Google second-quarter profit jumps on ad growth

Earnings and revenue beat analyst estimates as its reach continues to grow. Some investors, however, are unimpressed.

Search engine giant Google's second-quarter profit jumped more than 300 percent, driven by continued growth in Web advertising.

The Internet bellwether on Thursday posted a net income of $342.8 million, or $1.19 a share, on total revenue of $1.38 billion for the three months ended June 30.

That compares with a net income of $79 million, or 30 cents a share, on revenue of $700 million in the same period a year earlier.

Excluding $494 million in traffic acquisition costs, the portion of revenue shared with partners, Google posted revenue of $890 million, beating analyst estimates.

Analysts, on average, had expected Google to post earnings per share of $1.21, excluding stock-based compensation, on revenue of $842 million, excluding traffic acquisition costs, according to a Thomson Financial survey. Excluding stock option compensation, Google's earnings per share would have been between $1.29 and $1.35.

Google shares were down $18.14 to $295.80 in after-hours trading after closing at $313.94.

"The combination of high expectations going into the quarter and cautionary comments from management about the next quarter" may have pushed the stock down after hours, said David Edwards, an analyst at American Technology Research. The company, as a matter of policy, does not provide financial guidance, but "they were clearly providing cautionary commentary," he said.

On a conference call with analysts, Google Chief Financial Officer George Reyes warned that third-quarter results might be weaker than the second quarter because Web surfing decreases during August summer vacations in Europe.

Executives were clearly upbeat about the most recent quarter, however. "We are very proud of our results. Business is very good here at Google," said Chief Executive Eric Schmidt. "It's really because we've figured out ways to stay focused on end users and innovation."

Nearly all of Google's revenue comes from advertisements that appear on search results pages and on partner sites. The company also has rolled out a bevy of new products and services to expand its Web search leadership, like Google maps and localized and video search.

The Mountain View, Calif.-based company has had three blow-out quarters since going public last year, each time beating analyst estimates and each time followed by a rise in the stock in after-hours trading.

Google posted a first-quarter profit in April that was almost six times higher than a year earlier. In February, the company's fourth-quarter profit rose more than 100 percent year over year. Last October, the company's third-quarter profit more than doubled.

Meanwhile, Google's share price has skyrocketed, reaching a peak at above $300 a share for the first time last month, making it the world's biggest media group by stock market value.

Google's reach continues to grow. The search giant attracted more than 78.5 million U.S. visitors last month, up 25 percent from a year ago, while the Google and Blogger brands ranked No. 1 in search and Web hosting, respectively, according to recent figures from Nielsen/NetRatings.

WebSideStory says Google accounted for more than 52 percent of the U.S. search traffic in early June, while Nielsen/NetRatings puts its share at 47 percent for June, compared with Yahoo's 22 percent.

On Tuesday, Google's chief rival, Yahoo, posted a higher second-quarter profit, but its revenue fell short of analyst expectations. The news sent Yahoo shares down as much as 10 percent in after-hours trading. If not for the sale of an investment that some reports speculated was Google stock, Yahoo would have posted a net profit of 13 cents a share instead of 51 cents a share.

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