AOL profit sinks in Q1 despite climbing revenue

Earnings fall short of expectations in the quarter as a host of one-time costs depress AOL's bottom line despite revenue growth.

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AOL CEO Tim Armstrong Getty

AOL's first-quarter earnings slid Wednesday under the weight of costs from restructuring and write-offs, with its better-than-expected revenue growth eking out a small profit increase only if all unusual items and tax effects were ignored.

The company reported a profit of $9.3 million, or 11 cents a share, down from $25.9 million, or 32 cents a share, a year earlier. Excluding unfavorable one-time items such as restructuring costs and write-offs, AOL earned 34 cents a share -- far off the 45 cents that analysts on average had predicted. First-quarter revenue rose 8.4 percent year over year to $583.3 million. Analaysts had predicted $578 million in revenue.

Chief Executive Tim Armstrong has been pushing to position AOL as the Web's advertising leader, last year buying video-ad technology company Adap.tv for $405 million in AOL's biggest takeover since snagging the Huffington Post and hiring Bob Lord, who led the digital-technologies wing of giant ad agency Publicis Groupe. Just Tuesday, AOL said it acquired big-data online marketing tool Convertro for $101 million, which will help AOL better target ads to specific consumers.

Armstrong, previously Google's advertising head, said the company's "investment in global media and technology platforms is allowing AOL to compete on a global scale."

The strategy has stoked AOL's top line, but so far the company has yet to show that growth can trickle down to consistent, significant profit gains too.

AOL's first-quarter advertising revenue grew 16 percent year over year.

The company noted that its adjusted operating income before depreciation and amortization, a profit measure that strips out items, rose 2 percent.

Shares were up 36 cents, or less than a percentage point, at $43.90 in premarket trading.

 

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