Bullbear Buffett : A summary and discussion of Alphabet’s income statements.

Friday, 5 June 2026

A summary and discussion of Alphabet’s income statements.

A summary and discussion of Alphabet’s income statements, covering the five-year annual trends (2021–2025) and the latest five quarters (Q1 2025 – Q1 2026).

**Five-Year Annual Summary (2021–2025)**

Over the five-year period, Alphabet delivered consistently strong top-line growth, with revenue rising from $257.5 billion in 2021 to $403.0 billion in 2025, representing a compound annual growth rate of approximately 11.8%. The pace of revenue growth accelerated notably in the last two years, from 9.4% in 2023 to 13.9% in 2024 and 15.2% in 2025, reflecting robust demand for Google’s advertising, cloud, and subscription services, likely enhanced by AI-driven product innovations. Profitability improved even more dramatically: gross margin expanded from 56.9% to 59.7%, while EBITDA margin climbed from 35.3% to 38.2%. Net margin bottomed at 21.4% in 2022 due to investment cycles and unusual charges, then recovered to 28.6% in 2024 and reached 32.8% in 2025. However, the 2025 net income of $132.2 billion was significantly boosted by a $20.4 billion unusual gain (primarily mark-to-market investment gains or similar non-recurring items). Excluding this gain, normalized net income would be approximately $111.8 billion, still representing strong growth from 2024’s $100.1 billion. Operating expenses grew steadily, with research and development nearly doubling from $31.6 billion to $61.1 billion, reflecting Alphabet’s commitment to long-term innovation. Share buybacks reduced diluted shares outstanding by roughly 10% over five years, helping drive diluted EPS from $5.61 in 2021 to $10.81 in 2025, a 93% increase.

**Latest Five-Quarter Summary (Q1 2025 – Q1 2026)**

The quarterly data shows typical seasonality, with revenue rising from $90.0 billion in Q1 2025 to a peak of $114.0 billion in Q4 2025 (up 11.2% sequentially), then easing to $110.1 billion in Q1 2026 (a 3.4% decline, consistent with post-holiday slowdown). Year-over-year, Q1 2026 revenue grew 22.3% compared to Q1 2025, indicating healthy underlying momentum. Gross margin remained stable at approximately 59.7% throughout the five quarters. Underlying EBITDA improved steadily from $34.8 billion in Q1 2025 to $42.1 billion in Q4 2025 and further to $46.5 billion in Q1 2026, suggesting operational efficiency gains even as revenue dipped sequentially. The most striking feature is Q1 2026’s net income of $62.6 billion, more than double the prior quarter’s $34.5 billion, driven by an enormous $36.1 billion unusual gain (negative unusual expense). Excluding this one-time item, normalized pretax income in Q1 2026 would be roughly $41.3 billion, close to Q4 2025’s core level, but still slightly lower. Interest expense spiked in Q1 2026 to $533 million from just $34 million a year earlier, warranting attention. Diluted EPS followed net income trends: $2.81 in Q1 2025, dipping to $2.31 in Q2 2025 (likely due to a discrete tax or expense item), recovering to $2.87 in Q3 2025 and $2.82 in Q4 2025, then surging to $5.11 in Q1 2026 on the back of the unusual gain.

**Discussion & Implications**

Alphabet’s core business remains exceptionally healthy, characterized by accelerating revenue growth, expanding margins, and disciplined cost control outside of R&D. The annual data shows a clear upward trajectory, though investors should normalize for large, non-recurring gains that inflate net income in 2025 and Q1 2026. The quarterly trend reveals a slight sequential revenue decline in Q1 2026, which, after adjusting for the unusual gain, also points to a modest dip in core earnings. This could signal increasing competitive pressure (e.g., from AI search rivals or cloud pricing) or a natural moderation after a strong 2025. Nevertheless, the steady EBITDA growth suggests underlying operational resilience. Rising interest expense and ongoing antitrust risks are factors to monitor. Overall, Alphabet demonstrates strong financial discipline and scalable profitability, but forward-looking assessments should focus on normalized earnings excluding one-off investment gains.

No comments:

My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

Bullbear Buffett

Friday, 5 June 2026

A summary and discussion of Alphabet’s income statements.

No comments:

All equity security investments present a risk of loss of capital

The Ultimate Hold-versus-Sell Test

Some thoughts on Analysing Stocks (KISS)

Benjamin Graham

Sell the losers, let the winners run.

Investment Style

Warren Buffett

Political and Economic News

Interesting Blogs