Alphabet Inc.

The stable outlook reflects our expectation that Mountain View, Calif.-based Alphabet will sustain its leadership position in the online search and display advertising market and deliver very good operating performance, such that revenue growth returns to above 20% and EBITDA margin remains in the high-30% area in 2021 after the effects of the COVID-19 pandemic pass. Ample cushion within the rating supports the stable outlook and allows the company to pursue M&A and shareholder returns. We think a downgrade is unlikely over the next two years. We could lower the rating if our view of Alphabet's business position deteriorates, which might occur because of heightened regulatory risks or increased competition from established or emerging peers. In the regulatory area, we

...Increased regulatory scrutiny is the most important risk for the rating, but in our view, downgrade scenarios are unlikely. The U.S. Department of Justice and several state attorneys general have filed complaints against Google relating to search and digital advertising. We expect the complaints to take several years to resolve--one of the cases isn't set to go to trial until September 2023, and the other does not have a trial date yet--and they could result in fines or changes to business practices, but we think a breakup is unlikely under current law. In addition, the company has accrued $10.4 billion in fines from the EU for infringement of European competition law, and new cases may be coming under 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 liability protections related to user-generated content that could increase litigation...

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