Alphabet Inc.

The stable outlook reflects S&P Global Ratings' expectation that Mountain View, Calif.-based Alphabet Inc. will sustain its leadership position in the online search and display advertising market and continue delivering very good operating performance, with revenue growth returning to above 20% and EBITDA margin in the mid-30% area in 2021 after the impact from COVID-19 passes. Ample cushion within the rating to allow the company to pursue M&A and shareholder returns also supports the stable outlook. We think a downgrade is unlikely over the next two years. We could lower the rating if the company sustained leverage above 1x, which we think would only occur as the result of an acquisition or a change in financial policy. To reach this

...Increased regulatory scrutiny is the most important risk for the rating, but, in our view, downgrade scenarios are unlikely. Alphabet is the subject of antitrust investigations in the U.S. by the Department of Justice, the House Judiciary Committee, and 51 state and territorial attorneys general. We expect the investigations to take several years to resolve, and they could result in fines or changes to business practices, but we think a breakup is unlikely. In addition, the company has accrued $9.4 billion in fines from the EU for infringement of European competition law and the EU's General Data Protection Regulation (GDPR). Also, the California Consumer Privacy Act has imposed strict data privacy restrictions. Finally, U.S. lawmakers from both parties are considering changes to protections from liability from user-generated content that could increase litigation. While we believe regulations in place today are manageable, there is a risk that additional fines and more regulation could...

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