In Financial Statements 101, we built a balance sheet and income statement with a simple example — a small company with a building, a bank loan, and a lemonade stand’s worth of revenue. The rule was simple: Assets = Liabilities + Equity, and Revenue → Gross Profit → Operating Income → Net Income.
This time, we’re working from a real filing. We’re opening the real books of Alphabet — Google’s parent company — using its actual 10-Q, the quarterly report every public company is legally required to file with the SEC.
Why Alphabet? Across fiscal 2025, Alphabet earned $132.2 billion in net income — one of the highest annual profits any company has ever posted. By its most recent trailing twelve months, that figure has climbed to roughly $160.2 billion, edging out Nvidia’s $159.6 billion over the same stretch — making Alphabet, as of this writing, the most profitable public company on the planet, by a margin of well under 1%. That ranking shifts quarter to quarter. What doesn’t shift is that the numbers behind it are built out of the exact same two statements — and the exact same rules — as our simple example.
A note on the numbers: the balance sheet below is Alphabet’s actual position as of March 31, 2026, and the income statement covers the three months ended March 31, 2026 (Q1 2026) — both pulled directly from Alphabet’s 10-Q filing, the most recent one available. Nothing here is estimated or simplified. It’s also a good reminder of the “photo vs. video” idea from Part 1: this income statement is a shorter video than the full-year one — just one quarter, not twelve months.
The balance sheet: what $704 billion actually is
Remember the rule from Part 1: Assets = Liabilities + Equity. Everything a company owns was paid for either by borrowing it or by the owners funding it. That rule doesn’t change no matter how big the company gets — but at Alphabet’s scale, “everything a company owns” stops meaning just a building and a cash register. It spans cash sitting in a bank account, servers running in a data center, and stakes in companies you’ve probably never heard of. Some of that could be turned into cash by tomorrow. Some of it, realistically, never could be.
Before the numbers, it helps to split Alphabet’s assets into two big buckets: tangible and intangible.
Tangible assets are physical — things you could actually touch, or convert to cash quickly: cash, receivables, servers, buildings.
Intangible assets are real value, but nothing you could touch or quickly sell: stakes in other companies, acquisition premiums, lease rights, patents.
Of Alphabet’s $704 billion in assets, roughly $495 billion (70%) is tangible and $209 billion (30%) is intangible. That split matters more than the total does — it’s the difference between money a company could actually use in a pinch, and value that’s real but locked up.
With that in mind, here’s the rule holding at real scale: $703.9B in assets = $225.2B in liabilities + $478.7B in equity. A company with hundreds of thousands of employees and hundreds of billions in cash still has to balance the same way a lemonade stand does — there’s just a lot more on both sides of the equation.
What’s actually in the $704 billion of assets — this is the real, complete list from the filing, not a simplified version:
| Asset | Amount | What it is |
|---|---|---|
| Cash and cash equivalents | $38.1B | Actual cash — bank deposits and instruments that convert to cash almost instantly. Tangible, fully liquid. |
| Marketable securities | $88.8B | Safe, publicly-traded investments like short-term bonds — not cash yet, but sellable within days. Tangible, highly liquid. |
| Accounts receivable, net | $63.0B | Money owed by advertisers and cloud customers who’ve been billed but haven’t paid yet — already earned, usually collected within weeks. |
| Other current assets | $23.9B | Smaller short-term items, like prepaid expenses — due within the year. |
| Non-marketable securities | $106.9B | Stakes in companies that aren’t publicly traded, valued at what Alphabet estimates they’re worth. Intangible in practice: there’s no quick market to sell these into. |
| Deferred income taxes | $2.0B | A future tax benefit — money Alphabet expects to save on taxes later because of how past transactions were structured. Not cash you can spend. |
| Property and equipment, net | $281.0B | The single biggest line on the entire balance sheet — data centers, servers, custom AI chips, land, and buildings. Tangible, but not liquid: you can’t sell a data center by next week. |
| Operating lease assets | $15.5B | The right to use buildings and equipment Alphabet leases rather than owns. A lease is valuable enough to count as an asset, even without owning the underlying property. |
| Goodwill | $57.8B | The premium paid in past acquisitions — buying a company for more than its physical assets were worth. Purely intangible; not something Alphabet could sell. |
| Intangible assets, net | $9.4B | Patents, technology, and other non-physical assets acquired in past deals — a separate line from goodwill. |
| Other non-current assets | $17.5B | Smaller long-term items that don’t fit neatly elsewhere. |
Does $704 billion in assets mean Alphabet is safe from bankruptcy? Not automatically — it depends on which assets. Bankruptcy isn’t about how large your total assets are; it’s about whether you can pay your bills when they’re actually due. $281 billion of that $704 billion is property and equipment — useful, valuable, and completely useless for paying an unexpected bill next month. The part that actually protects a company in a crunch is the liquid part: mostly the $126.8 billion in cash and securities, plus the $63 billion owed to it that usually arrives within weeks. That’s a little over $189 billion that could realistically become cash fast — still enormous, but a very different number from $704 billion.
What else could this money be used for? Every dollar sitting in one asset is a dollar not being used somewhere else — that’s the real story a balance sheet tells. Alphabet could take its $126.8 billion in cash and pay off its entire $77.5 billion in long-term debt with room to spare, buy back its own stock, pay shareholders a dividend, or acquire another company outright. Instead, that cash is sitting there, earning interest while it waits to be deployed. A balance sheet isn’t just “what a company has” — it’s a record of the choices it’s made about where to park value instead of somewhere else.
What’s in the $225 billion of liabilities — same level of detail:
| Liability | Amount | What it is |
|---|---|---|
| Accounts payable | $16.9B | Bills Alphabet has received but hasn’t paid yet — the mirror image of accounts receivable, on the other company’s books. Due soon; not optional. |
| Accrued compensation and benefits | $13.9B | Salaries, bonuses, and benefits employees have already earned but haven’t been paid out yet. |
| Accrued expenses and other current liabilities | $63.0B | Other short-term costs that have already happened but haven’t been paid out yet. |
| Accrued revenue share | $10.2B | Money owed to partners — like YouTube creators or app developers — for their cut of revenue Alphabet has already collected on their behalf. |
| Deferred revenue | $7.2B | Money already received for services that haven’t been fully delivered yet. |
| Long-term debt | $77.5B | Money borrowed, due back in more than a year — the one liability with real breathing room, though it still has to be repaid on schedule no matter how business is going. |
| Income taxes payable, non-current | $12.5B | Taxes owed, but not due within the next year. |
| Operating lease liabilities | $13.0B | The obligation to keep paying rent on leased buildings and equipment — the mirror image of the operating lease asset above. |
| Other long-term liabilities | $11.0B | Smaller long-term obligations that don’t fit neatly elsewhere. |
The limits of a liability. Not every liability carries the same risk. A bill due in 30 days has to be paid regardless of whether business is good or bad that month — miss it, and it’s a real problem. Debt due in 10 years gives a company room to breathe. But every liability shares one trait that makes it fundamentally different from equity: it has to be paid back on a schedule, no matter what. A shareholder only gets paid if the company chooses to pay them. A lender gets paid whether the company had a great quarter or a terrible one — that’s the deal. That’s exactly why $77.5 billion in debt matters more than its size suggests, even sitting next to $478.7 billion in equity that’s six times as large: debt is the piece that can’t just be skipped.
And what’s left over — $478.7 billion in equity — is the part that belongs to shareholders:
| Equity | Amount | What it is |
|---|---|---|
| Common stock & additional paid-in capital | $96.9B | Money originally raised by selling shares to investors, plus the value of stock given to employees as compensation. |
| Accumulated other comprehensive income (loss) | −$2.2B | Unrealized gains and losses — mostly currency swings — that haven’t hit net income yet. |
| Retained earnings | $384.0B | Every dollar of profit Alphabet has ever kept, quarter after quarter, instead of paying it out. |
It’s the same math as the lemonade stand, just with twelve more zeroes.
Now try it yourself — these are Alphabet’s real numbers, turned into sliders:
The income statement: turning $109.9 billion into $62.6 billion — in one quarter
Here’s the same waterfall from Part 1 — Revenue down to Net Income — run on Alphabet’s real Q1 2026 numbers:
Walking down it line by line — and this is a good place to see how a real filing differs from the simplified version in Part 1:
- Revenue: $109.9B. Mostly advertising (Search, YouTube), plus a fast-growing slice from Google Cloud. For one quarter.
- − Cost of revenues: $41.3B. What it directly costs to deliver that revenue — data center operating costs, content acquisition costs for YouTube, hardware costs. Notice something: Alphabet’s real income statement doesn’t actually print a line called “Gross Profit.” You have to compute it yourself — Revenue minus Cost of revenues, = $68.6B — a 62.4% margin. Not every real filing hands you the exact checkpoints from Part 1; sometimes you build them yourself from what’s given.
- − R&D: $17.0B. Research and development — AI models, Search improvements, everything in Google’s various research labs.
- − Sales & marketing: $7.6B, and − G&A: $4.3B separately. Part 1 lumped these into one “Operating Expenses” line for simplicity; Alphabet’s real statement splits them, because a beginner just needs the concept, but an analyst wants to see exactly where the money went.
- = Income from operations: $39.7B — profit from the actual business of running Google, before anything else. This is Part 1’s “Operating Income,” just under Alphabet’s own name for it.
- + Other income (expense), net: $37.7B. This is the line that doesn’t show up in the simplified version from Part 1, and it’s worth pausing on — it’s almost as large as operating income itself, in a single quarter. It’s not revenue from selling ads; it’s interest earned on Alphabet’s cash pile, plus gains or losses on its investment holdings, including those non-marketable securities from the balance sheet above. This number can swing enormously from quarter to quarter depending on what happens to the value of Alphabet’s investments — it has nothing to do with how well Search or YouTube performed that quarter.
- − Provision for income taxes: $14.8B. = Net income: $62.6B.
That last line — $62.6 billion, in a single quarter — is roughly half of what Alphabet earned across all of fiscal 2025. A large chunk of it came from the “Other income” line, not from running the core business — a good reminder that a single bottom-line number can hide very different stories about where the profit actually came from, and that one unusually good (or bad) quarter for investment gains can swing the whole picture.
Putting it together
| Statement | What the real numbers show |
|---|---|
| Assets ($703.9B) | Mostly cash, investments (public and private), and a massive, still-growing pile of AI infrastructure |
| Liabilities ($225.2B) | Growing, but still small relative to equity — Alphabet still funds itself mostly with its own money |
| Equity ($478.7B) | What’s left over, and it’s larger than the market cap of all but a handful of companies on Earth |
| Revenue → Net Income ($109.9B → $62.6B, one quarter) | More than half of revenue survived all the way to net income this quarter — helped substantially by investment gains, not just the core business |
None of this required new rules — every number above still obeys Assets = Liabilities + Equity and the same Revenue-to-Net-Income waterfall from Part 1. What changed is scale, the fact that a real filing has more line items than a lemonade stand does, and that real companies don’t always print the exact same checkpoints — sometimes you compute them yourself. Once you can read the simple version, you can read this one; it’s just longer, and occasionally you have to do one extra subtraction yourself.
Up next: now that we have a real company’s real numbers on the table, we’ll use them to answer the question these two statements can’t answer on their own — is Alphabet’s stock actually a good buy? That’s what valuation metrics like P/E and PEG are for, and we’ll calculate every one of them using the exact numbers above.