Professional Documents
Culture Documents
Quarterly Earnings
Summary
Second Quarter 2010 Highlights
• Revenue growth of 24% Y/Y and 1% Q/Q
– G
Google
l properties
ti revenue iincreased
d 23% Y/Y and
d 1% Q/Q
– Network revenues increased 23% Y/Y and decreased 1% Q/Q
– International revenues were $3.5 billion
• Operational Highlights
– Strong financial metrics: revenue growth, profitability and cash flow
– Continuing to invest in our largest growth opportunities with the highest long-term ROI:
• Search Monetization
• Display
• Mobile
• Enterprise
2
Quarterly Revenues
Q2’10 Y/Y Growth = 24%
Q2’10 Q/Q Growth = 1% 6,820
6,674 6,775
$7,000
$6,500
5,945
5,541 5,701 5,509 5,523
$6,000
2,036 2,063
2,044
$5,500 5,186 5,367
$5,000 1,801
1,693
$ in millions)
$3 500
$3,500
($
$3,000
$1,000
$500
100 182 189 197 178 186 188 209 300 258
$0
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10
90%
80%
51% 52% 51% 50% 52% 53% 53% 53% 53% 52%
70%
60%
50%
40%
30%
49% 48% 49% 50% 48% 47% 47% 47% 47% 48%
20%
10%
0%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10
US International
4
Traffic Acquisition Costs
$1,800 40%
$1,700
$ ,
$1,600
$1,500 35%
$1,400
$1,300
29 2%
29.2%
$1,200 28.4% 27.9% 30%
$1,100 26.9% 26.9% 27.2% 27.1% 26.6% 26.4% 26.4%
($ in millions)
$1,000
$900 25%
1,721 1,711 1,732
$800 1 559
1,559
1,486 1,474 1,495 1,483 1,436 1,453
$700
$600 20%
$500
$
$400
$300 15%
$200
$100
$0 10%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10
Non-GAAP
($ in millions) Q2'09 Q1'10 Q2'10
Cost of Revenues $2,094 $2,446 $2,459
Percent of revenues 38% 36% 36%
Research & Development $526 $627 $696
Percent of revenues 10% 9% 10%
Sales & Marketing $412 $553 $573
Percent of revenues 7% 8% 8%
General & Administrative $324 $370 $418
Percent of revenues 6% 6% 7%
Total Costs & Expenses $3,356 $3,996 $4,146
Percent of revenues 61% 59% 61%
Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and
expenses to GAAP costs and expenses
6
Profitability
GAAP
($ in millions except per share amounts) Q2'09 Q1'10 Q2'10
Income from Operations $ 1,874 $ 2,488 $ 2,365
Operating Margin 34% 37% 35%
Net Income $ 1,485 $ 1,955 $ 1,840
EPS (diluted) $ 4.66 $ 6.06 $ 5.71
Non-GAAP
($ in
i millions
illi exceptt per share
h amounts)
t ) Q2'09 Q1'10 Q2'10
Income from Operations $ 2,167 $ 2,779 $ 2,674
Operating Margin 39% 41% 39%
Net Income $ 1,708 $ 2,181 $ 2,079
EPS (diluted) $ 5.36 $ 6.76 $ 6.45
7
Free Cash Flow
8
Overview of Q2 2010 OI&E and FX
• In Q2, we recognized $136M of interest income earned on our investments and $43M in
realized gains.
• In Q2, a greater portion of our option portfolio was in the money as foreign exchange rates
moved farther away from the option strike prices in Q2. As a result, we expensed $100M
related to our FX cash flow hedging program.
• Excluding gains related to our FX cash flow hedging program, had foreign exchange rates
remained constant from Q1 2010 through Q2 2010, our revenue in Q2 would have been
$176M higher. Excluding gains related to our FX cash flow hedging program, had foreign
exchange rates remained constant from Q2 2009 through Q2 2010, our revenue in Q2 2010
would
ld h
have b
been $24M llower.
9
Revenues by Geography
U it d States
United St t $2,609 $3,196 $3,288
10
International Revenues Excluding Hedging and FX Impact (Y/Y)
a) f/x impact on Q2'10 revenues using Q2'09 rates a) f/x impact on Q1'10 revenues using Q1'09 rates
(gains)/losses n/a 5 (gains)/losses n/a (72)
b) hedging gains (67) (19) b) hedging gains (82) (10)
UK revenues excluding f/x and hedging impact (Non- UK revenues excluding f/x and hedging impact (Non-
GAAP) $648 $756 GAAP) $651 $760
a) f/x impact on Q2'10 revenues using Q2'09 rates a) f/x impact on Q1'10 revenues using Q1'09 rates
(gains)/losses n/a (29) (gains)/losses n/a (170)
b) hedging gains (57) (60) b) hedging gains (72) -
ROW revenues excluding f/x and hedging impact ROW revenues excluding f/x and hedging impact
(Non-GAAP) $2,142 $2,673 (Non-GAAP) $2,077 $2,567
11
International Revenues Excluding Hedging and FX Impact (Q/Q)
12
Table 1 - Reconciliations of non-GAAP costs and expenses
to GAAP costs and expenses
As a % of As a % of As a % of
($ in millions) Q2'09 Revenues (1) Q1'10 Revenues (1) Q2'10 Revenues (1)
Cost of revenues (GAAP) $ 2,108
2 108 38% $ 2,452
2 452 36% $ 2,467
2 467 36%
Less: Stock-based compensation expense (14) (6) (8)
Cost of revenues (non-GAAP) $ 2,094 38% $ 2,446 36% $ 2,459 36%
Research and development (GAAP) $ 708 13% $ 818 12% $ 898 13%
Less: Stock-based compensation expense (182) (191) (202)
Research and development (non
(non-GAAP)
GAAP) $ 526 10% $ 627 9% $ 696 10%
Total costs and expenses (GAAP) $ 3,649 66% $ 4,287 63% $ 4,455 65%
Less: Stock-based compensation expense (293) (291) (309)
T t l costs
Total t andd expenses (non-GAAP)
( GAAP) $ 3 356
3,356 61% $ 3 996
3,996 59% $ 4 146
4,146 61%
(1) Percentages based on revenues of $5,523 million in Q2'09, $6,775 million in Q1'10 and $6,820 million in Q2'10.
13
Table 2 - Reconciliations of non-GAAP results of operations
measures to the nearest comparable GAAP measures
14
Q2 2010
Quarterly Earnings
Summary