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Alphabet Inc.

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Alphabet Inc.
Alphabet
TypePublic
ISIN
]
IndustryConglomerate
FoundedOctober 2, 2015; 9 years ago (2015-10-02)
Founders
HeadquartersGoogleplex,
Mountain View, California
,
U.S.
Area served
Worldwide
Key people
Products
RevenueIncrease US$282.8 billion (2022)
Decrease US$74.84 billion (2022)
Decrease US$59.97 billion (2022)
Total assetsIncrease US$365.3 billion (2022)
Total equityIncrease US$256.1 billion (2022)
Owners
  • Larry Page (controlling shareholder)
  • Sergey Brin (controlling shareholder)
Number of employees
Decrease 181,798 (June 2023)
Subsidiaries
Website
Footnotes / references
[1]

Alphabet Inc. is an American multinational technology company that is headquartered in California. The company was founded in late 2015 and later evolved into the parent company of Google and other former Google subsidiaries. Today, it stands as one of the largest technology companies in the world, ranking as the third-largest by revenue.

Alphabet's financial reporting is structured into three main segments: Google Services, Google Cloud, and Other Bets. The Google Services segment comprises key revenue-generating products such as Google Search, YouTube ads, and the Google network. These platforms have been instrumental in establishing Google's dominance in the online search and advertising market. The Google Cloud segment focuses on earnings derived from Google's cloud computing platform, which offers a wide range of cloud-based services to businesses and organizations. Additionally, this segment includes Google Workspace, a suite of productivity and collaboration tools tailored for enterprises. The third segment, Other Bets, encompasses a diverse portfolio of companies that Alphabet has acquired over the years. Some notable names within this category include DeepMind, a leading AI research lab; Wing, a company focused on drone delivery; Calico, a life sciences company aiming to tackle aging and diseases; and Waymo, a pioneering autonomous vehicle technology company.

With its subsidiaries and diverse business ventures, Alphabet has solidified its position as a global technology powerhouse, constantly innovating and contributing to various industries. As the parent company of Google and its various endeavours, Alphabet continues to play a crucial role in shaping the future of technology and its impact on society.

About the CompanyEdit

Alphabet Inc. is an innovative technology company looking to change the future with revolutionary ideas. Alphabet owns a series of companies including Google, Waymo, X lab, Calico, Wing and more, spreading its wings to technology, transportation, and biology. One of their main goals is to “organize the world’s information and make it universally accessible and useful” and since 2015, they have been transforming the world with their life-changing technologies and innovations.

OperationsEdit

Working from their dorm rooms two Stanford University students, Sergey Brin and Larry page, built a search engine called Backrub that used links to determine the importance of individual pages on the World Wide Web. It ranked web pages better than any of its competitors and so within a few years managed to outperform the competition.

In August 1998, Sun co-founder Andy Bechtolsheim wrote Larry and Sergey a check for $100,000, and Google Inc. was officially born. With this investment, the newly incorporated team made the upgrade from the dorms to their first office.

GoogleEdit

Google is the core business of Alphabet and accounts for the majority of its revenue. Google's products and services include:

  • Google Search  - most well known for the search engine, income is generated through the use of advertisements that are displayed when the user makes relevant searches. – prices can vary for advertisers depending on the industry that is being advertised, for example a legal client will be more profitable for a firm than someone looking to buy fitness equipment so the cost per click will vary drastically.  
  • Youtube – A video sharing site that is also one of alphabets most valuable assets. Again revenue is generated through the use of advertisements in a similar way to the Google search however instead short video adverts are played before/during a video.
  • Gmail
  • Google Workspace
  • Google Cloud is a state-of-the-art cloud computing platform that provides a wide range of services, such as virtual machines for flexible computing power, scalable storage solutions to securely manage data at any scale, AI and ML applications to drive data-driven decision-making and innovation, and data analytics tools for extracting valuable insights. This comprehensive suite of offerings empowers businesses to enhance efficiency, streamline operations, and achieve secure and scalable growth in the digital landscape. – prices vary depending on the features the customer is using however are generally in the range of about $10 per user per month
  • Android – A mobile/tablet operating system that currently controls 70% of the global market share in the mobile OS market. Revenue is generated through android apps and services which introduce users into the google ecosystem.

Other BetsEdit

Other Bets is a group of businesses that are still in the early stages of development. These businesses include:

Calico (longevity research)

Verily (life sciences)

Waymo (self-driving cars)

Wing (drone delivery)

CapitalG (venture capital arm)

GV (venture capital arm)

Online advertisingEdit

Alphabet generates the majority of its revenue from online advertising. The company's advertising products and services allow businesses to reach a large audience of potential customers.

Cloud computing:Edit

Alphabet's Google Cloud Platform is a leading cloud computing platform that offers a wide range of services to businesses of all sizes.

Hardware:Edit

Alphabet designs and manufactures a variety of hardware products, including the Pixel phone, the Nest smart home products, and the Fitbit fitness tracker.

Research and development:Edit

Alphabet invests heavily in research and development. The company's research teams are working on a variety of projects, including artificial intelligence, self-driving cars, and renewable energy.

Total Addressable Market:Edit

Because Alphabet participates in a diverse range of markets, the total addressable market sums up to be more than $650 billion. Google’s digital marketing ~$500 billion, Waymo’s autonomous vehicles ~$120 billion, Calico genetics ~$7.4 billion, and many more companies under Alphabet.

Serviceable Available Market:Edit

The serviceable available market is more than $475 billion. Google is the market leader for search engines and shares 85% of the market, $425 billion. Waymo also adds another $50 billion in autonomous vehicles, having only Tesla as a major competitor, and other smaller autonomous vehicle companies.

Serviceable Obtainable Market:Edit

Google is already the market leader for search engines and the serviceable obtainable market is $425 billion. Waymo’s currently estimated valuation is $30 billion, Calico $20 billion. This sums up to be an estimate of $456 billion with its biggest 3 companies.

Competitions:Edit

The design of goods and services directly relates Alphabet Inc.’s operations management to the competitive landscape. Products compete against information technologies and online services from other companies. For example, Google Search competes with Microsoft Bing. Also, through Google, Alphabet competes with Apple’s cloud services, consumer electronics, App Store, HomePod, and Siri; Facebook’s social media and digital advertising; eBay’s marketplace advertising; Amazon’s cloud services, Alexa, and consumer electronics; and Samsung’s consumer electronics and Bixby. Other Alphabet competitors include Disney, Netflix, and Sony, which compete with Google’s (and YouTube’s) digital content distribution or video streaming. Moreover, Uber competes with Waymo, which was a self-driving technology project under Google and is now a subsidiary of Alphabet Inc. These competitors affect the technology company’s product design. Thus, the competitive landscape influences this strategic decision area of operations management at Alphabet Inc.

LeadershipEdit

  • Board of Directors: John LeRoy Hennessy (Chairman), Sundar Pichai (Chief Executive Officer & Director), Lawrence E. Page (Director)
  • Executives: John LeRoy Hennessy (Chairman), Ruth M. Porat (Chief Financial Officer & Senior Vice President), Sundar Pichai (Chief Executive Officer & Director), Robert M. Califf (Head-Strategy & Policy), Torrence N. Boone (Vice President-Global Client Partnerships), Jewel Burks Solomon (Head-Google for Startups)[1]

John LeRoy Hennessy

John LeRoy Hennessy holds the position of Chairman on the Board of Directors at Alphabet. Currently, he hold other board membership at Gordon & Betty Moore Foundation, Alphabet, Inc., Chan Zuckerberg Biohub. He is the founder of Qualcomm Atheros, Inc. and MIPS Technologies, Inc. In the past Dr. Hennessy was Chairman for Qualcomm Atheros, Inc., President at Stanford University and Dean at Stanford University School of Engineering. He received a graduate degree and a doctorate from Stony Brook University and an undergraduate degree from Villanova University.[2]

Lawrence E. Page

Lawrence E. Page cofounded Google in 1998 with fellow Standford Ph.D student Sergey Brin. With Brin, he invented Google’s PageRank algorithm, which is the foundation of the search engine. He stepped down as CEO of Alphabet. His current board memberships are National Academy of Engineering, X PRIZE Foundation, Alphabet, Inc..[3]

Ruth M.Porat

Ruth M.Porat is a a Chief Financial Officer & Senior Vice President at Alphabet, Inc., a Chief Financial Officer & Senior Vice President at Google LLC. Ms. Porat was previously employed as a Vice Chairman by The Economic Club of New York and a Chief Financial Officer & Executive Vice President by Morgan Stanley. She received her undergraduate degree from Stanford University, a graduate degree from London School of Economics & Political Science and an MBA from The Wharton School of the University of Pennsylvania.[4]

Sundar Pichai

Sundar Pichai is Chief Executive Officer & Director at Alphabet, Inc. and the Founder of Pie.co Pte Ltd. He received a graduate degree from Stanford University, an undergraduate degree from Indian Institute of Technology Kharagpur and an MBA from The Wharton School of the University of Pennsylvania.[5]

Robert M.Califf

Rober M. Califf is a Head-Strategy & Policy at Alphabet. Currently, he is also a Commissioner of US Food & Drug Administration, a Vice Chancellor-Clinical & Translational Research at Duke University Medical Center, and a Member at National Academy of Medicine (United States). He also served on the board at Centessa Pharmaceuticals Plc, Duke Translational Medicine Institute, Nitrox LLC and Proventus, Inc. He received his undergraduate degree from Duke University School of Medicine and a doctorate degree from Duke University School of Medicine.[6]

Torrence N. Boone

Torrence N. Boone is the Vice President of Google LLC and Vice President-Global Client Partnerships at Alphabet, Inc. Currently, he is also the board of Macy's, Inc., Pond5, Inc. and The Joyce Theater Foundation, Inc.. In the past, Mr. Boone occupied the position of Senior Manager at Bain & Co., Inc., Chief Executive Officer for Enfatico LLC, President of Digitas, Inc. and VP & General Manager-Digital Marketing Agency at Razorfish LLC. He received an undergraduate degree from Stanford University and an MBA from Harvard Business School.[7]

Jewel Burks Solomon

Jewel Burks Solomon is a Head-Google for Startups at Alphabet, Inc.. She is currently Managing Partner at Collab Capital LLC, Managing Director at Burks Enterprises, Inc., and Managing Director at Storehouse 3:10 Ventures LLC and on the board of 5 other companies. She received an undergraduate degree from Howard University.[8]

FinancialsEdit

Income Statement:Edit

Year Revenue (in millions USD) Cost of Revenue (in millions USD) Gross Profit (in millions USD) Operating Expenses (in millions USD) Operating Income (in millions USD) General & Administrative Expense (in millions USD) Other Operating Expenses Interest Income Interest Expense Pretax Income Income Tax Net Income
2022 280,875 126,203 154,672 81,791 72,881 42,291 1,304 1,817 357 76,033 11,356 59,972
2021 257,488 110,939 146,549 67,984 78,565 42,291 1,089 1,499 346 76,033 14,701 61,332
2020 182,350 84,732 97,618 56,571 41,047 36,422 90 1,865 135 40,269 7,813 34,343
2019 161,402 71,896 89,506 54,033 35,473 28,998 111 1,730 100 36,231 5,282 30,949
2018 136,958 59,549 77,409 45,878 31,531 28,015 90 5,394 114 28,335 4,274 24,061

Balance Sheet:Edit

Year Total Assets Current Assets Non-Current Assets Total Liabilities Current Liabilities Long-Term Liabilities Total Equity
2022 1,086,197 400,771 685,426 429,283 297,256 132,027 656,914
2021 1,022,081 390,586 631,495 447,545 272,405 175,140 574,536
2020 804,833 331,452 473,381 422,099 260,279 161,820 382,734
2019 713,006 304,222 408,784 415,289 254,999 160,290 297,717
2018 621,222 278,167 343,055 387,489 232,002 155,487 233,733

Cash FlowEdit

Year Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Flow from Financing Activities Net Change in Cash and Cash Equivalents
2022 76,033 -27,494 56,361 60,302
2021 61,332 -30,048 49,884 70,408
2020 40,269 -32,459 29,250 6,800
2019 36,231 -25,221 15,227 32,338
2018 28,335 -24,889 6,741 3,795

ValuationEdit

DCF valutaionEdit

DCF valuation with USD
2022A 2023E 2024E 2025E 2026E 2027E Terminal Value
Free Cash Flow 47,955,749,720 37,096,789,333 41,414,172,250 45,969,731,197 51,026,401,629 56,639,305,808 815,303,277,185
Discount Factor 1.09 1.19 1.30 1.42 1.54 1.54
WACC 9.086%
Present Value 34,006,931,940 34,802,564,130 35,413,214,474 36,034,579,369 36,666,846,813 527,806,616,702

Made an assumption: perpetuity growth rate is 2%

Results of DCF valuation
Intrinsic Value 704,730,753,429
Shares Outstadning 5,800,000,000
Intrinsic Value per share 121,51
Current Share price 130.42
% difference -6.84%

[2] [3] [4]

Sensitive AnalysisEdit

Table. WACC & Perpetuity Growth
Perpetuity Growth
1.00% 1.50% 2.00% 2.50%
WACC 8.0% 121.720 129.223 137.976 148.321
8.5% 115.639 122.171 129.709 138.503
9.086% 109.469 115.090 121.505 128.893
9.5% 105.623 110.713 116.482 123.074
10% 101.450 105.995 111.108 116.903
Table. Sensitivity
WACC Fair Value % Change of WACC % Change of Fair Value Sensitivity
8.000% 134.310
8.500% 126.505 6.25% - 5.81% - 0.9297
9.086% 118.739 6.89% - 6.14% - 0.8905
9.500% 113.973 4.56% - 4.01% - 0.8810
10.000% 108.864 5.26% - 4.48% - 0.8517

Comparable Company AnalysisEdit

In the realm of tech competition, Alphabet Inc. leads through Google, but rivals like Yahoo and Microsoft Bing vie for a spot. Yahoo's $41 million market value and Microsoft Bing's $182,432.5 million showcase their efforts. Yet, Google dominates with a market value of $704,740.8 million, a testament to its digital supremacy.

Alphabet's impact goes beyond Google, encompassing innovative subsidiaries like Waymo in self-driving tech, Calico in biotech, and Wing in drone delivery. These ventures shape diverse industries and set the course for our technological future.

RisksEdit

Alphabet Inc.'s operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could harm its business, reputation, financial condition, and operating results, and affect the trading price of its Class A and Class C stock.

Risks Specific to the CompanyEdit

  1. Alphabet Inc. generates a significant portion of its revenues from advertising, and reduced spending by advertisers, a loss of partners, or new and existing technologies that block ads online and/or affect its ability to customize ads could harm its business.
  2. Alphabet Inc. faces intense competition. If Alphabet Inc. does not continue to innovate and provide products and services that are useful to users, customers, and other partners, Alphabet Inc. may not remain competitive, which could harm its business and operating results.
  3. Its ongoing investment in new businesses, products, services, and technologies is inherently risky, and could divert management attention and harm its financial condition and operating results.
  4. Its revenue growth rate could decline over time, and Alphabet Inc. anticipates downward pressure on its operating margin in the future.
  5. Its intellectual property rights are valuable, and any inability to protect them could reduce the value of its products, services, and brands as well as affect its ability to compete.
  6. Its business depends on strong brands, and failing to maintain and enhance its brands would hurt its ability to expand its base of users, advertisers, customers, content providers, and other partners.
  7. Alphabet Inc. faces a number of manufacturing and supply chain risks that could harm its financial condition, operating results, and prospects.
  8. Interruption to, interference with, or failure of its complex information technology and communications systems could hurt its ability to effectively provide its products and services, which could harm its reputation, financial condition, and operating results. In addition, problems with the design or implementation of its new global enterprise resource planning system could harm its business and operations.
  9. Its international operations expose us to additional risks that could harm its business, its financial condition, and operating results.

Risks Related to its IndustryEdit

  1. 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 its products and services developed for these interfaces, its business could be harmed.
  2. Data privacy and security concerns relating to its technology and its practices could damage its reputation, cause us to incur significant liability, and deter current and potential users or customers from using its products and services. Software bugs or defects, security breaches, and attacks on its systems could result in the improper disclosure and use of user data and interference with its users’ and customers’ ability to use its products and services, harming its business operations and reputation.
  3. Its ongoing investments in safety, security, and content review will likely continue to identify abuse of its platforms and misuse of user data.
  4. Problematic content on its platforms, including low-quality user-generated content, web spam, content farms, and other violations of its guidelines could affect the quality of its services, which could damage its reputation and deter its current and potential users from using its products and services.
  5. Its business depends on continued and unimpeded access to the Internet by us and its users. Internet access providers may be able to restrict, block, degrade, or charge for access to certain of its products and services, which could lead to additional expenses and the loss of users and advertisers.

Risks Related to Laws, Regulations, and PoliciesEdit

  1. Alphabet Inc. faces increased regulatory scrutiny as well as changes in regulatory conditions, laws, and policies governing a wide range of topics that may negatively affect its business.
  2. A variety of new and existing laws and/or interpretations could harm its business.
  3. Alphabet Inc. is subject to claims, suits, government investigations, other proceedings, and consent decrees that may harm its business, financial condition, and operating results.
  4. Alphabet Inc. may be subject to legal liability associated with providing online services or content.
  5. Privacy and data protection regulations are complex and rapidly evolving areas. Any failure or alleged failure to comply with these laws could harm its business, reputation, financial condition, and operating results.
  6. Alphabet Inc. faces, 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 its ability to use certain technologies in the future.

Risks Related to Ownership of its StockEdit

  1. Alphabet Inc. 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 its stock prices and could diminish its cash reserves.
  2. The concentration of its stock ownership limits its stockholders’ ability to influence corporate matters.
  3. Provisions in its charter documents and under Delaware law could discourage a takeover that stockholders may consider favourable.

General RisksEdit

  1. The continuing effects of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on its business, operations and its future financial performance.
  2. Its operating results may fluctuate, which makes its results difficult to predict and could cause its results to fall short of expectations.
  3. Acquisitions, joint ventures, investments, and divestitures could result in operating difficulties, dilution, and other consequences that may harm its business, financial condition, and operating results.
  4. If Alphabet Inc. was to lose the services of key personnel, Alphabet Inc. may not be able to execute its business strategy.
  5. Alphabet Inc. relies on highly skilled personnel and, if Alphabet Inc. is unable to retain or motivate key personnel, hire qualified personnel, or maintain its corporate culture, Alphabet Inc. may not be able to grow effectively.
  6. Alphabet Inc. is exposed to fluctuations in the fair values of its investments and, in some instances, its financial statements incorporate valuation methodologies that are subjective in nature resulting in fluctuations over time.
  7. Alphabet Inc. could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities.
  8. The trading price for its Class A stock and non-voting Class C stock may continue to be volatile.

ReferencesEdit

  1. https://finance.yahoo.com/quote/GOOG/financials?p=GOOG
  2. https://abc.xyz/
  3. https://finance.yahoo.com/news/digital-advertising-marketing-global-market-160800132.html#:~:text=The%20global%20market%20for%20Digital,the%20analysis%20period%202022%2D2030.
  4. https://www.precedenceresearch.com/autonomous-vehicle-market#:~:text=According%20to%20Precedence%20Research%2C%20the,35%25%20from%202023%20to%202032.
  5. https://www.grandviewresearch.com/industry-analysis/genetic-testing-market-report#:~:text=The%20global%20genetic%20testing%20market,22.0%25%20from%202023%20to%202030.
  6. https://www.statista.com/statistics/216573/worldwide-market-share-of-search-engines/#:~:text=Global%20market%20share%20of%20leading%20desktop%20search%20engines%202015%2D2023&text=As%20of%20March%202023%2C%20online,market%20share%20was%202.44%20percent.
  7. https://seekingalpha.com/article/4544631-googles-other-bet-a-deep-dive-into-waymo
  8. https://www.stock-analysis-on.net/NASDAQ/Company/Yahoo-Inc/DCF/Present-Value-of-FCFF
  9. https://www.alphaspread.com/security/nasdaq/msft/summary
  1. ↑
  2. ↑ https://finance.yahoo.com/quote/goog/key-statistics/
  3. ↑ https://valueinvesting.io/GOOGL/valuation/wacc
  4. ↑ https://www.wsj.com/market-data/quotes/GOOG/financials
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