• Google reported record revenues of $1.256 billion for the quarter ended March 31, 2005, up 93% year over year. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs or TAC, the portion of revenues shared with partners.
  
  
• Income from operations, on a GAAP basis, was $443 million, or 35.2% of revenues for the quarter ended March 31, 2005 compared to $155 million or 23.8% of revenues for the first quarter of 2004.
  
  
• Income from operations includes a $49 million non-cash, stock-based compensation charge compared to a $76 million non-cash, stock-based compensation charge in the prior year’s first quarter.
  
  
• Net income on a GAAP basis for the quarter ended March 31, 2005 was computed based on the following income statement or condensed income statement line items. Revenues of $1.256 billion less TAC of $462 million, less both other costs and expenses before stock-based compensation of $303 million and stock-based compensation of $49 million, increased by other income of $14 million and then reduced by a provision for income taxes of $87 million.
  
  
• Net income on a GAAP basis in the first quarter of 2005 was $369 million or $1.29 per share on a basis of a diluted 286.6 million weighted average shares outstanding. This compared to net income for the first quarter of 2004 of $64 million or $0.24 per share on a basis of a diluted 264.2 million weighted average shares outstanding.
  
  
• Some Wall Street analysts use non-GAAP measures to analyze our operating results. For instance, they may subtract TAC of $462 million from revenues of $1.256 billion to arrive at a net revenues amount. Also, certain analysts may arrive at net income before stock-based compensation by subtracting traffic acquisition costs of $462 million, other costs and expenses before stock-based compensation of $303 million, adding back other income of $14 million and subtracting our provision for income taxes of $87 million from revenues of $1.256 billion.
  
  
• Net cash provided by operating activities for the three months ended March 31, 2005 totaled $530 million as compared to $208 million for the first quarter of 2004, an increase of 155%.
  
  
• Adjusted EBITDA, which is an alternative measure of liquidity to GAAP net cash provided by operating activities (and is defined as income before interest, taxes, depreciation, amortization, the non-cash stock-based compensation charge and in-process R&D), increased by $293 million or 115% to $ 548 million (or 44% of revenues) in the first quarter of 2005 from $255 million in the first quarter of 2004 (or 39% of revenues).

Financial Highlights

Revenues - Revenues in the quarter totaled a record $1.256 billion, representing a 22% increase over the fourth quarter of 2004 and a 93% year-over-year increase. This revenue increase reflects strong traffic and monetization growth in the quarter as well as advertisers’ growing recognition of the Internet as an effective advertising medium.

Google-Sites Revenues - Google-owned sites generated $657 million or 52% of total revenues. This represents an increase of 116% over the first quarter of 2004.

The Google Network - Revenues generated on Google’s partner sites, through AdSense programs, contributed $584 million, or 47% of total revenues, a 75% increase over the Network revenues generated in the same quarter last year.

Income from operations - Income from operations in the first quarter, on a GAAP basis, was $443 million or 35.2% of revenues, and included a non-cash charge of $49 million for stock-based compensation. This compares to income from operations of $155 million or 23.8% of revenues in the first quarter of 2004, when the stock-based compensation charge was $76 million. This improvement in operating margins was primarily due to decreases in both stock-based compensation expense and TAC as a percentage of revenues.

Income Taxes - Google recorded a provision for income taxes of $87 million in the first quarter of 2005, an effective tax rate of 19% as compared to a $92 million provision for income taxes and a 59% effective tax rate in the first quarter of 2004. The provision for income taxes in this year’s first quarter was reduced by $49 million related to ISO disqualifying dispositions. The effective tax rate for the remainder of 2005 is expected to be less than 30%. However if future revenues recognized by Google’s Irish subsidiary are not as proportionately great as expected, Google’s effective tax rate will be higher than expected.

Net Income - Net income on a GAAP basis increased to $369 million or 29.4% of revenues in the first quarter of 2005 as compared to $64 million or 9.8% of revenues in the first quarter of 2004. Earnings on a diluted per share basis were $1.29 in the first quarter of 2005 as compared to $0.24 in the first quarter of 2004.

Webcast and conference call information

Forward looking statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to Google's market opportunity, future business prospects and our anticipated effective tax rate. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, our ability to compete with new or existing competitors, risks related to our ability to innovate and grow, risks related to our international operations, our ability to maintain and enhance our brand, and the fact that we may have exposure to greater than expected tax liabilities, as well as those included under the captions, "Factors That Could Affect Future Results" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations," in our annual report on Form 10-K for the year ended December 31, 2004 which is on file with the SEC and is available on our investor relations website at investor.google.com and on the SEC’s website at www.sec.gov. Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended March 31, 2005, which will be filed with the SEC in May 2005. All information provided in this release and in the attachments is as of April 21, 2005 and we undertake no duty to update this information.

About non-GAAP financial measures