Google Earnings

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Q4 2007 Quarterly Earnings Summary


Fourth Quarter 2007 Highlights •

Revenue growth of 51% Y/Y and 14% Q/Q –

Google properties revenue growth of 58% Y/Y and 14% Q/Q, driven by strength in the holiday retail season

Network revenues increased 37% Y/Y and 12% Q/Q

Strong international performance, with $2.3 billion in Q4 international revenue

Executing on Search.Ads.Apps Strategy – Infrastructure investments in search leading to improved quality worldwide

– Giving g advertisers more control and improving p g ROI – Improving Apps performance and ensuring data portability – Significant strides in mobile with the launch of Android

• 2

Ongoing focus on growth and profitability


Quarterly Revenue 4,827 $4,500

Q4’07 Y/Y Growth = 51% Q4’07 Q/Q Growth = 14%

4,231 3,872

$ in m millions

$4,000

1,636

3,664

$3,500

3,205

1,455 1,352

$3,000

2,456 $2,500

1,198

2,254 1,037

1 919 1,919

$2,000

997

1,578

928

1,384 $1,500

1,345

2,690

1,257

3,122

799 675

$1,000 $ ,

584

$500

2,282

630

657

737

Q1'05

Q2'05

2,486

2,735

1,977

885

1,098

1,297

1,432

1,626

Q2'06

Q3'06

$0 Q3'05

Q4'05

Google.com 3

Q1'06

Network

Q4'06

Q1'07

Licensing and Other

Q2'07

Q3'07

Q4'07


U S vs U.S. vs. International Revenue 4,827 $4,500

4,231 3,872

$ in m millions

$4,000

3,664

$3,500

3,205

48%

48%

52%

52%

48% $3,000

2,690 2,456

$2,500

1,919

44% 42%

1,578 1,384

$1,500

44%

2,254

$2,000

47%

42% 38%

1,257 39%

$1,000 ,

$500

39%

61%

39%

61%

61%

62%

58%

Q4'05 Q4 05

Q1'06 Q1 06

58%

56%

Q2'06 Q2 06

Q3'06 Q3 06

56%

53%

52%

Q1'07 Q1 07

Q2'07 Q2 07

$0 Q1'05 Q1 05

Q2'05 Q2 05

Q3'05 Q3 05

US 4

International

Q4'06 Q4 06

Q3'07 Q3 07

Q4'07 Q4 07


Traffic Acquisition Costs 1,440 $1,400

37.2%

40%

36.1%

$1,300

1,221 34.0%

$1,200

1,125 1,148

33.2%32.5% 32.3%

35%

$1,100 976

$ in n millions

$1,000 $ ,

31.0% 30.7% 31.0%

$900

825

785

$800

29.9%

29.1% 30.3%

723

$700

25%

629

$600 $500

30%

462

494

530 20%

$400 $300 15%

$200 $100 $0

10% Q1'05 Q1 05 Q2 Q2'05 05 Q3 Q3'05 05 Q4 Q4'05 05 Q1 Q1'06 06 Q2 Q2'06 06 Q3 Q3'06 06 Q4 Q4'06 06 Q1 Q1'07 07 Q2 Q2'07 07 Q3 Q3'07 07 Q4 Q4'07 07 TAC

5

TAC as % of Advertising Revenues


Costs and Expenses GAAP $Millions

Q4'06

Q3'07

Q4'07

C Cost off Revenues

$1,283

$1,663

$1,956

40%

39%

41%

Percent of revenues

Research & Development

$387

$549

$631

Percent of revenues

12%

13%

13%

Sales & Marketing

$255

$381

$422

8%

9%

9%

$220

$321

$377

7%

8%

8%

$2,145

$2,914

$3,386

67%

69%

71%

Q4'06

Q3'07

Q4'07

$1,272

$1,659

$1,950

40%

39%

40%

$305

$418

$470

Percent of revenues

10%

10%

10%

Sales & Marketing

$241

$351

$384

7%

8%

8%

$193

$288

$337

6%

7%

7%

$2,011

$2,716

$3,141

63%

64%

65%

Percent of revenues

General & Administrative Percent of revenues

Total Costs & Expenses Percent of revenues

Non-GAAP Non GAAP $Millions Cost of Revenues Percent of revenues

Research & Development Percent of revenues

General & Administrative Percent of revenues

Total Costs & Expenses Percent of revenues

Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses 6


Profitability GAAP $Millions

Q4'06

Q3'07

Q4'07

$1,061

$1,318

$1,441

33%

31%

30%

$1,031

$1,070

$1,206

EPS (diluted)

$3.29

$3.38

$3.79

Non-GAAP $Millions

Q4'06

Q3'07

Q4'07

$1,195

$1,516

$1,686

37%

36%

35%

Net Income

$ $997

$ $1,237

$ $1,409

EPS (diluted)

$3.18

$3.91

$4.43

Income from Operations Operating Margin Net Income

Income from Operations Operating Margin

Note: Please refer to supporting pp g Table 2 for reconciliations of non-GAAP results of operations p measures to the nearest comparable GAAP measures

7


Free Cash Flow

$Millions Net cash provided by operating activities

8

Q4'06

Q3'07

Q4'07

$911

$1,633

$1,693

Less purchases of property q p and equipment

($367)) ($

($553)) ($

($678)) ($

Free cash flow (Non-GAAP)

$544

$1,080

$1,015


Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expenses $Millions

Q4'06

Cost of Revenues (GAAP) Less: Stock-based compensation Cost of Revenues (non-GAAP)

$

Research and development (GAAP) Less: Stock-based compensation Research and development (non-GAAP) (non GAAP)

$

$

$

As a % of Revenues (1)

As a % of Revenues (1)

Q3'07

Q4'07

1,283 1 283 (11) 1,272

40% $ 40% $

1,663 1 663 (4) 1,659

39% $ 39% $

1,956 1 956 (6) 1,950

41% 40%

387 (82) 305

12% $ 10% $

549 (131) 418

13% $ 10% $

631 (161) 470

13% 10%

255 (14) 241

8% $

381 (30) 351

9% $

-

-

422 (38) 384

-

220 (27) 193

-

7% $

377 (40) 337

-

6% $

321 (33) 288

Sales and marketing (GAAP) Less: Stock-based compensation Sales and marketing (non-GAAP)

$

General and administrative (GAAP) Less: Stock-based compensation General and administrative (non-GAAP)

$

Total costs and expenses (GAAP) Less: Stock-based compensation T t l costs Total t and d expenses (non-GAAP) ( GAAP)

$

2,145 (134)

67% $ -

2,914 (198)

69% $ -

3,386 (245)

71% -

$

2 011 2,011

63% $

2 716 2,716

64% $

3 141 3,141

65%

$

$

7% $ 7% $

8% $ 8% $

(1) Percentages based on GAAP revenues of $3,205 million in Q4 '06, $4,231 million in Q3 '07 and $4,827 million in Q4 '07

9

As a % of Revenues (1)

9% 8% 8% 7%


Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures

Figures in millions except per share amounts

Q4'06

Operating Margin (1)

Q3'07

Q4'07

Operating Margin (1)

Income from operations (GAAP) Add: Stock-based compensation

$

1,061 134

33% $ -

1,318 198

31% $

1,441 245

30%

Income from operations (non (non-GAAP) GAAP)

$

1 195 1,195

37% $

1 516 1,516

36% $

1 686 1,686

35%

Net income (GAAP) Add: Stock-based compensation (net of tax) Less: Advanced Pricing Agreement and R&D credit

$

1,031 99 (133)

$

1,070 167 -

$

1,206 203 -

Net income (non-GAAP)

$

997

$

1,237

$

1,409

Net income per share - diluted (GAAP)

$3.29

$3.38

$3.79

Net income per share - diluted (non-GAAP) Shares used in per share calculation - diluted

$3.18 313

$3.91 317

$4.43 318

(1) Percentages based on GAAP revenues of $3,205 million in Q4 '06, $4,231 million in Q3 '07 and $4,827 million in Q4 '07

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Operating Margin (1)


Q4 2007 Quarterly Earnings Summary


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