Q4 2012 Quarterly Earnings Summary

Fourth Quarter 2012 Highlights

Please note: Results from Motorola Home are presented as net loss from discontinued operations on the consolidated statements of income, and are excluded from all other results unless otherwise noted. Previously reported quarters have been adjusted to conform with current period presentation.

Consolidated revenues growth of 36% Y/Y and 8% Q/Q. Including Home, consolidated revenues growth would have been 44% Y/Y and 8% Q/Q.

Consolidated revenues were $14.4 billion. Including Home, consolidated revenues would have been $15.2 billion.

Google revenues (advertising and other) were $12.9 billion

Google properties revenues increased 18% Y/Y and 12% Q/Q

Network revenues increased 19% Y/Y and 10% Q/Q

Other revenues increased 102% Y/Y and 24% Q/Q

Motorola Mobile revenues (hardware and other) were $1.5 billion.

Consolidated international revenues (excluding Home) were $7.7 billion

Operational Highlights

Strong financial metrics: revenue growth and cash flow Continuing to invest in three major areas of focus:

Core ads: Search and Display advertising Businesses demonstrating high consumer success: YouTube, Android, Chrome New businesses where were investing to drive adoption and innovation: Social, Enterprise, Commerce, Local

Consolidated Quarterly Revenues

$15,000 $14,000 $13,000 $12,000 $11,000 10,584 9,720 9,026 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 4,439 $2,000 $1,000 $0 300 Q1'10 258 Q2'10
Other
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14,419

Q412 Y/Y Growth = 36% Q412 Q/Q Growth = 8%

11,807 843

13,304 1,778

1,514

10,645

3,436 3,133

($ in millions)

$10,000 8,440 7,286 6,775 2,036 6,820 2,063 2,495 8,575

2,880 2,595

2,913

2,983

2,484 2,427

2,199
8,640 6,740

7,294

7,312

7,542

7,727

5,672 4,499 4,833

5,879

6,232

254 Q3'10

273 Q4'10

269 Q1'11

310 Q2'11

385 Q3'11
Network

410 Q4'11

420 Q1'12

439 Q2'12

666 Q3'12

829 Q4'12

Google.com

Motorola Mobile

U.S. vs. International Revenues Consolidated

($ in millions)
100% 90% 80% 53% 70% 60% 50% 40% 30% 47% 20% 10% 0% Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
US

6,775

6,820

7,286

8,440

8,575

9,026

9,720

10,584

10,645

11,807

13,304

14,419

52%

52%

52%

53%

54%

55%

53%

54%

54%

51%

53%

48%

48%

48%

47%

46%

45%

47%

46%

46%

49%

47%

Q3'11
International

Q4'11

Q1'12

Q2'12

Q3'12

Q4'12

Traffic Acquisition Costs

$3,000 30%

$2,500 26.4% 26.4% 25.7% 25.3% 24.5% 24.2% 23.7% 24.1% 24.5% 24.7% 25.5% 25.5% 25%

$2,000

($ in millions)

$1,500
2,770 2,453 2,510

3,076

2,600

$1,000
1,711 1,732 1,805

2,069

2,038

2,110

2,210

20%

$500

$0 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11

TAC

15% Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12

TAC as % of Advertising Revenues

Consolidated Costs and Expenses

GAAP ($ in millions)
Cost of Revenues
Percent of revenues

Q4'11
$3,702
35%

Q3'12
$5,955
45%

Q4'12
$6,213
43%

Research & Development

Percent of revenues

$1,298
12%

$1,879
14%

$1,935
13%

Sales & Marketing

Percent of revenues

$1,268
12%

$1,710
13%

$1,751
12%

General & Administrative

Percent of revenues

$809
8%

$1,020
8%

$1,126
8%

Total Costs & Expenses

Percent of revenues

$7,077
67%

$10,564
79%

$11,025
76%

Non-GAAP ($ in millions)
Cost of Revenues
Percent of revenues

Q4'11
$3,625
34%

Q3'12
$5,768
43%

Q4'12
$6,042
42%

Research & Development

Percent of revenues

$1,032
10%

$1,416
11%

$1,487
10%

Sales & Marketing

Percent of revenues

$1,163
11%

$1,479
11%

$1,611
11%

General & Administrative

Percent of revenues

$721
7%

$882
7%

$1,007
7%

Total Costs & Expenses

Percent of revenues

$6,541
62%

$9,545
72%

$10,147
70%

Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses
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Profitability
Consolidated
GAAP ($ in millions except per share amounts) Income from Operations Operating Margin Net Income from continuing operations Q4'11
$ 3,507 33% $ $ $ 2,705 $ $ $ $ 8.22 $

Q3'12
$ 2,740 21% 2,158 18 2,176 6.48 0.05 6.53

Q4'12
$ 3,394 24% $ $ $ $ $ $ 2,907 (21) 2,886 8.68 (0.06) 8.62

Net Income (loss) from discontinued operations

Net Income EPS (diluted) - continuing operations

EPS (diluted) - discontinued operations

EPS (diluted)

Non-GAAP ($ in millions except per share amounts) Income from Operations Operating Margin Net Income EPS (diluted)

Q4'12
Q4'11
$ 4,043 38% $ $ 3,127 9.50 $ $

Q3'12
$ 3,759 28% 2,955 8.87

Q4'12
$ 4,272 30% $ $ 3,568 10.65

(With Home)

4,307

Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
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Profitability (Contd)
Google GAAP ($ in millions) Income from Operations Google Operating Margin Non-GAAP ($ in millions) Income from Operations Google Operating Margin Motorola Mobile GAAP ($ in millions) Loss from Operations Motorola Mobile Operating Margin Non-GAAP ($ in millions) Loss from Operations Motorola Mobile Operating Margin Q3'12
$ 3,263 28%

Q4'12
$ 3,747 29%

Q3'12
$ 3,951 34%

Q4'12
$ 4,424 34%

Q3'12
$ (523) -29%

Q4'12
$ (353) -23%

Q3'12
$ (192) -11%

Q4'12
$ (152) -10%

Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
8

Consolidated Free Cash Flow

(including Motorola Home)

($ in millions) Net cash provided by operating activities Less purchases of property and equipment

Q4'11
$3,924

Q3'12
$4,004

Q4'12
$4,669

($951)

($872)

($1,020)

Free cash flow (non-GAAP)

$2,973

$3,132

$3,649

Overview of Q4 2012 OI&E and FX

In Interest and Other Income, Net, we recognized net income of $152M for Q4 In Q4, we recognized $179M of interest income earned on our investments and $71M in net realized gains. We expensed $77M related to 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 2012 through the fourth quarter of 2012, our Google business revenues in the fourth quarter of 2012 would have been $130M lower. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the fourth quarter of 2011 through the fourth quarter of 2012, our Google business revenues in the fourth quarter of 2012 would have been $193M higher.
In addition, our FX cash flow hedging program allowed us to recognize a benefit of approximately $37M to Google business international revenue this quarter.

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Google Business Revenues by Geography

($ in millions)

Q4'11

Q3'12

Q4'12

United States

$4,980

5,416

5,992

United Kingdom

1,064

1,216

1,305

Rest of the world

4,540

4,894

5,608

Total Revenues

$10,584

11,526

12,905

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Google Business - International Revenues Excluding Hedging and FX Impact (Y/Y)

($ in millions) UK revenues (GAAP) exclude: Q4'11 $1,064 Q4'12 $1,305 ($ in millions) UK revenues (GAAP) exclude: Q3'11 $1,047 Q3'12 $1,216

a) f/x impact on Q4'12 revenues using Q4'11 rates (gains)/losses b) hedging gains

n/a (6)

(16) (1)

a) f/x impact on Q3'12 revenues using Q3'11 rates (gains)/losses b) hedging gains

n/a -

47 (6)

UK revenues excluding f/x and hedging impact (Non-GAAP)

$1,058

$1,288

UK revenues excluding f/x and hedging impact (Non-GAAP)

$1,047

$1,257

Y/Y % (Non-GAAP)

22%

Y/Y % (Non-GAAP)

20%

($ in millions) ROW revenues (GAAP) exclude:

Q4'11 $4,540

Q4'12 $5,608

($ in millions) ROW revenues (GAAP) exclude:

Q3'11 $4,253

Q3'12 $4,894

a) f/x impact on Q4'12 revenues using Q4'11 rates (gains)/losses b) hedging gains

n/a (19)

209 (36)

a) f/x impact on Q3'12 revenues using Q3'11 rates (gains)/losses b) hedging gains

n/a (1)

510 (56)

ROW revenues excluding f/x and hedging impact (Non-GAAP)

$4,521

$5,781

ROW revenues excluding f/x and hedging impact (Non-GAAP)

$4,252

$5,348

Y/Y % (Non-GAAP)

28%

Y/Y % (Non-GAAP)

26%

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Google Business - International Revenues Excluding Hedging and FX Impact (Q/Q)

($ in millions) UK revenues (GAAP) exclude: Q3'12 $1,216 Q4'12 $1,305 ($ in millions) UK revenues (GAAP) exclude: Q2'12 $1,175 Q3'12 $1,216

a) f/x impact on Q4'12 revenues using Q3'12 rates (gains)/losses b) hedging gains

n/a (6)

(27) (1)

a) f/x impact on Q3'12 revenues using Q2'12 rates (gains)/losses b) hedging gains

n/a (7)

17 (6)

UK revenues excluding f/x and hedging impact (Non-GAAP)

$1,210

$1,277

UK revenues excluding f/x and hedging impact (Non-GAAP)

$1,168

$1,227

Q/Q % (Non-GAAP)

6%

Q/Q % (Non-GAAP)

5%

($ in millions) ROW revenues (GAAP) exclude:

Q3'12 $4,894

Q4'12 $5,608

($ in millions) ROW revenues (GAAP) exclude:

Q2'12 $4,784

Q3'12 $4,894

a) f/x impact on Q4'12 revenues using Q3'12 rates (gains)/losses b) hedging gains

n/a (56)

(103) (36)

a) f/x impact on Q3'12 revenues using Q2'12 rates (gains)/losses b) hedging gains

n/a (74)

119 (56)

ROW revenues excluding f/x and hedging impact (Non-GAAP)

$4,838

$5,469

ROW revenues excluding f/x and hedging impact (Non-GAAP)

$4,710

$4,957

Q/Q % (Non-GAAP)

13%

Q/Q % (Non-GAAP)

5%

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Table 1 - Reconciliations of consolidated non-GAAP costs and expenses to GAAP costs and expenses
($ in millions) Cost of revenues - (GAAP) Less: non-GAAP adjustments (2) Cost of revenues - (non-GAAP) $ Q4'11 $ 3,702 (77) 3,625 34% $ As a % of Revenues (1) 35% Q3'12 $ 5,955 (187) 5,768 43% $ As a % of Revenues (1) 45% Q4'12 $ 6,213 (171) 6,042 42% As a % of Revenues (1) 43%

Research and development - (GAAP) Less: non-GAAP adjustments (2) Research and development (non-GAAP)

1,298 (266)

12%

1,879 (463)

14%

1,935 (448)

13%

1,032

10%

1,416

11%

1,487

10%

Sales and marketing - (GAAP) Less: non-GAAP adjustments (2) Sales and marketing (non-GAAP)

1,268 (105)

12%

1,710 (231)

13%

1,751 (140)

12%

1,163

11%

1,479

11%

1,611

11%

General and administrative - (GAAP) Less: non-GAAP adjustments (2) General and administrative (non-GAAP)

809 (88)

8%

1,020 (138)

8%

1,126 (119)

8%

721

7%

882

7%

1,007

7%

Total costs and expenses (GAAP) Less: non-GAAP adjustments (2) Total costs and expenses (non-GAAP)

7,077 (536)

67%

10,564 (1,019)

79%

11,025 (878)

76%

6,541

62%

9,545

72%

10,147

70%

(1) Percentages based on consolidated revenues of $10,584 million in Q4'11, $13,304 million in Q3'12 and $14,419 million in Q4'12. (2) Pertains to stock-based compensation expense and Motorola Mobile restructuring and related charges in 2012.

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Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
Consolidated
(In millions except per share amounts) Income from operations (GAAP) Add: Stock-based compensation expense Add: Motorola Mobile restructuring and related charges Income from operations (non-GAAP) Add: Impact from Motorola Home Income from operations with Home (non-GAAP) Net income (GAAP) Add: Stock-based compensation expense (net of tax) (2) Add: Motorola Mobile restructuring and related charges net of tax (3) Minus: Net income (loss) from discontinued operations Net income (non-GAAP) Net income per share - diluted (GAAP) Net income per share - diluted (non-GAAP) Shares used in per share calculation - diluted Q4'11 $ 3,507 536 Operating Margin (1) 33% $ Q3'12 2,740 706 313 3,759 Operating Margin (1) 21% $ Q4'12 3,394 700 178 4,272 35 4,307 2,886 548 113 21 3,568 8.62 10.65 335 Operating Margin (1) 24%

4,043

38%

28%

$ $

30%

2,705 422

$ $ $

3,127 8.22 9.50 329

$ $ $

2,176 554 243 (18) 2,955 6.53 8.87 333

$ $ $

(1) Percentages based on consolidated revenues of $10,584 million in Q4'11, $13,304 million in Q3'12 and $14,419 million in Q4'12. (2) The tax effect of SBC is calculated using the tax-deductible portion of SBC and applying the entity-specific tax rates. (3) The tax effect of other special items is calculated using the entity-specific tax rates.

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Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures (contd)
Google
($ in millions) Income from operations (GAAP) Add: Stock-based compensation expense Income from operations (non-GAAP) $ $ Q3'12 3,263 688 3,951 34% $ Operating Margin (1) 28% $ Q4'12 3,747 677 4,424 34% Operating Margin (1) 29%

(1) Percentages based on Google revenues of $11,526 million in Q3'12 and $12,905 million in Q4'12.

Motorola Mobile
($ in millions) Loss from operations (GAAP) Add: Stock-based compensation expense Add: Motorola Mobile restructuring and related charges Income from operations (non-GAAP) $ $ Q3'12 (523) 18 313 (192) -11% $ Operating Margin (2) -29% $ Q4'12 (353) 23 178 (152) -10% Operating Margin (2) -23%

(2) Percentages based on Motorola Mobile revenues of $1,778 million in Q3'12 and $1,514 million in Q4'12.

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Q4 2012 Quarterly Earnings Summary