Is Alphabet Inc Class C (Google) Stock Halal to Invest in? Facts You Should Know

We have conducted a comprehensive review on Google Alphabet from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles. 

Google Alphabet is an American multinational technology conglomerate holding company headquartered in Mountain View, California. It is the world’s third-largest technology company by revenue and one of the world’s most valuable companies.

Alphabet is a collection of businesses — the largest of which is Google. We report Google in two segments, Google Services and Google Cloud, and all non-Google businesses collectively as Other Bets. Alphabet’s structure is about helping each of our businesses prosper through strong leaders and independence.

The Internet is one of the world’s most powerful equalizers; it propels ideas, people, and businesses large and small. Our mission to organize the world’s information and make it universally accessible and useful is as relevant today as it was when we were founded in 1998. Since then, we have evolved from a company that helps people find answers to a company that also helps people get things done. We are focused on building an even more helpful Google for everyone, and we aspire to give everyone the tools they need to increase their knowledge, health, happiness, and success. 

Google Search helps people find information and make sense of the world in more natural and intuitive ways, with trillions of searches on Google every year. YouTube provides people with entertainment, information, and opportunities to learn something new. Google Assistant offers the best way to get things done seamlessly across different devices, providing intelligent help throughout a person’s day, no matter where they are. Google Cloud helps customers solve today’s business challenges, improve productivity, reduce costs, and unlock new growth engines. We are continually innovating and building new products and features that will help our users, partners, customers, and communities and have invested more than $150 billion in research and development in the last five years in support of these efforts. Let’s have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them: 

Segment Breakup: (In millions of USD) 

 For the year ended 31^ST December 2023 

Tricky Areas from a Shariah perspective 

As you can see in the first table, one of the business segments are partially engaged in non-permissible activities. YouTube and Google subscriptions, platforms consist of non-permissible activities because of it’s partially Entertainment services. The tricky area from Shariah’s point of view in this company is the revenue derived from the entertainment services segment. The company has mentioned in the annual report that the subscription sales include fees associated with YouTube TV, YouTube Music and Premium, and NFL Sunday Ticket, as well as Google One, watching videos, streaming TV, playing games, listening to music and also revenues from Google Play from the sales of apps and in-app purchases.

Subscription services comprise of two parts: 

1. Access to faster delivery of goods. This seems to be permissible. 
2. Access to entertainment content.  This however does not seem to be permissible even though not all the content offered on Google is non-permissible. 

The question that was raised during the discussion with the Shariah board members was, do all users of Google subscription platform use the entertainment content service? Because the actual subscription fee is sold so that consumers can get faster delivery and special offers on e-commerce goods. Hence, this is the primary motive behind the revenue from subscription services and not getting access to digital content, although some consumers would. Upon reviewing this, the Shariah board concluded that in such cases where the revenue cannot be bifurcated into permissible and non-permissible revenue, the rule of 50-50 would be applied to this subscription revenue. Subscription services were $28.032 billion for the year, which accounts for 11.28% of the company’s revenue. This would make 5.64% of the 11.28% subscription revenue non-permissible, but within the allowed threshold of tolerance. With this rule applied, the Shariah Board concluded that Google Alphabet. would pass the business sector screening criteria. 

Based on the above information, it is safe to assume that the business operations of Google Alphabet, would be Shariah Compliant  

Let’s have a look at the non-operating income of the company

Non-operating revenue of the company: (In millions of USD) 

 For the year ended 31^ST December 2023 

It is clear from the table above that the non-operating income of the company includes interest income which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification. 

Sector Compliance Calculation: 

Dividend Purification Calculation: 

Financial Ratio Screen:  

(All figures in USD Millions for the Year ended 31^st December 2023) 

Source: All the above information is based on the website of the company and the latest Annual Report for the period ended 31^st December, 2023. 

Conclusion:  

Given the above information, we at Ratings Intelligence believe that Google Alphabet, is a Shariah Compliant company as per the Shariah screening criteria.