Google on Thursday posted first-quarter profit that blew past expectations as revenue jumped 79 percent on the strength of the search giant’s web properties and online advertising.
on Thursday posted first-quarter profit that blew past expectations as revenue jumped 79 percent on the strength of the search giant’s web properties and online advertising.
Excluding traffic acquisition and other one-time costs, profit rose to $697 million, or $2.29 per share, vs. $1.12 per share in the year-ago quarter. Wall Street on average had expected the company to earn $1.97 per share, according to Thomson One’s survey of analysts.
Meantime, Google’s quarterly revenue for the first time topped $2 billion, rising to $2.25 billion from $1.26 billion in the year-ago quarter.
Including special items, Google’s net income increased to $592.3 million, or $1.95 per share, from $369.2 million, or $1.29 per share, in the year-ago period.
Ahead of the news, which came after the markets closed, Google shares gained $4.50, or 1.15 percent, to $415 on the Nasdaq. Shares raced up $33.03, or nearly 8 percent, to $448.03 in after-hours trading.
The earnings showed Wall Street that Mountain View, California-based Google has not lost its mojo after recent skepticism over its stock price, its previous earnings report, the company’s cooperation with Chinese censors, as well as several recent product releases.
“Google had an exceptional quarter with strong growth and profitability, from both Google properties and the [advertising] network,” said Eric Schmidt, Google CEO.
Internet Portal Status
Minus traffic acquisition costs, this quarter’s revenue totaled $1.77 billion.
Reflecting success in its positioning as an Internet portal, Google attributed 58 percent of revenue to Google-owned sites, with that category up 97 percent year-over-year. The firm did not say what portion of this amount was due to advertising.
Partner sites, which generate revenue through Google’s AdSense program, accounted for 41 percent of revenue.
But it appears Google is paying more for the ad traffic. Morningstar analyst Rick Summer pointed to Google’s increased traffic acquisition costs: $723 million in the quarter, compared with $629 million in the preceding one.
“The content owners are continuing to extract a greater pound of flesh out of Google,” he said.
Despite the mismatch between analysts’ forecasts and the announced numbers, Mr. Summer said he was expecting a good earnings report from Google. That’s because he heard earlier this week that Google was gaining search share from Yahoo and saw Yahoo’s flat earnings announcement Tuesday.
YahoocomScore said Monday Google had 42.7 percent of the U.S. search market in March, up from 36.4 percent at the same time last year. In the same period, Yahoo’s share fell from 30.6 percent to 28 percent.
U.S.Google’s Challenges Ahead
But Mr. Summer said he expects that trend will shift. “The competitive pressure should work on reverse,” he said. “Consumers aren’t best served by having just one search.”
But Mr. Summer said he expects that trend will shift. “The competitive pressure should work on reverse,” he said. “Consumers aren’t best served by having just one search.”
He contended that as Google’s core advertising business becomes more of a commodity, the real question facing the search engine will be how it spends the vast sums of cash it has raised.
The company said Thursday it had $8.43 billion in cash, not including the $2.07 billion it recently raised from this month’s stock offering or the $1 billion it invested in AOL.
Pointing to the cautionary tale of AOL and Time Warner, Mr. Summer said Google will come under pressure to do “huge things to justify its huge stock price.” Mr. Summer said the company is still too young to have proven itself as a sound steward of its fortune.
Time Warner“We know they know how to buy servers,” he said. “But we haven’t seen them as investors.”