Q2-12 Financial

Highlights
J l 18,
July 18 2012

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This presentation contains non-GAAP measures relating to the company's performance. You can find the
reconciliation of those measures to the nearest comparable GAAP measures in the appendix at the end of
this presentation.
p

This presentation contains forward-looking statements relating to our future performance that are based on
our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements
include, but are not limited to, statements regarding expected financial results for the third quarter and full
year 2012 and the future growth in the Payments, Marketplaces and GSI businesses.

Our actual results may differ materially from those included in this presentation for a variety of reasons,
including, but not limited to; changes in political, business, and economic conditions; foreign exchange rate
fluctuations; changes to capital allocation, including increasing liquidity above current levels; the impact and
integration of recent and future acquisitions; our need to successfully react to the increasing importance of
mobile payments and mobile commerce and the social aspect of commerce; an increasingly competitive
environment for our businesses; the complexity of managing an increasingly large enterprise, with a broad
range of businesses; our need to manage regulatory, tax and litigation risks (including risks specific to
PayPal and Bill Me Later); and our need to to timely upgrade and develop our systems, infrastructure, and
customer service capabilities at reasonable cost while maintaining site stability and performance and adding
new products and features.

You can find more information about factors that could affect our operating results in our most recent annual
report on Form 10-K and our subsequent quarterly reports on Form 10-Q (available at
http://investor.ebayinc.com). You should not rely on any forward-looking statements, and we assume no
obligation to update them. All information in this presentation is as of July 18, 2012, and we do not intend,
and undertake no duty
duty, to update this presentation
presentation.

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Q2-12 Summary

• Strong second quarter results...

• Revenue* and non-GAAP EPS** grew 23% and 16%,
mainly driven by non-vehicles GMV (+15%), TPV (+23%)
and GSI SSS (+21%)
( )
• Margins expanded across all 3 businesses as we
continue to invest to drive growth. Our mobile efforts are
paying off … now expect $10B mobile volume for each
PayPal and Marketplaces
• Capital allocation: $411M free cash flow**... Repurchased
9 million shares … Announced a $2B increase to our
stock buyback program

• Maintaining
g full-year
y g
guidance

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*Note: All growth rates represent year-over-year growth in Q2-12 compared to the same period of the prior year at spot FX rates
2 ** Calculations of Non-GAAP EPS and free cash flow are included in the Appendix of this presentation
 Q2-12 Summary… Revenue

($ millions)
Revenue

3,380 3,398
3,277

2,966
2 760
2,760

2,495 2,546

2,196 2,215 2,249

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12
Reported Y/Y Growth 9% 6% 1% 5% 16% 25% 32% 35% 29% 23%
Organic
g Y/Y Growth* 11% 13% 12% 12% 14% 18% 18% 19% 18% 18%

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*Calculation of Organic Y/Y Growth is included in the Appendix of this presentation
 Q2-12 Summary… Non-GAAP EPS*

Non-GAAP EPS*
$0.60

$0.55 $0.56

$0.52
$0.48 $0.48
$0.47

$0.42
$0.40 $0.40

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12
Reported Y/Y Growth 8% 8% 4% 16% 12% 20% 20% 17% 18% 16%
p Margin*
Non-GAAP Op. g 30.6% 29.1% 28.7% 29.5% 29.4% 27.6% 25.3% 28.7% 26.9% 27.3%

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4 *Calculations of Non-GAAP EPS and Non-GAAP Op. Margin are included in the Appendix of this presentation
Q2-12 Results … vs. Guidance

Items impacting results…

Revenue Non-GAAP EPS*

Q2 Guidance
$3.250 - $3.350B $0.53 - $0.55
(April 18, 2012)

Stronger
$70M 0 02
0.02
Performance
Resolution of indirect
$29M 0.02
taxes dispute ***

One-time tax reserves 0 (0.02)

Q2 Reported $3.398B $0.56

*Calculations of Non-GAAP EPS are included in the Appendix of this presentation ®

5 ** Full impact of resolution of indirect tax dispute includes $29M of Revenue, $11M in Other Income with tax-effected impact of $0.02 on non-GAAP EPS
 Q2-12 Summary… Free Cash Flow* Generation

Free Cash Flow*

($ millions))

691
657
580
551 543
519 526

411

289
266

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12

Reported Y/Y Growth -54% -14% 3% 10% 107% 5% -9% 5% -48% -24%
Capex % of Revenue 7% 9% 7% 8% 6% 9% 10% 9% 7% 10%
FCF % of Revenue 12% 23% 26% 26% 22% 20% 18% 20% 9% 12%

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*Calculation of FCF is included in the Appendix of this presentation
 Business Update… Payments Revenue and Volume

Revenue* Int’l TPV

($ millions) ($ billions)
US

1
15.5  15 5
15.5  16 1
16.1 
672  694 
647  13.0  13.4 
11.9 
521  552 
480 

637  663  17.8  18.4  18.4 

552  555  592  15.5  15.8  15.9 
512 

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12

$ millions $ billions
992 1,073 1,107 1,240 1,309 1,357 27.4 28.7 29.3 33.4 33.9 34.5
y/y growth y/y growth
23% 31% 32% 28% 32% 26% 28% 34% 31% 24% 24% 20%
Fx-neutral y/y growth Fx-neutral y/y growth
23% 30% 31% 31% 31% 27% 27% 29% 27% 24% 25% 23%

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* Starting Q1’12, includes inter-BU revenue, which is eliminated at the consolidated eBay Inc. level
 Business Update… Payments Operating Metrics

(In millions, except %) Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12

Active Registered Accounts
Global Active Accounts 97.7 100.3 103.0 106.3 109.8 113.2
Y/Y Growth 16% 15% 14% 13% 12% 13% FX-neutral TPV growth
driven by continued
Net Number of Payments 424.6 432.0 459.2 548.1 555.7 564.8 expansion of PayPal on
merchant sites around the
Y/Y Growth 26% 29% 29% 30% 31% 31% world and an increase in
share of checkout.
TPV T
Transaction
ti margin
i up Y/Y
On eBay 9,795 9,881 9,968 11,413 11,424 11,337 driven by:
Y/Y Growth 14% 23% 22% 15% 17% 15% • Take rate: increased
due to gains from
Fx-Neutral Y/Y Growth 13% 17% 18% 16% 18% 18% hedging, revenues from
Merchant Services* 17,567 18,860 19,314 21,959 22,433 23,114 credit and FX fee
income
Y/Y Growth
G th 38% 42% 36% 29% 28% 23%
• Trxn expense:
Fx-Neutral Y/Y Growth 37% 37% 33% 29% 28% 26% decreased due to lower
processing costs
On eBay Penetration Rate • Loss rate: relatively
Global 70.8% 71.4% 73.1% 74.4% 75.6% 75.6% stable

Take Rate 3.63% 3.73% 3.78% 3.71% 3.87% 3.94% Segment margin increased
due primarily to
Transaction Expense 1.11% 1.11% 1.14% 1.04% 1.07% 1.07%
improvement in
Loss Rate 0.21% 0.25% 0.31% 0.27% 0.26% 0.26% transaction margin and
operating leverage
Transaction Margin** 63.7% 63.6% 61.5% 64.8% 65.6% 66.3%

Payments Segment Margin 22.3% 21.9% 19.5% 24.7% 26.4% 25.8%

* Merchant Services TPV includes TPV for Bill Me Later whether used within or outside of the PayPal wallet, and Zong ®
8 **Transaction Margin calculation has been adjusted to include total revenues (including revenue from credit and Zong), less transaction expense (including credit
cost of funds), less transaction loss (including credit loan losses), divided by global take rate (based on global total revenues divided by total TPV)
 Business Update… Credit Metrics

Portfolio Balance: $1.7B*

BML Share of US
BML TPV Growth Risk Adjusted Margin***
TPV ** 90% 20%
2 0%
2.0%
1.8% 80%
16%
1.6% 70%
1.4% 60%
1.2% 12%
50%
1.0%
40%
0.8% 8%
0.6%
30%

0.4% 20% 4%
0.2% 10%
0.0% 0% 0%
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12

• BML share of US TPV continued to • BML ggrowth coming g from increased • Slightly
g y lower Y/Y driven byy continued
grow Y/Y, creating transaction penetration in Marketplaces and strong revolving balances offset by
expense savings for PayPal Merchant Services higher losses
• BML active customer base grew 30%
Y/Y and spend per active customer
increased 7% Y/Y

Credit Operating Metrics

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12
BML TPV ($M)            431            499            566            790            650            696
BML TPV (Y/Y) 79% 67% 64% 44% 51% 39%
Portfolio Balance ($M)
( )          993       1,084
,08       1,236
, 36       1,560
,560        1,580
,580       1,692
,69
Risk Adjusted Margin 14.7% 16.5% 18.0% 16.9% 16.8% 15.5%
Net Charge‐offs 4.9% 4.3% 4.3% 4.4% 4.5% 4.6%
* Gross receivables balance as of 06/30/12 ®
** % of US Marketplaces and Merchant Services TPV funded using Bill Me Later
9 *** Risk adjusted margin represents the annualized ratio of Bill Me Later revenue, excluding contra-revenue incentives to customers or merchants, less cost of funds less net credit and
fraud losses relative to average loans receivable for the 3-month period
 Business Update… Marketplaces Revenue

Revenue*
($ millions)
Marketingg
Services & 323
Other Revenue 329 303
314 299
268
Transaction
Revenue

1,443 1,425 1,491

1,285 1,350 1,354

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12
$ millions
1,553 1,663 1,653 1,772 1,728 1,814
y/y growth
12% 19% 17% 16% 11% 9%
Fx‐neutral y/y growth
11% 12% 12% 17% 13% 14%
% Int'l
60% 59% 59% 60% 59% 60% ®
10 * Starting Q1’12, includes inter-BU revenue, which is eliminated at the consolidated eBay Inc. level
 Business Update… Marketplaces Operating Metrics

(In millions, except percentages Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12

Active Users 
Global Active Users
Global Active Users               95.9
95 9              97.2
97 2              98.7
98 7            100.4
100 4             102.4
102 4            104.8
104 8
Active user growth driven
Y/Y Growth 5% 6% 6% 6% 7% 8% by US, UK and emerging
markets
Sold Items
Sold items accelerated
Y/Y Growth in Sold Items 6.5% 7.7% 9.6% 11.3% 17.2% 19.7% +2.5pts... Y/Y growth
driven by UK, China, US
GMV   and Korea

US Non‐Vehicles GMV             5,631             5,490             5,588             6,157             6,366             6,241 FX-neutral non-vehicles

GMV:
Y/Y Growth 10% 14% 14% 10% 13% 14%
• US – momentum driven
by strong growth in
Int'l Non‐Vehicles GMV             8,866             9,191             9,078           10,333             9,840             9,930 fashion, tickets and
Y/Y G
Y/Y Growth
th 8% 19% 18% 9% 11% 8% parts
t & accessoriesi
Fx‐Neutral Y/Y Growth 6% 8% 10% 10% 13% 16% • Int’l – strong
performance in all major
Non‐Vehicles GMV          14,497           14,681           14,666           16,490           16,206           16,171 markets

Y/Y Growth 8% 17% 16% 10% 12% 10% GMV by format:

Fx‐Neutral
Fx Neutral Y/Y Growth
Y/Y Growth 8% 10% 11% 10% 13% 15% • Continued mix shift with
fixed price growth of
20% Y/Y and auctions up
Vehicles GMV             2,050             2,238             2,149             1,864             1,871             2,021 4% Y/Y
Y/Y Growth 1% 2% 0% ‐3% ‐9% ‐10%
Fx‐Neutral Y/Y Growth 0% ‐3% ‐4% ‐3% ‐8% ‐7%
Segment margin
Fi d i
Fixed price as a % of GMV
% f GMV 61% 62% 63% 64% 64% 65% increased due primarily to
a one-time item and
Segment Margin operating leverage
Marketplaces Segment Margin 40.5% 38.8% 38.5% 40.6% 38.7% 39.6% ®
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 Business Update… GSI Revenue and Operating Metrics

Revenue / Metrics
($ millions)
Marketing
Services &
Other Revenue
68

Transaction Q2-11 post

Revenue close
contribution
55
42 57
44 $8M 54
295

165 182 164

159 $16M 148

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Revenue growth impacted

by continued shift to
Total Revenue* 207 203 $24M 203 364 237 221 service fee model.
y/y growth n/a n/a 16% 11% 15% 9% Excluding this impact,
revenue growth would
have been 12% Y/Y
Y/Y***
GeC Merchandise 
Sales**                598                  570                   
$76M 601                1,362            715            674
SSS deceleration driven
y/y growth 21% 18% 18% 22% 20% 18% by seasonality

Same Store Sales (SSS)  20% 20% 18% 26% 26% 21% Segment margin impacted
y/y growth
/ h by seasonality and V11
Segment Margin N/A N/A -0.9% 2.8% 21.4% 9.5% 4.7% technology spend

* Results of operations of GSI are included in our consolidated results of operations as of June 17, 2011. Total Pro Forma transaction revenues are not comparable to prior year pro forma transaction revenues because of impact of
revenues from divested businesses being recorded as service fees vs. gross product revenues for the post-acquisition stub period. Starting Q1’12 includes inter BU-revenue, which is eliminated at the consolidated eBay Inc. level
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** GeC merchandise sales (GMS) represents the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI ecommerce platform, whether we record the
12 full amount of such transaction as a product sale or a percentage of such transaction as a service fee. As of Q1’12, the numbers for Q1’11, Q2’11 and Q3’11 have been adjusted
*** Calculation of revenue excluding the impact of the shift to a service fee model is included in the Appendix of this presentation.
 GSI… Integration Update

Synergies
Enhance GSIonPlatform
Track Leverage eBay Channel Increase PayPal Ubiquity

Revenue* 221 
Merchant
coverage
203 

Q2'11 Q2'12

Segment Consumer
Margin N/A 4.7% preference

• GSI clients continue to gain share (SSS • 13 GSI merchants/brands live on eBay • PayPal coverage of GSI’s volume
+21% Y/Y) was 83%
• GSI Marketing Services extensions are
• V11 certification shift to 2H’12... now live on Magento/x.commerce • PayPal share of checkout on GSI’s
deployment expected post holiday season volume was 13% in Q2’12, up from
• Utilizing GSI demand generation
12% last quarter
capabilities (email, retargeting and
affiliate marketing)

*Results of operations of GSI are included in our consolidated results of operations as of June 17, 2011. Total Pro Forma transaction revenues are not comparable to Q3-10 Pro Forma
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13 transaction revenues because of impact of revenues from divested businesses being recorded as service fees vs. gross product revenues for the post-acquisition stub period.
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 Business Update… Operating Expenses*

Sales & Marketing Product Development General & Admin. Prov. for Trxn
(% of Revenue) (% of Revenue) (% of Revenue) and Loan Loss**
(% of Revenue)

20.8% 20.1%

9.5% 10.5% 10.7% 10.2%

4.3% 3.8%

Q2 11 Q2 12 Q2 11 Q2 12 Q2 11 Q2 12 Q2 11 Q2 12

• Continued investment in • Accelerating innovation... • Continued operating leverage • Top Rated Seller penetration
online and brand marketing to Mobile, platforms and offline increasing... Lower buyer
drive consumer engagement protection expense

Q2-12 Non-GAAP Op Inc*: $927M

Q2-12 Non-GAAP Net Inc*: $730M

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* All expenses are shown on a non-GAAP basis (calculations can be found in the Appendix of this presentation)
14 ** Prov. for Trxn and Loan Loss includes Marketplaces and PayPal transaction loss, Marketplaces consumer protection programs, bad debt expense and BML loan loss
 Q2-12 Cash Flow / Capital Allocation…

Free Cash Flow / Other Movements

Cash Balance / Flows*
• Generated FCF*** of $411M
7.8
76
7.6 • CAPX ~10%
10% d
driven
i b
by ramp iin
0.4 (0.4) (0.1) (0.0) (0.1) search/data investments, site
operations, facilities
3.6 3.6
• Repurchased 9M shares for
~$350M
$350M

• ~53% of BML loan portfolio

funded with offshore cash
3.6 3.7
• Announced a $2B increase to
our stock buyback program

0.6 0.3 • Total US cash and non-equity

Q1'12 Ending FCF Buyback BML M&A Debt Other** Q2'12 Ending investments ~$0.9B
Balance* Balance*

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*Cash balances/flows include cash, cash equivalents and non-equity investments
15 ** Other includes FX impact, employee stock plans and other
***Calculation of FCF is included in the Appendix of this presentation
 Guidance FY 2012

FY’12 Guidance
Revenue Non-GAAP
(in billions) EPS*
Low High Low High
$13.80 $14.10 $2.30 $2.35

Y/Y
18% 21% 13% 16%
Growth

No change to full-year guidance

• North America stronger... Continue to gain operating leverage

• Pressure from Europe and European currencies
• Continue to invest in marketing, technology and new opportunities
• FY’12
FY 12 non
non-GAAP
GAAP effective tax rate:19 - 20%
• FY’12 Free Cash Flow: $2.4B - $2.5B
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* Calculations of Non-GAAP EPS and non-GAAP effective tax rate are included in the Appendix of this presentation
 Guidance Q3 2012

Q3'12 Guidance
Revenue Non-GAAP
(in billions) EPS*
Low High
g Low High
g
$3.30 $3.40 $0.53 $0.55

Y/Y
11% 15% 10% 15%
Growth

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* Calculation of Non-GAAP EPS is included in the Appendix of this presentation
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 Summary

• Strong Q2 with double digit top-

top & bottom
bottom-line
line growth
• PayPal continues strong growth … increasing focus on
improving financial products and consumer experience
• Marketplaces business is thriving ... strength across all
geographies driven by investments in all aspects of our
buyer and
buye a d seller
se e e experience
pe e ce
• GSI performing in line with expectations … continuing to
invest in technology and build client portfolio
• Investing for long-term … focused on delivering next
generation technology and commerce solutions

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 Q&A

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 Appendix

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 Q2-12 Summary… RoIC*

Return on Invested Capital*

25.7%
25.3%
25.0%
24.5%
23.9%
23 2%
23.2% 23 0%
23.0%
22.8%
22.5%
22.2%

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12

*Trailing 12-month Pro-Forma Net Operating Profits After Tax / (Average Total Assets – 95% of Average Cash, Cash Equivalents, and Investments - Average Current Liabilities)
Calculation of Return on Invested Capital is included in the Appendix of this presentation
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 Business Update… GMV-Based Formats

Fixed Price Auctions Vehicles

($ billions) ($ billions) ($ billions)
$12.0
$12.0 $12.0
$10.0
$10.0 $10.0

$8.0
$8.0 $8.0

$6.0
$6.0 $6.0

$4.0 $4.0 $4.0

$2.0 $2.0 $2.0

$0.0 $0.0 $0.0

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12

$ billions $ billions $ billions

$9.5 $9.8 $10.1 $11.3 $11.1 $11.3 $5.0 $4.9 $4.6 $5.2 $5.1 $4.8 $2.1 $2.2 $2.1 $1.9 $1.9 $2.0
Y/Y Growth Y/Y Growth Y/Y Growth
15% 22% 21% 14% 17% 16% ‐2% 9% 8% 1% 1% ‐1% 1% 2% 0% ‐3%
3% ‐9%
9% ‐10%
10%
FX-Neutral Y/Y Growth* FX-Neutral Y/Y Growth FX-Neutral Y/Y Growth
13% 15% 16% 14% 18% 20% ‐2% 2% 3% 1% 3% 4% 0% ‐3% ‐4% ‐3% ‐8% ‐7%
% of Total FX-Neutral GMV % of Total FX-Neutral GMV % of Total FX-Neutral GMV
57% 58% 60% 62% 62% 62% 30% 29% 27% 28% 28% 27% 12% 13% 13% 10% 10% 11%

Strong performance ... ... Stable dollar volume as shift ... Shifting from GMV to lead
continues to fixed price ... gen model
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Calculation of Organic Revenue Growth
Mar 31, Jun 30, Sept 30, Dec 31,
2010 2010 2010 2010

Total revenue growth 9% 6% 1% 5%

Acquisition/Disposition
impact 5% 6% 9% 5%
Foreign currency impact (3)% 1% 2% 2%
Total organic revenue
growth 11 % 13 % 12 % 12 %

Mar 31, Jun 30, Sept 30, Dec 31,

2011 2011 2011 2011

Total revenue growth 16 % 25 % 32 % 35 %

Acquisition/Disposition
p
impact ((1)%
) ((2)%
) ((11)%
) ((16)%
)
Foreign currency impact (1)% (2)% (3)% - %
Total organic revenue
growth 14 % 18 % 18 % 19 %

Mar 31, Jun 30,

2012 2012

Total revenue growth 29 % 23 %

Acquisition/Disposition
impact (11%) (8)%
Foreign currency impact - % 3%
Total organic revenue
growth
g 18 % 18 %

Note: Acquisition impact includes acquisitions made within 12 months of the quarter. ®
23
 Reconciliation of Quarterly GAAP to Non-
GAAP Operating Margin

Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, Jun 30,
2011 2011 2011 2011 2012 2012

GAAP operating income (loss) $ 565 $ 519 $ 537 $ 754 $ 653 $ 695
Stock-based compensation
expense 119 119 108 111 111 127
Employer payroll taxes on stock-
stock
based compensation 13 1 1 1 14 2
Acquisition related transaction
expense - 57 - 1 - -
Amortization of acquired intangible
assets (1) 52 66 105 105 105 103
Restructuring - - - - - -
Non-GAAP operating income $ 749 $ 762 $ 751 $ 972 $ 883 $ 927

Revenues $ 2,546 $ 2,760 $ 2,966 $ 3,380 $ 3,277 $ 3,398

GAAP operating margin 22.2 % 18.8 % 18.1 % 22.3 % 19.9 % 20.5 %
Non-GAAP operating margin 29.4 % 27.6 % 25.3 % 28.7 % 26.9 % 27.3 %

(1) Includes amortization of acquired intangible assets within cost of net revenues and operating
expenses.

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Reconciliation of Quarterly GAAP to Non-
GAAP Net Income / EPS

Jun 30, Sep 30, Dec 31, Mar31, Jun 30, Sept 30, Dec 31, Mar 31, Jun 30,
2010 2010 2010 2011 2011 2011 2011 2012 2012

GAAP net income $ 412 $ 432 $ 559 $ 476 $ 283 $ 491 $ 1,980 $ 570 $ 692
Stock-based compensation expense 92 94 94 119 119 108 111 111 127

Employer payroll taxes on stock-based compensation 1 3 2 13 1 1 1 14 2

Acquisition related transaction expense - - - - 57 - 1 - -
Amortization of acquired intangible assets (1) 59 56 50 52 66 105 105 105 103
Restructuring 9 3 1 - - - - - -
Joltid settlement - - - - - - - - -
Skype sale and transaction related items - (10) - - - - (1,664) - -
Amortization of intangibles and stock-based
compensation for Skype 9 9 13 9 10 24 - - -
Gain from the acquisition of a business - - - - (17) (56) - - -
Loss on divested business - - - - 257 - - 3 -
Accretion of note receivable - - - - - (4) (4) (9) (5)
Gain from the divestiture of a business - - - - - - - - (118)
Income taxes associated with certain non-GAAP
entries (52) (56) (35) (50) (145) (41) 259 (69) (71)
Non-GAAP net income $ 530 $ 531 $ 684 $ 619 $ 631 $ 628 $ 789 $ 725 $ 730

Non-GAAP net income per diluted share $ 0.40 $ 0.40 $ 0.52 $ 0.47 $ 0.48 $ 0.48 $ 0.60 $ 0.55 $ 0.56

Shares used in non-GAAP diluted share calculation 1,330 1,328 1,326 1,320 1,315 1,309 1,308 1,308 1,309

(1) Includes amortization of acquired intangible assets within cost of net revenues and operating expenses.

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Reconciliation of GAAP to Non-GAAP
Quarterly Statement of Income
Three Months Ended Three Months Ended
June 30, 2012 June 30, 2011
Reported Entries GAAP Reported Entries GAAP
(in millions
millions, except per share data and percentages)

Net revenues $ 3,398 $ - $ 3,398 $ 2,760 $ - $ 2,760

Cost of net revenues 987 (14) (a) 954 773 (14) (a) 750
(19) (c) (9) (c)
-
Gross Profit 2,411 33 2,444 1,987 23 2,010
Operating expenses:
S l and
Sales d marketing
k ti 717 (34) ( )
(a) 683 608 (34) ( )
(a) 574
Product development 394 (37) (a) 357 297 (33) (a) 264
General and administrative 390 (42) (a) 346 392 (42) (a) 292
(2) (b) (1) (b)
(57) (i)
Provision for transaction and loan
losses 131 131 118 - 118
Amortization of acquired
intangible assets 84 (84) (c) - 53 (53) (c) -
Total operating expense 1,716 (199) 1,517 1,468 (220) 1,248
Income from operations 695 232 927 519 243 762
Interest and other income, net 156 - 33 28 10 (h) 21
(118) (p) (17) (j)

Accretion of note receivable (5) (m) (256) 256 (k) -

Income before income taxes 851 109 960 291 492 783
Provision for income taxes (159) (71) (d) (230) (8) (145) (d) (152)
Net income $ 692 $ 38 $ 730 $ 283 $ 347 $ 631
Net income per share:
Basic $ 0.54 $ 0.57 $ 0.22 $ 0.49
Notes:
Diluted $ 0.53 $ 0.56 $ 0.22 $ 0.48 (a) Stock-based compensation expense
Weighted average shares: (b) Employer payroll taxes on stock-based compensation

Basic 1,291 1,291 1,297 1,297 (c) Amortization of acquired intangible assets and developed technology
(d) Income taxes associated with certain non-GAAP entries
Diluted 1,309 1,309 1,315 1,315
(h) Amortization of intangibles and stock-based compensation for Skype
Operating margin 20 % 7% 27 % 19 % 9% 28 % (i) Acquisition related transaction expense
Effective tax rate 19 % 5% 24 % 3% 16 % 19 % (j) Gain from the acquisition of a business
(k) Loss on divested business
(m) Accretion of note receivable ®
(p) Gain on the divestiture of a
26 business
Calculation of Free Cash Flow
Three Months Ended
Full
Mar 31, Jun 30, Sep 30, Dec 31, Year
2010 2010 2010 2010 2010
(in millions)
GAAP operating cash
flow $ 418 $ 726 $ 747 $ 854 $ 2,745
Purchases of property
and
equipment, net (152) (207) (167) (197) (723)
Free cash flow $ 266 $ 519 $ 580 $ 657 $ 2,022
2 022

Three Months Ended

Full
Mar 31, Jun 30, Sept 31, Dec 31, Year
2011 2011 2011 2011 2011
(i millions)
(in illi )
GAAP operating cash
flow $ 700 $ 783 $ 809 $ 982 $ 3,274
Purchases of property
and
equipment, net (149) (240) (283) (291) (963)
Free cash flow $ 551 $ 543 $ 526 $ 691 $ 2,311

Three Months Ended

Mar 31, Jun 30,
2012 2012
(in millions)
GAAP operating
p g cash
flow $ 531 $ 768
Purchases of property
and
equipment, net (242) (357) ®
Free cash flow $ 289 $ 411
27
 Calculation of GSI Revenue Growth
Excluding Shift to Service Fee Model

Three Months
Ended
June 30,
30
2012

Total proforma revenue growth 9%

Impact from shift to service fee model 3%

Total proforma growth excluding shift
to service fee model 12 %

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Reconciliation and Calculation of Return on
Invested Capital

In millions, except percentages

Numerator components: Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12
Non-GAAP operating income $ 646 $ 645 $ 737 $ 749 $ 762 $ 751 $ 972 $ 883 $ 927
Tax rate 21 % 21 % 8% 19 % 19 % 21 % 20 % 20 % 24 %
Non-GAAP operating income after tax $ 511 $ 510 $ 675 $ 608 $ 614 $ 594 $ 778 $ 705 $ 705

Denominator components: Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12
Total assets $ 18,748 $ 19,948 $ 22,004 $ 23,005 $ 24,834 $ 24,901 $ 27,320 $ 28,207 $ 28,258
Total cash, cash equivalents and
investments $ 6,726 $ 7,464 $ 9,115 $ 9,480 $ 7,475 $ 7,031 $ 8,382 $ 8,732 $ 8,384
Current liabilities $ 3,564 $ 3,809 $ 4,517 $ 4,763 $ 6,143 $ 6,145 $ 6,734 $ 6,965 $ 6,800

TTM Non-GAAP operating income

after tax $ 2,121 $ 2,126 $ 2,220 $ 2,304 $ 2,407 $ 2,491 $ 2,594 $ 2,691 $ 2,782
TTM average total assets 17,954 18,630 19,560 20,479 21,708 22,938 24,413 25,653 26,704
TTM 95% of average cash
cash,
cash equivalents and investments 5,003 5,825 6,866 7,465 7,649 7,707 7,882 7,809 7,601
TTM average current liabilities 3,634 3,650 3,824 4,048 4,559 5,076 5,661 6,150 6,558
ROIC 22.8 % 23.2 % 25.0 % 25.7 % 25.3 % 24.5 % 23.9 % 23.0 % 22.2 %

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29
Q3’12 and FY 2012 GAAP and Non-GAAP
Guidance
Three Months Ending
September 31, 2012
(in millions, except per share
amounts)t ) GAAP N
Non-GAAP
GAAP ((a))
Revenues $3,300 - $3,400 $3,300 - $3,400
Diluted EPS $0.42 - $0.44 $0.53 - $0.55

(a) Estimated non-GAAP amounts above for the three months ending September 30,
2012, reflect adjustments that exclude the estimated amortization of acquired
intangible assets of approximately $95
$95-$105
$105 million
million, estimated stock
stock-based
based
compensation expense and employer payroll taxes on stock-based compensation
expense of approximately $115-$135 million, and the accretion of a note receivable of
approximately $5 million as well as the related tax impact

Full Year Ending

December 31, 2012
(in millions, except per share
amounts) GAAP Non-GAAP (b)
Revenues $13,800 - $14,100 $13,800 - $14,100
Diluted EPS $1.91 - $ 1.96 $2.30 - $ 2.35
Tax rate 16.0%-17.0% 19.0%-20.0%

(b) Estimated non-GAAP amounts above for the 12 months ending December 31,
2012 reflect adjustments that exclude the estimated amortization of acquired
2012,
intangible assets of approximately $400-$420 million, estimated stock-based
compensation expense and employer payroll taxes on stock-based compensation
expense of approximately $485-$515 million, the gain on a divestiture of approximately
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$118 million, and the accretion of a note receivable of approximately $20 - $25 million
30 as well as the related tax impact.
 FY 2012 GAAP and Non-GAAP Cash Flow
Guidance

Year ended
(in billions) December 31, 2012
Forecasted operating cash flow $3.6 - $3.8
Forecasted purchases of PP&E $1.2 - $1.3
Forecasted free cash flow $2.4 - $2.5

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31