Alphabet Inc. (GOOGL Class A and GOOG Class C) is a collection of different businesses with Google being the largest. The company offers a variety of software and Internet-related services and solutions, including web browsing and searching, cloud computing, streaming entertainment, mobile operating systems and applications, and more. Alphabet leverages its various platforms and services to generate a substantial portion of its revenue from advertising.
Alphabet competes with companies that provide online platforms for connecting people with information and relevant advertising, digital content and application platforms, enterprise cloud services, and more. Major competitors include Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Apple Inc. (AAPL), Facebook Inc. (FB), Alibaba Group Holding Ltd. (BABA), and others.
- Alphabet leverages its search, web browsing, mobile operating systems, and cloud computing to make money through the sale of advertising and various service fees.
- Advertising generates the majority of revenue, but Google Cloud revenues are growing.
- Alphabet announced a 20-for-one stock split to be effected in the form of a one-time special stock dividend administered on July 15, 2022.
Alphabet earned $20.6 billion in net income during Q4 of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. Net income rose 35.6% compared to Q4 FY 2020. Revenue for the quarter was reported at $75.3 billion, up 32.4% from the year-ago quarter.
Alphabet said that it continued to enjoy strong growth in its advertising business during the quarter. The company’s Pixel phones reached a quarterly sales record despite supply constraints. Alphabet’s cloud business also saw strong revenue growth.
Alphabet’s Business Segments
Starting in Q4 2020, Alphabet began separating its business into three reportable segments: Google Services, Google Cloud, and Other Bets. The company provides a breakdown of revenue and operating income for each of these segments. It also reports certain unallocated corporate costs, including corporate initiatives, finance and legal costs, and costs associated with certain shared research and development activities. Corporate costs also include hedging gains (losses) related to revenue. All of these corporate costs are excluded from the segment breakdowns below as well as in the pie charts above. Prior to Q4 2020, Alphabet separated its business into two reportable segments: Google and Other Bets.
The Google Services segment is comprised of a range of products and services, including ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube. The segment generates most of its revenue from advertising. Other sources of revenue include sales of apps, in-app purchases, digital content products, hardware, and fees received for subscription-based products such as YouTube Premium and YouTube TV.
Google Services generated $69.4 billion, or about 92% of total revenue, in Q4 FY 2021. Advertising revenue, at $61.2 billion, comprised 88% of the segment’s revenue. The segment’s revenue is up 31.3% compared to Q4 FY 2020. Google Services posted an operating income of $26.0 billion, up 36.3% from the year-ago quarter.
This figure surpassed Alphabet’s total consolidated operating income of $21.9 billion due to operating losses in the other two segments as well as unallocated corporate costs. Google Services is thus the only segment that currently makes positive contributions to Alphabet’s overall operating income.
The Google Cloud segment is comprised of Google’s infrastructure and data analytics platforms, collaboration tools, and other services for enterprise customers. The majority of the segment’s revenue is generated from fees received for Google Cloud Platform services and Google Workspace (formerly known as G Suite) collaboration tools.
Google Cloud generated $5.5 billion in revenue during Q4 FY 2021, comprising about 7% of total revenue. It was up 44.6% compared to Q4 FY 2020. The segment is still not profitable, posting an operating loss of $890 million during the quarter. However, that loss was smaller than the $1.2 billion operating loss reported in the year-ago quarter.
The Other Bets segment is comprised of multiple different operating segments that are not individually material. Some of Alphabet’s Other Bets include its autonomous driving business Waymo and its cloud-gaming platform Stadia. Most of the segment’s revenue is generated through the sale of internet services as well as licensing and R&D services.
Other Bets generated $181 million in revenue in Q4 FY 2021, falling 7.7% from the year-ago quarter. It comprises just a tiny fraction of Alphabet’s total revenue. Other Bets posted an operating loss of $1.5 billion, which widened from the $1.1 billion operating loss reported for Q4 FY 2020.
Alphabet’s Recent Developments
On Feb. 1, 2022 Alphabet announced in its Q4 FY 2021 earnings release that its board of directors had approved a 20-for-one stock split, which is to be effected in the form of a one-time special stock dividend. If approved by shareholders, each stockholder of record as of the close of business on July 1, 2022 will receive, following the close of business on July 15, 2022, a dividend of 19 additional shares of the company’s stock for each share held.
How Alphabet Reports Diversity and Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Alphabet and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Alphabet releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Alphabet discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Alphabet breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
|Google (Alphabet) Diversity and Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
|General Management||✔ (U.S. Only)||✔|
|Employees||✔ (U.S. Only)||✔||✔||✔||✔|