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Table of Contents Alphabet Inc. and Google Inc.
23
The shift to online, as well as the advent of the multi-device world, has brought opportunities outside of the U.S.,
especially 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 impacted by our performance in these markets, particularly
as low-cost mobile devices become more available.
Our international revenues represent a significant proportion 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.
Non-advertising revenues have grown over time. We expect this trend to continue as we focus on expanding our
Google offerings to our users through products like Google Play, cloud and apps and hardware products. Across these
initiatives, we currently derive non-advertising revenues primarily from sales of digital content products, hardware
sales, service and licensing fees; 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
themselves could be volatile.
• As we continue to look for new ways to serve our users and expand our businesses, we will invest
heavily in R&D and our capital expenditures will continue to fluctuate.
We continue to make significant research and development (R&D) investments in areas of strategic focus for
Google, such as search and advertising, as well as in new products and services across both Google and Other Bets.
The amount of our capital expenditures has fluctuated and may continue to fluctuate in the long term as we invest
heavily in our systems, 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 expanding 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. Their energy and talent
drive Alphabet and create our success. We expect to continue hiring talented employees and to provide competitive
compensation programs to our employees. As of December 31, 2015, we had 61,814 full-time employees: 23,336 in
research and development, 19,082 in sales and marketing, 10,944 in operations, and 8,452 in general and
administrative, an increase of 8,214 total headcount from December 31, 2014.
Executive Overview of Results
Here are our key financial results for the fiscal year ended December 31, 2015 (consolidated unless otherwise
noted):
• Revenues of $75.0 billion and revenue growth of 14% year over year, constant currency revenue growth of
20% year over year.
• Google segment revenues of $74.5 billion with revenue growth of 14% and Other Bets revenues of $0.4 billion.
• Revenues from the United States, the United Kingdom, and Rest of World were $34.8 billion, $7.1 billion, and
$33.1 billion, respectively.
• Cost of revenues was $28.2 billion, consisting of traffic acquisition costs of $14.4 billion and other cost of
revenues of $13.8 billion. Our traffic acquisition costs as a percentage of advertising revenues was 21%.
• Operating expenses (excluding cost of revenues) were $27.5 billion.
• Income from operations was $19.4 billion.
• Effective tax rate of 17%.
• Net income was $16.3 billion with diluted net income per share for Class A and B common stock of $22.84
and for Class C capital stock of $24.34.
• Operating cash flow was $26.0 billion.
• Capital expenditures were $9.9 billion.