Analysis of Debt
Total Debt (Carrying Amount)
Alphabet Inc., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
Total debt and finance lease liabilities, as measured by the carrying amount, exhibited a generally stable pattern from 2021 to 2023, followed by significant increases in 2024 and 2025. A closer examination of the components reveals the drivers behind these changes.
- Short-Term Debt
- Short-term debt demonstrated considerable volatility. It increased substantially from 2021 to 2023, peaking at US$1,363 million, before declining in 2025 to US$1,996 million. The large increase in 2023 warrants further investigation to understand the underlying reasons for this surge in short-term borrowing.
- Long-Term Debt
- Long-term debt, excluding the current portion, generally decreased from 2021 to 2023, moving from US$14,817 million to US$13,253 million. However, a substantial increase was observed in 2025, reaching US$46,547 million. This represents a significant shift in the company’s long-term financing strategy and could be attributable to new debt issuances or acquisitions.
- Finance Lease Liabilities
- Finance lease liabilities were not reported for 2021, 2022, and 2023. They began to appear in 2024, with US$235 million in current liabilities and US$1,442 million in long-term liabilities. Both components increased in 2025, reaching US$441 million and US$2,059 million respectively. The introduction of these liabilities in 2024 suggests a change in the company’s accounting treatment or an increase in the utilization of finance leases.
The overall trend in total debt and finance lease liabilities indicates a period of relative stability followed by a substantial increase in borrowing in 2024 and 2025. The primary driver of this increase appears to be a significant rise in long-term debt, coupled with the introduction and subsequent growth of finance lease liabilities. The volatility in short-term debt also contributes to the overall debt profile. Further analysis is recommended to understand the specific purposes of these borrowings and their potential impact on the company’s financial health.
Total Debt (Fair Value)
| Dec 31, 2025 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Commercial paper | —) |
| Outstanding notes, including current portion | 45,600) |
| Other debt | —) |
| Finance lease liabilities | 2,500) |
| Total debt and finance lease liabilities (fair value) | 48,100) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 0.94 |
Based on: 10-K (reporting date: 2025-12-31).
Weighted-average Interest Rate on Debt
Weighted-average effective interest rate on debt and finance lease liabilities: 4.53%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 2.23% | 2,000) | 45) | |
| 2.33% | 9,000) | 210) | |
| 5.79% | 22,500) | 1,303) | |
| 4.51% | 15,585) | 703) | |
| 3.10% | 2,500) | 78) | |
| Total | 51,585) | 2,337) | |
| 4.53% | |||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × 2,337 ÷ 51,585 = 4.53%
Interest Costs Incurred
Alphabet Inc., interest costs incurred
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
Interest expense exhibited a fluctuating pattern over the five-year period. Initial increases were followed by decreases, culminating in a substantial rise in the final year. Interest capitalized also demonstrated variability, with an overall upward trend mirroring the increase in total interest costs towards the end of the period. Consequently, interest costs incurred, representing the sum of interest expense and capitalized interest, followed a similar fluctuating trajectory.
- Overall Trend in Interest Costs
- Interest costs incurred initially decreased from US$509 million in 2021 to US$462 million in 2024, representing a reduction of approximately 9.2%. However, a significant increase was observed in 2025, with interest costs incurred rising to US$1,183 million. This represents an increase of over 156% from 2024.
- Interest Expense Analysis
- Interest expense increased from US$346 million in 2021 to US$357 million in 2022, a modest increase of approximately 3.2%. A subsequent decrease was noted in 2023, falling to US$308 million. This downward trend continued into 2024, with interest expense reaching US$268 million. The final year, 2025, saw a substantial increase in interest expense to US$736 million.
- Interest Capitalization Analysis
- Interest capitalization decreased from US$163 million in 2021 to US$128 million in 2022, a decline of approximately 21.5%. It then increased to US$181 million in 2023 and further to US$194 million in 2024. Similar to interest expense, interest capitalized experienced a significant increase in 2025, reaching US$447 million.
- Relationship Between Components
- The increase in interest costs incurred in 2025 appears to be driven by increases in both interest expense and interest capitalized. The magnitude of the increase in interest capitalized in 2025 was proportionally larger than the increase in interest expense, suggesting a potential shift in the nature of projects or investments where interest is being capitalized.
The substantial increase in interest costs incurred in 2025 warrants further investigation to determine the underlying causes, such as increased borrowing, changes in interest rates, or a significant rise in projects qualifying for interest capitalization.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2025 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 159,562 ÷ 736 = 216.80
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 159,562 ÷ 1,183 = 134.88
The interest coverage ratios demonstrate fluctuations over the five-year period. Both the standard interest coverage ratio and the adjusted interest coverage ratio exhibit variability, though they generally remain at healthy levels. A notable pattern is the divergence between the two ratios, stemming from the inclusion of capitalized interest in the adjusted calculation.
- Interest Coverage Ratio (without capitalized interest)
- This ratio begins at 263.24 in 2021, decreases to 200.80 in 2022, then recovers significantly to 279.30 in 2023. Further improvement is observed in 2024, reaching 448.07, before declining to 216.80 in 2025. The substantial increase in 2024 suggests a considerable improvement in the ability to cover interest expenses with earnings before interest and taxes. The subsequent decrease in 2025 warrants further investigation.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted ratio starts at 178.94 in 2021 and declines to 147.80 in 2022, mirroring the trend of the unadjusted ratio. A recovery to 175.92 is seen in 2023, followed by a more pronounced increase to 259.92 in 2024. However, this is followed by a substantial decrease to 134.88 in 2025. The inclusion of capitalized interest consistently results in a lower ratio compared to the standard calculation, highlighting the impact of this accounting treatment on the assessment of interest coverage.
- Comparative Analysis
- The difference between the two ratios widens in years with higher capitalized interest. The largest gap is observed in 2025, where the adjusted ratio is significantly lower than the unadjusted ratio. This indicates that capitalized interest plays a more substantial role in reducing reported earnings available to cover interest expense during that period. Despite fluctuations, both ratios consistently remain above 1.0 throughout the period, suggesting the entity maintains a sufficient capacity to meet its interest obligations.
The observed declines in both ratios in 2025, particularly the adjusted ratio, represent a potential area of concern and merit further scrutiny. Understanding the drivers behind these decreases, such as changes in profitability or interest expense, is crucial for a comprehensive assessment of the entity’s financial health.