Google misses profit expectation, stock plunges

Company's net income was short of expectations, and Wall Street punished the search and advertising giant.

Faith in Google's financial strength, restored somewhat last quarter, turned out to be fragile as the company reported earnings Thursday that fell short of analyst expectations.

Google's net income rose 35 percent to $1.25 billion for its second quarter, the search giant said. Excluding various items, it reported earnings of $4.63 per share, short of the $4.74 expected on average by analysts surveyed by Thomson Reuters.

Google revenue continued its upward trajectory in the second quarter, but not to the satisfaction of Wall Street.
Google revenue continued its upward trajectory in the second quarter, but not to the satisfaction of Wall Street. (Click image to see larger version.) Google

In after-hours trading, the stock had dropped as much as $60, or more than 11 percent, according to CNBC. However, the stock recovered somewhat, down $46.31, or 9 percent, to $478.13.

The company's revenue increased 39 percent to $5.37 billion. Excluding $1.47 billion in commissions called traffic acquisition costs, the revenue was $3.88 billion.Revenue excluding commissions was $3.7 billion during the first quarter of 2008.

Analysts had expected revenue, excluding commissions, of $3.9 billion.

"Strong international growth as well as sustained traffic increases on Google's Web properties propelled us to another strong quarter, despite a more challenging economic environment," Chief Executive Eric Schmidt said in a statement. "As we continue to focus on innovating in our core business of search, ads, and apps, we also look forward to enhancing the experience of our users and expanding the reach of our advertisers and partners with new technologies and formats, particularly as our integration of DoubleClick gains momentum and creates new opportunities in display advertising and elsewhere."

Advertising overall has suffered from the current economic slowdown in the United States, but Google trounced pessimistic expectations for its first quarter and said it saw no evidence of trouble.

The Mountain View, Calif.-based company gets most of its money from ads appearing next to search results. Google dominates the search-ad market with 77 percent share of revenue by one estimate released Thursday.

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About the author

Stephen Shankland has been a reporter at CNET since 1998 and covers browsers, Web development, digital photography and new technology. In the past he has been CNET's beat reporter for Google, Yahoo, Linux, open-source software, servers and supercomputers. He has a soft spot in his heart for standards groups and I/O interfaces.

 

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