Google Q1 blowout on 31 percent sales increase feeds after-hours stock rally

After the company's stock got pummeled on Thursday, Google investors celebrate better-than-expected results by sending shares up sharply after hours.

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Google's revenues soared 31 percent in the company's first quarter, which ended March 31, to $13.97 billion. The company's operating income, on a non-GAAP basis, rose to $4.2 billion from $3.94 billion a year earlier.

"We had a very strong start to 2013, with $14.0 billion in revenue, up 31 percent year-on-year," said Larry Page, CEO of Google. "We are working hard and investing in our products that aim to improve billions of people's lives all around the world."

Shares of Google closed down more than 2 percent during regular trading to finish at $765.914. But just like that, investors celebrated the numbers, pushing the company's stock up more than 3 percent in after hours trading. Shares continued to bounce around until Google's conference call following the release of earnings on Thursday.

In the quarter, Google's posted net income of $3.35 billion, or $9.94 per share, compared to $2.89 billion, or $8.75 per share, in the first quarter of 2012. Analysts polled by FactSet expected Google to turn a profit of $10.64 per share, with $11.11 billion in revenue. In the first quarter of 2012, Google had a profit of $10.08 per share and $8.1 billion in revenue.

After opening up the conference call, Page riffed briefly on the company's penchant for dabbling in technical areas ranging widely beyond search advertising.

"It's my job to focus on things that are not incremental," he said, adding that focusing on incremental tweaks guarantees obsolescence. Page still wants to be a revolutionary, swinging for the fences with projects like Google Fiber and Glass. "We are still only at one percent of what's possible. And we really just getting started," he said.

If there was one glaring negative, it was the underperformance of Google's Motorola business. Motorola lost $271 million in the quarter, though excluding one-time items, the red ink would have been $179 million.

Investors likely will also pay close attention to any trends they can discern in the amount of money Google is reaping on a per-click basis. The highlights include:

  • Paid clicks for network members were up about 20 percent from the year-earlier quarter and increased roughly 3 percent from last year's fourth quarter.
  • Average cost-per-click fell approximately 4 percent from the first quarter of 2012 and was down about 4 percent from the fourth quarter of 2012.
  • Traffic acquisition costs rose to $2.96 billion in the first quarter of 2013, compared to $2.51 billion in the first quarter of 2012.

Here's the sales breakdown for Google's quarter:

  • Google Revenues (advertising and other): $12.95 billion, or 93 percent of consolidated revenues, up 22 percent from year earlier revenues of $10.65 billion.
  • Google Sites Revenues: $8.64 billion, or 67 percent of total Google revenues, up 18 percent increase over first quarter 2012 Google sites revenues of $7.31 billion.
  • Google Network Revenues: $3.26 billion, or 25 percent of total Google revenues, up 12 percent increase from first quarter 2012 Google network revenues of $2.91 billion.
  • Other Revenues: $1.05 billion, or 8 percent of total Google revenues, up 150 percent increase over first quarter 2012 other revenues of $420 million.
  • International: $7.1 billion, representing 55 percent of total Google revenues in the first quarter of 2013, compared to 54 percent in the year-earlier quarter.

"Overall, Google had a good quarter," said Victor Anthony, an analyst with Topeka Capital Markets. "Revenues were essentially in-line with our estimate while EPS came in above our estimate due to a lower than expected tax rate. The core business was solid with paid click growth of 20 percent YoY although CPCs declined 4 percent due to various factors. The Motorola segment continued to struggle, missing our estimates for the quarter. Google remains a must own stock, in our view, with continued strong growth fundamentals."

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