Rating Action: Moody’s affirms Alphabet’s Aa2 rating; outlook is stableGlobal Credit Research – 10 Dec 2021New York, December 10, 2021 — Moody’s Investors Service (“Moody’s”) affirmed Alphabet Inc.’s (Alphabet) Aa2 issuer rating and senior unsecured ratings and its Prime-1 rating for commercial paper. The outlook is stable. Affirmations: ..Issuer: Alphabet Inc. …. Issuer Rating, Affirmed Aa2….Senior Unsecured Shelf, Affirmed (P)Aa2….Senior Unsecured Commercial Paper Affirmed P-1….Senior Unsecured Regular Bond/Debenture, Affirmed Aa2 Outlook Actions: ..Issuer: Alphabet Inc. ….Outlook, Remains Stable RATINGS RATIONALE Alphabet Inc.’s (“Alphabet”) credit profile reflects the company’s position as the world’s leading Internet search engine and digital advertising facilitator through its varied Google, Youtube and other properties, and its significant and growing positions in Cloud services, mobile operating systems, consumer hardware and autonomous driving technology, among others. One of the company’s biggest strengths is its ability to use data and AI to innovate, reinvent and sometimes disrupt, taking market share using organic and sometimes acquired technology and eventually monetizing its technology. Alphabet exhibits extremely strong cash flow capability and credit measures, consistent with, if not stronger than, its Aa2 debt ratings. With free cash flow generation of approximately $66 billion for the last twelve months (LTM) ended September 30, 2021, about $142 billion of cash, cash equivalents and marketable securities as compared to reported debt of $13.0 billion, and management’s conservative financial practices, Alphabet has broad financial flexibility to invest aggressively to acquire technology or internally develop new products and services. While Alphabet currently has very modest leverage (0.4x adjusted debt to EBITDA), the Aa2 rating factors in the possibility that, over time, debt could rise producing gross debt to EBITDA of up to about 1.0x (using Moody’s standard adjustments).Alphabet’s liquidity profile is impeccable. We expect management will continue to maintain very strong liquidity based on: (1) management’s conservative financial philosophy; (2) its emphasis on maintaining significant financial after-tax cash balances to ensure its ability to quickly address competitive challenges and take advantage of opportunities; and (3) its significant and steady free cash generation. Alphabet has a $10 billion commercial paper program which is backed by its sizeable daily cash, cash equivalents and marketable securities balances. The company also has two revolving credit facilities of $4 billion due 2022 and $6 billion due 2026 and both are currently undrawn. There were no outstanding borrowings under the company’s commercial paper program at September 30, 2021. The credit facility has same day borrowing availability, it has no material adverse change clauses after the facility closing date, and it has no financial covenants. Alphabet’s next debt maturity is its revolving credit facility due April 2022.The largest risk for the company has always been regulatory risks. As that risk has risen materially in recent years, it poses a constraint on Alphabet’s Aa2 rating until there is greater certainty around the company’s sustained business model and practices. The increased regulatory risk is evidenced by multiple antitrust lawsuits and regulatory investigations initiated against the company by the US Department of Justice (DOJ), many states’ attorneys general and countries outside the US. The company also faces many private antitrust legal challenges which will depend upon those government cases. The most significant risk stems from regulatory challenges to the company’s strong market positions and certain business practices. Of increasing concern is the broad and bipartisan shift in tone from US regulators and lawmakers regarding Big Tech/Media. Reflecting this trend, the DOJ and a number of states’ attorneys general filed an antitrust lawsuit against Alphabet. The government contends Google used anti-competitive tactics to maintain and extend monopolies in general search services, search advertising, and general search text advertising limiting publishers’ and advertisers’ ability to choose other platforms. This investigation comes on top of separate antitrust investigations launched by the Justice Department (DOJ) into Google and other tech companies and the House Judiciary Committee into Big Tech more broadly. Separately, in 2020, a number of state attorneys general filed an antitrust complaint relating to its advertising technology. Certain market participants have expressed concerns over safe harbors as it relates to issues like censorship over certain viewpoints and content related to hate speech, disinformation, etc. Currently there are a number of legislative proposals trying to reduce safe harbor protection, which could negatively affect the company. While there are no US federal government fines for civil monopolization violations, our most important fundamental concern is whether regulation or actions imposed on the company materially and permanently alter its business model such that its leading positions, business diversity and profitability are significantly constrained or reduced.Privacy regulation has taken center stage for companies more recently. The EU implemented a regulation in May 2018 called General Data Protection Regulation (GDPR), which regulates data protection and privacy for all individuals within the European Union and the European Economic Area. It also addresses the export of personal data outside the EU and European Economic Area (EEA) areas. At home, the California Consumer Privacy Act went into effect in 2020, protecting consumer privacy rights for residents of California. Though increasing regulation is a threat to existing and advancing data gathering business models, it also widens Alphabet’s competitive moat as some newer competitors will find navigating the regulatory waters to be challenging and costly. However, we believe that Alphabet’s proactive work surrounding Sustainability, Safety & Security, and Data Privacy is a mitigating factor. The company has accrued over $9 billion in fines by the European Commission (EC) related to various decisions finding that Google infringed European competition law. The company has appealed the fines.Alphabet’s ESG Credit Impact Score is Neutral-to-Low (CIS-2). There is no credit impact to date, with the potential risk from social risk factors over time are largely mitigated by extremely conservative financial policies and significant financial capacity and liquidity. Alphabet’s social risk is moderately negative as the company faces high risks related to multiple antitrust lawsuits and regulatory investigations, and moderate risks from potential legislative changes to third-party content liability protection and potential changes to data privacy law changes that could negatively impact its business model. These risks are moderated by demographic and societal trends as consumers continue to increase their consumption of online content which supports the company’s leading position as a provider of search, targeted display and video advertising. Alphabet’s exposure to governance considerations positions it strongly, with material credit benefits. It has conservative financial policies and world class risk management, including a very successful track record, ultra-strong credit metrics and liquidity. Though there is some risk given the founders’ effective control of the board of directors, the company’s strong track record and conservative financial policies mitigate this risk.The stable outlook reflects constraint of the ratings at Aa2 due to the present legal and regulatory pressures. Supporting the rating outlook is the significant financial flexibility within the Aa2 rating and expectations that Alphabet will continue to maintain its very strong market position in search and display advertising on both desktop and now all-important mobile devices. The stable outlook also incorporates our expectation that Alphabet will continue to maintain a very liquid and mildly levered balance sheet. The outlook will improve if the company is able to take steps to successfully address regulatory challenges without material changes to the company’s economic business model, and fund potential fines, if any, with internal sources of cash, without impacting credit metrics.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSOver the medium term an upgrade could occur if:** The company maintains its ultra conservative financial policies that are already consistent with a higher credit rating.** Management can navigate its legal and regulatory risks such that its business models and diversity are not impaired.The ratings could face downward pressure if:** There is deterioration in the company’s core business model that results in a material, sustained erosion in its very strong market positions, profitability or cash flow generation; or** Management adopts more aggressive financial policies that materially weaken its very strong liquidity position and credit metricsAlphabet is the holding company for Google and its other subsidiaries and “Other Bets” and investments. Google is the world’s leading Internet search engine, and it maintains an index of websites and other online content for users, advertisers, Google network members, and other content providers. For the LTM ended September 30, 2021, Alphabet generated about 81% of its revenue from advertising and makes money from an advertiser when users click on an ad or view a video or display ad. About 85% of Google’s advertising revenue is derived from its own websites (e.g. Google.com, YouTube.com), with the rest derived from thousands of third-party websites who want to place targeted advertisements on their websites.The principal methodology used in these ratings was Business and Consumer Services published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1287897. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. 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For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Neil Begley Senior Vice President Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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