What is an income statement waterfall?

An income statement waterfall is a bar chart that walks from total revenue down to net income, with each step showing how much a cost or tax line removes (or adds). Subtotals — gross profit, operating income, pre-tax income — are anchored to zero so the cascade reconciles exactly to the bottom line.

How much of Alphabet (GOOGL) revenue becomes net income?

For TTM through Q2 2026, Alphabet turned $446B of revenue into $244B of net income — a net margin of 54.8%. The waterfall shows where the rest goes: cost of revenue, operating expenses, non-operating items, and taxes.

What are Alphabet (GOOGL) gross, operating, and net margins?

For TTM through Q2 2026, Alphabet reported a gross margin of 60.9%, an operating margin of 33.1%, and a net margin of 54.8%. Each subtotal in the waterfall corresponds to one of these margins.

Why does Alphabet (GOOGL) have such a high (or low) gross margin?

Gross margin (gross profit ÷ revenue) reflects how much of each revenue dollar remains after direct production costs. Capital-light software and platform businesses often show gross margins above 60–80% because their cost of revenue is mainly hosting and support. Hardware, retail, and commodity businesses show lower gross margins because raw materials and manufacturing costs are significant. The waterfall makes this visible at a glance — the size of the "Cost of Revenue" bar relative to Revenue is the gross margin complement.

What is the difference between gross, operating, and net margin?

Gross margin = (Revenue − Cost of Revenue) ÷ Revenue. It measures production efficiency. Operating margin = Operating Income ÷ Revenue. It adds operating expenses (R&D, S&M, G&A) and measures the profitability of core operations. Net margin = Net Income ÷ Revenue. It also includes interest, other income/expense, and taxes, and represents the shareholder take after everything.

Alphabet (GOOGL) Income Statement Waterfall

Revenue

$446B

Gross Margin

+60.9%

Operating Margin

+33.1%

Net Margin

+54.8%

Income statement waterfall for Alphabet (GOOGL) — TTM through Q2 2026

Net income: $244B

Margin breakdown for Alphabet (GOOGL) — TTM through Q2 2026

Line item	Amount	Running total
Revenue	$446B	$446B
Cost of Revenue	-$174B	$272B
Gross Profit	$272B	$272B
Operating Expenses	-$124B	$148B
Operating Income	$148B	$148B
Other Income / Expense	$152B	$299B
Pre-tax Income	$299B	$299B
Income Tax	-$55.1B	$244B
Net Income	$244B	$244B

Revenue$446B
Cost of Revenue-$174B
Gross Profit$272B
Operating Expenses-$124B
Operating Income$148B
Other Income / Expense$152B
Pre-tax Income$299B
Income Tax-$55.1B
Net Income$244B

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