Google profit rises 36.5%, tops Wall Street expectations

After a subpar showing during the second quarter, the company returns to beating Wall Street's predicted targets.

Google's hitting its stride again.

The Internet search giant on Thursday saw its third-quarter profit rise 36.5 percent to $2.97 billion, or $8.75 a share. Excluding one-time items, it posted per-share earnings of $10.74.

Revenue, meanwhile, rose 12 percent to $14.89 billion. Excluding traffic acquisition costs of $2.97 billion, which are paid out to its partners, its actual revenue was $11.9 billion.

Analysts, on average, projected total revenue of $14.79 billion and per-share earnings of $10.65.

The company bounced back from a disappointing second quarter, when its earnings fell short of Wall Street expectations.

Google's earnings are arguably even more impressive given that Motorola continues to be an albatross around the company's neck.

While search remains the driver of Google's success, the company is focusing on flattening out the differences between desktop and mobile search revenue, and even taking a short-term hit because of it.

Google's consolidated quarterly revenues for the third quarter of 2013. Google

"Net revenue is flat because of changes to search in the short-term," said Patrick Pichette, Google's chief financial officer. To make up the gap, Google is pushing its "enhanced campaigns," which it's using to unify advertising and encourage bidding on mobile keywords.

"Enhanced campaigns are aimed for ROI (return on investment) of the future. The dynamic of CPCs (cost-per-clicks) and paid clicks together is the magic that talks about our growth," he said.

Meanwhile, Google chief Larry Page said that he's not likely to be on earnings calls in the future, deferring to Pichette and Chief Business Officer Nikesh Arora.

"Going forward, I won't be joining every earnings call," Page said. "I know you'd love to have me on, but you're depending on me to ruthlessly prioritize."

Google's traffic acquisition costs for the third quarter of 2013. Google

Some other key numbers from Google's third quarter:

  • Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of Google's Network members, increased approximately 26 percent over the third quarter of 2012 and rose approximately 8 percent over the second quarter of 2013.
  • Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of Network members, decreased approximately 8 percent over the third quarter of 2012 and decreased approximately 4 percent over the second quarter of 2013.
  • Traffic acquisition costs, the portion of revenues shared with Google's partners, increased to $2.97 billion in the third quarter of 2013, compared with $2.77 billion in the third quarter of 2012. TAC was 24 percent of advertising revenue in the third quarter of 2013, compared with 26 percent the year before.
  • Google's effective tax rate was 15 percent for the third quarter of 2013.
  • This quarter, Google added around 2,000 employees, while Motorola Mobile signed on 340 new hires. Worldwide, Google employed 46,421 full-time employees as of September 30, 2013, compared with 44,777 full-time employees as of June 30, 2013.
  • At the end of the third quarter, Google's cash, cash equivalents, and marketable securities were $56.52 billion.
  • Around 56 percent of Google's revenue, $7.67 billion, comes from outside the United States, up from 53 percent in the third quarter of 2012.
  • Google shares rose nearly 8 percent to $959.13 in after-hours trading on Thursday.

    Updated at 4:05 p.m.with additional information.

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