Q1 2008 Quarterly EarningsQuarterly Earnings

Summary

First Quarter 2008 HighlightsFirst Quarter 2008 Highlights

• Revenue growth of 42% Y/Y and 7% Q/QGoogle properties revenue growth of 49% Y/Y and 9% Q/Q– Google properties revenue growth of 49% Y/Y and 9% Q/Q

– Network revenues increased 25% Y/Y and 3% Q/Q

– Growth in international markets continued to be strong, with $2.7 billion in Q1 international revenuerevenue

• Operational Highlights– Improvements in search quality remain key focus

– Continued ads quality initiatives to show users better, more relevant ads

– Increasing value for advertisers and publishers with broader and deeper solutions

A i iti f D bl Cli k i G l th l di di l d l tf• Acquisition of DoubleClick gives Google the leading display ad platform

– Strong Apps traction and addition of functionality to Google Apps suite of products

• Exercising operational discipline while investing in long-term

2

g p p g gopportunities

Quarterly RevenueQuarterly Revenue

$5,000

$5,500Q1’08 Y/Y Growth = 42%Q1’08 Q/Q Growth = 7% 4,827

5,186

1,636

1,686$4,000

$4,500

,

3,6643,872

4,231

,

in m

illio

ns

1,3451,352

1,455

1,198$2,500

$3,000

$3,500

2,2542,456

2,690

3,205

$

2,282 2,4862,735

3,1223,400

630675

799928

1,037997

$

$1,500

$2,000

1,3841,578

1,919

1,257

657 7371,098 1,297

1,626

,584 630 1,977

885

1,432

$0

$500

$1,000

Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08

3

Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08

Google.com Network Licensing and Other

U S vs International RevenueU.S. vs. International Revenue

$5 000

$5,500

4,8275,186

$4,000

$4,500

$5,000

3,6643,872

4,231

4,827

48% 51%

n m

illio

ns

$2,500

$3,000

$3,500

2 2542,456

2,690

44%

44%

3,205

47%48% 48%

$ in

$1 000

$1,500

$2,000

1,3841,578

1,9192,254

39%39%

38%42%

42% 44%

1,257

39% 53% 52%52% 52% 49%

$0

$500

$1,000

Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08

61% 61% 62% 58% 58% 56% 56%

61%

53% 52%

4

Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08

US International

Traffic Acquisition Costs

1,4401,486

36.1%37.2%$1,400$1,500 40%

Traffic Acquisition Costs

976

1,2211,1481,125

31 0%

33.2%32.5%32.3%34.0%

31 0%$1,000$1,100$1,200$1,300$ ,

30%

35%

825

530629

723785

29.2%30.3%30.7%31.0% 31.0%

29.9% 29.1%

$600$700$800$900

$1,000

25%

30%

n m

illio

ns

462 494 530

$200$300$400$500$600

15%

20%$ in

$0$100$200

Q1'05

Q2'05

Q3'05

Q4'05

Q1'06

Q2'06

Q3'06

Q4'06

Q1'07

Q2'07

Q3'07

Q4'07

Q1'08

10%

5

Q Q Q Q Q Q Q Q Q Q Q Q Q

TAC TAC as % of Advertising Revenues

Costs and ExpensesCosts and ExpensesGAAP$Millions Q1'07 Q4'07 Q1'08Cost of Revenues $1,470 $1,956 $2,111, , ,

Percent of revenues 40% 41% 41%

Research & Development $408 $631 $673Percent of revenues 11% 13% 13%

Sales & Marketing $303 $422 $447Percent of revenues 7% 9% 9%

General & Administrative $261 $377 $409General & Administrative $261 $377 $409Percent of revenues 7% 8% 7%

Total Costs & Expenses $2,443 $3,386 $3,640Percent of revenues 67% 71% 70%

Non-GAAP$Millions Q1'07 Q4'07 Q1'08Cost of Revenues $1,466 $1,950 $2,102

Percent of revenues 40% 40% 41%

Research & Development $288 $470 $479Percent of revenues 8% 10% 9%

Sales & Marketing $275 $384 $404Percent of revenues 8% 8% 8%

General & Administrative $230 $337 $374Percent of revenues 6% 7% 7%

Total Costs & Expenses $2,259 $3,141 $3,359Percent of revenues 62% 65% 65%

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

Percent of revenues 62% 65% 65%

ProfitabilityProfitability

GAAP$Millions Q1'07 Q4'07 Q1'08$Millions Q1 07 Q4 07 Q1 08Income from Operations $1,221 $1,441 $1,546Operating Margin 33% 30% 30%

Net Income $1 002 $1 206 $1 307Net Income $1,002 $1,206 $1,307EPS (diluted) $3.18 $3.79 $4.12

Non-GAAP$Millions Q1'07 Q4'07 Q1'08Income from Operations $1,405 $1,686 $1,827Operating Margin 38% 35% 35%

Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations

Net Income $1,159 $1,409 $1,537EPS (diluted) $3.68 $4.43 $4.84

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pp g pmeasures to the nearest comparable GAAP measures

Free Cash FlowFree Cash Flow

$Millions Q1'07 Q4'07 Q1'08Net cash provided by operating activities $1,220 $1,693 $1,780

Less purchases of property and equipment ($597) ($678) ($842)q p ($ ) ($ ) ($ )

Free cash flow (Non-GAAP) $623 $1,015 $938

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Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expensesto GAAP costs and expenses

$Millions Q1'07As a % of

Revenues (1) Q4'07As a % of

Revenues (1) Q1'08As a % of

Revenues (1)

Cost of Revenues (GAAP) 1 470$ 40% 1 956$ 41% 2 111$ 41%Cost of Revenues (GAAP) 1,470$ 40% 1,956$ 41% 2,111$ 41%Less: Stock-based compensation (4) (6) (9) Cost of Revenues (non-GAAP) 1,466$ 40% 1,950$ 40% 2,102$ 41%

- Research and development (GAAP) 408$ 11% 631$ 13% 673$ 13%Less: Stock-based compensation (121) (161) (194) R h d d l t ( GAAP) 288$ 8% 470$ 10% 479$ 9%Research and development (non-GAAP) 288$ 8% 470$ 10% 479$ 9%

- Sales and marketing (GAAP) 303$ 8% 422$ 9% 447$ 9%Less: Stock-based compensation (27) (38) (43) Sales and marketing (non-GAAP) 275$ 8% 384$ 8% 404$ 8%

- General and administrati e (GAAP) 261$ 7% 377$ 8% 409$ 7%General and administrative (GAAP) 261$ 7% 377$ 8% 409$ 7%Less: Stock-based compensation (31) (40) (35) General and administrative (non-GAAP) 230$ 6% 337$ 7% 374$ 7%

Total costs and expenses (GAAP) 2,443$ 67% 3,386$ 71% 3,640$ 70%Less: Stock-based compensation (184) (245) (281) T t l t d ( GAAP)Total costs and expenses (non-GAAP) 2,259$ 62% 3,141$ 65% 3,359$ 65%

(1) Percentages based on GAAP revenues of $3,664 million in Q1 '07, $4,827 million in Q4 '07 and $5,186 million in Q1 '08.

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

Operating Margin

Operating Margin

Operating Margin

Figures in millions except per share amounts Q1'07 (1) Q4'07 (1) Q1'08 (1)

Income from operations (GAAP) 1,221$ 33% 1,441$ 30% 1,546$ 30%Add: Stock-based compensation 184 245 281

Income from operations (non-GAAP) 1,405$ 38% 1,686$ 35% 1,827$ 35%

Net income (GAAP) 1,002$ 1,206$ 1,307$ ( ) ,$ ,$ ,$Add: Stock-based compensation (net of tax) 157 203 230

Net income (non-GAAP) 1,159$ 1,409$ 1,537$

Net income per share - diluted (GAAP) $3.18 $3.79 $4.12Net income per share - diluted (non-GAAP) $3.68 $4.43 $4.84Shares used in per share calculation - diluted 315 318 317p

(1) Percentages based on GAAP revenues of $3,664 million in Q1 '07, $4,827 million in Q4 '07 and $5,186 million in Q1 '08.

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Q1 2008 Quarterly EarningsQuarterly Earnings

Summary