Q4 2013

Quarterly Earnings Summary

Google Confidential and Proprietary

Q4 2013 Highlights
Financial Highlights:

Operational Highlights:

Consolidated revenues growth of 17% Y/Y and 13% Q/Q.

Strong financial metrics: revenue growth and cash flow.

Consolidated revenues were $16.86 billion.

Continuing to invest in three major areas of focus:

Google segment revenues were $15.72 billion

Google properties segment revenues increased

Core ads: Search and Display advertising

Businesses demonstrating high consumer success:

22% Y/Y and 12% Q/Q

Network segment revenues increased 3% Y/Y

and 12% Q/Q

Other revenues increased 99% Y/Y and 34% Q/Q

Motorola Mobile segment revenues were $1.24 billion.

Consolidated international revenues were $9.45 billion.

YouTube, Android/Play, and Chrome

New businesses where we are investing to drive

adoption and innovation: Social, Commerce, and
Enterprise

Our infrastructure continues to be a key strategic area of

investment.

Consolidated Quarterly Revenues

U.S. vs. International

Consolidated Revenues by Revenue Source

($ in millions)

($ in millions)

$20,000

Q4'13 Y/Y Growth = 17%

Q4'13 Q/Q Growth = 13%

16,858(1)
14,893(1) 1,243
14,419 13,969 14,105

$15,000

13,304

1,184
1,514

11,807
10,584 10,645
9,720
$10,000

8,575

9,026
2,880

2,913

843
2,983

1,018

998

1,778

3,522
3,148

3,436

3,262

6,232

10,551

269

310

6,740

7,294

7,312

385

410

420

7,542 7,727

439

666

9,720

10,584 10,645

11,807 13,304 14,419 13,969

14,105 14,893 16,858

90%
80%

50%

9,394
8,868

5,879

9,026

53% 54% 55% 53% 54% 54% 51% 53% 55% 55% 55% 56%

60%

3,133

2,484

$5,000

8,575

70%

3,193

2,595
2,427

100%

8,640

40%

8,640

47% 46% 45% 47% 46% 46% 49% 47% 45% 45% 45%
44%

30%
829

1,049

1,046

1,230

1,647

20%
10%

$0
Q1'11

Q2'11

Q3'11

Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13

0%
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13

Other

Google.com

Network

Motorola Mobile

US

International

(1)

Please note, starting from Q313 because of the eliminations, the sum of the segment
revenues will not equal the consolidated revenues unless the eliminations are taken into
account.

Traffic Acquisition Costs

$3,500

30%

$3,000

25.5% 25.5%

$2,500
24.5%

24.2%

(in millions)

23.7%

24.1%

24.9% 25.0%

24.5% 24.7%

25%
23.7% 23.5%

$2,000

3,311
3,076

$1,500
2,453
$1,000

2,038

2,110

2,510

2,600

2,770

2,962

3,013

2,972
20%

2,210

$500

$0

15%
Q1'11

Q2'11

Q3'11

TAC (in millions)

Q4'11

Q1'12

Q2'12

Q3'12

Q4'12

Q1'13

Q2'13

Q3'13

Q4'13

TAC as % of Advertising Revenues

Consolidated Costs and Expenses

Q4 2012

Q3 2013

Q4 2013

GAAP
$ in millions

As % of revenues

$ in millions

As % of revenues

$ in millions

As % of revenues

Cost of Revenues

$6,213

43%

$6,413

43%

$7,438

44%

Research & Development

$1,935

13%

$2,017

14%

$2,111

13%

Sales & Marketing

$1,751

12%

$1,806

12%

$2,126

13%

General & Administrative

$1,126

8%

$1,213

8%

$1,261

7%

Total Costs & Expenses

$11,025

76%

$11,449

77%

$12,936

77%

Q4 2012

Q3 2013

Q4 2013

Non-GAAP
$ in millions

As % of revenues

$ in millions

As % of revenues

$ in millions

As % of revenues

Cost of Revenues

$6,042

42%

$6,276

42%

$7,269

43%

Research & Development

$1,487

10%

$1,558

11%

$1,642

10%

Sales & Marketing

$1,611

11%

$1,643

11%

$1,970

12%

General & Administrative

$1,007

7%

$1,074

7%

$1,138

6%

Total Costs & Expenses

$10,147

70%

$10,551

71%

$12,019

71%

Please refer to Table 1 for reconciliations of consolidated GAAP to non-GAAP costs and expenses.

Profitability
Consolidated
GAAP ($ in millions)

Q4 2012

Q3 2013

Q4 2013

$3,394

$3,444

$3,922

24%

23%

23%

$2,907

$2,955

$3,381

$(21)

$15

$(5)

Net Income

$2,886

$2,970

$3,376

EPS (Diluted) - continuing operations

$8.68

$8.71

$9.91

$(0.06)

$0.04

$(0.01)

$8.62

$8.75

$9.90

Q4 2012

Q3 2013

Q4 2013

$4,272

$4,342

$4,839

30%

29%

29%

Net Income

$3,568

$3,643

$4,096

EPS (Diluted)

$10.65

$10.74

$12.01

Income from Operations

Operating margin

Net Income from continuing operations

Net Income (loss) from discontinued
operations

EPS (Diluted) - discontinued operations

EPS (Diluted)
Non-GAAP ($ in millions)
Income from Operations
Operating margin

Please refer to Table 2 for reconciliations of non-GAAP consolidated results of operations measures
to the nearest comparable GAAP measures.
6

Segment Profitability
Google Segment
($ in millions)

Income from Operations (Segment)

Operating margin

(1)

Q4 2012

Q3 2013

Q4 2013

$4,424

$4,635

$5,315

34%

34%

34%

Q4 2012

Q3 2013

Q4 2013

$(152)

$(248)

$(384)

-10%

-21%

-31%

Motorola Mobile Segment

($ in millions)

Loss from Operations (Segment)

Operating margin

(1)
(2)

(2)

Percentages based on Google segment revenues of $12,905 million in Q4 2012, $13,772 million in Q3 2013 and $15,720 million in Q4 2013.
Percentages based on Motorola Mobile segment revenues of $1,514 million in Q4 2012, $1,184 million in Q3 2013 and $1,243 million in Q4 2013.

Consolidated Free Cash Flow

Non-GAAP ($ in millions)
Net cash provided by operating activities

Less: Purchases of property and equipment

Free Cash Flow

(1)

Q4 2012 (1)

Q3 2013

Q4 2013

$4,669

$5,083

$5,238

$(1,020)

$(2,289)

$(2,255)

$3,649

$2,794

$2,983

Including Motorola Home.

Overview of Q4 2013 OI&E and FX

In Q4, we recognized $125M of Interest and Other Income, net.

In Q4, we recognized $215M of interest income earned on our investments, $23M in net
realized gains, and $21M of interest expense on our long-term debt.

We recognized $108M of foreign exchange loss, of which $56M related to the cost of our
FX cash flow hedging program.

Excluding gains related to our foreign exchange risk management program, had foreign
exchange rates remained constant from the third quarter of 2013 through the fourth
quarter of 2013, our Google segment revenues in the fourth quarter of 2013 would have
been $156M lower. Excluding gains related to our foreign exchange risk management
program, had foreign exchange rates remained constant from the fourth quarter of 2012
through the fourth quarter of 2013, our Google segment revenues in the fourth quarter of
2013 would have been $141M higher.

Our FX cash flow hedging program allowed us to recognize a benefit of approximately

$3M to Google international revenue this quarter.

Google Segment - Revenues by Geography

($ in millions)

Q4 2012

Q3 2013

Q4 2013

United States

$5,992

$6,098

$6,948

United Kingdom

1,305

1,389

1,503

Rest of the world

5,608

6,285

7,269

Total Revenues

$12,905

$13,772

$15,720

10

Google Segment - International Revenues excluding Hedging

and FX Impact (Y/Y)
($ in millions)

UK revenues (GAAP)

Q4 2012
$1,305

Q4 2013
$1,503

exclude:

($ in millions)

UK revenues (GAAP)

Q3 2012
$1,216 $

Q3 2013
1,389

exclude:

a) f/x impact on Q4'13 revenues

using Q4'12 rates

n/a

(5)

a) f/x impact on Q3'13 revenues

using Q3'12 rates

n/a

19

b) hedging gains

(1)

(2)

b) hedging gains

(6)

(17)

$1,304

$1,496

$1,210

$1,391

UK revenues excluding f/x and hedging

impact (Non-GAAP)
Y/Y% (Non-GAAP)

($ in millions)

ROW revenues (GAAP)

15%

Q4 2012
$5,608

Q4 2013
$7,269

exclude:
a) f/x impact on Q4'13 revenues
using Q4'12 rates
b) hedging gains
ROW revenues excluding f/x and
hedging impact (Non-GAAP)
Y/Y% (Non-GAAP)

UK revenues excluding f/x and hedging

impact (Non-GAAP)
Y/Y% (Non-GAAP)

($ in millions)

ROW revenues (GAAP)

15%

Q3 2012

Q3 2013

$4,894

$6,285

n/a

116

(56)

(5)

$4,838

$6,396

exclude:
n/a

146

(36)

(1)

$5,572

$7,414
33%

a) f/x impact on Q3'13 revenues

using Q3'12 rates
b) hedging gains
ROW revenues excluding f/x and
hedging impact (Non-GAAP)
Y/Y% (Non-GAAP)

32%

11

Google Segment - International Revenues excluding

Hedging and FX Impact (Q/Q)
($ in millions)
UK revenues (GAAP)

Q3 2013
$1,389

Q4 2013
$1,503

exclude:
a) f/x impact on Q4'13 revenues
using Q3'13 rates
b) hedging gains
UK revenues excluding f/x and hedging
impact (Non-GAAP)

ROW revenues (GAAP)

n/a

(54)

(17)

(2)

$1,372

$1,447
5%

Q3 2013
$6,285

Q4 2013
$7,269

exclude:
n/a

(102)

b) hedging gains

(5)

(1)

$6,280

$7,166

Q/Q% (Non-GAAP)

Q3 2013

$1,321

$1,389

a) f/x impact on Q3'13 revenues

using Q2'13 rates

n/a

(13)

b) hedging gains

(24)

(17)

UK revenues excluding f/x and hedging

impact (Non-GAAP)

$1,297

$1,359

Q/Q% (Non-GAAP)

($ in millions)
ROW revenues (GAAP)

5%

Q2 2013

Q3 2013

$5,890

$6,285

n/a

54

(11)

(5)

$5,879

$6,334

exclude:

a) f/x impact on Q4'13 revenues

using Q3'13 rates

ROW revenues excluding f/x and hedging

impact (Non-GAAP)

UK revenues (GAAP)

Q2 2013

exclude:

Q/Q% (Non-GAAP)

($ in millions)

($ in millions)

14%

a) f/x impact on Q3'13 revenues

using Q2'13 rates
b) hedging gains
ROW revenues excluding f/x and hedging
impact (Non-GAAP)
Q/Q% (Non-GAAP)

8%

12

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

Q4 2012

Cost of Revenues (GAAP)

Less: Non-GAAP adjustments (2)

$ in millions

As a % of revenues (1)

$ in millions

As a % of revenues (1)

$ in millions

As a % of revenues (1)

$6,213

43%

$6,413

43%

$7,438

44%

$(171)

$(169)

$(137)

$6,042

42%

$6,276

42%

$7,269

43%

Research & Development (GAAP)

$1,935

13%

$2,017

14%

$2,111

13%

$(448)

$(469)

$(459)

Research & Development (non-GAAP)

$1,487

10%

$1,558

11%

$1,642

10%

Sales & Marketing (GAAP)

$1,751

12%

$1,806

12%

$2,126

13%

Less: Non-GAAP adjustments (2)

$(140)

$(156)

$(163)

Sales & Marketing (non-GAAP)

$1,611

11%

$1,643

11%

$1,970

12%

General & Administrative (GAAP)

$1,126

8%

$1,213

8%

$1,261

7%

Less: Non-GAAP adjustments (2)

$(119)

$(139)

$(123)

General & Administrative (non-GAAP)

$1,007

7%

$1,074

7%

$1,138

6%

Total Costs & Expenses (GAAP)

$11,025

76%

$11,449

77%

$12,936

77%

Less: Non-GAAP adjustments (2)

Total Costs & Expenses (non- GAAP)

(2)

Q4 2013

Cost of Revenues (non-GAAP)

Less: Non-GAAP adjustments (2)

(1)

Q3 2013

$(878)
$10,147

$(898)
70%

$10,551

$(917)
71%

$12,019

71%

Percentages based on consolidated revenues of $14,419 million in Q4 2012, $14,893 million in Q3 2013 and $16,858 million in Q4 2013.
Includes stock-based compensation expense for Google and Motorola Mobile, and restructuring and related charges for Motorola Mobile.

13

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

measures to the nearest comparable GAAP measures

Consolidated
($ in millions)

Q4 2012

Q3 2013

Q4 2013

$3,394

$3,444

$3,922

24%

23%

23%

Add: Stock-based compensation expense (SBC)

$700

$886

$902

Add: Motorola Mobile restructuring and related charges

$178

$12

$15

$4,272

$4,342

$4,839

30%

29%

29%

$2,886

$2,970

$3,376

Add: Stock-based compensation expense (net of tax) (2)

$548

$679

$711

Add: Motorola Mobile restructuring and related charges (net of tax) (3)

$113

$9

$4

Less: Net income (loss) from discontinued operations

$21

$(15)

$5

$3,568

$3,643

$4,096

Income from Operations (GAAP)

Operating margin

(1)

Income from Operations (non-GAAP)

Operating margin

(1)

Net Income (GAAP)

Net Income (non-GAAP)

(1)

Percentages based on consolidated revenues of $14,419 million in Q4 2012, $14,893 million in Q3 2013, and $16,858 million in Q4 2013.
Tax effect of SBC is calculated using tax-deductible portion of SBC and applying entity-specific tax rates.
(3)
Tax effect of Motorola Mobile restructuring and related charges is calculated using entity-specific tax rates.
(2)

14