Other Bets primarily generate revenues from internet and TV services and licensing and RD services. Competition Our business is characterized by rapid change as well as new and disruptive technologies. We face formidable competition in every aspect of our business, particularly from companies that seek to connect people with online information and provide them with relevant advertising. We face competition from:  General purpose search engines and information services, such as Baidu, Microsoft's Bing, Naver, Seznam, Verizon's Yahoo, and Yandex.  Vertical search engines and e-commerce websites, such as Amazon and eBay (e-commerce), Booking's Kayak (travel queries), Microsoft's LinkedIn (job queries), and WebMD (health queries). Some users will navigate directly to such content, websites, and apps rather than go through Google.  Social networks, such as Facebook, Snapchat, and Twitter. Some users increasingly rely on social networks for product or service referrals, rather than seeking information through traditional search engines.  Other forms of advertising, such as billboards, magazines, newspapers, radio, and television. Our advertisers typically advertise in multiple media, both online and offline.  Other online advertising platforms and networks, including Amazon, AppNexus, Criteo, and Facebook, that compete for advertisers that use Google Ads, our primary auction-based advertising platform.  Providers of digital video services, such as Amazon, Facebook, Hulu, and Netflix. We compete with companies that have longer operating histories and more established relationships with customers and users in businesses that are further afield from our advertising business. We face competition from:  Other digital content and application platform providers, such as Apple.  Companies that design, manufacture, and market consumer electronics products, including businesses that have developed proprietary platforms.  Providers of enterprise cloud services, including Alibaba, Amazon, and Microsoft.  Digital assistant providers, such as Amazon and Apple. Competing successfully depends heavily on our ability to deliver and distribute innovative products and technologies to the marketplace across our businesses. Specifically, for our advertising-related businesses, competing successfully depends on attracting and retaining: Alphabet Inc.  Users, for whom other products and services are literally one click away, largely on the basis of the relevance of our advertising, as well as the general usefulness, security and availability of our products and services.  Advertisers, primarily based on our ability to generate sales leads, and ultimately customers, and to deliver their advertisements in an efficient and effective manner across a variety of distribution channels.  Content providers, primarily based on the quality of our advertiser base, our ability to help these partners generate revenues from advertising, and the terms of our agreements with them. Intellectual Property We rely on various intellectual property laws, confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We have registered, and applied for the registration of, U.S. and international trademarks, service marks, domain names and copyrights. We have also filed patent applications in the U.S. and foreign countries covering certain of our technology, and acquired patent assets to supplement our portfolio. We have licensed in the past, and expect that we may license in the future, certain of our rights to other parties. Culture and Employees We take great pride in our culture. We embrace collaboration and creativity, and encourage the iteration of ideas to address complex technical challenges. Transparency and open dialogue are central to how we work, and we aim to ensure that company news reaches our employees first through internal channels. Despite our rapid growth, we still cherish our roots as a startup and wherever possible empower employees to act on great ideas regardless of their role or function within the company. We strive to hire great employees, with backgrounds and perspectives as diverse as those of our global users. We work to provide an environment where these talented people can have fulfilling careers addressing some of the biggest challenges in technology and society. Our employees are among our best assets and are critical for our continued success. We expect to continue investing in hiring talented employees and to provide competitive compensation programs to our employees. As of December 31, 2018 , we had 98,771 full-time employees. Although we have work councils and statutory employee representation obligations in certain countries, our U.S. employees are not represented by a labor union. Competition for qualified personnel in our industry is intense, particularly for software engineers, computer scientists, and other technical staff. Seasonality Our business is affected by seasonal fluctuations in internet usage, advertising expenditures, and underlying business trends such as traditional retail seasonality. Other Items We believe that climate change is one of the most significant global challenges of our time. We have established a climate change strategy based on four dimensions: matching 100% of the electricity consumption of our operations with purchases of renewable energy; understanding the effect of climate change on the resiliency of our core business operations; being a vocal advocate for greening electrical grids worldwide; and empowering everyonebusinesses, governments, nonprofit organizations, communities, and individualsto use Google technology to help create a more sustainable and resource-efficient world. Google's approach to climate change and our broader sustainability efforts are provided in our annual sustainability reports. Available Information Our website is located at www.abc.xyz, and our investor relations website is located at www.abc.xyz/investor. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements are available through our investor relations website, free of charge, after we file them with the SEC. We also provide a link to the section of the SEC's website at www.sec.gov that has all of the reports that we file or furnish with the SEC. We webcast via our investor relations website our earnings calls and certain events we participate in or host with members of the investment community. Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items of interest to our investors, including SEC filings, investor events, press and earnings releases, and blogs. We also share Google news and product updates on Google's Keyword blog at https://www.blog.google/, which may be of interest or material to our investors. Further, corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading ""Other."" The content of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. Alphabet Inc. "," ITEM 1A. RISK FACTORS Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. Risks Related to Our Businesses and Industries We face intense competition. If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, and our revenues and operating results could be adversely affected. Our businesses are rapidly evolving, intensely competitive, and subject to changing technologies, shifting user needs, and frequent introductions of new products and services. Competing successfully depends heavily on our ability to accurately anticipate technology developments and deliver innovative, relevant and useful products, services, and technologies to the marketplace in a timely manner. As our businesses evolve, the competitive pressure to innovate will encompass a wider range of products and services. As a result, we must continue to invest significant resources in research and development, including through acquisitions, in order to enhance our technology and our existing products and services, and introduce new products and services that people can easily and effectively use. We have many competitors in different industries. Our current and potential domestic and international competitors range from large and established companies to emerging start-ups. Some companies have longer operating histories and more established relationships with customers and users. They can use their experiences and resources in ways that could affect our competitive position, including by making acquisitions, continuing to invest heavily in research and development and in hiring talent, aggressively initiating intellectual property claims (whether or not meritorious), and continuing to compete aggressively for users, advertisers, customers, and content providers. Our competitors may be able to innovate and provide products and services faster than we can or may foresee the need for products and services before us. In addition, new products and services, including those that incorporate or utilize artificial intelligence and machine learning, can raise new or exacerbate existing ethical, technological, legal, and other challenges, which may negatively affect our brands and demand for our products and services and adversely affect our revenues and operating results. Our operating results may also suffer if our innovations are not responsive to the needs of our users, advertisers, customers, and content providers; are not appropriately timed with market opportunities; or are not effectively brought to market. As technologies continue to develop, our competitors may be able to offer our users and/or customers experiences that are, or that are seen to be, substantially similar to or better than ours. This may force us to compete in different ways and expend significant resources in order to remain competitive. If our competitors are more successful than we are in developing compelling products or in attracting and retaining users, advertisers, customers, and content providers, our revenues and operating results could be adversely affected. We generate a significant portion of our revenues from advertising, and reduced spending by advertisers or a loss of partners could harm our advertising business. We generated over 85% of total revenues from advertising in 2018 . Many of our advertisers, companies that distribute our products and services, digital publishers, and content partners can terminate their contracts with us at any time. Those partners may not continue to do business with us if we do not create more value (such as increased numbers of users or customers, new sales leads, increased brand awareness, or more effective monetization) than their available alternatives. For example, changes to our data privacy practices, as well as changes to third-party advertising policies or practices may affect the type of ads and/or manner of advertising that we are able to provide which could have an adverse effect on our business. If we do not provide superior value or deliver advertisements efficiently and competitively, our reputation could be affected, we could see a decrease in revenue from advertisers and/or experience other adverse effects to our business. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions can also have a material negative effect on user activity and the demand for advertising and cause our advertisers to reduce the amounts they spend on advertising, which could adversely affect our revenues and advertising business. We are subject to increasing regulatory scrutiny as well as changes in public policies governing a wide range of topics that may negatively affect our business. We and other companies in the technology industry have experienced increased regulatory scrutiny recently. For instance, various regulatory agencies are reviewing aspects of our search and other businesses. This can lead to increased scrutiny from other regulators and legislators, that may affect our reputation, brand and third-party Alphabet Inc. relationships. Such reviews have and may in the future also result in substantial regulatory fines, changes to our business practices and other penalties, which could negatively affect our business and results of operations. We continue to cooperate with regulatory authorities around the world in investigations they are conducting with respect to our business. Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change our business practices. Further, our expansion into a variety of new fields also raises a number of new regulatory issues. These factors could negatively affect our business and results of operations in material ways. Our ongoing investment in new businesses and new products, services, and technologies is inherently risky, and could disrupt our current operations. We have invested and expect to continue to invest in new businesses, products, services, and technologies. The creation of Alphabet as a holding company in 2015 and the investments that we are making across various areas in Google and Other Bets are a reflection of our ongoing efforts to innovate and provide products and services that are useful to users. Our investments in Google and Other Bets span a wide range of industries. Such endeavors may involve significant risks and uncertainties, including distraction of management from our advertising and related business, use of alternative investment, governance or compensation structures, the fact that such offerings or strategies may not be commercially viable for an indefinite amount of time or at all, or may not result in adequate return of capital on our investments; and unidentified issues may not be discovered in our due diligence of such strategies and offerings which could cause us to fail to realize the anticipated benefits of such investments and incur unanticipated liabilities. Because these new ventures are inherently risky, no assurance can be given that such strategies and offerings will be successful and will not adversely affect our reputation, financial condition, and operating results. The Internet is accessed through a variety of platforms and form factors that continue to evolve with the advancement of technology and user preferences. If manufacturers and users do not widely adopt versions of our search technology, products, or operating systems developed for these devices and modalities, our business could be adversely affected. The number of people who access the Internet through devices other than desktop computers, including mobile phones, smartphones, laptops and tablets, video game consoles, voice-activated speakers, wearables, automobiles, and television set-top devices, is increasing dramatically. The functionality and user experience associated with some alternative devices and modalities may make the use of our products and services or the generation of advertising revenue through such devices more difficult (or just different), and the versions of our products and services developed for these devices may not be compatible or compelling to users, manufacturers, or distributors of alternative devices. Each manufacturer or distributor may establish unique technical standards for its devices, and our products and services may not be available on these devices as a result. Some manufacturers may also elect not to include our products on their devices. In addition, search queries are increasingly being undertaken via voice-activated speakers, apps, social media or other platforms, which could affect our search and  advertising business over time. As new devices and platforms are continually being released, it is difficult to predict the challenges we may encounter in adapting our products and services and developing competitive new products and services. We expect to continue to devote significant resources to the creation, support, and maintenance of products and services across multiple platforms and devices. If we are unable to attract and retain a substantial number of alternative device manufacturers, suppliers, distributors, developers, and users to our products and services, or if we are slow to develop products and technologies that are more compatible with alternative devices and platforms, we may fail to capture the opportunities available as consumers and advertisers continue to exist in a dynamic, multi-platform environment. Our revenue growth rate could decline over time, and we anticipate downward pressure on our operating margin in the future. Our revenue growth rate could decline and/or vary over time as a result of a number of factors, including increasing competition and the continued expansion of our business into a variety of new fields. Within our advertising business, changes in device mix, geographic mix, ongoing product and policy changes, product mix, and property mix and an increasing competition for advertising may also affect our revenue growth rate. We may also experience a decline in our revenue growth rate as our revenues increase to higher levels or if there is a decrease in the rate of adoption of our products, services, and technologies, among other factors. In addition to a decline in our revenue growth rate, we may also experience downward pressure on our operating margin resulting from a variety of factors, such as the continued expansion of our business into a variety of new fields, including through products and services such as Google Cloud, Google Play, and hardware products where margins have generally been lower than those we generate from advertising. We may also experience downward pressure on our operating margins from increasing competition and increased costs for many aspects of our business, including within advertising where changes such as device mix and property mix can affect margin. The margin we earn on Alphabet Inc. revenues generated from our Google Network Members could also decrease in the future if we pay a larger percentage of advertising fees to them. We may also pay increased TAC to our distribution partners due to a number of factors. Additionally, our spend to promote new products and services or distribute certain products or an increased investment in our innovation efforts across the Company (within Google as well as our Other Bets businesses) may affect our operating margins. Due to these factors and the evolving nature of our business, our historical revenue growth rate and historical operating margin may not be indicative of our future performance. Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations. Our operating results may fluctuate as a result of a number of factors, many outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date, and annual expenses as a percentage of our revenues may differ significantly from our historical rates. Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed in this section in addition to the following factors may affect our operating results:  Our ability to continue to attract and retain users and customers to our products and services.  Our ability to attract user and/or customer adoption of and generate significant revenues from new products, services, and technologies in which we have invested considerable time and resources.  Our ability to monetize (or generate revenues from) traffic on Google properties and our Google Network Members' properties across various devices.  Revenue fluctuations in our advertising business caused by changes in device mix, geographic mix, ongoing product and policy changes, product mix, and property mix.  The amount of revenues and expenses generated and incurred in currencies other than U.S. dollars, and our ability to manage the resulting risk through our foreign exchange risk management program.  The amount and timing of operating costs and expenses and capital expenditures related to the maintenance and expansion of our businesses, operations, and infrastructure.  Our focus on long-term goals over short-term results.  The results of our acquisitions, divestitures, and our investments in risky projects, including new businesses, products, services, and technologies.  Our ability to keep our products and services operational at a reasonable cost and without service interruptions.  The seasonal fluctuations in internet usage, advertising spending, and underlying business trends such as traditional retail seasonality. Our rapid growth has tended to mask the cyclicality and seasonality of our business. As our growth rate has slowed, the cyclicality and seasonality in our business has become more pronounced and caused our operating results to fluctuate. Because our businesses are changing and evolving, our historical operating results may not be useful to you in predicting our future operating results. A variety of new and existing laws and/or interpretations could harm our business. We are subject to numerous U.S. and foreign laws and regulations covering a wide variety of subject matters. New laws and regulations (or new interpretations of existing laws and regulations) may make our products and services less useful, require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices. For example, our products and services are closely scrutinized by competition authorities around the world, which may limit our ability to pursue certain business models or offer certain products or services. Current and new patent laws may also affect the ability of companies, including us, to protect their innovations and defend against claims of patent infringement. Similarly, the Directive on Copyright in the Digital Single Market (DSM) in Europe, if passed in its proposed form, will increase the liability of large hosted platforms with respect to content uploaded by their users. It will also create a new property right in news publications that will limit the ability of online services to interact with or present such content. In addition to the DSM, other  changes to copyright laws being considered elsewhere, will, if passed, increase costs and require companies, including us, to change or cease offering certain existing services. Additionally, as the focus on data privacy and security increases globally, we are and will Alphabet Inc. continue to be subject to various and evolving laws. The costs of compliance with these laws and regulations are high and are likely to increase in the future. Furthermore, many of these laws do not contemplate or address the unique issues raised by a number of our new businesses, products, services and technologies. In addition, the applicability and scope of these laws, as interpreted by the courts, remain uncertain. Other recently passed laws and/or certain court decisions that could harm our business include, among others:  We rely on statutory safe harbors, as set forth in the Digital Millennium Copyright Act in the United States and the E-Commerce Directive in Europe, against copyright liability for various linking, caching, and hosting activities. Any legislation or court rulings affecting these safe harbors may adversely affect us.  Court decisions such as the judgment of the Court of Justice of the European Union on May 13, 2014 on the right to be forgotten, which allows individuals to demand that Google remove search results about them in certain instances, may limit the content we can show to our users and impose significant operational burdens.  Court decisions that require Google to suppress content not just in the jurisdiction of the issuing court, but for all of our users worldwide, including locations where the content at issue is lawful. The Supreme Court of Canada issued such a decision against Google in June 2017, and others could treat its decision as persuasive. For instance, with respect to the right to be forgotten, a follow-up case is pending before the Court of Justice of the European Union, which could result in an order to apply delisting actions under the right to be forgotten worldwide.  Various U.S. and international laws that govern the distribution of certain materials to children and regulate the ability of online services to collect information from minors.  Various laws with regard to content removal and disclosure obligations, such as the Network Enforcement Act in Germany, which may affect our businesses and operations and may subject us to significant fines if such laws are interpreted and applied in a manner inconsistent with our practices.  Data protection laws passed by many states within the U.S. and by certain countries regarding notification to data subjects and/or regulators when there is a security breach of personal data.  The California Consumer Privacy Act of 2018 that comes into effect in January of 2020, and gives new data privacy rights to California residents and regulates the security of data in connection with internet connected devices.  Data localization laws, which generally mandate that certain types of data collected in a particular country be stored and/or processed within that country.  Privacy laws, which could be interpreted broadly thereby limiting product offerings and/or increasing costs. Any failure on our part to comply with laws and regulations can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties. We are regularly subject to claims, suits, government investigations, and other proceedings that may adversely affect our business and results of operations. We are regularly subject to claims, suits, and government investigations involving competition, intellectual property, data privacy and security, consumer protection, tax, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, and other matters. Due to our manufacturing and sale of an expanded suite of products, including hardware as well as our Google Cloud offerings, we may also be subject to a variety of claims including product warranty, product liability and consumer protection claims related to product defects, among other litigation. We may also be subject to claims involving health and safety, hazardous materials usage, other environmental concerns or if users or customers experience service disruptions, failures, or other issues. In addition, our businesses face intellectual property litigation, as discussed later, that exposes us to the risk of exclusion and cease and desist orders, which could limit our ability to sell products and services. Such claims, suits, and government investigations are inherently uncertain. Regardless of the outcome, any of these types of legal proceedings can have an adverse effect on us because of legal costs, diversion of management resources, negative publicity and other factors. Determining reserves for our pending litigation is a complex, fact-intensive process that requires significant judgment. The resolution of one or more such proceedings has resulted and may in the future result in additional substantial fines and penalties that could adversely affect our business, consolidated financial position, results of operations, or cash flows in a particular period. These proceedings could also result in Alphabet Inc. reputational harm, criminal sanctions, consent decrees, or orders preventing us from offering certain features, functionalities, products, or services, requiring a change in our business practices or product recalls or corrections, or requiring development of non-infringing or otherwise altered products or technologies. Any of these consequences could adversely affect our business and results of operations. We may be subject to legal liability associated with providing online services or content. We host and provide a wide variety of services and products that enable users to exchange information, advertise products and services, conduct business, and engage in various online activities both domestically and internationally. The law relating to the liability of providers of these online services and products for activities of their users is still somewhat unsettled both within the U.S. and internationally. Claims have been threatened and have been brought against us for defamation, negligence, breaches of contract, copyright or trademark infringement, unfair competition, unlawful activity, tort, including personal injury, fraud, or other theories based on the nature and content of information that we publish or to which we provide links or that may be posted online or generated by us or by third parties, including our users. In addition, we are and have been and may again in the future be subject to domestic or international actions alleging that certain content we have generated or third-party content that we have made available within our products and services violates U.S. and international law. We also place advertisements which are displayed on third-party publishers and advertising networks properties, and we offer third-party products, services, or content. We may be subject to claims concerning these products, services, or content by virtue of our involvement in marketing, branding, broadcasting, or providing access to them, even if we do not ourselves host, operate, provide, or provide access to these products, services, or content. Defense of any such actions could be costly and involve significant time and attention of our management and other resources, which may result in monetary liabilities or penalties, and may require us to change our business in an adverse manner. Data privacy and security concerns relating to our technology and our practices could damage our reputation and deter current and potential users or customers from using our products and services. Bugs or defects in our products and services have occurred and may occur in the future, or our security measures could be breached, resulting in the improper use and/or disclosure of user data, and our services and systems are subject to attacks that could degrade or deny the ability of users and customers to access, or rely on information received about, our products and services. As a consequence, our products and services may be perceived as being insecure, users and customers may curtail or stop using our products and services, and we may incur significant legal, reputational, and financial exposure. From time to time, concerns are expressed about whether our products, services, or processes compromise the privacy of users, customers, and others. Concerns about our practices with regard to the collection, use, disclosure, or security of personal information or other data privacy related matters, even if unfounded, could damage our reputation and adversely affect our operating results. Our policies and practices may change over time as users and customers expectations regarding privacy and their data changes. Our products and services involve the storage and transmission of users and customers proprietary information, and bugs, theft, misuse, defects, vulnerabilities in our products and services, and security breaches expose us to a risk of loss of this information, improper use and disclosure of such information, litigation, and other potential liability. Systems failures, compromises of our security, failure to abide by our privacy policies, inadvertent disclosure that results in the release of our users data, or in our or our users inability to access such data, could result in government investigations and other liability, legislation or regulation, seriously harm our reputation and brand and, therefore, our business, and impair our ability to attract and retain users. We expect to continue to expend significant resources to maintain state-of-the-art security protections that shield against bugs, theft, misuse or security vulnerabilities or breaches. We experience cyber attacks of varying degrees and other attempts to gain unauthorized access to our systems on a regular basis. Our security measures may in the future be breached due to employee error, malfeasance, system errors or vulnerabilities, including vulnerabilities of our vendors, suppliers, their products, or otherwise. Such breach or other unauthorized access, increased government surveillance, or attempts by outside parties to fraudulently induce employees, users, or customers to disclose sensitive information in order to gain access to our data or our users or customers data could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our products and services that could potentially have an adverse effect on our business. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, become more sophisticated, and often are not recognized until launched against a target, we may be unable to anticipate or detect these techniques or to implement adequate preventative measures. Cyber attacks could also compromise trade secrets and other sensitive information and result in such information being disclosed to others and becoming less valuable, which could negatively affect our business. If an actual or perceived breach of our security Alphabet Inc. occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose users and customers. While we have dedicated significant resources to privacy and security incident response, including dedicated worldwide incident response teams, our response process may not be adequate, may fail to accurately assess the severity of an incident, may not respond quickly enough, or may fail to sufficiently remediate an incident, among other issues. As a result, we may suffer significant legal, reputational, or financial exposure, which could adversely affect our business and results of operations. Our business is subject to complex and rapidly evolving U.S. and international laws and regulations regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, changes to our business practices, penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business. Companies are under increased regulatory scrutiny relating to data privacy and security. Authorities around the world are considering a number of legislative and regulatory proposals concerning data protection, including measures to ensure that encryption of users data does not hinder law enforcement agencies access to that data. In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe and elsewhere are often uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. These legislative and regulatory proposals, if adopted, and such interpretations could, in addition to the possibility of fines, result in an order requiring that we change our data practices, which could have an adverse effect on our business and results of operations. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. Recent legal developments in Europe have created compliance uncertainty regarding certain transfers of personal data from Europe to the United States. For example, the General Data Protection Regulation (GDPR), became effective in the European Union (EU) beginning on May 25, 2018, and applies to all of our activities conducted from an establishment in the EU or related to products and services that we offer to EU users or customers, or the monitoring of their behavior in the EU. The GDPR subjects us to a range of new compliance obligations. Ensuring compliance with the GDPR is an ongoing commitment which involves substantial costs, and it is possible that despite our efforts, governmental authorities or third parties will assert that our business practices fail to comply. We have been and may in the future be, subject to lawsuits alleging violations of the GDPR. If our operations are found to be in violation of the GDPRs requirements, we may be required to change our business practices and/or be subject to significant civil penalties, business disruption, and reputational harm, any of which could have a material adverse effect on our business. In particular, serious breaches of the GDPR can result in administrative fines of up to the higher of 4% of annual worldwide revenues or 20 million. Fines of up to the higher of 2% of annual worldwide  revenues or 10 million can be levied for other specified violations. In addition, the European Commission in July 2016 and the Swiss Government in January 2017 approved the EU-U.S. and the Swiss-U.S. Privacy Shield frameworks, respectively, which are designed to allow U.S. companies that self-certify to the U.S. Department of Commerce and publicly commit to comply with the Privacy Shield requirements to freely import personal data from the EU and Switzerland. However, these frameworks face a number of legal challenges and their validity remains subject to legal, regulatory and political developments in both Europe and the U.S. This has resulted in some uncertainty, and compliance obligations could cause us to incur costs or require us to change our business practices in a manner adverse to our business. We are, and may in the future be, subject to intellectual property or other claims, which are costly to defend, could result in significant damage awards, and could limit our ability to use certain technologies in the future. Many companies, in particular those in internet, technology and media own large numbers of patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, patent holding companies may continue to seek to monetize patents they have purchased or otherwise obtained by bringing claims against us, whether such claims are meritorious or not. As we have grown, the number of intellectual property claims against us has increased and may continue to increase as we develop new products, services, and technologies. We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe the intellectual property rights of others. Third parties have also sought broad injunctive relief against us by filing claims in U.S. and international courts and the U.S. International Trade Commission (ITC) for exclusion and cease and desist orders, which could limit our ability to sell our products or services in the U.S. or elsewhere if our products or services or those of our customers or suppliers are found to Alphabet Inc. infringe the intellectual property subject to the claims. Adverse results in any of these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements (if licenses are available at all), or orders preventing us from offering certain features, functionalities, products, or services, and may also cause us to change our business practices and require development of non-infringing products, services or technologies, which could result in a loss of revenues for us and otherwise harm our business. Many of our agreements with our customers and partners, including certain suppliers, require us to defend against certain intellectual property infringement claims and/or indemnify them for certain intellectual property infringement claims against them, which could result in increased costs for defending such claims or significant damages if there were an adverse ruling in any such claims. Such customers and partners may also discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. Moreover, intellectual property indemnities provided to us by our suppliers, when obtainable, may not cover all damages and losses suffered by us and our customers arising from intellectual property infringement claims brought against us. Furthermore, in connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, including those associated with intellectual property claims. Regardless of their merits, intellectual property claims are often time consuming, expensive to litigate or settle, and cause significant diversion of management attention. To the extent such claims are successful, they may have an adverse effect on our business, including our product and service offerings, consolidated financial position, results of operations, or cash flows. Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand as well as affect our ability to compete. Our patents, trademarks, trade secrets, copyrights, and other intellectual property rights are important assets for us. Various events outside of our control pose a threat to our intellectual property rights, as well as to our products, services and technologies. For example, effective intellectual property protection may not be available in every country in which our products and services are distributed or made available through the Internet. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Although we seek to obtain patent protection for our innovations, it is possible we may not be able to protect some of these innovations. Moreover, we may not have adequate patent or copyright protection for certain innovations that later turn out to be important. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued patent may be deemed invalid or unenforceable. We also seek to maintain certain intellectual property as trade secrets. The secrecy of such trade secrets and other sensitive information could be compromised by outside parties, or by our employees, which could cause us to lose the competitive advantage resulting from these trade secrets. We also face risks associated with our trademarks. For example, there is a risk that the word Google could become so commonly used that it becomes synonymous with the word search. Some courts have ruled that ""Google"" is a protectable trademark, however it is possible that other courts, particularly those outside of the United States, may reach a different determination. If this happens, we could lose protection for this trademark, which could result in other people using the word Google to refer to their own products, thus diminishing our brand. Any significant impairment of our intellectual property rights could harm our business and our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results. Acquisitions, joint ventures, investments, and divestitures could result in operating difficulties, dilution, and other consequences that may adversely affect our business and results of operations. Acquisitions, joint ventures, investments and divestitures are important elements of our overall corporate strategy and use of capital, and these transactions could be material to our financial condition and results of operations. We expect to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions. Effecting these strategic transactions could create unforeseen operating difficulties and expenditures. The areas where we face risks include, among others:  Diversion of management time and focus from operating our business to challenges related to acquisitions and other strategic transactions.  Failure to successfully further develop the acquired business or technology.  Implementation or remediation of controls, procedures, and policies at the acquired company. Alphabet Inc.  Integration of the acquired company's accounting, human resource, and other administrative systems, and coordination of product, engineering, and sales and marketing functions.  Transition of operations, users, and customers onto our existing platforms.  Failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition or other strategic transaction.  In the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries.  Cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire.  Liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, privacy issues, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities.  Litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders, or other third parties. Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities, and harm our business generally. Our acquisitions and other strategic transactions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, or impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results. Also, the anticipated benefits or value of our acquisitions and other strategic transactions may not materialize. In connection with our divestitures, we have agreed, and may in the future agree, to provide indemnification for certain potential liabilities, which may adversely affect our financial condition or results. Our business depends on strong brands, and failing to maintain and enhance our brands would hurt our ability to expand our base of users, advertisers, customers, content providers, and other partners. Our strong brands have significantly contributed to the success of our business. Maintaining and enhancing the brands within Google and Other Bets increases our ability to enter new categories and launch new and innovative products that better serve the needs of our users, advertisers, customers, content providers, and other partners. Our brands may be negatively affected by a number of factors, including, among others, reputational issues, third-party content shared on our platforms, data privacy issues and developments, and product or technical performance failures. For example, if we fail to appropriately respond to the sharing of objectionable content on our services or objectionable practices by advertisers, or to otherwise adequately address user concerns, our users may lose confidence in our brands. Our brands may also be negatively affected by the use of our products or services to disseminate information that is deemed to be false or misleading. Furthermore, if we fail to maintain and enhance equity in our brands, our business, operating results, and financial condition may be materially and adversely affected. Our success will depend largely on our ability to remain a technology leader and continue to provide high-quality, innovative products and services that are truly useful and play a meaningful role in peoples everyday lives. We face a number of manufacturing and supply chain risks that, if not properly managed, could adversely affect our financial results and prospects. We face a number of risks related to manufacturing and supply chain management. These manufacturing and supply chain risks could affect our ability to supply both our products and our internet-based services. We rely on third parties to manufacture many of our assemblies and finished products, third-party arrangements for the design of some components and parts, and third party distributors, including cellular network carriers. Our business could be negatively affected if we are not able to engage third parties with the necessary capabilities or capacity on reasonable terms, or if those we engage fail to meet their obligations (whether due to financial difficulties or other reasons), or make adverse changes in the pricing or other material terms of our arrangements with them. Alphabet Inc. We may experience supply shortages and price increases driven by raw material availability, manufacturing capacity, labor shortages, industry allocations, natural disasters, the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), and significant changes in the financial or business condition of our suppliers. We may experience shortages or other supply chain disruptions in the future that could negatively affect our operations. In addition, some of the components we use in our technical infrastructure and products are available only from a single source or limited sources, and we may not be able to find replacement vendors on favorable terms or at all in the event of a supply chain disruption. In addition, a significant hardware supply interruption could delay critical data center upgrades or expansions. We may enter into long term contracts that commit us to significant terms and conditions of supply. We may be liable for material and product that is not consumed due to market acceptance, technological change, obsolescences, quality, product recalls, and warranty issues. For instance, because many of our hardware supply contracts have volume-based pricing or minimum purchase requirements, if the volume of our hardware sales decreases or does not reach projected targets, we could face increased materials and manufacturing costs or other financial liabilities that could make our products more costly per unit to manufacture and therefore less competitive and negatively affect our financial results. Furthermore, certain of our competitors may negotiate more favorable contractual terms based on volume and other commitments that may provide them with competitive advantages and may affect our supply. The products and services we sell or offer may have quality issues resulting from the design or manufacture of the product, or from the software used. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers. If the quality of our products and services does not meet our users and/or customers expectations or our products or services are found to be defective, then our sales and operating earnings, and ultimately our reputation, could be negatively affected. We also require our suppliers and business partners to comply with law and, where applicable, our company policies, such as the Google Supplier Code of Conduct, regarding workplace and employment practices, data security, environmental compliance and intellectual property licensing, but we do not control them or their practices. If any of them violates laws or implements practices regarded as unethical, we could experience supply chain disruptions, canceled orders, terminations of or damage to key relationships, and damage to our reputation. If any of them fails to procure necessary license rights to third-party intellectual property, legal action could ensue that could affect the saleability of our products and expose us to financial obligations to third parties. Web spam, including content farms, and other violations of our guidelines could affect the quality of our services, which could damage our reputation and deter our current and potential users from using our products and services. Web spam refers to websites that violate or attempt to violate our guidelines or that otherwise seek to inappropriately rank higher in search results than our search engine's assessment of their relevance and utility would rank them. Web spam may also affect the quality of content posted on our platforms and may manipulate them to display false, misleading or undesirable content. Although English-language web spam in our search results has been significantly reduced, and web spam in most other languages is limited, we expect web spammers will continue to seek ways to improve their rankings inappropriately. We continuously combat web spam in our search results, including through indexing technology that makes it harder for spam-like, less useful web content to rank highly. We also continue to invest in and deploy proprietary technology to detect and prevent web spam from abusing our platforms. We also face other challenges from web spam such as low-quality and irrelevant content websites, including content farms, which are websites that generate large quantities of low-quality content to help them improve their search rankings. We are continually launching algorithmic changes focused on low-quality websites. We, like others in the industry, face other violations of our guidelines, including sophisticated attempts by bad actors to manipulate our advertising systems to fraudulently generate revenues for themselves or others, or to otherwise generate traffic that does not represent genuine user interest or intent. While we invest significantly in efforts to detect and prevent invalid traffic, including attempts by bad actors to generate income fraudulently, we may be unable to adequately detect and prevent such abuses in the future. If we are subject to an increasing number of web spam, including content farms or other violations of our guidelines, this could hurt our reputation for delivering relevant information or reduce user traffic to our websites or their use of our platforms, which may adversely affect our financial condition or results. Interruption, interference with or failure of our information technology and communications systems could hurt our ability to effectively provide our products and services, which could damage our reputation and harm our operating results. Alphabet Inc. The availability of our products and services depends on the continuing operation of our information technology and communications systems. Our systems are vulnerable to damage, interference or interruption from terrorist attacks, natural disasters, the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), power loss, telecommunications failures, computer viruses, computer denial of service attacks, or other attempts to harm or access our systems. Some of our data centers are located in areas with a high risk of major earthquakes or other natural disasters. Our data centers are also subject to break-ins, sabotage, and intentional acts of vandalism, and to potential disruptions if the operators of certain of these facilities have financial difficulties. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, a decision to close a facility we are using, or other unanticipated problems at our data centers could result in lengthy interruptions in our service. In addition, our products and services are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in our services or the failure of our systems. Our international operations expose us to additional risks that could harm our business, operating results, and financial condition. Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. International revenues accounted for approximately 54% of our consolidated revenues in 2018 . In addition to risks described elsewhere in this section, our international operations expose us to other risks, including the following:  Restrictions on foreign ownership and investments, and stringent foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S.  Import and export requirements, tariffs, trade disputes and barriers, and customs classifications that may prevent us from offering products or providing services to a particular market and may increase our operating costs.  Longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud.  Evolving foreign laws and legal systems, including those that may occur as a result of the United Kingdom's potential withdrawal from the European Union (""Brexit""). Brexit may adversely affect global economic and market conditions and could contribute to volatility in the foreign  exchange markets, which we may be unable to effectively manage through our foreign exchange risk management program. Brexit may also adversely affect our revenues and could subject us to new regulatory costs and challenges, in addition to other adverse effects that we are unable to effectively anticipate.  Uncertainty regarding liability for services and content, including uncertainty as a result of local laws and lack of legal precedent.  Different employee/employer relationships, existence of workers' councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions. Changes in international local political, economic, regulatory, tax, social, and labor conditions may also harm our business, and compliance with complex international and U.S. laws and regulations that apply to our international operations increases our cost of doing business. These numerous and sometimes conflicting laws and regulations include, among others, internal control and disclosure rules, privacy and data protection requirements, anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, and other local laws prohibiting certain payments to governmental officials, and competition regulations, among others. Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, our international growth efforts, our ability to attract and retain employees, our business, and our operating results. Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies. Since we conduct business in currencies other than U.S. dollars but report our financial results in U.S. dollars, we face exposure to fluctuations in foreign currency exchange rates. Although we hedge a portion of our international currency exposure, significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings. Hedging programs are also inherently risky and could expose us to additional risks that could adversely affect our financial condition and results of operations. If we were to lose the services of key personnel, we may not be able to execute our business strategy. Alphabet Inc. Our future success depends in a large part upon the continued service of key members of our senior management team. In particular, Larry Page and Sergey Brin are critical to the overall management of Alphabet and its subsidiaries, and they, along with Sundar Pichai, the Chief Executive Officer of Google, play an important role in the development of our technology. They also play a key role in maintaining our culture and setting our strategic direction. All of our executive officers and key employees are at-will employees, and we do not maintain any key-person life insurance policies. The loss of key personnel could seriously harm our business. We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel, hire qualified personnel, or maintain our corporate culture, we may not be able to grow effectively. Our performance largely depends on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense, and certain of our competitors have directly targeted our employees. In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees. In addition, we believe that our corporate culture fosters innovation, creativity, and teamwork. As our organization grows, and we are required to implement more complex organizational management structures, particularly in light of our holding company structure, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. This could negatively affect our future success. Our business depends on continued and unimpeded access to the Internet by us and our users. Internet access providers may be able to restrict, block, degrade, or charge for access to certain of our products and services, which could lead to additional expenses and the loss of users and advertisers. Our products and services depend on the ability of our users to access the Internet, and certain of our products require significant bandwidth to work effectively. Currently, this access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, and government-owned service providers. Some of these providers have taken, or have stated that they may take measures, including legal actions, that could degrade, disrupt, or increase the cost of user access to certain of our products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, or by charging increased fees to us or our users to provide our offerings. Some jurisdictions have adopted regulations prohibiting certain forms of discrimination by Internet access providers; however, substantial uncertainty exists in the United States and elsewhere regarding such protections. For example, in the United States the Federal Communications Commission repealed net neutrality rules effective June 11, 2018, which could lead internet access providers to restrict, block, degrade, or charge for access to certain of our products and services. In addition, in some jurisdictions, our products and services have been subject to government-initiated restrictions or blockages. Such interference could result in a loss of existing users, customers and advertisers, goodwill, and increased costs, and could impair our ability to attract new users, customers and advertisers, thereby harming our revenues and growth. New and existing technologies could affect our ability to customize ads and/or could block ads online, which would harm our business. Technologies have been developed to make customizable ads more difficult or to block the display of ads altogether and some providers of online services have integrated technologies that could potentially impair the core functionality of third-party digital advertising. Most of our Google revenues are derived from fees paid to us in connection with the display of ads online. As a result, such technologies and tools could adversely affect our operating results. We are exposed to fluctuations in the market values of our investments. Given the global nature of our business, we have investments both domestically and internationally. Market values of these investments can be negatively affected by liquidity, credit deterioration or losses, financial results, foreign exchange rates, changes in interest rates, including changes that may result from the implementation of new benchmark rates that replace LIBOR, the effect of new or changing regulations, or other factors. Due to the adoption of ASU 2016-01 Financial Instruments; Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities in January 2018, we adjust the carrying value of our non-marketable equity securities to fair value for observable transactions of identical or similar investments of the same issuer and impairment. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), which increases the volatility of our other income (expense). Alphabet Inc. As a result of these factors, the value or liquidity of our cash equivalents, as well as our marketable and non-marketable securities could decline and result in a material impairment, which could materially adversely affect our financial condition and operating results. We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. Our future income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, the net gains and losses recognized by legal entities on certain hedges and related hedged intercompany and other transactions under our foreign exchange risk management program, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items. In addition, we are subject to regular review and audit by both domestic and foreign tax authorities. As a result, we have received, and may in the future receive, assessments in multiple jurisdictions on various tax-related assertions, examples include transfer pricing adjustments or permanent establishment. Any adverse outcome of such a review or audit could have a negative effect on our operating results and financial condition. In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made. Furthermore, due to shifting economic and political conditions, tax policies, laws or rates in various jurisdictions may be subject to significant change, which could materially affect our financial position and results of operations. Risks Related to Ownership of Our Stock The trading price for our Class A common stock and non-voting Class C capital stock may continue to be volatile. The trading price of our stock has at times experienced substantial price volatility and may continue to be volatile. For example, from January 1, 2018 through December 31, 2018, the closing price of our Class A common stock ranged from $984.66 per share to $1,285.50 per share, and the closing price of our Class C capital stock ranged from $976.21 to $1,268.32 per share. In addition to the factors discussed in this report, the trading price of our Class A common stock and Class C capital stock may fluctuate widely in response to various factors, many of which are beyond our control, including, among others:  Quarterly variations in our results of operations or those of our competitors.  Announcements by us or our competitors of acquisitions, divestitures, investments, new products, significant contracts, commercial relationships, or capital commitments.  Recommendations by securities analysts or changes in earnings estimates.  Announcements about our earnings that are not in line with analyst expectations, the risk of which is enhanced because it is our policy not to give guidance on earnings.  Announcements by our competitors of their earnings that are not in line with analyst expectations.  Commentary by industry and market professionals about our products, strategies, and other matters affecting our business and results, regardless of its accuracy.  The volume of shares of Class A common stock and Class C capital stock available for public sale.  Sales of Class A common stock and Class C capital stock by us or by our stockholders (including sales by our directors, executive officers, and other employees).  Short sales, hedging, and other derivative transactions on shares of our Class A common stock and Class C capital stock.  The perceived values of Class A common stock and Class C capital stock relative to one another.  Any share repurchase program. In addition, the stock market in general, which can be affected by various factors, including overall economic and political conditions, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Alphabet Inc. These broad market and industry factors may harm the market price of our Class A common stock and our Class C capital stock regardless of our actual operating performance. We cannot guarantee that any share repurchase program will be fully consummated or that any share repurchase program will enhance long-term stockholder value, and share repurchases could increase the volatility of the price of our stock and could diminish our cash reserves. In 2016 and 2018, the board of directors of Alphabet authorized the company to repurchase up to $7.0 billion and $8.6 billion of its Class C capital stock, respectively. The 2016 authorization was completed in 2018. As of December 31, 2018 , $1.7 billion remains available for repurchase. In January 2019, our board of directors authorized the repurchase of up to an additional $12.5 billion of our Class C capital stock. Our repurchase program does not have an expiration date and does not obligate Alphabet to repurchase any specific dollar amount or to acquire any specific number of shares. Our share repurchase program could affect the price of our stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our stock. The concentration of our stock ownership limits our stockholders ability to influence corporate matters. Our Class B common stock has 10 votes per share, our Class A common stock has one vote per share, and our Class C capital stock has no voting rights. As of December 31, 2018, Larry Page, Sergey Brin, and Eric E. Schmidt beneficially owned approximately 92.8% of our outstanding Class B common stock, which represented approximately 56.5% of the voting power of our outstanding common stock. Larry, Sergey, and Eric therefore have significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. In addition, because our Class C capital stock carries no voting rights (except as required by applicable law), the issuance of the Class C capital stock, including in future stock-based acquisition transactions and to fund employee equity incentive programs, could prolong the duration of Larry, Sergey and Erics current relative ownership of our voting power and their ability to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders. This concentrated control limits or severely restricts our stockholders ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our Class A common stock and our Class C capital stock could be adversely affected. Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable. Provisions in Alphabets certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:  Our certificate of incorporation provides for a tri-class capital stock structure. As a result of this structure, Larry, Sergey, and Eric have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets. This concentrated control could discourage others from initiating any potential merger, takeover, or other change of control transaction that other stockholders may view as beneficial. As noted above, the issuance of the Class C capital stock could have the effect of prolonging the influence of Larry, Sergey, and Eric.  Our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors.  Our stockholders may not act by written consent. As a result, a holder, or holders, controlling a majority of our capital stock would not be able to take certain actions without holding a stockholders' meeting.  Our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates.  Stockholders must provide advance notice to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.  Our board of directors may issue, without stockholder approval, shares of undesignated preferred stock. The ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. Alphabet Inc. As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its outstanding voting stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us. Risk Related to Our Holding Company Reorganization As a holding company, Alphabet is dependent on the operations and funds of its subsidiaries. Alphabet is a holding company with no business operations of its own. Alphabets most significant assets are the outstanding equity interests in its subsidiaries, including Google, that are each separate and distinct legal entities. As a result of our holding company structure, we rely on cash flows from subsidiaries to meet our obligations, including to service any debt obligations of Alphabet. Our subsidiaries may be restricted in their ability to pay cash dividends or to make other distributions to Alphabet and therefore, our ability to meet our obligations may be adversely affected by such restrictions. ", ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ," ITEM 2. PROPERTIES Our headquarters are located in Mountain View, California. We also own and lease office and building space in the surrounding areas near our headquarters, which in the aggregate (including our headquarters) represent approximately 11.2 million square feet of office/building space and approximately fifty-nine acres of developable land to accommodate anticipated future growth. In addition, we own and lease office/building space and research and development sites around the world, primarily in North America, Europe, South America, and Asia. We own and operate data centers in the U.S., Europe, South America, and Asia. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business. "," ITEM 3. LEGAL PROCEEDINGS For a description of our material pending legal proceedings, please see Note 9 Commitments and Contingencies - Legal Matters of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. "," ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of October 2, 2015, Alphabet Inc. became the successor issuer of Google Inc. pursuant to Rule 12g-3(a) under the Exchange Act. Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol GOOG since August 19, 2004 and under the symbol ""GOOGL"" since April 3, 2014. Prior to August 19, 2004, there was no public market for our stock. Our Class B common stock is neither listed nor traded. Our Class C capital stock has been listed on the Nasdaq Global Select Market under the symbol GOOG since April 3, 2014. Holders of Record As of December 31, 2018 , there were approximately 2,026 and 2,195 stockholders of record of our Class A common stock and Class C capital stock, respectively. Because many of our shares of Class A common stock and Class C capital stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2018 , there were approximately 65 stockholders of record of our Class B common stock. Dividend Policy We have never declared or paid any cash dividend on our common or capital stock. We do not expect to pay any cash dividends in the foreseeable future. Issuer Purchases of Equity Securities The following table presents information with respect to Alphabet's repurchases of Class C capital stock during the quarter ended December 31, 2018 : Period  Total Number of Shares Purchased (in thousands) (1)  Average Price Paid per Share (2)  Total Number of Shares Purchased as Part of Publicly Announced Programs (in thousands) (1)  Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) October 1 - 31   $ 1,115.81   $ 3,412 November 1 - 30   $ 1,054.22   $ 2,506 December 1 - 31   $ 1,048.23   $ 1,688 Total  2,470  $ 1,073.02  2,470   (1)  In January 2018, the board of directors of Alphabet authorized the company to repurchase up to  $8.6 billion  of its Class C capital stock.  The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. See  Note 10  in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to share repurchases. (2)  Average price paid per share includes costs associated with the repurchases. Alphabet Inc. Stock Performance Graphs The graph below matches Alphabet Inc. Class A's cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the SP 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2013 to December 31, 2018 . The returns shown are based on historical results and are not intended to suggest future performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* ALPHABET INC. CLASS A COMMON STOCK Among Alphabet Inc., the SP 500 Index, the NASDAQ Composite Index, and the RDG Internet Composite Index *$100 invested on December 31, 2013 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright  2015 SP, a division of The McGraw-Hill Companies Inc. All rights reserved. Alphabet Inc. The graph below matches Alphabet Inc. Class C's cumulative 57-Month total shareholder return on capital stock with the cumulative total returns of the SP 500 index, the NASDAQ Composite index, and the RDG Internet Composite index. The graph tracks the performance of a $100 investment in our Class C capital stock and in each index (with the reinvestment of all dividends) from April 3, 2014 to December 31, 2018 . The returns shown are based on historical results and are not intended to suggest future performance. COMPARISON OF CUMULATIVE TOTAL RETURN* ALPHABET INC. CLASS C CAPITAL STOCK Among Alphabet Inc., the SP 500 Index, the NASDAQ Composite Index, and the RDG Internet Composite Index *$100 invested on April 3, 2014 in stock or in index, including reinvestment of dividends. Fiscal year ending December 31. Copyright  2015 SP, a division of The McGraw-Hill Companies Inc. All rights reserved. Alphabet Inc. "," ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Part II, Item 8 of this Annual Report on Form 10-K. Trends in Our Business The following trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results:  Users' behaviors and advertising continue to shift online as the digital economy evolves. The continuing shift from an offline to online world has contributed to the growth of our business since inception, contributing to revenue growth, and we expect that this online shift will continue to benefit our business.  As online advertising evolves, we continue to expand our product offerings which may affect our monetization. As interactions between users and advertisers change and as online user behavior evolves, we continue to expand and evolve our product offerings to serve their changing needs. Over time, we expect our monetization trends to fluctuate. For example, we have seen an increase in YouTube engagement ads, which monetize at a lower rate than traditional desktop search ads. Additionally, we continue to see a shift to programmatic buying which presents opportunities for advertisers to connect with the right user, in the right moment, in the right context. Programmatic buying has a different monetization profile than traditional advertising buying on Google properties.  Users are increasingly using diverse devices and modalities to access our products and services, and our advertising revenues are increasingly coming from mobile and other new formats. Our users are accessing the Internet via diverse devices and modalities and want to feel connected no matter where they are or what they are doing. We seek to expand our products and services to stay in front of this shift in order to maintain and grow our business. We generate our advertising revenues increasingly from mobile and newer advertising formats, and the margins from the advertising revenues from these sources have generally been lower than those from traditional desktop search. Accordingly, we expect TAC paid to our distribution partners to increase due to changes in device mix between mobile, desktop, and tablet, partner mix, partner agreement terms, and the percentage of queries channeled through paid access points. We expect these trends to continue to put pressure on our overall margins.  As users in developing economies increasingly come online, our revenues from international markets continue to increase and movements in foreign exchange rates affect such revenues. The shift to online, as well as the advent of the multi-device world, has brought opportunities outside of the U.S., including in emerging markets, and we continue to develop localized versions of our products and relevant advertising programs useful to our users in these markets. This has led to a trend of increased revenues from international markets over time and we expect that our results will continue to be affected by our performance in these markets, particularly as low-cost mobile devices become more available. Our international revenues represent a significant portion of our revenues and are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. While we have a foreign exchange risk management program designed to reduce our exposure to these fluctuations, this program does not fully offset their effect on our revenues and earnings.  The portion of our revenues that we derive from non-advertising revenues is increasing and may affect margins. Non-advertising revenues have grown over time. We expect this trend to continue as we focus on expanding our offerings to our users through products and services like Google Cloud, Google Play, hardware products, and YouTube subscriptions. Across these initiatives, we currently derive non-advertising revenues primarily from sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees including fees received for Google Cloud offerings. The margins on these non-advertising businesses vary significantly and may be lower than the margins on our advertising business. A number of our Other Bets initiatives are in their initial development stages, and as such, the sources of revenues from these businesses could change over time and the revenues could be volatile. Alphabet Inc.  As we continue to look for new ways to serve our users and expand our businesses, we will invest heavily in RD and capital expenditures. We continue to make significant RD investments in areas of strategic focus such as advertising, cloud, machine learning, and search, as well as in new products and services. Our capital expenditures have grown over time. We expect this trend to continue in the long term as we invest heavily in data centers, real estate and facilities, and information technology infrastructure. In addition, acquisitions remain an important part of our strategy and use of capital, and we expect to continue to spend cash on acquisitions and other investments. These acquisitions generally enhance the breadth and depth of our offerings, as well as expand our expertise in engineering and other functional areas.  Our employees are critical to our success and we expect to continue investing in them. Our employees are among our best assets and are critical for our continued success. We expect to continue hiring talented employees around the globe and to provide competitive compensation programs to our employees. Executive Overview of Results Below are our key financial results for the fiscal year ended December 31, 2018 (consolidated unless otherwise noted):  Revenues of $136.8 billion and revenue growth of 23% year over year, constant currency revenue growth of 22% year over year.  Google segment revenues of $136.2 billion with revenue growth of 23% year over year and Other Bets revenues of $595 million with revenue growth of 25% year over year.  Revenues from the United States , EMEA , APAC , and Other Americas were $63.3 billion , $44.6 billion , $21.4 billion , and $7.6 billion , respectively.  Cost of revenues was $59.5 billion , consisting of TAC of $26.7 billion and other cost of revenues of $32.8 billion . Our TAC as a percentage of advertising revenues was 23% .  Operating expenses (excluding cost of revenues) were $50.9 billion .  Income from operations was $26.3 billion .  Other income (expense), net, was $8.6 billion .  Effective tax rate was 12% .  Net income was $30.7 billion with diluted net income per share of $43.70 .  Operating cash flow was $48.0 billion .  Capital expenditures were $25.1 billion .  Number of employees was 98,771 as of December 31, 2018 . Information about Segments We operate our business in multiple operating segments. Google is our only reportable segment. None of our other segments meet the quantitative thresholds to qualify as reportable segments; therefore, the other operating segments are combined and disclosed as Other Bets. Our reported segments are:  Google  Google includes our main products such as Ads, Android, Chrome, Google Cloud, Google Maps, Google Play, Hardware (including Nest), Search, and YouTube. Our technical infrastructure is also included in Google. Google generates revenues primarily from advertising; sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud offerings.   Other Bets  Other Bets is a combination of multiple operating segments that are not individually material. Other Bets includes businesses such as Access, Calico, CapitalG, GV, Verily, Waymo, and X. Revenues from the Other Bets are derived primarily through the sales of internet and TV services through Access as well as licensing and RD services through Verily.  In Q1 2018, Nest joined Googles hardware team. Consequently, the financial results of Nest are reported in the Google segment, with Nest revenues reflected in Google other revenues. Prior period segment information has been recast to conform to the current period segment presentation. Consolidated financial results are not affected. Alphabet Inc. Please refer to Note 14  of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. Revenues The following table presents our revenues, by segment and revenue source (in millions):  Year Ended December 31,    Google segment      Google properties revenues $ 63,785  $ 77,788  $ 96,336 Google Network Members' properties revenues 15,598  17,587  19,982 Google advertising revenues 79,383  95,375  116,318 Google other revenues 10,601  15,003  19,906 Google segment revenues $ 89,984  $ 110,378  $ 136,224       Other Bets      Other Bets revenues $  $  $       Revenues $ 90,272  $ 110,855  $ 136,819 Google segment The following table presents our Google segment revenues (in millions):  Year Ended December 31,    Google segment revenues $ 89,984  $ 110,378  $ 136,224 Google segment revenues as a percentage of total revenues 99.7 %  99.6 %  99.6 % Use of Monetization Metrics When assessing our advertising revenues performance, historically we presented the percentage change in the number of paid clicks and cost-per-click for both our Google properties and our Google Network Members properties (Network) revenues. As our impression-based revenues have become a more significant driver of Network revenues growth, the percentage change in paid clicks and cost-per-click cover less of our total Network revenues. As a result, in Q1 2018, we transitioned our Network revenue metrics from the percentage change in paid clicks and cost-per-click to the percentage change in impressions and cost-per-impression. Click-based revenues generated by our Network business are included in impression-based metrics, so that these metrics cover nearly all of our Network business. The monetization metrics for Google properties revenues remain unchanged. Paid clicks for our Google properties represent engagement by users and include clicks on advertisements by end-users related to searches on Google.com, clicks related to advertisements on other owned and operated properties including Gmail, Google Maps, and Google Play; and viewed YouTube engagement ads. Impressions for our Google Network Members' properties include impressions displayed to users served on Google Network Members' properties participating primarily in AdMob, AdSense for Content, AdSense for Search, and Google Ad Manager (includes what was formerly DoubleClick AdExchange). Cost-per-click is defined as click-driven revenues divided by our total number of paid clicks and represents the average amount we charge advertisers for each engagement by users. Cost-per-impression is defined as impression-based and click-based revenues divided by our total number of impressions and represents the average amount we charge advertisers for each impression displayed to users. As our business evolves, we periodically review, refine and update our methodologies for monitoring, gathering, and counting the number of paid clicks on our Google properties and the number of impressions on Google Network Members properties and for identifying the revenues generated by click activity on our Google properties and the revenues generated by impression activity on Google Network Members properties. Our advertising revenue growth, as well as the change in paid clicks and cost-per-click on Google properties and the change in impressions and cost-per-impression on Google Network Members' properties and the correlation between these items, have fluctuated and may continue to fluctuate because of various factors, including: Alphabet Inc.  advertiser competition for keywords;  changes in advertising quality or formats;  changes in device mix;  changes in foreign currency exchange rates;  fees advertisers are willing to pay based on how they manage their advertising costs;  general economic conditions;  growth rates of revenues within Google properties;  seasonality; and  traffic growth in emerging markets compared to more mature markets and across various advertising verticals and channels. Our advertising revenue growth rate has fluctuated over time as a result of a number of factors, including challenges in maintaining our growth rate as revenues increase to higher levels, changes in our product mix, increasing competition, query growth rates, our investments in new business strategies, shifts in the geographic mix of our revenues, and the evolution of the online advertising market. We also expect that our revenue growth rate will continue to be affected by evolving user preferences, the acceptance by users of our products and services as they are delivered on diverse devices and modalities, our ability to create a seamless experience for both users and advertisers, and movements in foreign currency exchange rates. Google properties The following table presents our Google properties revenues (in millions), and changes in our paid clicks and cost-per-click (expressed as a percentage):  Year Ended December 31,    Google properties revenues $ 63,785  $ 77,788  $ 96,336 Google properties revenues as a percentage of Google segment revenues 70.9 %  70.5 %  70.7 % Paid clicks change   %  % Cost-per-click change   (21 )%  (25 )% Google properties revenues consist primarily of advertising revenues that are generated on:  Google search properties which includes revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.; and  Other Google owned and operated properties like Gmail, Google Maps, Google Play, and YouTube. Our Google properties revenues increased  $18,548 million from 2017 to 2018 and increased  $14,003 million from 2016 to 2017 . The growth during both periods was primarily driven by increases in mobile search resulting from ongoing growth in user adoption and usage, as well as continued growth in advertiser activity. We also experienced growth in YouTube driven primarily by video advertising, as well as growth in desktop search due to improvements in ad formats and delivery. Additionally, revenue growth from 2017 to 2018 was favorably affected by the general weakening of the U.S. dollar compared to certain foreign currencies. The growth from 2016 to 2017 was partially offset by the general strengthening of the U.S. dollar compared to certain foreign currencies. The number of paid clicks through our advertising programs on Google properties increased from 2017 to 2018 and from 2016 to 2017 due to growth in YouTube engagement ads, increases in mobile search queries, improvements we have made in ad formats and delivery, and continued global expansion of our products, advertisers and user base. The positive effect on our revenues from an increase in paid clicks was partially offset by a decrease in the cost-per-click paid by our advertisers from 2017 to 2018 and from 2016 to 2017 . The decreases in cost-per-click were primarily driven by continued growth in YouTube engagement ads where cost-per-click remains lower than on our other advertising platforms. Cost-per-click was also affected by changes in device mix, geographic mix, ongoing product changes, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign currencies. Alphabet Inc. Google Network Members' properties The following table presents our Google Network Members' properties revenues (in millions) and changes in our impressions and cost-per-impression (expressed as a percentage):  Year Ended December 31,    Google Network Members' properties revenues $ 15,598  $ 17,587  $ 19,982 Google Network Members' properties revenues as a percentage of Google segment revenues 17.3 %  15.9 %  14.7 % Impressions change   %  % Cost-per-impression change   %  % Google Network Members' properties revenues consist primarily of advertising revenues generated from advertisements served on Google Network Members' properties participating in:  AdMob;  AdSense (such as AdSense for Content, AdSense for Search, etc.); and  Google Ad Manager . Our Google Network Members' properties revenues increased  $2,395 million from 2017 to 2018 . The growth was primarily driven by strength in both AdMob and programmatic advertising buying, offset by a decline in our traditional AdSense businesses. Additionally, the growth was favorably affected by the general weakening of the U.S. dollar compared to certain foreign currencies. The increase in impressions from 2017 to 2018 resulted primarily from growth in AdMob offset by a decrease from AdSense for Content due to ongoing product changes. The increase in cost-per-impression was primarily due to ongoing product and policy changes and improvements we have made in ad formats and delivery and was also affected by changes in device mix, geographic mix, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign currencies. Our Google Network Members' properties revenues increased  $1,989 million from 2016 to 2017 . The growth was primarily driven by strength in both programmatic advertising buying and AdMob, offset by a decline in our traditional AdSense businesses and the general strengthening of the U.S. dollar compared to certain foreign currencies. The increase in impressions from 2016 to 2017 resulted primarily from growth in programmatic advertising and AdMob, partially offset by a decrease from AdSense for Search. The increase in cost-per-impression from 2016 to 2017 was primarily due to ongoing product and policy changes and improvements we have made in ad formats and delivery and was also affected by changes in device mix, geographic mix, product mix, property mix, and fluctuations of the U.S. dollar compared to certain foreign currencies. Google other revenues The following table presents our Google other revenues (in millions):  Year Ended December 31,    Google other revenues $ 10,601  $ 15,003  $ 19,906 Google other revenues as a percentage of Google segment revenues 11.8 %  13.6 %  14.6 % Google other revenues consist primarily of revenues from:  Apps, in-app purchases, and digital content in the Google Play store;  Google Cloud offerings; and  Hardware. Our Google other revenues increased  $4,903 million from 2017 to 2018 . The increase was primarily driven by revenues from Google Cloud offerings, revenues from Google Play, largely relating to in-app purchases (revenues which we recognize net of payout to developers), and hardware sales. Our Google other revenues increased  $4,402 million from 2016 to 2017 . The increase was primarily driven by revenues from Google Cloud offerings, hardware sales, and revenues from Google Play, largely relating to in-app purchases (revenues which we recognize net of payout to developers). Alphabet Inc. Other Bets The following table presents our Other Bets revenues (in millions):  Year Ended December 31,    Other Bets revenues $  $  $ Other Bets revenues as a percentage of total revenues 0.3 %  0.4 %  0.4 % Other Bets revenues consist primarily of revenues and sales from internet and TV services as well as licensing and RD services. Our Other Bets revenues increased  $118 million from 2017 to 2018 and increased  $189 million from 2016 to 2017 . These increases were primarily driven by revenues from sales of Access internet and TV services and revenues from Verily licensing and RD services. Revenues by Geography The following table presents our revenues by geography as a percentage of revenues, determined based on the addresses of our customers:  Year Ended December 31,    United States %  %  % EMEA %  %  % APAC %  %  % Other Americas %  %  % For the amounts of revenues by geography, please refer to Note 2 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Use of Constant Currency Revenues and Constant Currency Revenue Growth The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. Our international revenues are favorably affected as the U.S. dollar weakens relative to other foreign currencies, and unfavorably affected as the U.S. dollar strengthens relative to other foreign currencies. Our international revenues are also favorably affected by net hedging gains and unfavorably affected by net hedging losses. We use non-GAAP constant currency revenues and constant currency revenue growth for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of results on a constant currency basis in addition to GAAP results helps improve the ability to understand our performance because they exclude the effects of foreign currency volatility that are not indicative of our core operating results. Constant currency information compares results between periods as if exchange rates had remained constant period over period. We define constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and use it to determine the constant currency revenue growth on a year-on-year basis. Constant currency revenues are calculated by translating current period revenues using prior period exchange rates, as well as excluding any hedging effects realized in the current period. Constant currency revenue growth (expressed as a percentage) is calculated by determining the increase in current period revenues over prior period revenues where current period foreign currency revenues are translated using prior period exchange rates and hedging effects are excluded from revenues of both periods. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP. Alphabet Inc. The following table presents the foreign exchange effect on our international revenues and total revenues (in millions):  Year Ended December 31,    EMEA revenues $ 30,304  $ 36,046  $ 44,567 Exclude foreign exchange effect on current period revenues using prior year rates 1,291  (5 )  (1,325 ) Exclude hedging effect recognized in current period (479 )   EMEA constant currency revenues $ 31,116  $ 36,231  $ 43,414 Prior period EMEA revenues, excluding hedging effect $ 25,379  $ 29,825  $ 36,236 EMEA revenue growth   %  % EMEA constant currency revenue growth   %  %       APAC revenues $ 12,559  $ 16,235  $ 21,374 Exclude foreign exchange effect on current period revenues using prior year rates (362 )   (49 ) Exclude hedging effect recognized in current period (31 )  (43 )  (33 ) APAC constant currency revenues $ 12,166  $ 16,218  $ 21,292 Prior period APAC revenues, excluding hedging effect $ 9,564  $ 12,528  $ 16,192 APAC revenue growth   %  % APAC constant currency revenue growth   %  %       Other Americas revenues $ 4,628  $ 6,125  $ 7,609 Exclude foreign exchange effect on current period revenues using prior year rates  (148 )  Exclude hedging effect recognized in current period (29 )   (1 ) Other Americas constant currency revenues $ 4,943  $ 5,999  $ 8,012 Prior period Other Americas revenues, excluding hedging effect $ 3,836  $ 4,599  $ 6,147 Other Americas revenue growth   %  % Other Americas constant currency revenue growth   %  %       United States revenues $ 42,781  $ 52,449  $ 63,269 United States revenue growth   %  %       Total revenues $ 90,272  $ 110,855  $ 136,819 Total constant currency revenues $ 91,006  $ 110,897  $ 135,987 Total revenue growth   %  % Total constant currency revenue growth   %  % Our EMEA revenues and revenue growth from 2017 to 2018 were favorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Euro and British pound. Our EMEA revenues and revenue growth from 2016 to 2017 were unfavorably affected by hedging losses. Our APAC revenues and revenue growth from 2017 to 2018 were favorably affected by changes in foreign currency exchange rates, as well as hedging benefits, primarily due to the U.S. dollar weakening relative to the Japanese yen, offset by the U.S. dollar strengthening relative to the Australian dollar. Our APAC revenues and revenue growth from 2016 to 2017 were slightly affected by hedging benefits and changes in foreign currency exchange rates, primarily due to the U.S. dollar strengthening relative to the Japanese yen, offset by the U.S. dollar weakening relative to the Australian dollar, Indian rupee, South Korean won, and Taiwanese dollar. Alphabet Inc. Our Other Americas revenues and revenue growth from 2017 to 2018 were unfavorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar strengthening relative to the Brazilian real and Argentine peso. Our Other Americas revenues and revenue growth from 2016 to 2017 were favorably affected by changes in foreign currency exchange rates, primarily due to the U.S. dollar weakening relative to the Brazilian real and Canadian dollar, offset by the U.S. dollar strengthening relative to the Argentine peso. Costs and Expenses Cost of Revenues Cost of revenues consists of TAC which are paid to Google Network Members primarily for ads displayed on their properties and amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers. The cost of revenues related to revenues generated from ads placed on Google Network Members' properties are significantly higher than the cost of revenues related to revenues generated from ads placed on Google properties because most of the advertiser revenues from ads served on Google Network Members properties are paid as TAC to our Google Network Members. Additionally, other cost of revenues (which is the cost of revenues excluding TAC) includes the following:  Content acquisition costs primarily related to payments to content providers from whom we license video and other content for distribution on YouTube and Google Play (we pay fees to these content providers based on revenues generated or a flat fee);  Expenses associated with our data centers and other operations (including bandwidth, compensation expenses (including stock-based compensation (SBC)), depreciation, energy, and other equipment costs); and  Inventory related costs for hardware we sell. The following tables present our cost of revenues, including TAC (in millions):  Year Ended December 31,    TAC $ 16,793  $ 21,672  $ 26,726 Other cost of revenues 18,345  23,911  32,823 Total cost of revenues $ 35,138  $ 45,583  $ 59,549 Total cost of revenues as a percentage of revenues 38.9 %  41.1 %  43.5 %        Year Ended December 31,    TAC to distribution partners $ 5,894  $ 9,031  $ 12,572 TAC to distribution partners as a percentage of Google properties revenues (1) (Google properties TAC rate) 9.2 %  11.6 %  13.1 %       TAC to Google Network Members $ 10,899  $ 12,641  $ 14,154 TAC to Google Network Members as a percentage of Google Network Members' properties revenues (1) (Network Members TAC rate) 69.9 %  71.9 %  70.8 %       TAC $ 16,793  $ 21,672  $ 26,726 TAC as a percentage of advertising revenues (1) (Aggregate TAC rate) 21.2 %  22.7 %  23.0 % (1)  Revenues include hedging gains (losses) which affect TAC rates. Cost of revenues increased  $13,966 million from 2017 to 2018 . The increase was due to increases in TAC and other cost of revenues of $5,054 million and $8,912 million , respectively. The increase in TAC to distribution partners from 2017 to 2018 was a result of an increase in Google properties revenues and the associated TAC rate. The increase in the Google properties TAC rate was driven by changes in partner agreements and the ongoing shift to mobile, which carries higher TAC because more mobile searches are Alphabet Inc. channeled through paid access points. The increase in TAC to Google Network Members from 2017 to 2018 was a result of an increase in Google Network Members' properties revenues offset by a decrease in the associated TAC rate. The decrease in the Network Members TAC rate was primarily due to a shift to lower TAC products within programmatic advertising buying. The increase in the aggregate TAC rate from 2017 to 2018 was a result of an increase in Google properties TAC rate, partially offset by a favorable revenue mix shift from Google Network Members' properties to Google properties. Other cost of revenues increased  $8,912 million from 2017 to 2018 . The increase was due to an increase in data center and other operations costs, which was affected by increased allocations primarily from general and administrative expenses; content acquisition costs as a result of increased activities related to YouTube; and hardware costs associated with new hardware launches. Cost of revenues increased  $10,445 million from 2016 to 2017 . The increase was due to an increase in TAC of $4,879 million . The increase in TAC to distribution partners was a result of an increase in Google properties revenues and the associated TAC rate. The increase in TAC to Google Network Members was a result of an increase in Google Network Members' properties revenues and the associated TAC rate. The increase in the Google properties TAC rate was driven by changes in partner agreements and the ongoing shift to mobile, which carries higher TAC because more mobile searches are channeled through paid access points. The increase in the Network Members TAC rate was driven by the continued underlying shift in advertising buying from our traditional network business to programmatic advertising buying. The increase in the aggregate TAC rate was also partially offset by a favorable revenue mix shift from Google Network Members' properties to Google properties. Other cost of revenues increased  $5,566 million from 2016 to 2017. The increase was due to various factors, including an increase in data center and other operations costs, which include depreciation, compensation expenses (including SBC), energy, bandwidth, and other equipment costs as a result of business growth; hardware costs associated with new hardware launches; and content acquisition costs as a result of increased activities related to YouTube. We expect cost of revenues to increase in dollar amount and as a percentage of total revenues in future periods based on a number of factors, including the following:  Google Network Members TAC rates, which are affected by a combination of factors such as geographic mix, product mix, revenue share terms, and fluctuations of the U.S. dollar compared to certain foreign currencies ;  Google properties TAC rates, which are affected by changes in device mix between mobile, desktop, and tablet, partner mix, partner agreement terms such as revenue share arrangements, and the percentage of queries channeled through paid access points;  Growth rates of expenses associated with our data centers and other operations, content acquisition costs, as well as our hardware inventory and related costs;  Higher cost of revenues associated with the increased proportion of non-advertising revenues relative to our advertising revenues; and  Relative revenue growth rates of Google properties and our Google Network Members' properties. Research and Development The following table presents our RD expenses (in millions):  Year Ended December 31,    Research and development expenses $ 13,948  $ 16,625  $ 21,419 Research and development expenses as a percentage of revenues 15.5 %  15.0 %  15.7 % RD expenses consist primarily of:  Compensation expenses (including SBC) and facilities-related costs for engineering and technical employees responsible for RD of our existing and new products and services;  Depreciation expenses;  Equipment-related expenses; and  Professional services fees primarily related to consulting and outsourcing services. RD expenses increased  $4,794 million from 2017 to 2018 . The increase was primarily due to an increase in compensation expenses (including SBC) and facilities-related costs of $3,518 million, largely resulting from a 24% increase in headcount. In addition, there was an increase in depreciation and equipment-related expenses of $499 Alphabet Inc. million and $318 million, respectively, as well as an increase in professional services fees of $305 million due to additional expenses incurred for outsourced services and consulting. RD expenses increased  $2,677 million from 2016 to 2017 . The increase was primarily due to an increase in compensation expenses (including SBC) and facilities-related costs of $1,886 million, largely resulting from a 16% increase in headcount. In addition, there was an increase in depreciation expenses of $323 million and equipment-related expenses of $246 million. We expect that RD expenses will increase in dollar amount and may fluctuate as a percentage of revenues in future periods. Sales and Marketing The following table presents our sales and marketing expenses (in millions):  Year Ended December 31,    Sales and marketing expenses $ 10,485  $ 12,893  $ 16,333 Sales and marketing expenses as a percentage of revenues 11.6 %  11.6 %  11.9 % Sales and marketing expenses consist primarily of:  Advertising and promotional expenditures related to our products and services; and  Compensation expenses (including SBC) and facilities-related costs for employees engaged in sales and marketing, sales support, and certain customer service functions. Sales and marketing expenses increased  $3,440 million from 2017 to 2018 . The increase was primarily due to an increase in compensation expenses (including SBC) and facilities-related costs of $1,418 million, largely resulting from a 12% increase in headcount. In addition, there was an increase in advertising and promotional expenses of $1,233 million, largely resulting from increases in marketing and promotion-related expenses for our Cloud offerings and the Google Assistant. Sales and marketing expenses increased  $2,408 million from 2016 to 2017 . The increase was primarily due to an increase in advertising and promotional expenses of $1,266 million, largely resulting from increases in marketing and promotion-related expenses for our hardware products, Cloud offerings, and YouTube. In addition, there was an increase in compensation expenses (including SBC) and facilities-related costs of $853 million, largely resulting from a 6% increase in headcount. We expect that sales and marketing expenses will increase in dollar amount and may fluctuate as a percentage of revenues in future periods. General and Administrative The following table presents our general and administrative expenses (in millions):  Year Ended December 31,    General and administrative expenses $ 6,985  $ 6,872  $ 8,126 General and administrative expenses as a percentage of revenues 7.7 %  6.2 %  5.9 % General and administrative expenses consist primarily of:  Compensation expenses (including SBC and accrued performance fees related to gains on securities) and facilities-related costs for employees in our facilities, finance, human resources, information technology, and legal organizations;  Depreciation;  Equipment-related expenses; and  Professional services fees primarily related to audit, information technology consulting, outside legal, and outsourcing services. General and administrative expenses increased  $1,254 million from 2017 to 2018 . The increase was primarily due to an increase in compensation expenses (including SBC) and facilities-related costs of $1,660 million, largely resulting from accrued performance fees primarily related to gains on equity securities. The increase was offset by reduced allocations (with a corresponding net increase primarily in cost of revenues). Alphabet Inc. General and administrative expenses decreased  $113 million from 2016 to 2017 . The decrease was primarily from reduced allocations to general and administrative expenses with an offsetting increase to cost of revenues and other operating expenses. The decrease was partially offset by an increase in compensation expenses (including SBC) and facilities-related costs of $271 million, largely resulting from a 9% increase in headcount. Additionally, there was an increase in professional service fees of $253 million due to additional expenses incurred for outsourced services and consulting services. We expect general and administrative expenses will increase in dollar amount and may fluctuate as a percentage of revenues in future periods. European Commission Fines In June 2017, the EC announced its decision that certain actions taken by Google regarding its display and ranking of shopping search results and ads infringed European competition law. The EC decision imposed a 2.4 billion ($2.7 billion as of June 27, 2017) fine, which was accrued in the second quarter of 2017. In July 2018, the EC announced its decision that certain provisions in Google's Android-related distribution agreements infringed European competition law. The EC decision imposed a 4.3 billion ($5.1 billion as of June 30, 2018) fine, which was accrued in the second quarter of 2018. Please refer to Note 9 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. Other Income (Expense), Net The following table presents other income (expense), net, (in millions):  Year Ended December 31,    Other income (expense), net $  $ 1,047  $ 8,592 Other income (expense), net, as a percentage of revenues 0.5 %  0.9 %  6.3 % Other income (expense), net, increased  $7,545 million from 2017 to 2018 . This increase was primarily driven by unrealized gains on equity securities resulting from the adoption of a new accounting standard and the modification of the terms of a non-marketable debt security resulting in a recognized unrealized gain. Other income (expense), net, increased  $613 million from 2016 to 2017 . This increase was primarily driven by reduced costs of our foreign currency hedging activities, decreased losses on marketable securities and an increase in interest income. We expect other income (expense), net, will fluctuate in dollar amount and percentage of revenues in future periods as it is largely driven by market dynamics. Beginning in 2018, changes in the value of marketable and non-marketable equity security investments are reflected in OIE. Equity values generally change daily for marketable equity securities and upon the occurrence of observable price changes or upon impairment of non-marketable equity securities. In addition, volatility in the global economic climate and financial markets could result in a significant change in the value of our equity securities. Fluctuations in the value of these investments could contribute to the volatility of OIE in future periods. For additional information about equity investments, please see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Provision for Income Taxes The following table presents our provision for income taxes (in millions) and effective tax rate:  Year Ended December 31,    Provision for income taxes $ 4,672  $ 14,531  $ 4,177 Effective tax rate 19.3 %  53.4 %  12.0 % Our provision for income taxes and our effective tax rate decreased from 2017 to 2018 , due to the U.S. Tax Cuts and Jobs Act (Tax Act) which was enacted in December 2017. Please refer to Note 13 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. Alphabet Inc. Our provision for income taxes and our effective tax rate increased from 2016 to 2017 , due to the effects of the Tax Act related to the one time-transition tax on accumulated foreign subsidiary earnings not previously subject to U.S. income tax. Effective in 2018, the Tax Act reduces the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively. Our future effective tax rate could be adversely affected by earnings being lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items. Quarterly Results of Operations The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report on Form 10-K. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. Our operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year. The following table presents our unaudited quarterly results of operations for the eight quarters ended December 31, 2018 . This table includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of our consolidated financial position and operating results for the quarters presented. Both seasonal fluctuations in internet usage, advertising expenditures and underlying business trends such as traditional retail seasonality have affected, and are likely to continue to affect, our business. Commercial queries typically increase significantly in the fourth quarter of each year. These seasonal trends have caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.  Quarter Ended  Mar 31, 2017 Jun 30, 2017 Sept 30, 2017 Dec 31, 2017  Mar 31, 2018  Jun 30, 2018  Sept 30, 2018  Dec 31, 2018                  (In millions, except per share amounts) (unaudited) Consolidated Statements of Income Data:         Revenues $ 24,750  $ 26,010  $ 27,772  $ 32,323  $ 31,146  $ 32,657  $ 33,740  $ 39,276 Costs and expenses:                Cost of revenues 9,795  10,373  11,148  14,267  13,467  13,883  14,281  17,918 Research and development 3,942  4,172  4,205  4,306  5,039  5,114  5,232  6,034 Sales and marketing 2,644  2,897  3,042  4,310  3,604  3,780  3,849  5,100 General and administrative 1,801  1,700  1,595  1,776  2,035  2,002  2,068  2,021 European Commission fines  2,736     5,071   Total costs and expenses 18,182  21,878  19,990  24,659  24,145  29,850  25,430  31,073 Income from operations 6,568  4,132  7,782  7,664  7,001  2,807  8,310  8,203 Other income (expense), net     3,542  1,408  1,773  1,869 Income from continuing operations before income taxes 6,819  4,377  7,979  8,018  10,543  4,215  10,083  10,072 Provision for income taxes 1,393   1,247  11,038  1,142  1,020   1,124 Net income (loss) $ 5,426  $ 3,524  $ 6,732  $ (3,020 )  $ 9,401  $ 3,195  $ 9,192  $ 8,948                 Basic net income (loss) per share of Class A and B common stock and Class C capital stock $ 7.85  $ 5.09  $ 9.71  $ (4.35 )  $ 13.53  $ 4.60  $ 13.21  $ 12.87 Diluted net income (loss) per share of Class A and B common stock and Class C capital stock $ 7.73  $ 5.01  $ 9.57  $ (4.35 )  $ 13.33  $ 4.54  $ 13.06  $ 12.77 Capital Resources and Liquidity As of December 31, 2018 , we had $109.1 billion in cash, cash equivalents, and marketable securities. Ca sh equivalents and marketable securities a re comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities. From time to time, we may hold Alphabet Inc. marketable equity securities obtained through acquisitions or strategic investments in private companies that subsequently go public. In December 2017, the Tax Act was enacted and resulted in a one-time transition tax on accumulated foreign subsidiary earnings. After 2017, our foreign earnings held by foreign subsidiaries are no longer subject to U.S. tax upon repatriation to the U.S. As of December 31, 2018 , the remaining long-term tax payable related to the Tax Act of $7.4 billion is presented within income tax payable, non-current on our Consolidated Balance Sheets. As permitted by the Tax Act, we will pay the transition tax in annual interest-free installments through 2025. During the years ended December 31, 2017 and 2018, the EC announced decisions that certain actions taken by Google infringed European competition law and imposed fines of 2.4 billion ($2.7 billion as of June 27, 2017) and 4.3 billion ($5.1 billion as of June 30, 2018), respectively. While under appeal, EC 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 respective fines. Please refer to Note 9 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. Our principal sources of liquidity are our cash, cash equivalents, and marketable securities, as well as the cash flow that we generate from our operations. We have a short-term debt financing program of up to $5.0 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, 2018 . We have $4.0 billion of revolving credit facilities expiring in July 2023 with no amounts outstanding. The interest rate for the credit facilities is determined based on a formula using certain market rates. We believe that our sources of funding will be sufficient to satisfy our currently anticipated cash requirements including capital expenditures, working capital requirements, potential acquisitions and other liquidity requirements through at least the next 12 months. As of December 31, 2018 , we have senior unsecured notes outstanding due in 2021, 2024, and 2026 with a total carrying value of $4.0 billion . In 2016 and 2018, the board of directors of Alphabet authorized the company to repurchase up to $7.0 billion and $8.6 billion of its Class C capital stock, respectively. The 2016 authorization was completed in 2018. As of December 31, 2018 , $1.7 billion remains available for repurchase. In January 2019, our board of directors authorized the repurchase of up to an additional $12.5 billion of our Class C capital stock. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. Please refer to Note 10 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to stock repurchases. The following table presents our cash flows (in millions):  Year Ended December 31,    Net cash provided by operating activities $ 36,036  $ 37,091  $ 47,971 Net cash used in investing activities $ (31,165 )  $ (31,401 )  $ (28,504 ) Net cash used in financing activities $ (8,332 )  $ (8,298 )  $ (13,179 ) Cash Provided by Operating Activities Our largest source of cash provided by our operations are advertising revenues generated by Google properties and Google Network Members' properties. Additionally, we generate cash through sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees including fees received for Google Cloud offerings . Our primary uses of cash from our operating activities include payments to our Google Network Members and distribution partners, and payments for content acquisition costs. In addition, uses of cash from operating activities include compensation and related costs, hardware inventory costs, other general corporate expenditures, and income taxes. Net cash provided by operating activities increased from 2017 to 2018 primarily due to increases in cash received from advertising revenues and Google other revenues (net of payouts to app developers), offset by increases in cash paid for cost of revenues and operating expenses. Alphabet Inc. Net cash provided by operating activities increased from 2016 to 2017 primarily due to increases in cash received from advertising revenues and Google other revenues (net of payouts to app developers), offset by increases in cash paid for cost of revenues, operating expenses, and income taxes. Cash Used in Investing Activities Cash provided by or used in investing activities primarily consists of purchases of property and equipment; purchases, maturities, and sales of marketable and non-marketable securities; and payments for acquisitions. Net cash used in investing activities decreased from 2017 to 2018 primarily due to a decrease in purchases of marketable securities. The decrease was partially offset by higher investments in land and buildings for offices and data centers, as well as, servers to provide capacity for the growth of our businesses. Generally, our investment in office facilities is driven by workforce needs; and our investment in data centers is driven by our compute and storage requirements and has a lead time of up to three years. Further, the decrease was partially offset by an increase in payments for acquisitions and a decrease in maturities and sales of marketable securities. Net cash used in investing activities increased slightly from 2016 to 2017 primarily due to an increase in purchases of marketable securities and an increase in purchases of property and equipment, partially offset by an increase in the maturities and sales of marketable securities, a decrease in cash collateral paid related to securities lending, and an increase in proceeds received from collections of notes receivables. Cash Used in Financing Activities Cash provided by or used in financing activities consists primarily of net proceeds or payments from stock-based award activities, repurchases of capital stock, and net proceeds or payments from issuance or repayments of debt. Net cash used in financing activities increased from 2017 to 2018 primarily due to higher cash payments for repurchases of capital stock and stock-based award activities. Net cash used in financing activities decreased slightly from 2016 to 2017 primarily due to lower net cash payments from repayments and issuance of debt, partially offset by higher cash payments for repurchases of capital stock. Contractual Obligations as of December 31, 2018 The following summarizes our contractual obligations as of December 31, 2018 (in millions):  Payments Due By Period  Total  Less than 1 year  1-3 years  3-5 years  More than 5 years Operating lease obligations, net of sublease income amounts (1) $ 10,047  $ 1,303  $ 2,711  $ 2,122  $ 3,911 Purchase obligations (2) 7,433  5,132  1,407   Long-term debt obligations (3) 4,689   1,220   3,181 Tax payable (4) 7,440    2,029  5,411   Other long-term liabilities reflected on our balance sheet (5) 2,443     1,048 Total contractual obligations $ 32,052  $ 6,910  $ 8,005  $ 8,473  $ 8,664 (1)  For further information, refer to Note 9 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (2)  Represents non-cancelable contractual obligations primarily related to information technology assets and data center operation costs; purchases of inventory; and digital media content licensing arrangements. The amounts included above represent the non-cancelable portion of agreements or the minimum cancellation fee. For those agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of December 31, 2018 . Excluded from the table above are open orders for purchases that support normal operations. (3)  Represents our principal and interest payments. For further information on long-term debt, refer to Note 5 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (4)  Represents one-time transition tax payable incurred as a result of the Tax Act. For further information, refer to Note 13 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Excluded from the table above are long-term taxes payable of $3.9 billion as of December 31, 2018 primarily related to uncertain tax positions, for which we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes. (5)  Represents cash obligations recorded on our Consolidated Balance Sheets, including the short-term portion of these long-term liabilities, primarily for the construction of offices and certain commercial agreements. These amounts do not include the EC fines which are classified as current liabilities on our Consolidated Balance Sheets. For further information regarding the Alphabet Inc. EC fines, refer to Note 9 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Off-Balance Sheet Arrangements As of December 31, 2018 , we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, expenses, gains and losses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below. We have reviewed our critical accounting policies and estimates with the audit committee of our board of directors. Please see Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements. Revenues For the sale of third-party goods and services, we evaluate whether we are the principal, and report revenues on a gross basis, or an agent, and report revenues on a net basis. In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price. Income Taxes We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Services (IRS) and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes. Loss Contingencies We are regularly subject to claims, suits, government investigations, and other proceedings involving competition and antitrust, intellectual property, privacy, non-income taxes, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in the Notes to the Consolidated Financial Statements. We evaluate, on a regular basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both the likelihood of there being, and the estimated amount of, a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Should any Alphabet Inc. of our estimates and assumptions change or prove to have been incorrect, it could have a material effect on our business, consolidated financial position, results of operations, or cash flows. Long-lived Assets Long-lived assets, including property and equipment, long-term prepayments, and intangible assets, excluding goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. An impairment loss would be recognized when estimated undiscounted future cash flows generated from the assets are less than their carrying amount. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Valuation of Non-marketable Equity Securities Beginning on January 1, 2018, our non-marketable equity securities not accounted for under the equity method are carried either at fair value or under the measurement alternative upon the adoption of ASU 2016-01. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and obligations of the securities. Recording upward and downward adjustments to the carrying value of our equity securities as a result of observable price changes requires quantitative assessments of the fair value of our securities using various valuation methodologies and involves the use of estimates. Non-marketable equity securities are also subject to periodic impairment reviews. Our quarterly impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the investment's fair value. Qualitative factors considered include industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, we prepare quantitative assessments of the fair value of our equity investments using both the market and income approaches which require judgment and the use of estimates, including discount rates, investee revenues and costs, and comparable market data of private and public companies, among others. When our assessment indicates that an impairment exists, we measure our non-marketable securities at fair value. "," ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to financial market risks, including changes in foreign currency exchange rates, interest rates, and equity investment risks. Foreign Currency Exchange Risk We transact business globally in multiple currencies. Our international revenues, as well as costs and expenses denominated in foreign currencies, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. Principal currencies hedged included the Australian dollar, British pound, Canadian dollar, Euro and Japanese yen. For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term. We use foreign exchange forward contracts to offset the foreign exchange risk on our assets and liabilities denominated in currencies other than the local currency of the subsidiary. These forward contracts reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements on our assets and liabilities. The foreign currency gains and losses on the assets and liabilities are recorded in other income (expense), net, which are offset by the gains and losses on the forward contracts. If an adverse 10% foreign currency exchange rate change was applied to total monetary assets and liabilities denominated in currencies other than the local currencies at the balance sheet dates, it would have resulted in an adverse effect on income before income taxes of approximately $52 million and $1 million as of December 31, 2017 and 2018 , respectively. The adverse effect as of December 31, 2017 and 2018 is after consideration of the offsetting effect of approximately $374 million for both periods from foreign exchange contracts in place for the months ended December 31, 2017 and December 31, 2018 . We use foreign currency forwards and option contracts, including collars (an option strategy comprised of a combination of purchased and written options) to protect our forecasted U.S. dollar-equivalent earnings from changes in foreign currency exchange rates. When the U.S. dollar strengthens, gains from foreign currency options and forwards reduce the foreign currency losses related to our earnings. When the U.S. dollar weakens, losses from foreign currency collars and forwards offset the foreign currency gains related to our earnings. These hedging contracts reduce, but do Alphabet Inc. not entirely eliminate, the effect of foreign currency exchange rate movements. We designate these contracts as cash flow hedges for accounting purposes. We reflect the gains or losses of foreign currency spot rate changes as a component of AOCI and subsequently reclassify them into revenues to offset the hedged exposures as they occur. If the U.S. dollar weakened by 10% as of December 31, 2017 and December 31, 2018 , the amount recorded in AOCI related to our foreign exchange contracts before tax effect would have been approximately $950 million and $772 million lower as of December 31, 2017 and December 31, 2018 , respectively. The change in the value recorded in AOCI would be expected to offset a corresponding foreign currency change in forecasted hedged revenues when recognized. During 2018, we entered into foreign exchange forward contracts designated as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. These forward contracts serve to offset the foreign currency translation risk from our foreign operations. If the U.S. dollar weakened by 10%, the amount recorded in cumulative translation adjustment (CTA) within AOCI related to our net investment hedge would have been approximately $635 million lower as of December 31, 2018. The change in value recorded in CTA would be expected to offset a corresponding foreign currency translation gain or loss from our investment in foreign subsidiaries. Interest Rate Risk Our investment strategy is to achieve a return that will allow us to preserve capital and maintain liquidity requirements. We invest primarily in debt securities including those of the U.S. government and its agencies, corporate debt securities, mortgage-backed securities, money market and other funds, municipal securities, time deposits, asset backed securities, and debt instruments issued by foreign governments. By policy, we limit the amount of credit exposure to any one issuer. Our investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Unrealized gains or losses on our marketable debt securities are primarily due to interest rate fluctuations as a result of higher market interest rates compared to interest rates at the time of purchase. We account for both fixed and variable rate securities at fair value with gains and losses recorded in AOCI until the securities are sold. We use value-at-risk (VaR) analysis to determine the potential effect of fluctuations in interest rates on the value of our marketable debt security portfolio. The VaR is the expected loss in fair value, for a given confidence interval, for our investment portfolio due to adverse movements in interest rates. We use a variance/covariance VaR model with 95% confidence interval. The estimated one-day loss in fair value of our marketable debt securities as of December 31, 2017 and 2018 are shown below (in millions):  As of December 31,  12-Month Average As of December 31,     Risk Category - Interest Rate $  $  $  $ Actual future gains and losses associated with our marketable debt security portfolio may differ materially from the sensitivity analyses performed as of December 31, 2017 and 2018 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates and our actual exposures and positions. VaR analysis is not intended to represent actual losses but is used as a risk estimation. Equity Investment Risk Our marketable and non-marketable equity securities are subject to a wide variety of marketrelated risks that could substantially reduce or increase the fair value of our holdings. Our marketable equity securities are publicly traded stocks or funds and our non-marketable equity securities are investments in privately held companies, some of which are in the startup or development stages. We record our marketable equity securities not accounted for under the equity method at fair value based on readily determinable market values, of which publicly traded stocks and mutual funds are subject to market price volatility, and represent $1.2 billion of our investments as of December 31, 2018. A hypothetical adverse price change of 10%, which could be experienced in the near term, would decrease the fair value of our marketable equity securities by $120 million . Our non-marketable equity securities not accounted for under the equity method are adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the Alphabet Inc. measurement alternative). The fair value is measured at the time of the observable transaction, which is not necessarily an indication of the current fair value as of the balance sheet date. These investments, especially those that are in the early stages, are inherently risky because the technologies or products these companies have under development are typically in the early phases and may never materialize and they may experience a decline in financial condition, which could result in a loss of a substantial part of our investment in these companies. The success of our investment in any private company is also typically dependent on the likelihood of our ability to realize value in our investments through liquidity events such as public offerings, acquisitions, private sales or other favorable market events reflecting appreciation to the cost of our initial investment. As of December 31, 2018, the carrying value of our non-marketable equity securities, which were accounted for under the measurement alternative, was $12.3 billion . Valuations of our equity investments in private companies are inherently more complex due to the lack of readily available market data. Volatility in the global economic climate and financial markets could result in a significant impairment charge on our non-marketable equity securities. The carrying values of our equity method investments generally do not fluctuate based on market price changes, however these investments could be impaired if the carrying value exceeds the fair value. For further information about our equity investments, please refer to Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Part II of this Annual Report on Form 10-K. Alphabet Inc. "," ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Alphabet Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS    Page Reports of Ernst  Young LLP, Independent Registered Public Accounting Firm Financial Statements:  Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements The supplementary financial information required by this Item 8 is included in Item 7 under the caption Quarterly Results of Operations. Alphabet Inc. REPORT OF ERNST  YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alphabet Inc. (the Company) as of December 31, 2017 and 2018, the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 4, 2019 expressed an unqualified opinion thereon. Adoption of New Accounting Standard As discussed in Note 1 to the consolidated financial statements, the Company changed its method for accounting for the recognition, measurement, presentation and disclosure of certain equity securities in the year ended December 31, 2018. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst  Young LLP    We have served as the Company's auditor since 1999.    San Jose, California  February 4, 2019  Alphabet Inc. REPORT OF ERNST  YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alphabet Inc. Opinion on Internal Control over Financial Reporting We have audited Alphabet Inc.s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Alphabet Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2018 consolidated financial statements of the Company and our report dated February 4, 2019 expressed an unqualified opinion thereon that included an explanatory paragraph regarding the Companys adoption of a new accounting standard for the recognition, measurement, presentation and disclosure of certain equity securities in the year ended December 31, 2018. Basis for Opinion The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitation of Internal Control over Financial Reporting A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst  Young LLP    San Jose, California  February 4, 2019  Alphabet Inc. Alphabet Inc. CONSOLIDATED BALANCE SHEETS (In millions, except share amounts which are reflected in thousands, and par value per share amounts)  As of December 31, 2017  As of December 31, 2018 Assets    Current assets:    Cash and cash equivalents $ 10,715  $ 16,701 Marketable securities 91,156  92,439 Total cash, cash equivalents, and marketable securities 101,871  109,140 Accounts receivable, net of allowance of $674 and $729 18,336  20,838 Income taxes receivable, net  Inventory  1,107 Other current assets 2,983  4,236 Total current assets 124,308  135,676 Non-marketable investments 7,813  13,859 Deferred income taxes  Property and equipment, net 42,383  59,719 Intangible assets, net 2,692  2,220 Goodwill 16,747  17,888 Other non-current assets 2,672  2,693 Total assets $ 197,295  $ 232,792 Liabilities and Stockholders Equity    Current liabilities:    Accounts payable $ 3,137  $ 4,378 Accrued compensation and benefits 4,581  6,839 Accrued expenses and other current liabilities 10,177  16,958 Accrued revenue share 3,975  4,592 Deferred revenue 1,432  1,784 Income taxes payable, net  Total current liabilities 24,183  34,620 Long-term debt 3,969  4,012 Deferred revenue, non-current  Income taxes payable, non-current 12,812  11,327 Deferred income taxes  1,264 Other long-term liabilities 3,059  3,545 Total liabilities 44,793  55,164 Commitments and Contingencies (Note 9)  Stockholders equity:    Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding  Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000); 694,783 (Class A 298,470, Class B 46,972, Class C 349,341) and 695,556 (Class A 299,242, Class B 46,636, Class C 349,678) shares issued and outstanding 40,247  45,049 Accumulated other comprehensive loss (992 )  (2,306 ) Retained earnings 113,247  134,885 Total stockholders equity 152,502  177,628 Total liabilities and stockholders equity $ 197,295  $ 232,792 See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts)  Year Ended December 31,    Revenues $ 90,272  $ 110,855  $ 136,819 Costs and expenses:      Cost of revenues 35,138  45,583  59,549 Research and development 13,948  16,625  21,419 Sales and marketing 10,485  12,893  16,333 General and administrative 6,985  6,872  8,126 European Commission fines  2,736  5,071 Total costs and expenses 66,556  84,709  110,498 Income from operations 23,716  26,146  26,321 Other income (expense), net  1,047  8,592 Income before income taxes 24,150  27,193  34,913 Provision for income taxes 4,672  14,531  4,177 Net income $ 19,478  $ 12,662  $ 30,736       Basic net income per share of Class A and B common stock and Class C capital stock $ 28.32  $ 18.27  $ 44.22 Diluted net income per share of Class A and B common stock and Class C capital stock $ 27.85  $ 18.00  $ 43.70 See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions)  Year Ended December 31,    Net income $ 19,478  $ 12,662  $ 30,736 Other comprehensive income (loss):      Change in foreign currency translation adjustment (599 )  1,543  (781 ) Available-for-sale investments:      Change in net unrealized gains (losses) (314 )   Less: reclassification adjustment for net (gains) losses included in net income   (911 ) Net change (net of tax effect of $0, $0, and $156) (93 )   (823 ) Cash flow hedges:      Change in net unrealized gains (losses)  (638 )  Less: reclassification adjustment for net (gains) losses included in net income (351 )   Net change (net of tax effect of $64, $247, and $103) (545 )  Other comprehensive income (loss) (528 )  1,410  (1,216 ) Comprehensive income $ 18,950  $ 14,072  $ 29,520 See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (In millions, except share amounts which are reflected in thousands)  Class A and Class B Common Stock, Class C Capital Stock and Additional Paid-In Capital  Accumulated Other Comprehensive Income (Loss)  Retained Earnings  Total Stockholders Equity  Shares  Amount  Balance as of December 31, 2015 687,348  $ 32,982  $ (1,874 )  $ 89,223  $ 120,331 Cumulative effect of accounting change    (133 )  Common and capital stock issued 9,106     Stock-based compensation expense  6,700    6,700 Tax withholding related to vesting of restricted stock units  (3,597 )    (3,597 ) Repurchases of capital stock (5,161 )  (256 )   (3,437 )  (3,693 ) Net income    19,478  19,478 Other comprehensive loss   (528 )   (528 ) Balance as of December 31, 2016 691,293  36,307  (2,402 )  105,131  139,036 Cumulative effect of accounting change    (15 )  (15 ) Common and capital stock issued 8,652     Stock-based compensation expense  7,694    7,694 Tax withholding related to vesting of restricted stock units  (4,373 )    (4,373 ) Repurchases of capital stock (5,162 )  (315 )   (4,531 )  (4,846 ) Sale of subsidiary shares     Net income    12,662  12,662 Other comprehensive income   1,410   1,410 Balance as of December 31, 2017 694,783  40,247  (992 )  113,247  152,502 Cumulative effect of accounting change   (98 )  (599 )  (697 ) Common and capital stock issued 8,975     Stock-based compensation expense  9,353    9,353 Tax withholding related to vesting of restricted stock units and other  (4,782 )    (4,782 ) Repurchases of capital stock (8,202 )  (576 )   (8,499 )  (9,075 ) Sale of subsidiary shares     Net income    30,736  30,736 Other comprehensive loss   (1,216 )   (1,216 ) Balance as of December 31, 2018 695,556  $ 45,049  $ (2,306 )  $ 134,885  $ 177,628 See accompanying notes. Alphabet Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)  Year Ended December 31,    Operating activities      Net income $ 19,478  $ 12,662  $ 30,736 Adjustments:      Depreciation and impairment of property and equipment 5,267  6,103  8,164 Amortization and impairment of intangible assets   Stock-based compensation expense 6,703  7,679  9,353 Deferred income taxes (38 )   (Gain) loss on debt and equity securities, net   (6,650 ) Other   (189 ) Changes in assets and liabilities, net of effects of acquisitions:      Accounts receivable (2,578 )  (3,768 )  (2,169 ) Income taxes, net 3,125  8,211  (2,251 ) Other assets  (2,164 )  (1,207 ) Accounts payable   1,067 Accrued expenses and other liabilities 1,515  4,891  8,614 Accrued revenue share   Deferred revenue   Net cash provided by operating activities 36,036  37,091  47,971 Investing activities      Purchases of property and equipment (10,212 )  (13,184 )  (25,139 ) Proceeds from disposals of property and equipment   Purchases of marketable securities (84,509 )  (92,195 )  (50,158 ) Maturities and sales of marketable securities 66,895  73,959  48,507 Purchases of non-marketable investments (1,109 )  (1,745 )  (2,073 ) Maturities and sales of non-marketable investments   1,752 Cash collateral related to securities lending (2,428 )   Investments in reverse repurchase agreements   Acquisitions, net of cash acquired, and purchases of intangible assets (986 )  (287 )  (1,491 ) Proceeds from collection of notes receivable  1,419  Net cash used in investing activities (31,165 ) (31,401 )  (28,504 ) Financing activities      Net payments related to stock-based award activities (3,304 )  (4,166 )  (4,993 ) Repurchases of capital stock (3,693 )  (4,846 )  (9,075 ) Proceeds from issuance of debt, net of costs 8,729  4,291  6,766 Repayments of debt (10,064 )  (4,377 )  (6,827 ) Proceeds from sale of subsidiary shares   Net cash used in financing activities (8,332 )  (8,298 )  (13,179 ) Effect of exchange rate changes on cash and cash equivalents (170 )   (302 ) Net increase (decrease) in cash and cash equivalents (3,631 )  (2,203 )  5,986 Cash and cash equivalents at beginning of period 16,549  12,918  10,715 Cash and cash equivalents at end of period $ 12,918  $ 10,715  $ 16,701       Supplemental disclosures of cash flow information      Cash paid for taxes, net of refunds $ 1,643  $ 6,191  $ 5,671 Cash paid for interest, net of amounts capitalized $  $  $ See accompanying notes. Alphabet Inc. Alphabet Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Operations and Summary of Significant Accounting Policies  Nature of Operations 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 primarily by delivering relevant, cost-effective online advertising. Basis of Consolidation The consolidated financial statements of Alphabet include the accounts of Alphabet and entities consolidated under the variable interest and voting models. Noncontrolling interests are not presented separately as the amounts are not material. All intercompany balances and transactions have been eliminated. Use of Estimates Preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires us to make 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. On an ongoing basis, we evaluate our estimates, including those related to the bad debt allowance, sales allowances, fair values of financial instruments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, and contingent liabilities, among others. We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Revenue Recognition We recognize revenues when we transfer control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services. See Note 2 for further discussion on Revenues. Cost of Revenues Cost of revenues consists of TAC and other costs of revenues. TAC represents the amounts paid to Google Network Members primarily for ads displayed on their properties and amounts paid to our distribution partners who make available our search access points and services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers. Other costs of revenues (which is the cost of revenues excluding TAC) include the following:  Content acquisition costs primarily related to payments to content providers from whom we license video and other content for distribution on YouTube and Google Play (we pay fees to these content providers based on revenues generated or a flat fee);  Expenses associated with our data centers and other operations (including bandwidth, compensation expense (including SBC), depreciation, energy, and other equipment costs); and  Inventory related costs for hardware we sell. Stock-based Compensation Stock-based compensation primarily consists of Alphabet restricted stock units (RSUs). RSUs are equity classified and measured at the fair market value of the underlying stock at the grant date. We recognize RSU expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur. For RSUs, shares are issued on the vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued than the number of RSUs outstanding. We record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital. Additionally, stock-based compensation includes other types of stock-based awards that may be settled in the stock of certain of our Other Bets or in cash. Awards that are liability classified are remeasured at fair value through settlement or maturity. The fair value of such awards is based on the valuation of equity of the respective Other Bet. Alphabet Inc. Performance Fees We have compensation arrangements with payouts based on realized investment returns. We recognize compensation expense based on the estimated payouts. Certain Risks and Concentrations Our revenues are primarily derived from online advertising, the market for which is highly competitive and rapidly changing. In addition, our revenues are generated from a multitude of vertical market segments in countries around the world. Significant changes in this industry or changes in customer buying or advertiser spending behavior could adversely affect our operating results. We are subject to concentrations of credit risk principally from cash and cash equivalents, marketable securities, foreign exchange contracts, and accounts receivable. Cash equivalents and marketable securities consist primarily of time deposits, money market and other funds, highly liquid debt instruments of the U.S. government and its agencies, debt instruments issued by foreign governments, debt instruments issued by municipalities in the U.S., corporate debt securities, mortgage-backed securities, and asset-backed securities. Foreign exchange contracts are transacted with various financial institutions with high credit standing. Accounts receivable are typically unsecured and are derived from revenues earned from customers located around the world. We perform ongoing evaluations to determine customer credit and we limit the amount of credit we extend. We generally do not require collateral from our customers. We maintain reserves for estimated credit losses and these losses have generally been within our expectations. No individual customer or groups of affiliated customers represented more than 10% of our revenues in 2016 , 2017 , or 2018 . In 2016 , 2017 , and 2018 , we generated approximately 47% , 47% , and 46% of our revenues, respectively, from customers based in the U.S. See Note 2 for further details. Fair Value of Financial Instruments Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative contracts, and non-marketable debt securities. Our financial assets that are measured at fair value on a nonrecurring basis include non-marketable equity securities measured at fair value when observable price changes are identified or when non-marketable equity securities are impaired . Other financial assets and liabilities are carried at cost with fair value disclosed, if required. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings. Level 3 - Unobservable inputs that are supported by little or no market activities. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Cash, Cash Equivalents, and Marketable Securities We invest all excess cash primarily in government bonds, corporate debt securities, mortgage-backed and asset-backed securities, time deposits, and money market funds. We classify all investments that are readily convertible to known amounts of cash and have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities. We determine the appropriate classification of our investments in marketable securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt securities as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities. As we view these securities as available Alphabet Inc. to support current operations, we classify highly liquid securities with maturities beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders equity, except for unrealized losses determined to be other-than-temporary, which we record within other income (expense), net. We determine any realized gains or losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net. Non-Marketable Investments We account for non-marketable equity investments through which we exercise significant influence but do not have control over the investee under the equity method. Beginning on January 1, 2018, our non-marketable equity securities not accounted for under the equity method are either carried at fair value or under the measurement alternative upon the adoption of ASU 2016-01. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined primarily based on a market approach as of the transaction date. We classify our non-marketable investments as non-current assets on the Consolidated Balance Sheets as those investments do not have stated contractual maturity dates. We account for our non-marketable investments that meet the definition of a debt security as available-for-sale securities. Impairment of Investments We periodically review our debt and equity investments for impairment. For debt securities we consider the duration, severity and the reason for the decline in security value; whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or if the amortized cost basis cannot be recovered as a result of credit losses. If any impairment is considered other-than-temporary, we will write down the security to its fair value and record the corresponding charge as other income (expense), net. For equity securities we consider impairment indicators such as negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors. If indicators exist and the fair value of the security is below the carrying amount, we write down the security to fair value. Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests in is considered a variable interest entity (VIE). We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP. Accounts Receivable We record accounts receivable at the invoiced amount. We maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables. We review the accounts receivable by amounts due from customers that are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, we make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Property and Equipment Property and equipment includes the following categories: land and buildings, information technology assets, construction in progress, leasehold improvements, and furniture and fixtures. Land and buildings include land, offices, data centers and related building improvements. Information technology assets include servers and network equipment. We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets. We depreciate buildings over periods of seven to 25 years. We generally depreciate information technology assets over periods of three to five years (specifically, three years for servers and three to five years for network equipment). We depreciate leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. Construction in progress is the construction or development of property and equipment that have not yet been placed in service for our intended use. Depreciation for equipment, buildings, and leasehold improvements commences once they are ready for our intended use. Land is not depreciated. Alphabet Inc. Inventory Inventory consists primarily of finished goods and is stated at the lower of cost and net realizable value. Cost is computed using the first-in, first-out method. Software Development Costs We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the criteria for capitalization were not material for the periods presented. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented. Business Combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Long-Lived Assets, Goodwill and Other Acquired Intangible Assets We review property and equipment, long-term prepayments and intangible assets, excluding goodwill, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value. Impairments were not material for the periods presented. We allocate goodwill to reporting units based on the expected benefit from the business combination. We evaluate our reporting units when changes in our operating structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach. We test our goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill impairments were not material for the periods presented. Intangible assets with definite lives are amortized over their estimated useful lives. We amortize intangible assets on a straight-line basis with definite lives over periods ranging from one to twelve years. Income Taxes We account for income taxes using the asset and liability method, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized. We recognize the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination. The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority. In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision. Foreign Currency Generally, the functional currency of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities, and average rates for the annual period derived from month-end exchange rates for revenues, costs, and expenses. We record translation gains and losses in accumulated other comprehensive income (AOCI) as a component of stockholders equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange losses in other income (expense), net. Alphabet Inc. Advertising and Promotional Expenses We expense advertising and promotional costs in the period in which they are incurred. For the years ended December 31, 2016 , 2017 and 2018 , advertising and promotional expenses totaled approximately $3.9 billion , $5.1 billion , and $6.4 billion , respectively. Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 (Topic 842) ""Leases."" Topic 842 supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840, ""Leases."" Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will continue to be classified as either finance or operating. We will adopt Topic 842 effective January 1, 2019 using a modified retrospective method and will not restate comparative periods. As permitted under the transition guidance, we will carry forward the assessment of whether our contracts contain or are leases, classification of our leases and remaining lease terms. Based on our portfolio of leases as of December 31, 2018, approximately $9 billion of lease assets and liabilities will be recognized on our balance sheet upon adoption, primarily relating to real estate. We are substantially complete with our implementation efforts. In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) ""Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"" which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. We will adopt ASU 2016-13 effective January 1, 2020. We are currently evaluating the effect of the adoption of ASU 2016-13 on our consolidated financial statements. The effect will largely depend on the composition and credit quality of our investment portfolio and the economic conditions at the time of adoption. Recently adopted accounting pronouncements In January 2016, the FASB issued Accounting Standards Update No. 2016-01 (ASU 2016-01) ""Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,"" which amends various aspects of the recognition, measurement, presentation, and disclosure of financial instruments. We adopted ASU 2016-01 as of January 1, 2018 using the modified retrospective method for our marketable equity securities and the prospective method for our non-marketable equity securities. This resulted in a $98 million reclassification of net unrealized gains from AOCI to opening retained earnings. We have elected to use the measurement alternative for our non-marketable equity securities, defined as cost adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment. The adoption of ASU 2016-01 increases the volatility of our other income (expense), net, as a result of the unrealized gain or loss from the remeasurement of our equity securities. For further information on unrealized gains from equity securities, see Note 3 . In October 2016, the FASB issued Accounting Standards Update No. 2016-16 (ASU 2016-16) ""Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory."" ASU 2016-16 generally accelerates the recognition of income tax consequences for asset transfers between entities under common control. We adopted ASU 2016-16 as of January 1, 2018 using a modified retrospective transition method, resulting in a $701 million reclassification of prepaid income taxes related to asset transfers that occurred prior to adoption from other current and non-current assets to opening retained earnings. Prior Period Reclassifications Certain amounts in prior periods have been reclassified to conform with current period presentation. Note 2. Revenues  Adoption of ASC Topic 606, ""Revenue from Contracts with Customers"" On January 1, 2017 , we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2017 . Results for reporting periods beginning after January 1, 2017 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The effect from the adoption of ASC 606 was not material to our financial statements. Alphabet Inc. Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The following table presents our revenues disaggregated by revenue source (in millions). Sales and usage-based taxes are excluded from revenues.  Year Ended December 31,  2016 (1)   Google properties $ 63,785  $ 77,788  $ 96,336 Google Network Members' properties 15,598  17,587  19,982 Google advertising revenues 79,383  95,375  116,318 Google other revenues 10,601  15,003  19,906 Other Bets revenues   Total revenues (2) $ 90,272  $ 110,855  $ 136,819  (1)  As noted above, prior period amounts have not been adjusted under the modified retrospective method. (2)  Revenues include hedging gains (losses) of $539 million , $(169) million , and $(138) million for the years ended December 31, 2016 , 2017 , and 2018 , respectively, which do not represent revenues recognized from contracts with customers. The following table presents our revenues disaggregated by geography, based on the addresses of our customers (in millions):  Year Ended December 31,    United States $ 42,781  %  $ 52,449  %  $ 63,269  % EMEA (1) 30,304   36,046   44,567  APAC (1) 12,559   16,235   21,374  Other Americas (1) 4,628   6,125   7,609  Total revenues (2) $ 90,272  %  $ 110,855  %  $ 136,819  % (1)  Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific (APAC); and Canada and Latin America (Other Americas). (2)  Revenues include hedging gains (losses) for the years ended December 31, 2016 , 2017 , and 2018 . Advertising Revenues We generate revenues primarily by delivering advertising on Google properties and Google Network Members properties. Google properties revenues consist primarily of advertising revenues generated on Google.com, the Google Search app, and other Google owned and operated properties like Gmail, Google Maps, Google Play, and YouTube. Google Network Members properties revenues consist primarily of advertising revenues generated on Google Network Members properties. Our customers generally purchase advertising inventory through Google Ads (formerly AdWords), Google Ad Manager as part of the Authorized Buyers marketplace (formerly DoubleClick AdExchange), and Google Marketing Platform (includes what was formerly DoubleClick Bid Manager), among others. We offer advertising on a cost-per-click basis, which means that an advertiser pays us only when a user clicks on an ad on Google properties or Google Network Members' properties or when a user views certain YouTube engagement ads. For these customers, we recognize revenue each time a user clicks on the ad or when a user views the ad for a specified period of time. We also offer advertising on other bases such as cost-per-impression, which means an advertiser pays us based on the number of times their ads are displayed on Google properties or Google Network Members properties. For these customers, we recognize revenue each time an ad is displayed. For ads placed on Google Network Members properties, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, we report advertising revenues for ads placed on Google Network Members properties on a gross basis, that is, the amounts billed to our customers Alphabet Inc. are recorded as revenues, and amounts paid to Google Network Members are recorded as cost of revenues. Where we are the principal, we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers, and is further supported by us being primarily responsible to our customers and having a level of discretion in establishing pricing. Other Revenues Google other revenues and Other Bets revenues consist primarily of revenues from:  Apps, in-app purchases, and digital content in the Google Play store;  Google Cloud offerings;  Hardware; and  Other miscellaneous products and services. As it relates to Google other revenues, the most significant judgment is determining whether we are the principal or agent for app sales and in-app purchases through the Google Play store. We report revenues from these transactions on a net basis because our performance obligation is to facilitate a transaction between app developers and end users, for which we earn a commission. Consequently, the portion of the gross amount billed to end users that is remitted to app developers is not reflected as revenues. Arrangements with Multiple Performance Obligations Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost plus margin. Customer Incentives and Credits Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration. Deferred Revenues We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. The increase in the deferred revenue balance for the twelve months ended  December 31, 2018 is primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $1.5 billion of revenues recognized that were included in the deferred revenue balance as of December 31, 2017 . Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer. Practical Expedients and Exemptions We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. Note 3. Financial Instruments  Debt Securities We classify our marketable debt securities 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. In January 2018, we reclassified our U.S. government notes included in marketable debt securities from Level 1 to Level 2 within the fair value hierarchy as these securities are priced based on a combination of quoted prices for identical or similar instruments in active markets and models with significant observable market inputs. Prior period amounts have been reclassified to conform with current period presentation. The vast majority of our government bond holdings are highly liquid U.S. government notes. We classify our non-marketable debt securities within Level 3 in the fair value hierarchy because they are preferred stock and convertible notes issued by private companies without quoted market prices. To estimate the fair value of Alphabet Inc. our non-marketable debt securities, we use a combination of valuation methodologies, including market and income approaches based on prior transaction prices; estimated timing, probability, and amount of cash flows; and illiquidity considerations. Financial information of private companies may not be available and consequently we estimate the fair value based on the best available information at the measurement date.  The following tables summarize our debt securities by significant investment categories as of December 31, 2017 and 2018 (in millions):  As of December 31, 2017    Adjusted Cost  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value  Cash and Cash Equivalents  Marketable Securities  Non-Marketable Securities Level 2:              Time deposits (1) $  $  $  $  $  $  $ Government bonds (2) 51,548   (406 )  51,152  1,241  49,911  Corporate debt securities 24,269   (135 )  24,155   24,029  Mortgage-backed and asset-backed securities 16,789   (180 )  16,622   16,622   92,965   (721 )  92,288  1,724  90,564  Level 3:              Non-marketable debt securities 1,083    1,894    1,894               Total $ 94,048  $  $ (721 )  $ 94,182  $ 1,724  $ 90,564  $ 1,894  As of December 31, 2018    Adjusted Cost  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value  Cash and Cash Equivalents  Marketable Securities  Non-Marketable Securities Level 2:              Time deposits (1) $ 2,202  $  $  $ 2,202  $ 2,202  $  $ Government bonds (2) 53,634   (414 )  53,291  3,717  49,574  Corporate debt securities 25,383   (316 )  25,082   25,038  Mortgage-backed and asset-backed securities 16,918   (324 )  16,605   16,605   98,137   (1,054 )  97,180  5,963  91,217  Level 3:              Non-marketable debt securities                     Total $ 98,284  $  $ (1,054 )  $ 97,443  $ 5,963  $ 91,217  $ (1)  As of December 31, 2017, the majority of our time deposits were foreign deposits. As of December 31, 2018, the majority of our time deposits are domestic deposits. (2)  Government bonds are comprised primarily of U.S. government notes, and also includes U.S. government agencies, foreign government bonds, and municipal securities. We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. We recognized gross realized gains of $251 million , $185 million , and $1.3 billion for the years ended December 31, 2016 , 2017 , and 2018 , respectively. We recognized gross realized losses of $304 million , $295 million , and $143 million for the years ended December 31, 2016 , 2017 , and 2018 , respectively. We reflect these gains and losses as a component of other income (expense), net, in the Consolidated Statements of Income. The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities (in millions): Alphabet Inc.  As of December 31, 2018 Due in 1 year $ 23,669 Due in 1 year through 5 years 54,504 Due in 5 years through 10 years 2,236 Due after 10 years 10,808 Total $ 91,217 The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 2017 and 2018 , 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, 2017  Less than 12 Months  12 Months or Greater  Total  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss Government bonds (1) $ 28,836  $ (211 )  $ 17,660  $ (195 )  $ 46,496  $ (406 ) Corporate debt securities 18,300  (114 )  1,710  (21 )  20,010  (135 ) Mortgage-backed and asset-backed securities 11,061  (105 )  3,449  (75 )  14,510  (180 ) Total $ 58,197  $ (430 )  $ 22,819  $ (291 )  $ 81,016  $ (721 )  As of December 31, 2018  Less than 12 Months  12 Months or Greater  Total  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss Government bonds (1) $ 12,019  $ (85 )  $ 23,877  $ (329 )  $ 35,896  $ (414 ) Corporate debt securities 10,171  (107 )  11,545  (209 )  21,716  (316 ) Mortgage-backed and asset-backed securities 5,534  (75 )  8,519  (249 )  14,053  (324 ) Total $ 27,724  $ (267 )  $ 43,941  $ (787 )  $ 71,665  $ (1,054 ) (1)  Government bonds are comprised primarily of U.S. government notes, and also includes U.S. government agencies, foreign government bonds, and municipal securities. During the years ended December 31, 2016 , 2017 and 2018 , we did not recognize any significant other-than-temporary impairment losses. Losses on impairment 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 following table presents a reconciliation for our non-marketable debt securities measured and recorded at fair value on a recurring basis, using significant unobservable inputs (Level 3) (in millions):  Year Ended December 31,   Beginning balance $ 1,165  $ 1,894 Total net gains (losses)    Included in earnings (10 )  Included in other comprehensive income  (1 ) Purchases  Sales (2 )  (52 ) Settlements (1) (54 )  (2,228 ) Ending balance $ 1,894  $ (1)  During the year ended December 31, 2018 the terms of a non-marketable debt security were modified resulting in an unrealized $1.3 billion gain recognized in other income (expense), net and a reclassification of the security to non-marketable equity securities. Alphabet Inc. Equity Investments The following discusses our marketable equity securities, non-marketable equity securities, realized and unrealized gains and losses on marketable and non-marketable equity securities, as well as our equity securities accounted for under the equity method. Marketable equity securities Our marketable equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 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. Prior to January 1, 2018, we accounted for the majority of our marketable equity securities at fair value with unrealized gains and losses recognized in accumulated other comprehensive income on the balance sheet. Realized gains and losses on marketable equity securities sold or impaired were recognized in other income (expense), net. Starting January 1, 2018, upon our adoption of ASU 2016-01, unrealized gains and losses during the year are recognized in other income (expense), net. Upon adoption, we reclassified $98 million  net unrealized gains related to marketable equity securities from accumulated other comprehensive income to opening retained earnings. The following table summarizes marketable equity securities measured at fair value by significant investment categories as of December 31, 2017 and 2018 (in millions):   As of December 31, 2017   Cash and Cash Equivalents  Marketable Securities Level 1:     Money market funds  $ 1,833  $ Marketable equity securities     1,833  Level 2:     Mutual funds (1)   Total  $ 1,833  $ (1) The fair value option was elected for mutual funds with gains (losses) recognized in other income (expense), net.   As of December 31, 2018   Cash and Cash Equivalents  Marketable Securities Level 1:     Money market funds  $ 3,493  $ Marketable equity securities     3,493  Level 2:     Mutual funds   Total  $ 3,493  $ 1,222 Non-marketable equity securities Our non-marketable equity securities are investments in privately held companies without readily determinable market values. Prior to January 1, 2018, we accounted for our non-marketable equity securities at cost less impairment. Realized gains and losses on non-marketable securities sold or impaired were recognized in other income (expense), net. As of December 31, 2017, non-marketable equity securities accounted for under the cost method had a carrying value of $ 4.5 billion and a fair value of approximately $ 8.8 billion . On January 1, 2018, we adopted ASU 2016-01 which changed the way we account for non-marketable securities. The carrying value of our non-marketable equity securities is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), net. Because we adopted ASU 2016-01 prospectively, we recognize unrealized gains that occurred in prior Alphabet Inc. periods in the first period after January 1, 2018 when there is an observable transaction for our securities. Non-marketable equity securities remeasured during the year ended December 31, 2018 are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities we hold. The following is a summary of unrealized gains and losses recorded in other income (expense), net, and included as adjustments to the carrying value of non-marketable equity securities held as of December 31, 2018 (in millions):  Twelve Months Ended December 31, 2018 Upward adjustments $ 4,285 Downward adjustments (including impairment) (178 ) Total unrealized gain (loss) for non-marketable equity securities $ 4,107 The following table summarizes the total carrying value of our non-marketable equity securities held as of December 31, 2018 including cumulative unrealized upward and downward adjustments made to the initial cost basis of the securities (in millions): Initial cost basis (1) $ 8,168 Upward adjustments 4,285 Downward adjustments (including impairment) (178 ) Total carrying value at the end of the period $ 12,275 (1)  Includes $2.2 billion for a non-marketable equity security reclassified from a non-marketable debt security during 2018. During the year ended December 31, 2018 , included in the $12.3 billion of non-marketable equity securities, $6.9 billion were measured at fair value based on observable market transactions, resulting in a net unrealized gain of $4.1 billion . Gains and losses on marketable and non-marketable equity securities Realized and unrealized gains and losses for our marketable and non-marketable equity securities for the year ended December 31, 2018 are summarized below (in millions):  Twelve Months Ended December 31, 2018 Realized gain (loss) for equity securities sold during the period $ 1,458 Unrealized gain (loss) on equity securities held as of the end of the period (1) 4,002 Total gain (loss) recognized in other income (expense), net $ 5,460 (1)  Includes $4,107 million related to non-marketable equity securities for the year ended December 31, 2018 . Equity securities accounted for under the Equity Method As of December 31, 2017 and 2018 , equity securities accounted for under the equity method had a carrying value of approximately $1.4 billion and $1.3 billion , respectively. Our share of gains and losses including impairment 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. Derivative Financial Instruments We classify our foreign currency and interest rate derivative contracts primarily within Level 2 in the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments. We recognize derivative instruments as either assets or liabilities in the Consolidated Balance Sheets at fair value. We record changes in the fair value (i.e., gains or losses) of the derivatives in the Consolidated Statements of Income as either other income (expense), net, or revenues, or in the Consolidated Balance Sheets in AOCI, as discussed below. As a result of our adoption of Accounting Standard Update No. 2017-12 (ASU 2017-12) ""Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,"" the components excluded from the assessment of hedge effectiveness are recognized in the same income statement line as the hedged item beginning January 1, 2018. Alphabet Inc. We enter into foreign currency contracts with financial institutions 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 use interest rate derivative contracts to hedge interest rate exposures on our fixed income securities and debt issuances. Our program is not used for trading or speculative purposes. We enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. To further reduce credit risk, we enter into collateral security arrangements under which the counterparty is required to provide collateral when the net fair value of certain financial instruments fluctuates from contractually established thresholds. We can take possession of the collateral in the event of counterparty default. As of December 31, 2017 and 2018 , we received cash collateral related to the derivative instruments under our collateral security arrangements of $15 million and $327 million , respectively, which was included in other current assets. Cash Flow Hedges We use foreign currency forwards and option contracts, including collars (an option strategy comprised of a combination of purchased and written options), designated as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the U.S. dollar. The notional principal of these contracts was approximately $11.7 billion and $11.8 billion as of December 31, 2017 and 2018 , respectively. These contracts have maturities of 24 months or less. For forwards and option contracts, we exclude the change in the forward points and time value from our assessment of hedge effectiveness. The initial value of the excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI. We reflect the gains or losses of a cash flow hedge included in our hedge effective assessment as a component of AOCI and subsequently reclassify these gains and losses to revenues when the hedged transactions are recorded. If the hedged transactions become probable of not occurring, the corresponding amounts in AOCI are immediately reclassified to other income (expense), net.  As of December 31, 2018 , the net gain or loss of our foreign currency cash flow hedges before tax effect was a net accumulated gain of $247 million , of which a net gain of $247 million is expected to be reclassified from AOCI into earnings within the next 12 months. Fair Value Hedges We use forward contracts designated as fair value hedges to hedge foreign currency risks for our investments denominated in currencies other than the U.S. dollar. We exclude changes in forward points for the forward contracts from the assessment of hedge effectiveness. We recognize changes in the excluded component in other income (expense), net. The notional principal of these contracts was $2.9 billion and $2.0 billion as of December 31, 2017 and 2018 , respectively. Gains and losses on these forward contracts are recognized in other income (expense), net, along with the offsetting gains and losses of the related hedged items. Net Investment Hedges During the year ended December 31, 2018 , we entered into forward contracts designated as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries. We exclude changes in forward points for the forward contracts from the assessment of hedge effectiveness. We recognize changes in the excluded component in other income (expense), net. The notional principal of these contracts was $6.7 billion as of December 31, 2018 . Gains and losses on these forward contracts are recognized in AOCI as part of the foreign currency translation adjustment. Other Derivatives Other derivatives not designated as hedging instruments consist of foreign currency forward contracts that we use to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the local currency of a subsidiary. We recognize gains and losses on these contracts, as well as the related costs in other income (expense), net, along with the foreign currency gains and losses on monetary assets and liabilities. The notional principal of the outstanding foreign exchange contracts was $15.2 billion and $20.1 billion as of December 31, 2017 and 2018 , respectively. Alphabet Inc. The fair values of our outstanding derivative instruments were as follows (in millions):     As of December 31, 2017    Balance Sheet Location  Fair Value of Derivatives Designated as Hedging Instruments  Fair Value of Derivatives Not Designated as Hedging Instruments  Total Fair Value Derivative Assets:         Level 2:         Foreign exchange contracts  Other current and non-current assets  $  $  $ Total    $  $  $ Derivative Liabilities:         Level 2:         Foreign exchange contracts  Accrued expenses and other liabilities, current and non-current  $  $  $ Total    $  $  $     As of December 31, 2018    Balance Sheet Location  Fair Value of Derivatives Designated as Hedging Instruments  Fair Value of Derivatives Not Designated as Hedging Instruments  Total Fair Value Derivative Assets:         Level 2:         Foreign exchange contracts  Other current and non-current assets  $  $  $ Total    $  $  $ Derivative Liabilities:         Level 2:         Foreign exchange contracts  Accrued expenses and other liabilities, current and non-current  $  $  $ Total    $  $  $ 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   Year Ended December 31,     Derivatives in Cash Flow Hedging Relationship:       Foreign exchange contracts       Amount included in the assessment of effectiveness  $  $ (955 )  $ Amount excluded from the assessment of effectiveness    Derivatives in Net Investment Hedging Relationship:       Foreign exchange contracts       Amount included in the assessment of effectiveness    Total  $  $ (955 )  $  Alphabet Inc. The effect of derivative instruments on income is summarized below (in millions):  Gains (Losses) Recognized in Income  Year Ended December 31,     Revenues  Other income (expense), net  Revenues  Other income (expense), net  Revenues  Other income (expense), net Total amounts presented in the Consolidated Statements of Income in which the effects of cash flow and fair value hedges are recorded $ 90,272  $  $ 110,855  $ 1,047  $ 136,819  $ 8,592             Gains (Losses) on Derivatives in Cash Flow Hedging Relationship:            Foreign exchange contracts            Amount of gains (losses) reclassified from AOCI to income $  $  $ (169 )  $  $ (139 )  $ Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach      Amount excluded from the assessment of effectiveness  (381 )     Gains (Losses) on Derivatives in Fair Value Hedging Relationship:            Foreign exchange contracts            Hedged items  (139 )     (96 ) Derivatives designated as hedging instruments    (197 )   Amount excluded from the assessment of effectiveness      Gains (Losses) on Derivatives in Net Investment Hedging Relationship:            Foreign exchange contracts            Amount excluded from the assessment of effectiveness      Gains (Losses) on Derivatives Not Designated as Hedging Instruments:            Foreign exchange contracts            Derivatives not designated as hedging instruments    (230 )   Total gains (losses) $  $ (245 )  $ (169 )  $ (124 )  $ (138 )  $ Offsetting of Derivatives We present our forwards and purchased options at gross fair values in the Consolidated Balance Sheets. For foreign currency collars, we present at net fair values where both purchased and written options are with the same counterparty. Our master netting and other similar arrangements allow net settlements under certain conditions. As of December 31, 2017 and 2018 , information related to these offsetting arrangements were as follows (in millions): Alphabet Inc. Offsetting of Assets  As of December 31, 2017        Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset    Gross Amounts of Recognized Assets  Gross Amounts Offset in the Consolidated Balance Sheets  Net Presented in the Consolidated Balance Sheets  Financial Instruments  Cash Collateral Received  Non-Cash Collateral Received  Net Assets Exposed Derivatives $  $ (22 )  $  $ (64 ) (1)  $ (4 )  $ (2 )  $                As of December 31, 2018        Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset    Gross Amounts of Recognized Assets  Gross Amounts Offset in the Consolidated Balance Sheets  Net Presented in the Consolidated Balance Sheets  Financial Instruments  Cash Collateral Received  Non-Cash Collateral Received  Net Assets Exposed Derivatives $  $ (56 )  $  $ (90 ) (1)  $ (307 )  $ (14 )  $ (1)  The balances as of December 31, 2017 and 2018 were related to derivative liabilities which are allowed to be net settled against derivative assets in accordance with our master netting agreements. Offsetting of Liabilities  As of December 31, 2017        Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset    Gross Amounts of Recognized Liabilities  Gross Amounts Offset in the Consolidated Balance Sheets  Net Presented in the Consolidated Balance Sheets  Financial Instruments  Cash Collateral Pledged  Non-Cash Collateral Pledged  Net Liabilities Derivatives $  $ (22 )  $  $ (64 ) (2)  $  $  $                As of December 31, 2018        Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset   Gross Amounts of Recognized Liabilities  Gross Amounts Offset in the Consolidated Balance Sheets  Net Presented in the Consolidated Balance Sheets  Financial Instruments  Cash Collateral Pledged  Non-Cash Collateral Pledged  Net Liabilities Derivatives $  $ (56 )  $  $ (90 ) (2)  $  $  $ (2)  The balances as of December 31, 2017 and 2018 were related to derivative assets which are allowed to be net settled against derivative liabilities in accordance with our master netting agreements. Note 4. Variable Interest Entities (VIEs)  Consolidated VIEs We consolidate VIEs in which we hold a variable interest and are the primary beneficiary. We are the primary beneficiary because we have the power to direct activities that most significantly affect their economic performance and have the obligation to absorb the majority of their losses or benefits. 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, 2017 and 2018 , assets that can only be used to settle obligations of these VIEs were $1.7 billion and $2.4 billion , respectively, and the liabilities for which creditors only have recourse to the VIEs were $997 million and $909 million , respectively. Calico Calico is a life science company with a mission to harness advanced technologies to increase our understanding of the biology that controls lifespan. Alphabet Inc. In September 2014, AbbVie Inc. (AbbVie) and Calico entered into a research and development collaboration agreement intended to help both companies discover, develop, and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer. In the second quarter of 2018, AbbVie and Calico amended the collaboration agreement resulting in an increase in total commitments. As of December 31, 2018 , AbbVie has contributed $750 million to fund the collaboration pursuant to the agreement and is committed to an additional $500 million which will be paid by the fourth quarter of 2019. As of December 31, 2018 , Calico has contributed $500 million and has committed up to an additional $750 million . Calico has used its scientific expertise to establish a world-class research and development facility, with a focus on drug discovery and early drug development; and AbbVie provides scientific and clinical development support and its commercial expertise to bring new discoveries to market. Both companies share costs and profits for projects covered under this agreement equally. AbbVie's contribution has been recorded as a liability on Calico's financial statements, which is reduced and reflected as a reduction to research and development expense as eligible research and development costs are incurred by Calico. As of December 31, 2018 , we have contributed $480 million to Calico in exchange for Calico convertible preferred units and are committed to fund up to an additional $750 million on an as-needed basis and subject to certain conditions. Verily Verily is a life science company with a mission to make the world's health data useful so that people enjoy healthier lives. In 2017, Temasek, a Singapore-based investment company, purchased a noncontrolling interest in Verily for an aggregate of $800 million in cash. In December 2018, Verily received $900 million in cash from a $1.0 billion investment round. The remaining $100 million is expected to be received in the first quarter of 2019. These transactions were accounted for as equity transactions and no gain or loss was recognized. Unconsolidated VIEs Certain renewable energy investments included in our non-marketable equity investments accounted for under the equity method are VIEs. These entities' 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 such as setting operating budgets. Therefore, we do not consolidate these VIEs in our consolidated financial statements. The carrying value and maximum exposure of these VIEs were $896 million and $705 million as of December 31, 2017 and 2018 , respectively. The maximum exposure is based on current investments to date. We have determined the single source of our exposure to these VIEs is our capital investment in them. Other unconsolidated VIEs were not material as of December 31, 2017 and 2018 . Note 5. Debt  Short-Term Debt We have a debt financing program of up to $5.0 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, 2017 and 2018 . Long-Term Debt Google issued $3.0 billion of senior unsecured notes in three tranches (collectively, 2011 Notes) in May 2011, due in 2014, 2016, and 2021, as well as $1.0 billion of senior unsecured notes (2014 Notes) in February 2014 due in 2024. In April 2016, we completed an exchange offer with eligible holders of Googles 2011 Notes due 2021 and 2014 Notes due 2024 (collectively, the Google Notes). An aggregate principal amount of approximately $1.7 billion of the Google Notes was exchanged for approximately $1.7 billion of Alphabet notes with identical interest rate and maturity. Because the exchange was between a parent and the subsidiary company and for substantially identical notes, the change was treated as a debt modification for accounting purposes with no gain or loss recognized. In August 2016, Alphabet issued $2.0 billion of senior unsecured notes (2016 Notes) due 2026. The net proceeds from the issuance of the 2016 Notes were used for general corporate purposes, including the repayment of outstanding Alphabet Inc. commercial paper. The Alphabet notes due in 2021, 2024, and 2026 rank equally with each other and are structurally subordinate to the outstanding Google Notes. The total outstanding long-term debt is summarized below (in millions):  As of December 31, 2017  As of December 31, 2018 3.625% Notes due on May 19, 2021 $ 1,000  $ 1,000 3.375% Notes due on February 25, 2024 1,000  1,000 1.998% Notes due on August 15, 2026 2,000  2,000 Unamortized discount for the Notes above (57 )  (50 ) Subtotal (1) 3,943  3,950 Capital lease obligation  Total long-term debt $ 3,969  $ 4,012 (1)  Includes the outstanding (and unexchanged) Google Notes issued in 2011 and 2014 and the Alphabet notes exchanged in 2016. The effective interest yields based on proceeds received from the outstanding notes due in 2021, 2024, and 2026 were 3.734% , 3.377% , and 2.231% , respectively, with interest payable semi-annually. We may redeem these notes at any time in whole or in part at specified redemption prices. The total estimated fair value of all outstanding notes was approximately $4.0 billion and $3.9 billion as of December 31, 2017 and 2018 , 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 December 31, 2018 , the aggregate future principal payments for long-term debt including long-term capital leases for each of the next five years and thereafter are as follows (in millions):  $ 2020  2021  1,003  2023  Thereafter  3,039 Total  $ 4,062 Credit Facility As of December 31, 2018 , we have $4.0 billion of revolving credit facilities which expire in July 2023. The interest rate for the credit facilities is determined based on a formula using certain market rates. No amounts were outstanding under the credit facilities as of December 31, 2017 and 2018 . Note 6. Supplemental Financial Statement Information  Property and Equipment, Net Property and equipment, net, consisted of the following (in millions):  As of December 31, 2017  As of December 31, 2018 Land and buildings $ 23,183  $ 30,179 Information technology assets 21,429  30,119 Construction in progress 10,491  16,838 Leasehold improvements 4,496  5,310 Furniture and fixtures  Property and equipment, gross 59,647  82,507 Less: accumulated depreciation (17,264 )  (22,788 ) Property and equipment, net $ 42,383  $ 59,719 Alphabet Inc. As of December 31, 2017 and 2018 , assets under capital lease with a cost basis of $390 million and $648 million , respectively, were included in property and equipment. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in millions):  As of December 31, 2017  As of December 31, 2018 European Commission fines (1) $ 2,874  $ 7,754 Accrued customer liabilities 1,489  1,810 Other accrued expenses and current liabilities 5,814  7,394 Accrued expenses and other current liabilities $ 10,177  $ 16,958 (1)  Includes the effects of foreign exchange and interest.  See Note 9 for further details Accumulated Other Comprehensive Income (Loss) The components of AOCI, net of 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, 2015 $ (2,047 )  $ (86 )  $  $ (1,874 ) Other comprehensive income (loss) before reclassifications (599 )  (314 )   (398 ) Amounts reclassified from AOCI   (351 )  (130 ) Other comprehensive income (loss) (599 )  (93 )   (528 ) Balance as of December 31, 2016 $ (2,646 )  $ (179 )  $  $ (2,402 ) Other comprehensive income (loss) before reclassifications 1,543   (638 )  1,212 Amounts reclassified from AOCI    Other comprehensive income (loss) 1,543   (545 )  1,410 Balance as of December 31, 2017 $ (1,103 )  $  $ (122 )  $ (992 ) Other comprehensive income (loss) before reclassifications (1) (781 )  (10 )   (527 ) Amounts excluded from the assessment of hedge effectiveness recorded in AOCI    Amounts reclassified from AOCI  (911 )   (813 ) Other comprehensive income (loss) (781 )  (921 )   (1,314 ) Balance as of December 31, 2018 $ (1,884 )  $ (688 )  $  $ (2,306 ) (1)  The change in unrealized gains (losses) on available-for-sale investments included a $98 million  adjustment of net unrealized gains related to marketable equity securities from AOCI to opening retained earnings as a result of the adoption of ASU 2016-01 on January 1, 2018. Alphabet Inc. 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     Year Ended December 31, AOCI Components  Location    Unrealized gains (losses) on available-for-sale investments         Other income (expense), net  $ (221 )  $ (105 )  $ 1,190   Provision for income taxes    (279 )   Net of tax  $ (221 )  $ (105 )  $ Unrealized gains (losses) on cash flow hedges       Foreign exchange contracts  Revenue  $  $ (169 )  $ (139 ) Interest rate contracts  Other income (expense), net      Benefit (provision) for income taxes  (193 )     Net of tax  $  $ (93 )  $ (98 ) Total amount reclassified, net of tax    $  $ (198 )  $ Other Income (Expense), Net The components of other income (expense), net, were as follows (in millions):  Year Ended December 31,    Interest income $ 1,220  $ 1,312  $ 1,878 Interest expense (1) (124 )  (109 )  (114 ) Foreign currency exchange losses, net (2) (475 )  (121 )  (80 ) Gain (loss) on debt securities, net (3) (53 )  (110 )  1,190 Gain (loss) on equity securities, net (20 )   5,460 Loss and impairment from equity method investments, net (202 )  (156 )  (120 ) Other   Other income (expense), net $  $ 1,047  $ 8,592 (1)  Interest expense is net of interest capitalized of $0 million , $48 million , and $92 million for the years ended December 31, 2016 , 2017 , and 2018 , respectively. (2)  Our foreign currency exchange losses, net, are related to the option premium costs and forwards points for our foreign currency hedging contracts, our foreign exchange transaction gains and losses from the conversion of the transaction currency to the functional currency, offset by the foreign currency hedging contract losses and gains. The net foreign currency transaction losses were $112 million , $226 million , and $195 million for the years ended December 31, 2016 , 2017 , and 2018 , respectively. (3)  During the year ended December 31, 2018, the terms of a non-marketable debt security were modified resulting in an unrealized $1.3 billion gain. Note 7. Acquisitions  2018 Acquisitions HTC Corporation (HTC) In January 2018, we completed the acquisition of a team of engineers and a non-exclusive license of intellectual property from HTC for $1.1 billion in cash. In aggregate, $10 million was cash acquired, $165 million was attributed to intangible assets, $934 million was attributed to goodwill, and $9 million was attributed to net liabilities assumed. Goodwill, which was included in the Google segment, is not deductible for tax purposes. We expect this transaction to accelerate Googles ongoing hardware efforts. The transaction was accounted for as a business combination. Other Acquisitions During the year ended December 31, 2018 , we completed other acquisitions and purchases of intangible assets for total consideration of approximately $573 million . In aggregate, $10 million was cash acquired, $295 million was attributed to intangible assets, $293 million was attributed to goodwill, and $25 million was attributed to net liabilities Alphabet Inc. assumed . These acquisitions generally enhance the breadth and depth of our offerings and expand our expertise in engineering and other functional areas. The amount of goodwill expected to be deductible for tax purposes is approximately $81 million . Pro forma results of operations for these acquisitions, including HTC, have not been presented because they are not material to the consolidated results of operations, either individually or in the aggregate. For all intangible assets acquired and purchased during the year ended December 31, 2018 , patents and developed technology have a weighted-average useful life of 3.7 years, customer relationships have a weighted-average useful life of 2.3 years, and trade names and other have a weighted-average useful life of 3.7 years. 2017 Acquisitions During the year ended December 31, 2017 , we completed various acquisitions and purchases of intangible assets for total consideration of approximately $322 million . In aggregate, $12 million was cash acquired, $117 million was attributed to intangible assets, $221 million was attributed to goodwill, and $28 million was attributed to net liabilities assumed . These acquisitions generally enhance the breadth and depth of our offerings and expand our expertise in engineering and other functional areas. The amount of goodwill expected to be deductible for tax purposes is approximately $60 million . Pro forma results of operations for these acquisitions have not been presented because they are not material to the consolidated results of operations, either individually or in aggregate. For all intangible assets acquired and purchased during the year ended December 31, 2017 , patents and developed technology have a weighted-average useful life of 3.7 years, customer relationships have a weighted-average useful life of 2.0 years, and trade names and other have a weighted-average useful life of 8.8 years. Note 8. Goodwill and Other Intangible Assets  Goodwill Changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2018 were as follows (in millions):  Google  Other Bets  Total Consolidated Balance as of December 31, 2016 $ 16,027  $  $ 16,468 Acquisitions   Foreign currency translation and other adjustments   Balance as of December 31, 2017 16,295   16,747 Acquisitions 1,227   1,227 Transfers  (80 )  Foreign currency translation and other adjustments (81 )  (5 )  (86 ) Balance as of December 31, 2018 $ 17,521  $  $ 17,888 Other Intangible Assets Information regarding purchased intangible assets were as follows (in millions):  As of December 31, 2017  Gross Carrying Amount  Accumulated Amortization  Net Carrying Amount Patents and developed technology $ 5,260  $ 3,040  $ 2,220 Customer relationships   Trade names and other   Total $ 6,163  $ 3,471  $ 2,692 Alphabet Inc.  As of December 31, 2018  Gross Carrying Amount  Accumulated Amortization  Net Carrying Value Patents and developed technology $ 5,125  $ 3,394  $ 1,731 Customer relationships   Trade names and other   Total $ 6,177  $ 3,957  $ 2,220 Patents and developed technology, customer relationships, and trade names and other have weighted-average remaining useful lives of 3.0 years, 0.5 years, and 3.8 years, respectively. Amortization expense relating to purchased intangible assets was $833 million , $796 million , and $865 million for the years ended December 31, 2016 , 2017 , and 2018 , respectively. As of December 31, 2018 , expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter is as follows (in millions):  $ 2020 2021 2022 2023 Thereafter  $ 2,220 Note 9. Commitments and Contingencies  Operating Leases We have entered into various non-cancelable operating lease agreements for data centers and land and offices throughout the world with lease periods expiring between 2019 and 2063 . We are committed to pay a portion of the actual operating expenses under certain of these lease agreements. These operating expenses are not included in the table below. Certain of these arrangements have free or escalating rent payment provisions. We recognize rent expense on a straight-line basis. As of December 31, 2018 , future minimum payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year, net of sublease income amounts, were as follows (in millions):  Operating Leases (1)  Sub-lease Income  Net Operating Leases $ 1,319  $  $ 1,303 1,397   1,384 1,337   1,327 1,153   1,145 980   Thereafter 3,916   3,911 Total minimum payments $ 10,102  $ $ 10,047 (1)  Includes future minimum payments for leases which have not yet commenced. We have entered into certain non-cancelable lease agreements with lease periods expiring between 2021 and 2044 where we are the deemed owner for accounting purposes of new construction projects. Excluded from the table above are future minimum lease payments under such leases totaling approximately $3.5 billion , for which a $1.5 billion liability is included on the Consolidated Balance Sheets as of December 31, 2018 . Rent expense under operating leases was $897 million , $1.1 billion , and $1.3 billion for the years ended December 31, 2016 , 2017 , and 2018 , respectively. Alphabet Inc. Purchase Obligations As of December 31, 2018 , we had $7.4 billion of other non-cancelable contractual obligations, primarily related to data center operations and build-outs, digital media content licensing, and purchases of inventory. Indemnifications In the normal course of business, to facilitate transactions in our services and products, we indemnify certain parties, including advertisers, Google Network Members, and lessors with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents. It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of December 31, 2018 , we did not have any material indemnification claims that were probable or reasonably possible. Legal Matters Antitrust Investigations On November 30, 2010, the EC's Directorate General for Competition opened an investigation into various antitrust-related complaints against us. On April 15, 2015, the EC issued a Statement of Objections (SO) regarding the display and ranking of shopping search results and ads, to which we responded on August 27, 2015. On July 14, 2016, the EC issued a Supplementary SO regarding shopping search results and ads. On June 27, 2017, the EC announced its decision that certain actions taken by Google regarding its display and ranking of shopping search results and ads infringed European competition law. The EC decision imposed a 2.4 billion ( $2.7 billion as of June 27, 2017) fine. On September 11, 2017, we appealed the EC decision and on September 27, 2017, we implemented product changes to bring shopping ads into compliance with the EC's decision. We recognized a charge of $2.7 billion for the fine in the second quarter of 2017. While under appeal, the fine is 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 fine. On April 20, 2016, the EC issued an SO regarding certain Android distribution practices. We responded to the SO and the EC's informational requests. On July 18, 2018, the EC announced its decision that certain provisions in Googles Android-related distribution agreements infringed European competition law. The EC decision imposed a 4.3 billion ( $5.1 billion as of June 30, 2018) fine and directed the termination of the conduct at issue. On October 9, 2018, we appealed the EC decision and implemented changes to certain of our Android distribution practices. We recognized a charge of $5.1 billion for the fine in the second quarter of 2018. While under appeal, the fine is 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 fine. On July 14, 2016, the EC issued an SO regarding the syndication of AdSense for Search. We responded to the SO and continue to respond to the EC's informational requests. There is significant uncertainty as to the outcome of this investigation; however, an adverse decision could result in fines and directives to alter or terminate certain conduct. Given the nature of this case, we are unable to estimate the reasonably possible loss or range of loss, if any. We remain committed to working with the EC to resolve these matters. The Comision Nacional de Defensa de la Competencia in Argentina, the Competition Commission of India (CCI), Brazil's Administrative Council for Economic Defense (CADE), and the Korean Fair Trade Commission have also opened investigations into certain of our business practices. In November 2016, we responded to the CCI Director General's report with interim findings of competition law infringements regarding search and ads. On February 8, 2018, the CCI issued its final decision, including a fine of approximately $21 million , finding no violation of competition law infringement on most of the issues it investigated, but finding violations, including in the display of the flights unit in search results, and a contractual provision in certain direct search intermediation agreements. We have appealed the CCI decision. The fine was accrued for in 2018. Alphabet Inc. Patent and Intellectual Property Claims We have had patent, copyright, trade secret, and trademark infringement lawsuits filed against us claiming that certain of our products, services, and technologies infringe the intellectual property rights of others. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, functionalities, products, or services, and may also cause us to change our business practices, and require development of non-infringing products or technologies, which could result in a loss of revenues for us and otherwise harm our business. In addition, the U.S. International Trade Commission (ITC) has increasingly become an important forum to litigate intellectual property disputes because an ultimate loss for a company or its suppliers in an ITC action could result in a prohibition on importing infringing products into the U.S. Because the U.S. is an important market, a prohibition on importation could have an adverse effect on us, including preventing us from importing many important products into the U.S. or necessitating workarounds that may limit certain features of our products. Furthermore, many of our agreements with our customers and partners require us to indemnify them for certain intellectual property infringement claims against them, which would increase our costs as a result of defending such claims, and may require that we pay significant damages if there were an adverse ruling in any such claims. Our customers and partners may discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business. In 2010, Oracle America, Inc. (Oracle) brought a copyright lawsuit against Google in the Northern District of California, alleging that Google's Android operating system infringes Oracle's copyrights related to certain Java application programming interfaces. After trial, final judgment was entered by the district court in favor of Google on June 8, 2016, and the court decided post-trial motions in favor of Google. Oracle appealed and on March 27, 2018, the appeals court reversed and remanded the case for a trial on damages. On May 29, 2018, we filed a petition for an en banc rehearing at the Federal Circuit, and on August 28, 2018, the Federal Circuit denied the petition. On January 24, 2019, we filed a petition to the Supreme Court of the United States to review this case. We believe this lawsuit is without merit and are defending ourselves vigorously. Given the nature of this case, we are unable to estimate the reasonably possible loss or range of loss, if any, arising from this matter. Other We are also regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving competition (such as the pending EC investigations described above), intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury, consumer protection, and other matters. Such claims, suits, regulatory and government investigations, and other proceedings could result in fines, civil or criminal penalties, or other adverse consequences. Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters. With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties. We expense legal fees in the period in which they are incurred. Non-Income Taxes We are under audit by various domestic and foreign tax authorities with regards to non-income tax matters. The subject matter of non-income tax audits primarily arises from disputes on the tax treatment and tax rate applied to the sale of our products and services in these jurisdictions and the tax treatment of certain employee benefits. We accrue non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We believe these matters are without merit and we are defending ourselves vigorously. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from our expectations. Alphabet Inc. For information regarding income tax contingencies, see Note 13 . Note 10. Stockholders Equity  Convertible Preferred Stock Our board of directors has authorized 100 million shares of convertible preferred stock, $0.001 par value, issuable in series. As of December 31,  2017 and 2018 , no shares were issued or outstanding. Class A and Class B Common Stock and Class C Capital Stock Our board of directors has authorized three classes of stock, Class A and Class B common stock, and Class C capital stock. The rights of the holders of each class of our common and capital stock are identical, except with respect to voting. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 10 votes per share. Class C capital stock has no voting rights, except as required by applicable law. Shares of Class B common stock may be converted at any time at the option of the stockholder and automatically convert upon sale or transfer to Class A common stock. Share Repurchases In October 2016, the board of directors of Alphabet authorized the company to repurchase up to $7.0 billion of its Class C capital stock, which was completed during 2018. In January 2018, the board of directors of Alphabet authorized the company to repurchase up to $8.6 billion of its Class C capital stock. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. During the years ended December 31,  2017 and 2018 , we repurchased and subsequently retired 5.2 million shares of Alphabet Class C capital stock for an aggregate amount of $4.8 billion and 8.2 million shares of Alphabet Class C capital stock for an aggregate amount of $9.1 billion , respectively. Note 11. Net Income Per Share We compute net income per share of Class A and Class B common stock and Class C capital stock using the two-class method. Basic net income per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of restricted stock units and other contingently issuable shares. The dilutive effect of outstanding restricted stock units and other contingently issuable shares is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares. The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock and Class C capital stock are identical, except with respect to voting. Furthermore, there are a number of safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our board of directors from declaring or paying unequal per share dividends on our Class A and Class B common stock and Class C capital stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock must be approved by the class of stock adversely affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our board of directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common shares and Class C capital stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. In the years ended December 31, 2016 , 2017 and 2018 , the net income per share amounts are the same for Class A and Class B common stock and Class C capital stock because the holders of each class are entitled to equal per share dividends or distributions in liquidation in accordance with the Amended and Restated Certificate of Incorporation of Alphabet Inc. Alphabet Inc. The following tables set forth the computation of basic and diluted net income per share of Class A and Class B common stock and Class C capital stock (in millions, except share amounts which are reflected in thousands and per share amounts):  Year Ended December 31,   Class A  Class B  Class C Basic net income per share:      Numerator      Allocation of undistributed earnings $ 8,332  $ 1,384  $ 9,762 Denominator      Number of shares used in per share computation 294,217  48,859  344,702 Basic net income per share $ 28.32  $ 28.32  $ 28.32 Diluted net income per share:      Numerator      Allocation of undistributed earnings for basic computation $ 8,332  $ 1,384  $ 9,762 Effect of dilutive securities in equity method investments and subsidiaries (9 )  (2 )  (10 ) Allocation of undistributed earnings for diluted computation 8,323  1,382  9,752 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 1,382   Reallocation of undistributed earnings (94 )  (21 )  Allocation of undistributed earnings $ 9,611  $ 1,361  $ 9,846 Denominator      Number of shares used in basic computation 294,217  48,859  344,702 Weighted-average effect of dilutive securities      Add:      Conversion of Class B to Class A common shares outstanding 48,859   Restricted stock units and other contingently issuable shares 2,055   8,873 Number of shares used in per share computation 345,131  48,859  353,575 Diluted net income per share $ 27.85  $ 27.85  $ 27.85  Year Ended December 31,   Class A  Class B  Class C Basic net income per share:      Numerator      Allocation of undistributed earnings $ 5,438  $  $ 6,362 Denominator      Number of shares used in per share computation 297,604  47,146  348,151 Basic net income per share $ 18.27  $ 18.27  $ 18.27 Diluted net income per share:      Numerator      Allocation of undistributed earnings for basic computation $ 5,438  $  $ 6,362 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares   Reallocation of undistributed earnings (74 )  (14 )  Allocation of undistributed earnings $ 6,226  $  $ 6,436 Denominator      Number of shares used in basic computation 297,604  47,146  348,151 Weighted-average effect of dilutive securities      Add:      Conversion of Class B to Class A common shares outstanding 47,146   Restricted stock units and other contingently issuable shares 1,192   9,491 Number of shares used in per share computation 345,942  47,146  357,642 Diluted net income per share $ 18.00  $ 18.00  $ 18.00 Alphabet Inc.  Year Ended December 31,   Class A  Class B  Class C Basic net income per share:      Numerator      Allocation of undistributed earnings $ 13,200  $ 2,072  $ 15,464 Denominator      Number of shares used in per share computation 298,548  46,864  349,728 Basic net income per share $ 44.22  $ 44.22  $ 44.22 Diluted net income per share:      Numerator      Allocation of undistributed earnings for basic computation $ 13,200  $ 2,072  $ 15,464 Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 2,072   Reallocation of undistributed earnings (146 )  (24 )  Allocation of undistributed earnings $ 15,126  $ 2,048  $ 15,610 Denominator      Number of shares used in basic computation 298,548  46,864  349,728 Weighted-average effect of dilutive securities      Add:      Conversion of Class B to Class A common shares outstanding 46,864   Restricted stock units and other contingently issuable shares   7,456 Number of shares used in per share computation 346,101  46,864  357,184 Diluted net income per share $ 43.70  $ 43.70  $ 43.70 Note 12. Compensation Plans  Stock Plans Under our 2012 Stock Plan, RSUs or stock options may be granted. An RSU award is an agreement to issue shares of our publicly traded stock at the time the award vests. Incentive and non-qualified stock options, or rights to purchase common stock, are generally granted for a term of 10 years. RSUs granted to participants under the 2012 Stock Plan generally vest over four years contingent upon employment or service with us on the vesting date. As of December 31, 2018 , there were 31,848,134 shares of stock reserved for future issuance under our Stock Plan. Stock-Based Compensation For the years ended December 31,  2016 , 2017 and 2018 , total stock-based compensation expense was $6.9 billion , $7.9 billion and $10.0 billion , including amounts associated with awards we expect to settle in Alphabet stock of $6.7 billion , $7.7 billion , and $9.4 billion , respectively. For the years ended December 31,  2016 , 2017 and 2018 , we recognized tax benefits on total stock-based compensation expense, which are reflected in the provision for income taxes in the Consolidated Statements of Income, of $1.5 billion , $1.6 billion , and $1.5 billion , respectively. For the years ended December 31,  2016 , 2017 and 2018 , tax benefit realized related to awards vested or exercised during the period was $2.1 billion , $2.7 billion and $2.1 billion , respectively. These amounts do not include the indirect effects of stock-based awards, which primarily relate to the research and development tax credit. Alphabet Inc. Stock-Based Award Activities The following table summarizes the activities for our unvested RSUs for the year ended December 31, 2018 :  Unvested Restricted Stock Units  Number of Shares  Weighted- Average Grant-Date Fair Value Unvested as of December 31, 2017 20,077,346  $ 712.45 Granted 12,669,251  $ 1,095.89 Vested (12,847,910 )  $ 756.45 Forfeited/canceled (1,431,009 )  $ 814.19 Unvested as of December 31, 2018 18,467,678  $ 936.96 The weighted-average grant-date fair value of RSUs granted during the years ended December 31,  2016 and 2017 , was $713.89 and $845.06 , respectively. Total fair value of RSUs, as of their respective vesting dates, during the years ended December 31,  2016 , 2017 , and 2018 were $9.0 billion , $11.3 billion , and $14.1 billion , respectively. As of December 31, 2018 , there was $16.2 billion of unrecognized compensation cost related to unvested employee RSUs. This amount is expected to be recognized over a weighted-average period of 2.5 years . 401(k) Plans We have two 401(k) Savings Plans that qualify as deferred salary arrangements under Section 401(k) of the Internal Revenue Code. Under these 401(k) Plans, matching contributions are based upon the amount of the employees contributions subject to certain limitations. We recognized expense of approximately $385 million , $448 million , and $691 million for the years ended December 31, 2016 , 2017 , and 2018 , respectively. Performance Fees We have compensation arrangements with payouts based on realized investment returns. We recognize compensation expense based on the estimated payouts, which may result in expense recognized before investment returns are realized. For the year ended December 31, 2018 , performance fees of $1.2 billion primarily related to gains on equity securities (for further information on gains on equity securities, see Note 3 ) were accrued and recorded as a component of general and administrative expenses. Note 13. Income Taxes  Income from continuing operations before income taxes included income from domestic operations of $12.0 billion , $10.7 billion , and $15.8 billion for the years ended December 31, 2016 , 2017 , and 2018 , respectively, and income from foreign operations of $12.1 billion , $16.5 billion , and $19.1 billion for the years ended December 31, 2016 , 2017 , and 2018 , respectively. The provision for income taxes consists of the following (in millions): Year Ended December 31,  2017 Current:      Federal and state $ 3,826  $ 12,608  $ 2,153 Foreign  1,746  1,251 Total 4,792  14,354  3,404 Deferred:      Federal and state (70 )   Foreign (50 )  (43 )  (134 ) Total (120 )   Provision for income taxes $ 4,672  $ 14,531  $ 4,177 The Tax Act enacted on December 22, 2017 introduced significant changes to U.S. income tax law. Effective 2018, the Tax Act reduced the U.S. statutory tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings and certain related-party payments. Alphabet Inc. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our consolidated financial statements as of December 31, 2017. As we collected and prepared necessary data, and interpreted the additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we made adjustments, over the course of the year, to the provisional amounts including refinements to deferred taxes. The accounting for the tax effects of the Tax Act has been completed as of December 31, 2018. One-time transition tax The Tax Act required us to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets and 8% on the remaining earnings. We recorded a provisional amount for our one-time transitional tax liability and income tax expense of $10.2 billion as of December 31, 2017. Deferred tax effects Due to the change in the statutory tax rate from the Tax Act, we remeasured our deferred taxes as of December 31, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. We recognized a deferred tax benefit of $376 million to reflect the reduced U.S. tax rate and other effects of the Tax Act as of December 31, 2017. The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows:  Year Ended December 31,    U.S. federal statutory tax rate 35.0 %  35.0 %  21.0 % Foreign income taxed at different rates (11.0 )  (14.2 )  (4.9 ) Effect of the Tax Act   One-time transition tax 0.0  37.6  (0.1 ) Deferred tax effects 0.0  (1.4 )  (1.2 ) Federal research credit (2.0 )  (1.8 )  (2.4 ) Stock-based compensation expense (3.4 )  (4.5 )  (2.2 ) European Commission fine 0.0  3.5  3.1 Deferred tax asset valuation allowance 0.1  0.9  (2.0 ) Other adjustments 0.6  (1.7 )  0.7 Effective tax rate 19.3 %  53.4 %  12.0 % Our effective tax rate for each of the years presented was affected by earnings realized in foreign jurisdictions with statutory tax rates lower than the federal statutory tax rate. Substantially all of the income from foreign operations was earned by an Irish subsidiary. Beginning in 2018, earnings realized in foreign jurisdictions are subject to U.S. tax in accordance with the Tax Act. On July 27, 2015, the United States Tax Court, in an opinion in Altera Corp. v. Commissioner, invalidated the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. The U.S. Tax Court issued the final decision on December 28, 2015. The IRS served a Notice of Appeal on February 22, 2016 and the case is being heard by the Ninth Circuit Court of Appeals. The Ninth Circuit Court of Appeals overturned the Tax Courts decision in an opinion issued on July 24, 2018, but withdrew that opinion in an order issued on August 7, 2018 to allow time for a reconstituted panel to confer on the appeal. At this time, the Ninth Circuit Court of Appeals has not issued a final decision, and the U.S. Treasury has not withdrawn the requirement to include stock-based compensation from its regulations. We have evaluated the opinion and continue to record a tax benefit related to reimbursement of cost share payments for the previously shared stock-based compensation costs. In accordance with the Tax Act, the Altera tax benefit was remeasured from 35% to 21%. We also remeasured the tax benefit expected to be realized upon settlement including the expected future new taxes enacted by the Tax Act due upon resolution of the matter. The tax liability recorded as of December 31, 2016 for the U.S. tax cost of the potential repatriation associated with the contingent foreign earnings was reversed due to the Tax Act introducing a territorial tax system and providing a 100% dividend received deduction on certain qualified dividends from foreign subsidiaries. We will continue to monitor developments related to the case and the potential effect on our consolidated financial statements. Alphabet Inc. Deferred Income Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We recorded a provisional adjustment to our U.S. deferred income taxes as of December 31, 2017 to reflect the reduction in the U.S. statutory tax rate from 35% to 21% resulting from the Tax Act. Significant components of our deferred tax assets and liabilities are as follows (in millions):  As of December 31,   Deferred tax assets:    Stock-based compensation expense $  $ Accrued employee benefits  Accruals and reserves not currently deductible  1,062 Tax credits 1,187  1,979 Basis difference in investment in Arris  Prepaid cost sharing  Net operating losses  Other  Total deferred tax assets 4,351  5,781 Valuation allowance (2,531 )  (2,817 ) Total deferred tax assets net of valuation allowance 1,820  2,964 Deferred tax liabilities:    Property and equipment (551 )  (1,382 ) Identified intangibles (419 )  (229 ) Renewable energy investments (531 )  (500 ) Investment gains/losses (22 )  (1,143 ) Other (47 )  (237 ) Total deferred tax liabilities (1,570 )  (3,491 ) Net deferred tax assets (liabilities) $  $ (527 ) As of December 31, 2018 , our federal and state net operating loss carryforwards for income tax purposes were approximately $1.2 billion and $1.4 billion , respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in 2021 and the state net operating loss carryforwards will begin to expire in 2019. It is more likely than not that certain federal net operating loss carryforwards and our state net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions. Our foreign net operating loss carryforwards for income tax purposes were $950 million that will begin to expire in 2021. As of December 31, 2018 , our California research and development credit carryforwards for income tax purposes were approximately $2.4 billion that can be carried over indefinitely. We believe the state tax credit is not likely to be realized. As of December 31, 2018 , we maintained a valuation allowance with respect to California deferred tax assets, certain federal net operating losses, and certain foreign net operating losses that we believe are not likely to be realized. Due to gains from equity securities recognized in 2018, we released the valuation allowance against the deferred tax asset for the book-to-tax basis difference in our investments in Arris shares received from the sale of the Motorola Home business to Arris in 2013. We continue to reassess the remaining valuation allowance quarterly and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly. For further information on the unrealized gains related to marketable equity securities recognized in other income (expenses), see Note 1. Alphabet Inc. Uncertain Tax Positions The following table summarizes the activity related to our gross unrecognized tax benefits from January 1, 2016 to December 31, 2018 (in millions):    Beginning gross unrecognized tax benefits $ 4,167  $ 5,393  $ 4,696 Increases related to prior year tax positions   Decreases related to prior year tax positions (157 )  (257 )  (623 ) Decreases related to settlement with tax authorities (196 )  (1,875 )  (191 ) Increases related to current year tax positions   Ending gross unrecognized tax benefits $ 5,393  $ 4,696  $ 4,652 The total amount of gross unrecognized tax benefits was $5.4 billion , $4.7 billion , and $4.7 billion as of December 31, 2016 , 2017 , and 2018 , respectively, of which, $4.3 billion , $3.0 billion , and $2.9 billion , if recognized, would affect our effective tax rate, respectively. The decrease in gross unrecognized tax benefits in 2017 was primarily as a result of the resolution of a multi-year U.S. audit. As of December 31, 2017 and 2018 , we had accrued $362 million and $490 million in interest and penalties in provision for income taxes, respectively. We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions, our two major tax jurisdictions are the U.S. federal and Ireland. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. The IRS is currently examining our 2013 through 2015 tax returns. We have also received tax assessments in multiple foreign jurisdictions asserting transfer pricing adjustments or permanent establishment. We continue to defend any and all such claims as presented. Our 2016 and 2017 tax years remain subject to examination by the IRS for U.S. federal tax purposes, and our 2011 through 2017 tax years remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are other ongoing audits in various other jurisdictions that are not material to our financial statements. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. Although the timing of resolution, settlement, and closure of audits is not certain, it is reasonably possible that certain U.S. federal and non-U.S. tax audits may be concluded within the next 12 months, which could significantly increase or decrease the balance of our gross unrecognized tax benefits. We estimate that our unrecognized tax benefits as of December 31, 2018 could possibly decrease by approximately $600 million in the next 12 months. Positions that may be resolved include various U.S. and non-U.S. matters. Note 14. Information about Segments and Geographic Areas  We operate our business in multiple operating segments. Google is our only reportable segment. None of our other segments meet the quantitative thresholds to qualify as reportable segments; therefore, the other operating segments are combined and disclosed as Other Bets. Our reported segments are:  Google  Google includes our main products such as Ads, Android, Chrome, Google Cloud, Google Maps, Google Play, Hardware (including Nest), Search, and YouTube. Our technical infrastructure is also included in Google. Google generates revenues primarily from advertising; sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud offerings.   Other Bets  Other Bets is a combination of multiple operating segments that are not individually material. Other Bets includes businesses such as Access, Calico, CapitalG, GV, Verily, Waymo, and X. Revenues from the Other Bets are derived primarily through the sales of internet and TV services through Access as well as licensing and RD services through Verily.  Alphabet Inc. Revenues, cost of revenues, and operating expenses are generally directly attributed to our segments. Inter-segment revenues are not presented separately, as these amounts are immaterial. Our Chief Operating Decision Maker does not evaluate operating segments using asset information. In Q1 2018, Nest joined Googles hardware team. Consequently, the financial results of Nest are reported in the Google segment, with Nest revenues reflected in Google other revenues. Prior period segment information has been recast to conform to the current period segment presentation. Consolidated financial results are not affected. Information about segments during the periods presented were as follows (in millions):  Year Ended December 31,    Revenues:      Google $ 89,984  $ 110,378  $ 136,224 Other Bets   Total revenues $ 90,272  $ 110,855  $ 136,819  Year Ended December 31,    Operating income (loss):      Google $ 27,055  $ 32,287  $ 36,517 Other Bets (2,741 )  (2,734 )  (3,358 ) Reconciling items (1) (598 )  (3,407 )  (6,838 ) Total income from operations $ 23,716  $ 26,146  $ 26,321 (1)  Reconciling items are primarily comprised of the European Commission fines for the years ended December 31, 2017 and 2018, and performance fees for the year ended December 31, 2018, as well as corporate administrative costs and other miscellaneous items that are not allocated to individual segments for all periods presented.  Year Ended December 31,    Capital expenditures:      Google $ 9,437  $ 12,619  $ 25,460 Other Bets 1,365   Reconciling items (2) (590 )   (502 ) Total capital expenditures as presented on the Consolidated Statements of Cash Flows $ 10,212  $ 13,184  $ 25,139 (2)  Reconciling items are related to timing differences of payments as segment capital expenditures are on accrual basis while total capital expenditures shown on the Consolidated Statements of Cash Flow are on cash basis and other miscellaneous differences. Alphabet Inc. Stock-based compensation (SBC) and depreciation, amortization, and impairment are included in segment operating income (loss) as shown below (in millions):  Year Ended December 31,    Stock-based compensation:      Google $ 6,201  $ 7,168  $ 8,755 Other Bets   Reconciling items (3)   Total stock-based compensation (4) $ 6,703  $ 7,679  $ 9,353       Depreciation, amortization, and impairment:      Google $ 5,882  $ 6,608  $ 8,708 Other Bets   Reconciling items (5)     Total depreciation, amortization, and impairment as presented on the Consolidated Statements of Cash Flows $ 6,144  $ 6,915  $ 9,035 (3)  Reconciling items represent corporate administrative costs that are not allocated to individual segments. (4)  For purposes of segment reporting, SBC represents awards that we expect to settle in Alphabet stock. (5)  Reconciling items are primarily related to corporate administrative costs and other miscellaneous items that are not allocated to individual segments. The following table presents our long-lived assets by geographic area (in millions):  As of December 31, 2017  As of December 31, 2018 Long-lived assets:    United States $ 55,113  $ 74,882 International 17,874  22,234 Total long-lived assets $ 72,987  $ 97,116 For revenues by geography, see Note 2 . "," ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2018 , our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Alphabet Inc. Managements Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2018 . Management reviewed the results of its assessment with our Audit Committee. The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by Ernst  Young LLP, an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Annual Report on Form 10-K. Limitations on Effectiveness of Controls and Procedures In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. "