Q1 2015

Quarterly Earnings Summary

Quarterly Revenues
Revenues by Revenue Source(1)

Revenues by Geography
($ in millions)

($ in millions)

$25,000

Y/Y Change = 12%

Q/Q Change = -5%

100%

18,103
15,707

15,420

15,955

17,258

16,523

11%

10%

44%

12,951

13,107

3,528

3,563

10%

10%

10%

10%

10%

9%

10%

45%

46%

46%

47%

48%

48%

47%

47%

45%

45%

44%

44%

43%

42%

42%

44%

43%

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

80%

60%
50%

3,313

$10,000

40%
12,429
10,538
8,868

16,523

17,258

15,420

3,568

3,278

8,640

15,955

18,103

15,707

3,576

13,754
3,668

3,391

13,754

70%

3,880

$5,000

13,107

90%

$20,000

$15,000

12,951

10,469

10,935

11,252

11,932

30%

9,376

20%
10%

$0

920

926

1,100

Q1'13

Q2'13

Q3'13

Other

1,501

1,423

1,457

1,703

Q4'13

Q1'14

Q2'14

Q3'14

Google Sites

1,794

1,750

0%
Q4'14

Network

Q1'15

US

Rest of World

UK

(1) Prior period amounts have been adjusted to reflect the reclassification primarily related to DoubleClick ad serving software revenues from other revenues to advertising
revenues from Google Network Members' websites to conform with our current period presentation.

Paid Clicks
Y/Y Paid Clicks Growth %

50%

Q/Q Paid Clicks Growth %

25%

44%
40%
40%

20%

37%

18%
33%
16%

31%
29%

30%

15%
26%

26%

25%

23%

24%

25%

13%

25%
11%

11%

20%
20%

10%

17%

9%
8%

14%

13%

7%

13%

6%
10%
10%

9%

5%

9%
5%

4%
3%

5%

4%

4%

4%

3%

2%

2%

2%

2%
0%

0%

-1%

-1%

-3%

-3%
-4%

(11)%

-10%

-5%
(12)%

-5%

-5%
-7%

-20%

-10%
Q1'13

Q2'13

Q3'13

Aggregated

Q4'13

Q1'14

Network

Q2'14

Q3'14

Q4'14

Google Sites

Q1'15

Q1'13

Q2'13

Q3'13

Aggregated

Q4'13

Q1'14

Network

Q2'14

Q3'14

Q4'14

Q1'15

Google Sites

Cost-per-Click
Y/Y Cost-Per-Click Growth %

Q/Q Cost-Per-Click Growth %

10%

15%

6%
10%

5%

10%

2%

0%

5%
-2%

4%

-2%

3%

3%

-3%
-4%

2%

-4%
-5%

-5%

0%

-6%

-6%

-8%

-8%

-6%

0%

0%

0%

-7%

-7%

0%
-1%

-2%

-2%

-2%

-2%

-8%

-9%

-3%

-9%

-4%

-4%
-5%

-10%

-11%

-11%

-5%

-12%
-13%

-5%

-6%
-7%

-13%

-3%

-4%

-7%

-13%

-8%

-8%

-15%
-15%

-10%

-20%

-11%

-15%
Q1'13

Q2'13

Q3'13

Aggregated

Q4'13

Q1'14

Network

Q2'14

Q3'14

Q4'14

Google Sites

Q1'15

Q1'13

Q2'13

Q3'13

Aggregated

Q4'13

Q1'14

Network

Q2'14

Q3'14

Q4'14

Q1'15

Google Sites

Traffic Acquisition Costs

$4,000

30%
3,624

$3,500

$3,000

3,311
2,962

3,013

24.6%

24.7%

(in millions)

$2,500

3,232

3,293

3,348

3,345

2,972
25%
23.5%

23.3%

23.1%

22.7%

22.6%

$2,000

22.2%
21.6%

$1,500
20%
$1,000

$500

$0

15%
Q1'13

Q2'13

Q3'13

TAC ($ in millions)

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

TAC as % of Advertising Revenues

GAAP Costs and Expenses

($ in millions)

$16,000

$13,704

$14,000

$12,799
$11,697

$12,000

$11,278
$9,993

$10,000

$9,203
1,015

$8,000
1,435
$6,000

(As a % of Revenues)

100%

1,617

$9,642
1,098
1,583
1,766

1,135
1,628

1,184

1,908
1,933

5,195

1,365

1,404
1,489

1,729
2,126

1,941

2,655

8%
2,065

2,813

6,921
6,356

73%

72%

73%

73%

9%

9%

8%

9%

9%

12%

12%

12%

11%

12%

13%

60%
11%

2,753

6,114

74%

8%

16%

2,238

6,695
5,961

71%

1,637

2,084

77%

80%

2,377

1,821
6,253

5,136

$11,305

$12,811
1,593

40%

12%

13%

13%

12%

14%

14%

40%

40%

39%

40%

39%

38%

Q3'13

Q4'13

Q1'14

Q2'14

40%

76%
9%

13%

74%

9%

12%

16%

16%

38%

37%

Q4'14

Q1'15

5,409

$4,000
20%
$2,000

$0

0%
Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Q1'13

Q2'13

Q3'14

Cost of Revenues

Research and Development

Cost of Revenues

Research and Development

Sales and Marketing

General and Administrative

Sales and Marketing

General and Administrative

Non-GAAP Costs and Expenses

($ in millions)

$14,000

(As a % of Revenues)

80%
$12,503
$11,608

$12,000

$11,166
$10,817
$10,405 $10,466

1,414

1,142
$10,000
$8,548
$8,000

915
1,317

$6,000

1,279
5,037

$8,899

$9,137

1,058

1,229

991
1,458
1,365

5,085

1,473

1,754
1,467

1,783

1,670

60%

1,860
2,182

1,582
1,791

2,138

1,989

5,866

66%

66%

68%

68%

68%

69%

7%

9%

8%

8%

8%

7%

67%

7%

8%

8%

10%

11%

11%

11%

10%

11%

11%

12%

10%

10%

10%

9%

11%

11%

12%

12%

12%

39%

39%

38%

39%

38%

38%

37%

37%

36%

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

11%

40%
6,750

1,385
6,126

68%

2,164

1,348
1,887

1,003

66%

1,407

6,014

6,196

6,148

5,276

$4,000
20%

$2,000

0%

$0
Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Q1'13

Q2'13

Cost of Revenues

Research and Development

Cost of Revenues

Research and Development

Sales and Marketing

General and Administrative

Sales and Marketing

General and Administrative

For reconciliation of GAAP to non-GAAP costs and expenses please refer to Table 1 at the end of the slide deck.

Operating Income and Operating Margin

GAAP

Non-GAAP

$5,000

50%

$6,000

50%
5,600

4,429

$4,500

4,399

4,447

4,258

4,954
$5,000

3,761

3,748

4,617

40%

3,724

$4,500

3,465
$3,500

34%

35%

26%

27%

28%

30%
27%

27%

$2,500

26%
23%

24%

25%

$2,000

20%

$1,500

15%

4,208

34%

34%

32%

32%

32%

32%

33%

35%

31%
30%

$3,500
(in millions)

(in millions)

29%

40%

4,403

$4,000
$3,000

45%

5,138

4,115
$4,000

5,357

5,302

$5,500

45%

5,650

$3,000

25%

$2,500

20%

$2,000
15%
$1,500
$1,000

10%

10%
$1,000

$500

5%

$0

0%
Q1'13

Q2'13

Q3'13

Q4'13

Operating Income ($ in millions)

Q1'14

Q2'14

Q3'14

Q4'14

Operating Margin (%)

Q1'15

5%

$500
$0

0%
Q1'13

Q2'13

Q3'13

Q4'13

Operating income ($ in millions)

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Operating Margin (%)

For reconciliation of GAAP to non-GAAP operating income please refer to Table 2 at the end of the slide deck.

Net Income and Earnings per Share

GAAP

Non-GAAP

$5,000

$8

4,757

$5,000

6.91

$4,500

$4,500

$7

6.70
4,042

$4,000

$4,000
3,586
3,346
4.97

3,376
3,228
4.77

(in millions)

$3,000

2,970

4.95

3,452
5.04

4,299

4,373
4,175

6.88
6.57

6.08
$6

3,357

$3,500

5.20

$7

6.35

5.63

3,422
4.99

4.96
$5

2,813

4.38

4,532

6.27

3,819

6.00

$6

4.09
$2,500

$4

$2,000

$3

$1,500

$5

$3,000
(in millions)

$3,500

$8

4,736
4,571

$2,500

$4

$2,000

$3

$1,500
$2

$1,000

$2
$1,000

$1

$500

$0

$0
Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

$1

$500

$0

$0
Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

GAAP Net income ($ in millions)

Non-GAAP Net income ($ in millions)

GAAP Diluted earnings per share ($)

Non-GAAP Diluted earnings per share ($)

Q4'14

Q1'15

Please refer to previous press releases for net income and diluted earnings per share on continuing and discontinuing operations base, and Table 2 for
GAAP to non-GAAP reconciliations.

Capital Expenditures & Free Cash Flow

$8,000
6,364
($ in millions)

$7,000

6,617

5,994
5,627

5,083

$6,000

5,238

4,705
4,391

$5,000

2,927
2,417

3,633
$4,000

1,611

2,289

3,551

2,646

2,255

3,690

3,577

$3,000

1,203

2,345
3,094
2,794

2,983

2,981

2,813

2,430

$2,000

2,046

$1,000

$0
Q1'13

Q2'13

Q3'13

Q4'13

Free Cash Flow

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Capital Expenditures

Capital expenditures added to free cash flow equals net cash provided from operating activities on the statement of cash flow.
All numbers include Motorola Home until its date of disposal (April 17,2013) and Motorola Mobile until its date of disposal (October 29, 2014).

10

Overview of Q1 2015 OI&E

250

(26)

32

200

(62)

(13)

Interest and other

Income(net)

$ (Millions)

150

226
100
157
50

0
Interest income

Interest expense

Realized gains
on AFS
securities, net

FX currency
exchange
losses, net (1)

Other income, net

Interest and other

income, net

(1) We recognized $62M of foreign exchange loss, which is primarily related to our FX hedging programs.

11

FX Impact on Q1'15 Revenues Using Q1'14 Rates (Y/Y)

UK Revenues

Rest of World (ROW) Revenues

Y/Y Change(1) = 12%

Y/Y Change(2) = 24%

2,000

10,000
116

990

1,771

1,675

8,195

(20)

8,894
(291)

8,000

$ (Millions)

$ (Millions)

1,500

1,000

6,000

4,000

500
2,000

0
GAAP revenues

Foreign exchange impact

Hedging benefit

Non-GAAP revenues

GAAP revenues

Foreign exchange impact

Hedging benefit

Non-GAAP revenues

(1) Y/Y change is calculated as Q1'15 fixed revenue of $1,771M compared with Q1'14 revenues of $1,583M (UK GAAP revenue of $1,583M less hedge
benefit of $0M).
(2)Y/Y change is calculated as Q1'15 fixed revenue of $8.894 compared with Q1'14 revenues of $7,173M (ROW GAAP revenue of $7,181M less hedge
benefit of $8M).
12

FX Impact on Q1'15 Revenues Using Q4'14 Rates (Q/Q)

UK Revenues

Rest of World (ROW) Revenues

Q/Q Change(1) = 4%

Q/Q Change(2) = 0%

2,000

10,000
1,675

62

512

1,717

8,416

8,195

(20)

8,000

(291)

$ (Millions)

$ (Millions)

1,500

1,000

6,000

4,000

500
2,000

0
GAAP revenues

Foreign exchange
impact

Hedging benefit

Non-GAAP revenues

GAAP revenues

Foreign exchange
impact

Hedging benefit

Non-GAAP revenues

(1) Q/Q change is calculated as Q1'15 Fixed revenue of $1,717M compared with Q4'14 revenues of $1,654M (UK GAAP
revenue of $1,657M less hedge benefit of $3M).
(2) Q/Q change is calculated as Q1'15 Fixed revenue of $8,416M compared with Q4'14 revenues of $8,423M (ROW GAAP
revenue of $8,568M less hedge benefit of $145M).

13

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

$ in millions
Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

$5,136

$5,195

$5,409

$6,253

$5,961

$6,114

$6,695

$6,921

$6,356

(99)

(110)

(133)

(127)

(95)

(100)

(547)

(171)

(160)

Cost of Revenues (non-GAAP)

$5,037

$5,085

$5,276

$6,126

$5,866

$6,014

$6,148

$6,750

$6,196

Research & Development

(GAAP)

$1,617

$1,766

$1,821

$1,933

$2,126

$2,238

$2,655

$2,813

$2,753

(338)

(401)

(436)

(466)

(456)

(447)

(666)

(631)

(615)

Research & Development (nonGAAP)

$1,279

$1,365

$1,385

$1,467

$1,670

$1,791

$1,989

$2,182

$2,138

Sales & Marketing (GAAP)

$1,435

$1,583

$1,628

$1,908

$1,729

$1,941

$2,084

$2,377

$2,065

(118)

(125)

(155)

(154)

(147)

(158)

(197)

(213)

(205)

Sales & Marketing (non-GAAP)

$1,317

$1,458

$1,473

$1,754

1,582

1,783

1,887

2,164

$1,860

General & Administrative

(GAAP)

$1,015

$1,098

$1,135

$1,184

$1,489

$1,404

$1,365

$1,593

$1,637

(100)

(107)

(132)

(126)

(141)

(175)

(223)

(186)

(223)

$915

$991

$1,003

$1,058

$1,348

$1,229

$1,142

$1,407

$1,414

$9,203

$9,642

$9,993

$11,278

$11,305

$11,697

$12,799

$13,704

$12,811

Less: Non-GAAP
adjustments (1)

(655)

(743)

(856)

(873)

(839)

(880)

(1,633)

(1,201)

(1,203)

Total Costs & Expenses (nonGAAP)

$8,548

$8,899

$9,137

$10,405

$10,466

$10,817

$11,166

$12,503

$11,608

Cost of Revenues (GAAP)

Less: Non-GAAP
adjustments (1)

Less: Non-GAAP
adjustments (1)

Less: Non-GAAP
adjustments (1)

Less: Non-GAAP
adjustments (1)

General & Administrative (nonGAAP)

Total Costs & Expenses
(GAAP)

(1) Compromised of stock based compensation expense

(2) Includes a $378M impairment charge related to a patent licensing royalty asset acquired in the purchase of Motorola

(2)

14

Table 2 - Reconciliations of non-GAAP consolidated results of operations

measures to the nearest comparable GAAP measures
($ in millions)

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Income from operations (GAAP)

$3,748

$3,465

$3,761

$4,429

$4,115

$4,258

$3,724

$4,399

$4,447

$655

$743

$856

$873

$839

$880

$1,255

$1,201

$1,203

Add: Stock-based compensation expense

(SBC) from continuing operations
Add: Impairment charge related to a patent
licensing royalty asset
Income from operations (non-GAAP)

$378

$4,403

$4,208

$4,617

$5,302

$4,954

$5,138

$5,357

$5,600

$5,650

($ in millions)

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Net income (GAAP)

$3,346

$3,228

$2,970

$3,376

$3,452

$3,422

$2,813

$4,757

$3,586

Add: Stock-based compensation expense (net

of tax) (1)

$514

$583

$656

$689

$649

$685

$997

$946

$946

Add: Impairment charge related to a patent

licensing royalty asset acquired in connection
with the purchase of Motorola

$378

$182

$(454)

$193

$506

$198

$68

$185

$(967)

$4,042

$3,357

$3,819

$4,571

$4,299

$4,175

$4,373

$4,736

$4,532

Add: Net loss (income) from discontinued

operations
Net income (non-GAAP)
.

(1)

Tax effect of SBC is calculated using tax-deductible portion of SBC and applying entity-specific tax rates.

15