Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Alphabet Inc., profitability ratios
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).
The profitability metrics demonstrate a generally positive trend over the five-year period. While some ratios experienced initial declines, subsequent years show consistent improvement, culminating in strong performance by the end of the observed timeframe. This suggests successful implementation of strategies to enhance operational efficiency and overall financial health.
- Gross Profit Margin
- The gross profit margin exhibited a slight decrease from 56.94% in 2021 to 55.38% in 2022. However, it then steadily increased, reaching 59.65% in 2025. This indicates improving cost management relative to revenue or a shift towards higher-margin products or services.
- Operating Profit Margin
- A more pronounced decline was observed in the operating profit margin, falling from 30.55% in 2021 to 26.46% in 2022. The margin then recovered, rising to 32.11% in 2024 and remaining relatively stable at 32.03% in 2025. This suggests initial pressures on operating expenses were addressed, leading to improved operational profitability.
- Net Profit Margin
- The net profit margin mirrored the trend of the operating profit margin, decreasing significantly from 29.51% in 2021 to 21.20% in 2022. A consistent upward trajectory followed, with the margin reaching 32.81% in 2025. This indicates that improvements in operational efficiency and potentially favorable changes in non-operating items contributed to stronger bottom-line performance.
- Return on Equity (ROE)
- Return on equity followed a similar pattern to the profit margins. It decreased from 30.22% in 2021 to 23.41% in 2022 before steadily increasing to 31.83% in 2025. This suggests improved profitability relative to shareholder equity.
- Return on Assets (ROA)
- The return on assets also experienced a decline from 21.16% in 2021 to 16.42% in 2022. Subsequent years showed improvement, with the ROA reaching 22.24% in 2024 and remaining at 22.20% in 2025. This indicates enhanced profitability relative to total assets, suggesting more efficient asset utilization.
Overall, the observed trends suggest a period of initial challenges followed by a successful turnaround and sustained improvement in profitability across all measured ratios. The consistency of the upward trends in the later years indicates a strengthening financial position.
Return on Sales
Return on Investment
Gross Profit Margin
Alphabet Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 240,301) | 203,712) | 174,062) | 156,633) | 146,698) | |
| Revenues | 402,836) | 350,018) | 307,394) | 282,836) | 257,637) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 59.65% | 58.20% | 56.63% | 55.38% | 56.94% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Comcast Corp. | 71.75% | 70.08% | 69.76% | 68.53% | 66.96% | |
| Meta Platforms Inc. | 82.00% | 81.67% | 80.76% | 78.35% | 80.79% | |
| Netflix Inc. | 48.49% | 46.06% | 41.54% | 39.37% | 41.64% | |
| Trade Desk Inc. | — | 80.69% | 81.21% | 82.18% | 81.48% | |
| Walt Disney Co. | 37.76% | 35.75% | 33.41% | 34.24% | 33.06% | |
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).
1 2025 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenues
= 100 × 240,301 ÷ 402,836 = 59.65%
2 Click competitor name to see calculations.
The gross profit margin exhibited an overall upward trend between 2021 and 2025. While fluctuations occurred during the period, the metric demonstrated consistent improvement over the five-year timeframe.
- Gross Profit Margin Trend
- In 2021, the gross profit margin stood at 56.94%. A slight decrease was observed in 2022, with the margin declining to 55.38%. However, the margin recovered in 2023, reaching 56.63%, and continued to increase in subsequent years. By 2024, the gross profit margin had risen to 58.20%, and further increased to 59.65% in 2025.
The growth in gross profit margin appears to be correlated with revenue increases. Revenues consistently rose throughout the period, from US$257,637 million in 2021 to US$402,836 million in 2025. Simultaneously, gross profit also increased, moving from US$146,698 million in 2021 to US$240,301 million in 2025. This suggests an increasing ability to control the cost of goods sold as revenue scales.
- Gross Profit and Revenue Relationship
- The consistent growth in both gross profit and revenues indicates a strong operational performance. The increasing margin suggests that the company is becoming more efficient in its production or service delivery processes, or is benefiting from favorable pricing dynamics. The largest absolute increase in gross profit margin occurred between 2024 and 2025, coinciding with the largest absolute increase in revenue during the same period.
The observed trend in gross profit margin is positive, indicating improving profitability from core business operations. Continued monitoring of this metric, alongside cost of goods sold and revenue trends, is recommended to assess the sustainability of this performance.
Operating Profit Margin
Alphabet Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Income from operations | 129,039) | 112,390) | 84,293) | 74,842) | 78,714) | |
| Revenues | 402,836) | 350,018) | 307,394) | 282,836) | 257,637) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 32.03% | 32.11% | 27.42% | 26.46% | 30.55% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Comcast Corp. | 16.71% | 18.83% | 19.18% | 11.56% | 17.89% | |
| Meta Platforms Inc. | 41.44% | 42.18% | 34.66% | 24.82% | 39.65% | |
| Netflix Inc. | 29.49% | 26.71% | 20.62% | 17.82% | 20.86% | |
| Trade Desk Inc. | — | 17.47% | 10.30% | 7.20% | 10.43% | |
| Walt Disney Co. | 13.78% | 9.11% | 5.74% | 7.90% | 4.46% | |
| Operating Profit Margin, Sector | ||||||
| Media & Entertainment | — | 29.08% | 24.20% | 20.43% | 26.36% | |
| Operating Profit Margin, Industry | ||||||
| Communication Services | — | 26.13% | 22.20% | 16.69% | 22.44% | |
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).
1 2025 Calculation
Operating profit margin = 100 × Income from operations ÷ Revenues
= 100 × 129,039 ÷ 402,836 = 32.03%
2 Click competitor name to see calculations.
The operating profit margin exhibited fluctuations over the five-year period. Initial observations reveal a decline followed by a recovery and subsequent stabilization.
- Operating Profit Margin Trend
- In 2022, the operating profit margin decreased to 26.46% from 30.55% in 2021. This represents a contraction in profitability relative to revenue. A subsequent increase was observed in 2023, with the margin reaching 27.42%. The most significant improvement occurred between 2023 and 2024, where the operating profit margin rose substantially to 32.11%. This upward trajectory continued modestly into 2025, with a margin of 32.03%.
The increase in income from operations, coupled with revenue growth, drove the improvement in the operating profit margin from 2022 onwards. While revenues consistently increased year-over-year, the rate of increase in income from operations exceeded that of revenues in 2024, contributing to the largest single-year increase in the operating profit margin. The stabilization of the operating profit margin in 2025 suggests a potential plateau in the rate of profitability improvement, despite continued revenue expansion.
- Relationship to Revenue Growth
- Revenues increased consistently throughout the period, moving from US$257,637 million in 2021 to US$402,836 million in 2025. The operating profit margin’s performance is directly linked to this revenue growth, but also to the company’s ability to control operating costs and improve operational efficiency. The margin’s peak in 2024 indicates a period of strong operational performance alongside revenue gains.
Overall, the operating profit margin demonstrates a positive trend from 2022 to 2025, indicating improved profitability. The stabilization in 2025 warrants further investigation to determine if this represents a new normal or a temporary pause in the upward trend.
Net Profit Margin
Alphabet Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 132,170) | 100,118) | 73,795) | 59,972) | 76,033) | |
| Revenues | 402,836) | 350,018) | 307,394) | 282,836) | 257,637) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 32.81% | 28.60% | 24.01% | 21.20% | 29.51% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Comcast Corp. | 16.17% | 13.09% | 12.66% | 4.42% | 12.17% | |
| Meta Platforms Inc. | 30.08% | 37.91% | 28.98% | 19.90% | 33.38% | |
| Netflix Inc. | 24.30% | 22.34% | 16.04% | 14.21% | 17.23% | |
| Trade Desk Inc. | — | 16.08% | 9.19% | 3.38% | 11.51% | |
| Walt Disney Co. | 13.14% | 5.44% | 2.65% | 3.80% | 2.96% | |
| Net Profit Margin, Sector | ||||||
| Media & Entertainment | — | 25.00% | 19.79% | 15.11% | 23.18% | |
| Net Profit Margin, Industry | ||||||
| Communication Services | — | 20.96% | 16.67% | 11.45% | 18.71% | |
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).
1 2025 Calculation
Net profit margin = 100 × Net income ÷ Revenues
= 100 × 132,170 ÷ 402,836 = 32.81%
2 Click competitor name to see calculations.
The net profit margin exhibited a fluctuating pattern over the five-year period. Initial values decreased before demonstrating a consistent upward trajectory.
- Net Profit Margin Trend
- In 2021, the net profit margin stood at 29.51%. A significant decline was observed in 2022, with the margin decreasing to 21.20%. This represents the lowest value within the observed timeframe. Subsequently, the margin experienced a recovery in 2023, rising to 24.01%. The upward trend continued into 2024, reaching 28.60%, and further accelerated in 2025, culminating in a margin of 32.81%.
The observed decrease in net profit margin between 2021 and 2022 coincided with an increase in revenues, suggesting potential increases in operating costs or other expenses that outpaced revenue growth. The subsequent recovery and sustained growth in the net profit margin from 2023 through 2025 indicate improved cost management, increased operational efficiency, or a shift in revenue mix towards higher-margin products or services. The margin’s peak in 2025 suggests a strengthening of the company’s profitability.
- Relationship to Net Income and Revenues
- The net profit margin’s movements correlate with changes in both net income and revenues. While revenues consistently increased throughout the period, net income experienced a decrease from 2021 to 2022, contributing to the margin decline. The subsequent increases in net income, particularly the substantial growth from 2024 to 2025, drove the observed improvements in the net profit margin.
Overall, the net profit margin demonstrates a positive trend over the latter portion of the analyzed period, indicating improving profitability despite consistent revenue growth. The initial dip in 2022 warrants further investigation to understand the underlying factors contributing to the reduced margin.
Return on Equity (ROE)
Alphabet Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 132,170) | 100,118) | 73,795) | 59,972) | 76,033) | |
| Stockholders’ equity | 415,265) | 325,084) | 283,379) | 256,144) | 251,635) | |
| Profitability Ratio | ||||||
| ROE1 | 31.83% | 30.80% | 26.04% | 23.41% | 30.22% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Comcast Corp. | 20.64% | 18.92% | 18.61% | 6.63% | 14.73% | |
| Meta Platforms Inc. | 27.83% | 34.14% | 25.53% | 18.45% | 31.53% | |
| Netflix Inc. | 41.26% | 35.21% | 26.27% | 21.62% | 32.28% | |
| Trade Desk Inc. | — | 13.33% | 8.27% | 2.52% | 9.02% | |
| Walt Disney Co. | 11.29% | 4.94% | 2.37% | 3.31% | 2.25% | |
| ROE, Sector | ||||||
| Media & Entertainment | — | 26.71% | 21.24% | 16.57% | 23.65% | |
| ROE, Industry | ||||||
| Communication Services | — | 23.56% | 18.91% | 13.30% | 20.32% | |
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).
1 2025 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 132,170 ÷ 415,265 = 31.83%
2 Click competitor name to see calculations.
The analysis reveals a fluctuating, yet generally positive, trend in Return on Equity (ROE) over the five-year period. Net income and stockholders’ equity both demonstrate growth, contributing to the observed ROE performance.
- Net Income
- Net income experienced a decrease from US$76,033 million in 2021 to US$59,972 million in 2022, representing a significant decline. However, it subsequently recovered, reaching US$73,795 million in 2023 and continuing to increase substantially to US$100,118 million in 2024 and US$132,170 million in 2025. This indicates a strong recovery and accelerating growth in profitability in the later years of the period.
- Stockholders’ Equity
- Stockholders’ equity exhibited consistent growth throughout the period. It increased from US$251,635 million in 2021 to US$256,144 million in 2022, US$283,379 million in 2023, US$325,084 million in 2024, and further to US$415,265 million in 2025. This steady expansion suggests increasing investment in the company and retained earnings.
- Return on Equity (ROE)
- ROE mirrored the trend in net income, initially decreasing from 30.22% in 2021 to 23.41% in 2022. It then rose to 26.04% in 2023, followed by further increases to 30.80% in 2024 and 31.83% in 2025. The ROE values in 2024 and 2025 are comparable to the 2021 level, suggesting a return to prior profitability levels after the dip in 2022. The increasing ROE alongside growing equity suggests efficient utilization of shareholder investments to generate profits.
In summary, while a temporary setback occurred in 2022, the overall trend indicates improving profitability and efficient capital utilization as evidenced by the increasing ROE. The substantial growth in both net income and stockholders’ equity in the latter part of the period contributes to this positive outlook.
Return on Assets (ROA)
Alphabet Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 132,170) | 100,118) | 73,795) | 59,972) | 76,033) | |
| Total assets | 595,281) | 450,256) | 402,392) | 365,264) | 359,268) | |
| Profitability Ratio | ||||||
| ROA1 | 22.20% | 22.24% | 18.34% | 16.42% | 21.16% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Comcast Corp. | 7.34% | 6.08% | 5.81% | 2.09% | 5.13% | |
| Meta Platforms Inc. | 16.52% | 22.59% | 17.03% | 12.49% | 23.72% | |
| Netflix Inc. | 19.75% | 16.24% | 11.10% | 9.24% | 11.48% | |
| Trade Desk Inc. | — | 6.43% | 3.66% | 1.22% | 3.85% | |
| Walt Disney Co. | 6.28% | 2.53% | 1.15% | 1.54% | 0.98% | |
| ROA, Sector | ||||||
| Media & Entertainment | — | 15.44% | 11.78% | 9.04% | 12.99% | |
| ROA, Industry | ||||||
| Communication Services | — | 10.40% | 7.93% | 5.42% | 8.36% | |
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).
1 2025 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × 132,170 ÷ 595,281 = 22.20%
2 Click competitor name to see calculations.
The Return on Assets (ROA) exhibited fluctuating performance over the five-year period. Initial observations indicate a decline followed by a recovery and subsequent stabilization.
- Overall Trend
- The ROA began at 21.16% in 2021, decreased to 16.42% in 2022, and then demonstrated a recovery, reaching 18.34% in 2023. Further improvement was observed in 2024, with the ROA climbing to 22.24%. The ratio remained relatively stable in 2025 at 22.20%.
- Year-over-Year Changes
- A significant decrease in ROA occurred between 2021 and 2022, representing a 4.74 percentage point reduction. This was followed by a 1.92 percentage point increase from 2022 to 2023. The most substantial year-over-year increase was observed between 2023 and 2024, with a 3.9 percentage point improvement. The change from 2024 to 2025 was minimal, showing a decrease of only 0.04 percentage points.
- Relationship to Net Income and Total Assets
- The decrease in ROA from 2021 to 2022 coincided with a decrease in net income, while total assets remained relatively consistent. The subsequent increases in ROA from 2022 to 2024 were driven by a combination of increasing net income and increasing total assets, with net income growth outpacing asset growth. The stabilization in 2025 suggests a balance between net income and asset expansion.
In summary, the ROA demonstrates a pattern of initial decline, followed by a period of strong recovery and stabilization. The ratio’s performance appears closely linked to the growth of net income relative to the expansion of total assets.