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Quarterly Earnings
Summary
Fourth Quarter 2010 Highlights
• Revenue growth of 26% Y/Y and 16% Q/Q
– Google properties revenue increased 28% Y/Y and 17% Q/Q
– Network revenues increased 22% Y/Y and 13% Q/Q
– International revenues were $4.4 billion
• Operational Highlights
– Strong financial metrics: revenue growth, profitability and cash flow
• Investing in Sales & Marketing – for both new products + advertiser acquisition
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Quarterly Revenues
Q4’10 Y/Y Growth = 26%
Q4’10 Q/Q Growth = 16%
$8,500 8,440
$8,000
$7,500 7,286
2,495
$7,000 6,674 6,775 6,820
$6,500
5,945 2,199
5,541 5,701 5,509 5,523
$6,000
2,036 2,063
($ in millions)
2,044
$5,500
5,186 5,367
$5,000 1,801
1,693
1,680 1,638 1,684
$4,500 1,655
1,686
$4,000
$3,500
$3,000 5,672
4,833
$2,500 4,421 4,439 4,499
3,672 3,811 3,653 3,956
$2,000 3,530 3,693
3,400
$1,500
$1,000
$500
100 182 189 197 178 186 188 209 300 258 254 273
$0
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10
90%
80%
51% 52% 51% 50% 52% 53% 53% 53% 53% 52% 52% 52%
70%
60%
50%
40%
30%
49% 48% 49% 50% 48% 47% 47% 47% 47% 48% 48% 48%
20%
10%
0%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10
US International
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Traffic Acquisition Costs
$2,100 40%
$2,000
$1,900
$1,800
35%
$1,700
$1,600
$1,500
29.2%
$1,400 28.4% 30%
27.9%
$1,300 26.9% 26.9% 27.2% 27.1% 26.6%
($ in millions)
26.4% 26.4%
$1,200 25.7% 25.3%
$1,100
25%
$1,000 2,069
$900 1,805
1,721 1,711 1,732
$800 1,559
1,486 1,474 1,495 1,483 1,436 1,453
$700 20%
$600
$500
$400
15%
$300
$200
$100
$0 10%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10
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Costs and Expenses
GAAP
($ in millions) Q4'09 Q3'10 Q4'10
Cost of Revenues $2,408 $2,552 $2,946
Percent of revenues 36% 35% 35%
Non-GAAP
($ in millions) Q4'09 Q3'10 Q4'10
Cost of Revenues $2,402 $2,544 $2,901
Percent of revenues 36% 35% 34%
Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and
expenses to GAAP costs and expenses
6
Profitability
GAAP
($ in millions except per share amounts) Q4'09 Q3'10 Q4'10
Income from Operations $ 2,481 $ 2,547 $ 2,982
Non-GAAP
($ in millions except per share amounts) Q4'09 Q3'10 Q4'10
Income from Operations $ 2,757 $ 2,927 $ 3,378
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Free Cash Flow
8
Overview of Q4 2010 OI&E and FX
In Interest and Other Income, Net, we recognized net income of $160M for Q4
• In Q4, we recognized $176M of interest income earned on our investments and $55M in
realized gains.
• Excluding gains related to our FX cash flow hedging program, had foreign exchange rates
remained constant from Q3 2010 through Q4 2010, our revenue in Q4 2010 would have
been $201M lower. Excluding gains related to our FX cash flow hedging program, had
foreign exchange rates remained constant from Q4 2009 through Q4 2010, our revenue in
Q4 2010 would have been $132M higher.
9
Revenues by Geography
10
International Revenues Excluding Hedging and FX Impact (Y/Y)
a) f/x impact on Q4'10 revenues using Q4'09 a) f/x impact on Q3'10 revenues using Q3'09
rates (gains)/losses n/a 26 rates (gains)/losses n/a 50
UK revenues excluding f/x and hedging impact UK revenues excluding f/x and hedging impact
(Non-GAAP) $764 $902 (Non-GAAP) $740 $879
a) f/x impact on Q4'10 revenues using Q4'09 a) f/x impact on Q3'10 revenues using Q3'09
rates (gains)/losses n/a 106 rates (gains)/losses n/a 119
ROW revenues excluding f/x and hedging impact ROW revenues excluding f/x and hedging impact
(Non-GAAP) $2,747 $3,590 (Non-GAAP) $2,364 $2,970
11
International Revenues Excluding Hedging and FX Impact (Q/Q)
a) f/x impact on Q4'10 revenues using Q3'10 a) f/x impact on Q3'10 revenues using Q2'10
rates (gains)/losses n/a (23) rates (gains)/losses n/a (24)
b) hedging gains (11) (2) b) hedging gains (19) (11)
UK revenues excluding f/x and hedging impact UK revenues excluding f/x and hedging impact
(Non-GAAP) $829 $853 (Non-GAAP) $751 $805
a) f/x impact on Q4'10 revenues using Q3'10 rates a) f/x impact on Q3'10 revenues using Q2'10 rates
(gains)/losses n/a (178) (gains)/losses n/a 15
b) hedging gains (78) (23) b) hedging gains (60) (78)
ROW revenues excluding f/x and hedging impact ROW revenues excluding f/x and hedging impact
(Non-GAAP) $2,851 $3,306 (Non-GAAP) $2,702 $2,866
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Table 1 - Reconciliations of non-GAAP costs and expenses
to GAAP costs and expenses
As a % of As a % of As a % of
($ in millions) Q4'09 Revenues (1) Q3'10 Revenues (1) Q4'10 Revenues (1)
Cost of revenues (GAAP) $ 2,408 36% $ 2,552 35% $ 2,946 35%
Less: Stock-based compensation expense (6) (8) (45)
Cost of revenues (non-GAAP) $ 2,402 36% $ 2,544 35% $ 2,901 34%
Research and development (GAAP) $ 736 11% $ 994 14% $ 1,051 12%
Less: Stock-based compensation expense (179) (244) (224)
Research and development (non-GAAP) $ 557 8% $ 750 10% $ 827 10%
Total costs and expenses (GAAP) $ 4,193 63% $ 4,739 65% $ 5,458 65%
Less: Stock-based compensation expense (276) (380) (396)
Total costs and expenses (non-GAAP) $ 3,917 59% $ 4,359 60% $ 5,062 60%
(1) Percentages based on revenues of $6,674 million in Q4'09, $7,286 million in Q3'10 and $8,440 million in Q4'10.
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Table 2 - Reconciliations of non-GAAP results of operations
measures to the nearest comparable GAAP measures
(1) Percentages based on revenues of $6,674 million in Q4'09, $7,286 million in Q3'10 and $8,440 million in Q4'10.
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Q4 2010
Quarterly Earnings
Summary