Net Income Per Share

12 Months Ended

Dec. 31, 2019

We compute net income per share of Class A and Class B common stock and Class C capital stock using the two-class method. Basic net income per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of restricted stock units and other contingently issuable shares. The dilutive effect of outstanding restricted stock units and other contingently issuable shares is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares.

The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock and Class C capital stock are identical, except with respect to voting. Furthermore, there are a number of safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our board of directors from declaring or paying unequal per share dividends on our Class A and Class B common stock and Class C capital stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock must be approved by the class of stock adversely

affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our board of directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common shares and Class C capital stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis.

In the years ended December 31, 2017, 2018 and 2019, the net income per share amounts are the same for Class A and Class B common stock and Class C capital stock because the holders of each class are entitled to equal per share dividends or distributions in liquidation in accordance with the Amended and Restated Certificate of Incorporation of Alphabet Inc.

The following tables set forth the computation of basic and diluted net income per share of Class A and Class B common stock and Class C capital stock (in millions, except share amounts which are reflected in thousands and per share amounts):



	Year Ended December 31,
	2017
	Class A			Class B			Class C
Basic net income per share:
Numerator
Allocation of undistributed earnings	$	5,438		$	862		$	6,362
Denominator
Number of shares used in per share computation	297,604			47,146			348,151
Basic net income per share	$	18.27		$	18.27		$	18.27
Diluted net income per share:
Numerator
Allocation of undistributed earnings for basic computation	$	5,438		$	862		$	6,362
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares	862			0			0
Reallocation of undistributed earnings	(74		)	(14		)	74
Allocation of undistributed earnings	$	6,226		$	848		$	6,436
Denominator
Number of shares used in basic computation	297,604			47,146			348,151
Weighted-average effect of dilutive securities
Add:
Conversion of Class B to Class A common shares outstanding	47,146			0			0
Restricted stock units and other contingently issuable shares	1,192			0			9,491
Number of shares used in per share computation	345,942			47,146			357,642
Diluted net income per share	$	18.00		$	18.00		$	18.00



	Year Ended December 31,
	2018
	Class A			Class B			Class C
Basic net income per share:
Numerator
Allocation of undistributed earnings	$	13,200		$	2,072		$	15,464
Denominator
Number of shares used in per share computation	298,548			46,864			349,728
Basic net income per share	$	44.22		$	44.22		$	44.22
Diluted net income per share:
Numerator
Allocation of undistributed earnings for basic computation	$	13,200		$	2,072		$	15,464
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares	2,072			0			0
Reallocation of undistributed earnings	(146		)	(24		)	146
Allocation of undistributed earnings	$	15,126		$	2,048		$	15,610
Denominator
Number of shares used in basic computation	298,548			46,864			349,728
Weighted-average effect of dilutive securities
Add:
Conversion of Class B to Class A common shares outstanding	46,864			0			0
Restricted stock units and other contingently issuable shares	689			0			7,456
Number of shares used in per share computation	346,101			46,864			357,184
Diluted net income per share	$	43.70		$	43.70		$	43.70



	Year Ended December 31,
	2019
	Class A			Class B			Class C
Basic net income per share:
Numerator
Allocation of undistributed earnings	$	14,846		$	2,307		$	17,190
Denominator
Number of shares used in per share computation	299,402			46,527			346,667
Basic net income per share	$	49.59		$	49.59		$	49.59
Diluted net income per share:
Numerator
Allocation of undistributed earnings for basic computation	$	14,846		$	2,307		$	17,190
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares	2,307			0			0
Reallocation of undistributed earnings	(126		)	(20		)	126
Allocation of undistributed earnings	$	17,027		$	2,287		$	17,316
Denominator
Number of shares used in basic computation	299,402			46,527			346,667
Weighted-average effect of dilutive securities
Add:
Conversion of Class B to Class A common shares outstanding	46,527			0			0
Restricted stock units and other contingently issuable shares	413			0			5,547
Number of shares used in per share computation	346,342			46,527			352,214
Diluted net income per share	$	49.16		$	49.16		$	49.16