Alphabet Inc. Financial Performance Overview

Alphabet Inc., the parent company of Google, reported strong financial results for the year ended December 31, 2024. Total revenues increased 14% year-over-year to $350.0 billion, driven by growth in both the Google Services and Google Cloud segments. Google Services revenues grew 12% to $304.9 billion, while Google Cloud revenues increased 31% to $43.2 billion.

The company’s profitability also improved significantly, with operating income increasing 33% to $112.4 billion and net income rising 36% to $100.1 billion. This translated to a 39% increase in diluted earnings per share to $8.04.

Revenue and Monetization Trends

Alphabet’s revenues continue to benefit from the ongoing shift of user behavior and advertising dollars to digital platforms. Google Search & other revenues, which include revenues from Google’s search properties and other owned-and-operated properties, grew 13% year-over-year. YouTube ads revenues increased 14%, driven by growth in both brand and direct response advertising.

However, Google Network revenues declined 3% due to decreases in Google Ad Manager and AdMob revenues, as well as the impact of foreign currency exchange rates. The company’s monetization metrics showed mixed trends, with paid clicks on Google Search & other properties increasing 5% and cost-per-click rising 7%, while impressions on Google Network properties declined 11% even as cost-per-impression increased 10%.

The company also saw continued growth in its Google subscriptions, platforms, and devices revenues, which increased 16% year-over-year. This was primarily driven by growth in YouTube services and Google One subscriptions. Google Cloud revenues grew 31%, fueled by strong demand for the company’s infrastructure and platform services.

Geographically, the United States remained Alphabet’s largest market, accounting for 49% of total revenues in 2024, up from 47% in the prior year. EMEA (Europe, Middle East, and Africa) contributed 29% of revenues, while APAC (Asia-Pacific) and Other Americas made up 16% and 6%, respectively.

Costs and Expenses

Alphabet’s cost of revenues increased 10% year-over-year to $146.3 billion, primarily driven by higher content acquisition costs, traffic acquisition costs (TAC), and depreciation expenses. TAC as a percentage of advertising revenues decreased from 21.4% in 2023 to 20.7% in 2024, due to a revenue mix shift from Google Network properties to Google Search & other properties.

Operating expenses grew 2% to $91.3 billion, with increases in R&D, sales and marketing, and general and administrative costs. The R&D expense increase was mainly attributable to higher employee compensation, depreciation, and third-party services fees, partially offset by a reduction in charges related to the company’s office space optimization efforts. General and administrative expenses decreased, driven by lower charges related to legal matters and a decrease in employee compensation.

Segment Performance

The Google Services segment, which includes the company’s advertising, subscription, and device businesses, saw operating income increase 26% to $121.3 billion. This was driven by the strong revenue growth, as well as a reduction in employee compensation expenses.

Google Cloud’s operating income grew significantly from $1.7 billion in 2023 to $6.1 billion in 2024, as revenues increased at a faster pace than the segment’s operating costs. The Other Bets segment, which includes the company’s moonshot projects, reported an operating loss of $4.4 billion, a slight increase from the prior year.

Other Income and Expenses

Alphabet’s other income and expenses, net, increased from $1.4 billion in 2023 to $7.4 billion in 2024. This was primarily due to an increase in net gains on equity securities, driven by fair value adjustments related to observable transactions on the company’s non-marketable equity investments. Foreign currency exchange losses also decreased compared to the prior year.

In January 2025, the company recognized an $8.0 billion unrealized gain on its investment in a private company, reflecting an increase in the fair value of this investment following an observable transaction.

Taxes and Cash Flows

Alphabet’s effective tax rate increased from 13.9% in 2023 to 16.4% in 2024, primarily due to a one-time adjustment for tax rule changes and a decrease in the company’s U.S. federal Foreign Derived Intangible Income tax deduction.

Net cash provided by operating activities increased from $101.7 billion in 2023 to $125.3 billion in 2024, driven by the growth in cash receipts from customers. Net cash used in investing activities rose from $27.1 billion to $45.5 billion, mainly due to higher purchases of property and equipment and marketable securities, partially offset by increased maturities and sales of securities.

Net cash used in financing activities increased from $72.1 billion to $79.7 billion, primarily due to $7.4 billion in dividend payments and higher net payments related to stock-based award activities, partially offset by an increase in proceeds from debt issuance.

Capital Expenditures and Liquidity

Alphabet’s capital expenditures increased from $32.3 billion in 2023 to $52.5 billion in 2024, as the company invested heavily in technical infrastructure, including servers, network equipment, and data centers, to support the growth of its business and long-term initiatives, particularly in AI.

As of December 31, 2024, the company had $95.7 billion in cash, cash equivalents, and short-term marketable securities. Alphabet’s existing cash, cash equivalents, short-term marketable securities, and cash flows from operations and financing activities are expected to be sufficient to fund its operating activities and cash commitments for investing and financing activities for at least the next 12 months and the foreseeable future.

Shareholder Returns

During 2024, Alphabet repurchased and retired 379 million shares of its Class A and Class C stock for a total of $62.0 billion. In April 2024, the company’s Board of Directors authorized an additional $70.0 billion for share repurchases, of which $44.7 billion remained available as of December 31, 2024.

The company also initiated a quarterly cash dividend program in 2024, paying a total of $7.4 billion in dividends to its Class A, Class B, and Class C shareholders.

Regulatory Environment and Risks

Alphabet continues to face an evolving regulatory environment, with changes in social, political, economic, tax, and regulatory conditions potentially affecting its business practices and financial results. The company is subject to various claims, lawsuits, investigations, and other forms of legal liability, which could result in fines and cause the company to change its business practices.

For example, in 2024, the European Court of Justice rejected Alphabet’s appeal of a 2017 European Commission decision, upholding a €2.4 billion ($3.0 billion) fine. The company also faced a separate 2019 European Commission decision that was overturned by the EU’s General Court, resulting in the annulment of a €1.5 billion ($1.7 billion) fine.

Outlook and Conclusion

Alphabet’s strong financial performance in 2024, characterized by double-digit revenue growth, expanding profitability, and robust cash flow generation, demonstrates the company’s ability to capitalize on the continued shift to digital advertising and cloud computing. The company’s investments in technical infrastructure, AI, and new product offerings position it well to maintain its leadership in the evolving technology landscape.

However, Alphabet must navigate an increasingly complex regulatory environment, with ongoing legal and compliance challenges that could impact its business practices and financial results. The company’s ability to adapt to changing user behaviors, competitive dynamics, and technological advancements will be crucial in sustaining its long-term growth and profitability.

Overall, Alphabet’s 2024 financial results reflect the company’s operational excellence, innovative capabilities, and disciplined capital allocation, which have enabled it to deliver substantial value to shareholders. As the company continues to execute on its strategic priorities, investors will closely monitor its ability to navigate the various risks and opportunities that lie ahead.