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MOUNTAIN VIEW, Calif. - April 20, 2006 - Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter ended March 31, 2006. 

"Google had an exceptional quarter with strong growth and profitability, from both Google properties and the network," said Eric Schmidt, CEO of Google. "We are driving this growth through investments in our infrastructure and our people, product innovations that attract new users, and relationships with advertisers and partners around the world.  The strength of our business model gives us the opportunity to invest in our business, allowing us to maintain and grow our market leadership."

Q1 Financial Summary

Google reported revenues of $2.25 billion for the quarter ended March 31, 2006, an increase of 79% compared to the first quarter of 2005 and an increase of 17% compared to the fourth quarter of 2005.  Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs, or TAC.  In the first quarter of 2006, TAC totaled $723 million, or 32% of advertising revenues. 

Google reports operating income, net income, and earnings per share (EPS) on a GAAP and non-GAAP basis.  The non-GAAP measures are described below and reconciled to the corresponding GAAP measures in the section below titled "About non-GAAP financial measures."

• GAAP operating income for the first quarter of 2006 was $743 million, or 33% of revenues.  This compares to GAAP operating income of $570 million, or 30% of revenues, in the fourth quarter of 2005.  Non-GAAP operating income in the first quarter was $887 million, or 39% of revenues. This compares to non-GAAP operating income of $718 million, or 37% of revenues, in the fourth quarter.
  
  
• GAAP net income for the first quarter was $592 million as compared to $372 million in the fourth quarter.  Non-GAAP net income was $697 million, compared to $469 million in the fourth quarter.
  
  
• GAAP EPS for the first quarter was $1.95 on 304 million diluted shares outstanding, compared to $1.22 for the fourth quarter, on 304 million diluted shares outstanding.  Non-GAAP EPS was $2.29, compared to $1.54 in the fourth quarter.
  
  
• Non-GAAP operating income, non-GAAP net income, and non-GAAP EPS in the first quarter of 2006 are computed net of certain material items: stock-based compensation (SBC) and estimated plaintiffs' attorneys' fees related to the proposed settlement of the Lane's Gift class action lawsuit.  In the first quarter, the charge related to stock-based compensation was $115 million as compared to $58 million in the fourth quarter of 2005, which was also excluded from non-GAAP calculations.  Plaintiffs' attorneys' fees related to the proposed Lane's Gift class-action lawsuit settlement are estimated to be $30 million.  In the fourth quarter of 2005, the contribution to the Google Foundation of $90 million was excluded from the calculation of non-GAAP operating income, non-GAAP net income, and non-GAAP EPS.  Tax benefits related to SBC charges, the estimated plaintiffs' attorneys' fees, and the contribution to the Google Foundation have been excluded from non-GAAP calculations.  The tax benefit related to SBC was $27 million in the first quarter and $14 million in the fourth quarter.  The tax benefit related to the estimated plaintiffs' attorneys' fees in the first quarter was $12 million.  The tax benefit related to the contribution to the Google Foundation in the fourth quarter was $37 million.  Reconciliations of non-GAAP measures to GAAP operating income, net income, and EPS are included at the end of this release.

Google Sites Revenues - Google-owned sites generated revenues of $1.30 billion, or 58% of total revenues. This represents a 97% increase over first quarter 2005 revenues of $657 million and an 18% increase over fourth quarter 2005 revenues of $1.10 billion.

Google Network Revenues - Google's partner sites generated revenues, through AdSense programs, of $928 million, or 41% of total revenues.  This is a 59% increase over network revenues of $584 million generated in the first quarter of 2005 and a 16% increase over fourth quarter 2005 revenues of $799 million.

International Revenues - Revenues from outside of the United States contributed 42% of total revenues, compared to 38% in the fourth quarter of 2005 and 39% in the first quarter of 2005.  Foreign exchange rates had an immaterial impact on sequential international revenue growth.  Had foreign exchange rates remained constant from the first quarter of 2005 through the first quarter of 2006, our international revenues would have been $65 million higher.

Reconciliations of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, are included at the end of this release.

Cash - As of March 31, 2006, cash, cash equivalents, and marketable securities were $8.43 billion.  This balance does not reflect the additional $2.07 billion raised in the offering that closed in early April.

We also completed the investment of $1 billion in AOL in early April, and the balance of $8.43 billion does not reflect the impact of the cash investment.

On a worldwide basis, Google employed 6,790 full-time employees as of March 31, 2006, up from 5,680 full time employees as of December 31, 2005.

Webcast and conference call information

A live audio webcast of Google's first quarter 2006 earnings release call will be available at http://investor.google.com/news.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET).  This press release, the financial tables, as well as other supplemental information including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available at that site.  A replay of the call will be available beginning at 7:30 PM (ET) through midnight Thursday, April 27, 2006 by calling 888-203-1112 in the United States or 719-457-0820 for calls from outside the United States.  The required confirmation code for the replay is 5907541.

Forward looking statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to our plans to invest in our business, our expected stock-based compensation, the expected dilution related to equity grants to our employees, our anticipated effective tax rate for 2006, and planned capital expenditures.  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, risks related to our international operations, our hiring patterns, the amount of stock-based compensation we issue to our service providers, the mix of our US revenue as compared to our non-US revenue, the uncertain and complex nature of tax forecasting, the fact that we may have exposure to greater than expected tax liabilities, and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties 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 report on Form 10-K for the year ended December 31, 2005, 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, 2006, which will be filed with the SEC in the second quarter of 2006.  All information provided in this release and in the attachments is as of April 20, 2006, and Google undertakes no duty to update this information.

About non-GAAP financial measures

To supplement Google's consolidated financial statements presented in accordance with GAAP, Google uses the following measures defined as non-GAAP financial measures by the SEC: non-GAAP operating income, non-GAAP net income, non-GAAP operating margins, non-GAAP EPS and free cash flow.  The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.  For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" and "Reconciliation from net cash provided by operating activities to free cash flow" included at the end of this release.

Google's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our core business operating results.  Google believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Google's performance and when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to Google's historical performance and liquidity and our competitors' operating results.  Google believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.

Google has computed its non-GAAP financial measures using the same consistent method from quarter to quarter and year to year.  The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

		December 31, 2005		March 31, 2006
Assets
Current assets:
Cash and cash equivalents		$          3,877,174		$        2,935,179
Marketable securities		4,157,073		5,493,849
Accounts receivable, net of allowance		687,976		844,378
Deferred income taxes, net		49,341		26,317
Prepaid revenue share, expenses and other assets		229,507		256,234
Total current assets		9,001,071		9,555,957
Property and equipment, net		961,749		1,209,681
Goodwill		194,900		318,806
Intangible assets, net		82,783		160,573
Prepaid revenue share, expenses and other assets, non-current		31,310		49,853
Total assets		$      10,271,813		$       11,294,870
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$          115,575		$            145,911
Accrued compensation and benefits		198,788		118,395
Accrued expenses and other current liabilities		114,377		156,784
Accrued revenue share		215,771		267,202
Deferred revenue		73,099		80,172
Income taxes payable		27,774		211,560
Total current liabilities		745,384		980,024
Deferred revenue, long-term		10,468		17,123
Liabilities for stock option exercised early, long-term		2,083		1,368
Deferred income taxes, net		35,419		-
Other long-term liabilities		59,502		53,087
Stockholders' equity:
Common stock		293		295
Additional paid-in capital		7,477,792		7,605,177
Deferred stock-based compensation		(119,015)		-
Accumulated other comprehensive income		4,019		(10,363)
Retained earnings		2,055,868		2,648,159
Total stockholders' equity		9,418,957		10,243,268
Total liabilities and stockholders' equity		$      10,271,813		$      11,294,870

		Three Months Ended March 31,
		2005		2006
Revenues		$   1,256,516		$    2,253,755
Costs and expenses:
Cost of revenues (including stock-based compensation expense of $1,573 and $2,283)*		546,781		904,119
Research and development (including stock-based compensation expense of $29,299 and $73,086)*		108,711		246,599
Sales and marketing (including stock-based compensation expense of $6,536 and $15,929)*		89,488		190,943
General and administrative (including stock-based compensation expense of $11,500 and $23,366)*		68,766		169,395
Total costs and expenses		813,746		1,511,056
Income from operations		442,770		742,699
Interest income and other, net		13,686		67,919
Income before income taxes		456,456		810,618
Provision for income taxes		87,263		218,327
Net income		$   369,193		$      592,291
Net income per share - basic		$        1.39		$            2.02
Net income per share - diluted		$        1.29		$           1.95
Shares used in per share calculation - basic		266,106		293,896
Shares used in per share calculation - diluted		286,612		304,123
*Stock-based compensation recognized in the three months ended March 31, 2005 has been reclassed to this expense line to conform with the presentation in the three months ended March 31, 2006.

		Three Months Ended March 31,
		2005		2006
Operating activities
Net income		$     369,193		$     592,291
Adjustments:
Depreciation and amortization of property and equipment		46,478		95,868
Amortization of intangibles and warrants		9,715		15,290
In-process research and development		-		4,000
Stock-based compensation		48,908		114,664
Excess tax benefits from stock-based award activity		77,377		-
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		(60,069)		(155,221)
Income taxes, net		6,044		139,242
Prepaid revenue shares, expenses and other assets		(29,571)		(26,525)
Accounts payable		42,694		30,232
Accrued expenses and other liabilities		(17,767)		(39,295)
Accrued revenue share		32,085		51,216
Deferred revenue		4,535		3,042
Net cash provided by operating activities		529,622		824,804
Investing activities
Purchases of property and equipment		(142,391)		(344,938)
Purchases of marketable securities		(1,160,160)		(13,111,471)
Maturities and sales of marketable securities		835,223		11,755,756
Acquisitions, net of cash acquired, and purchases of intangibles and other assets		(5,000)		(187,964)
Net cash used in investing activities		(472,328)		(1,888,617)
Financing activities
Proceeds from exercise of stock options, net		4,097		42,611
Excess tax benefits from stock-based award activity		-		77,285
Payments of principal on capital leases and equipment loans		(592)		-
Net cash provided by financing activities		3,505		119,896
Effect of exchange rate changes on cash and cash equivalents		(5,100)		1,922
Net increase(decrease) in cash and cash equivalents		55,699		(941,995)
Cash and cash equivalents at beginning of year		426,873		3,877,174
Cash and cash equivalents at end of the period		$      482,572		$       2,935,179

		Three months ended December 31, 2005										Three months ended March 31, 2006
		Actual		As a % of revenues		Adjustments		Non-GAAP Results		As a % of revenues		Actual		As a % of revenues		Adjustments		Non-GAAP Results		As a % of revenues
						58,154	(a)									114,664	(c)
						90,000	(b)									30,000	(d)
Income from operations		$    569,640		29.7%		$   148,154		$   717,794		37.4%		$   742,699		33.0%		$    144,664		$    887,363		39.4%
						58,154	(a)									114,664	(c)
						90,000	(b)									30,000	(d)
						(13,881)	(e)									(27,444)	(e)
						(37,026)	(e)									(12,342)	(e)
Net income		$    372,208				$    97,247		$    469,455				$    592,291				$    104,878		$    697,169
Net income per share - diluted		$    1.22						$    1.54				$    1.95						$    2.29
Shares used in per share calculation - diluted		303,972						303,972				304,123						304,123

		Three months ended March 31, 2005		Three months ended December 31, 2005		Three months ended March 31, 2006
Net cash provided by operating activities		$    529,622		$    658,434		$    824,804
Less purchases of property and equipment		(142,391)		(245,831)		(344,938)
Free cash flow		$    387,231		$    412,603		$    479,866

(1) Excess tax benefits related to stock-based award activity of $77,377 and $162,024 were included in net cash provided by operating activities in the first and the fourth quarters of 2005.
Excess tax benefits related to stock-based award activity of $77,285 were excluded from net cash provided by operating activities in the first quarter of 2006 as a result of our adoption of SFAS 123R, "Shared-based Payment" on January 1, 2006; these amounts are now included in net cash provided by financing activities.