GOOGLE EARNING

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					    Q4 2009
Quarterly Earnings
    Summary
    Fourth Quarter 2009 Highlights
    • Revenue growth of 17% Y/Y and 12% Q/Q
      –   Google properties revenue growth of 16% Y/Y and 12% Q/Q
          G   l        ti               th f            d
      –   Network revenues increased 21% Y/Y and 13% Q/Q
      –   International revenues were $3.5 billion

    • Operational Highlights
      –   Strong financial metrics: revenue growth, profitability, and cash flow
      –   Investing in technological innovation: 70/20/10
          •   Innovation in our more established business

               –   Search, Display
                   Search Display, Enterprise

          •   Innovation in our new businesses

               –   Mobile/Android

          •   Innovation in long-view investments

               –   Commerce and social
2
    Quarterly Revenues
                                 Q4’09 Y/Y Growth = 17%
                                 Q4’09 Q/Q Growth = 12%
                       $7,000
                                                                                                     6,674
                       $6,500

                       $6,000                              5,701                           5,945
                                         5,367    5,541            5,509       5,523
                       $5,500   5,186                                                                2,044

                       $5,000
                                                                                            1,801
     ($ in millions)




                                                           1,693
                       $4,500                      1,680               1,638    1,684
                                         1,655
                                1,686
                       $4,000

                       $3,500
                       $3 500
      $




                       $3,000

                       $2,500
                                                                                                     4,421
                       $2,000                              3,811                 3,653      3,956
                                         3,530     3,672
                                                   3 672               3,693
                                                                       3 693
                                3,400
                       $1,500

                       $1,000

                        $500

                          $0
                                Q1'08    Q2'08     Q3'08   Q4'08       Q1'09    Q2'09       Q3'09    Q4'09


3                                           Google.com       Network           Licensing and Other
    U.S. vs.
    U S vs International Revenues
                                             ($ in millions)
              5,186    5,367    5,541    5,701       5,509     5,523     5,945    6,674
       100%


       90%


       80%


       70%      51%     52%      51%     50%           52%       53%      53%     53%

       60%


       50%


       40%

                49%     48%      49%         50%       48%       47%      47%      47%
       30%


       20%


       10%


        0%
               Q1'08    Q2'08   Q3'08    Q4'08         Q1'09     Q2'09    Q3'09   Q4'09

                                        US             International
4
    Traffic Acquisition Costs
                       $1,800                                                                               40%
                       $ ,
                       $1,700
                       $1,600
                       $1,500                                                                               35%
                       $1,400
                       $1,300
                                29.2%
                                29 2%
                       $1,200           28.4%                                                               30%
                                                27.9%
                       $1,100                           26.9%       26.9%       27.2%       27.1%
     ($ in millions)




                                                                                                    26.6%
                       $1,000
                        $900                                                                                25%
                                                                                                    1,721
                        $800                                                               1,559
                                                                                           1 559
                                1,486   1,474   1,495   1,483      1,436       1,453
                        $700
                        $600                                                                                20%
                        $500
                        $
                        $400
                        $300                                                                                15%
                        $200
                        $100
                          $0                                                                                10%
                                Q1'08   Q2'08   Q3'08   Q4'08       Q1'09      Q2'09       Q3'09    Q4'09

                                                TAC             TAC as % of Advertising Revenues
5
    Costs and Expenses
          GAAP
          $Millions                                  Q4'08           Q3'09            Q4'09
          Cost of Revenues                               $2,190
                                                         $2 190           $2,226
                                                                          $2 226          $2 408
                                                                                          $2,408
            Percent of revenues                              38%             37%             36%
          Research & Development                           $733             $758            $736
            Percent of revenues                              13%             13%             11%
          Sales & Marketing                                $506             $498            $583
            Percent of revenues                               9%              8%                 9%
          General & Administrative
          G     l Ad i i t ti                              $
                                                           $412             $
                                                                            $389            $465
                                                                                            $
            Percent of revenues                               7%              7%                 7%
          Total Costs & Expenses                         $3,841           $3,871          $4,192
            Percent of revenues                              67%             65%             63%


          Non-GAAP
          $Millions                                  Q4'08           Q3'09            Q4'09
          Cost of Revenues                               $2,178           $2,211          $2,402
            Percent of revenues                              38%             37%             36%
          Research & Development                           $551             $563            $557
            Percent of revenues                              10%             10%                 8%
          Sales & Marketing                                $450             $436            $531
            Percent of revenues                               8%              7%                 8%
          General & Administrative                         $376             $344            $426
            Percent of revenues                               6%              6%                 7%
          Total Costs & Expenses                         $3,555           $3,554          $3,916
            Percent of revenues                              62%             60%             59%

            Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and
            expenses to GAAP costs and expenses
6
    Profitability
       GAAP
       $Millions (except per share amounts)                            Q4'08              Q3'09              Q4'09
       Income from Operations                                      $       1,860      $      2,074      $      2,481
       Operating Margin                                                      33%               35%              37%
       Net Income                                                  $         382      $      1,639      $      1,974
       EPS (diluted)                                               $        1.21      $        5.13     $       6.13


       Non-GAAP
       $Millions (except per share amounts)
       $Milli    (     t      h         t )                            Q4'08              Q3'09              Q4'09
       Income from Operations                                      $       2,146      $      2,391      $      2,757
       Operating Margin                                                      38%               40%              41%
       Net Income                                                  $       1,616      $      1,884      $      2,188
       EPS (diluted)                                               $        5.10      $        5.89     $       6.79

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



7
    Free Cash Flow



          $Millions                    Q4'08     Q3'09     Q4'09
          Net cash provided by
          operating activities          $2,122    $2,726    $2,731

          Less purchases of property
          and equipment
               q p                      ($368)
                                        ($   )    ($186)
                                                  ($   )    ($   )
                                                            ($221)



          Free cash flow (Non-GAAP)     $1,754    $2,540    $2,510




8
      Overview of Q4 2009 OI&E and FX

    In Interest Income and Other, Net, we recognized net income of $88M for Q4

    • In Q4, the interest income earned on our investments was $67M and we recognized $27M
    in realized gains.

    • As a result of foreign exchange rates moving closer to the strike p
                          g        g             g                                     p         Q4
                                                                        prices of our options in Q
    relative to Q3, we expensed only $8M related to our FX cash flow hedging program vs. $67M
    in Q3.

    • Before hedging, the weaker USD relative to other currencies during the quarter had
                         $112M on revenue compared to Q3 and a positive impact of $
    a positive impact of $                                                          $196M
    compared to Q4’08.

    • In addition to the positive impact on revenue quarter-over-quarter and year-over-year due
                           rates,
    to more favorable FX rates our cash flow FX hedging programs allowed us to recognize a
    benefit of approximately $8M to international revenue this quarter.




9
      Table 1 - Reconciliations of non-GAAP costs and expenses
      to GAAP costs and expenses
                                                                       As a % of                        As a % of                      As a % of
     $Millions                                             Q4'08      Revenues (1)      Q3'09          Revenues (1)       Q4'09       Revenues (1)
     Cost of revenues (GAAP)                           $     2 190
                                                             2,190            38% $         2 226
                                                                                            2,226              37% $         2 408
                                                                                                                             2,408            36%
     Less: Stock-based compensation expense                    (12)                           (15)                              (6)
     Cost of revenues (non-GAAP)                       $     2,178            38% $         2,211              37% $         2,402            36%

     Research and development (GAAP)                   $       733            13% $           758              13% $           736            11%
     Less: Stock-based compensation expense                   (182)                          (195)                            (179)
                               (non-GAAP)
     Research and development (non GAAP)               $       551            10% $           563              10% $           557             8%

     Sales and marketing (GAAP)                        $      506              9% $             498             8% $          583              9%
     Less: Stock-based compensation expense                   (56)                              (62)                          (52)
     Sales and marketing (non-GAAP)                    $      450              8% $             436             7% $          531              8%

     General and administrative (GAAP)                 $      412              7% $             389             7% $          465              7%
     Less: Stock-based compensation expense                   (36)                              (45)                          (39)
     General and administrative (non-GAAP)             $      376              6% $             344             6% $          426              7%

     Total costs and expenses (GAAP)                   $     3,841            67% $         3,871              65% $         4,192            63%
     Less: Stock-based compensation expense                   (286)                          (317)                            (276)
     Total    t    d          (     GAAP)
     T t l costs and expenses (non-GAAP)               $     3,555
                                                             3 555            62% $         3,554
                                                                                            3 554              60% $         3 916
                                                                                                                             3,916            59%

     (1) Percentages based on revenues of $5,701 million in Q4'08, $5,945 million in Q3'09 and $6,674 million in Q4'09.




10
         Table 2 - Reconciliations of non-GAAP results of operations
         measures to the nearest comparable GAAP measures



                                                                                                     Operating                     Operating                   Operating
$ millions except per share amounts                                                       Q4'08      Margin (1)          Q3'09     Margin (1)       Q4'09      Margin (1)
Income from operations (GAAP)                                                         $     1,860            33% $         2,074          35% $        2,481          37%
     Stock-based
Add: Stock based compensation expense                                                         286                            317                         276
Income from operations (non-GAAP)                                                     $     2,146            38% $         2,391          40% $        2,757          41%

Net income (GAAP)                                                                     $       382                    $     1,639                $      1,974
Add: Stock-based compensation expense (net of tax)                                            221                            245                         214
Add: Impairment of equity investments (net of tax)                                          1,013                             -                           -
N ti       (non-GAAP)
Net income (    GAAP)                                                                 $     1,616
                                                                                            1 616                    $     1,884
                                                                                                                           1 884                $      2 188
                                                                                                                                                       2,188

Net income per share - diluted (GAAP)                                                 $      1.21                    $      5.13                $       6.13
Net income per share - diluted (non-GAAP)                                             $      5.10                    $      5.89                $       6.79
Shares used in per share calculation - diluted                                               317                            320                         322

(1) Percentages based on revenues of $5,701 million in Q4'08, $5,945 million in Q3'09 and $6,674 million in Q4'09.




 11
    Q4 2009
Quarterly Earnings
    Summary

				
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