Google earnings miss; revenue jumps at Play
Google, still the king of online advertising, reported surging second-quarter revenue, but heavy spending pushed its earnings below Wall Street expectations.
”This is a quarter that has something for everyone: the bulls and the bears,” BGC Partners analyst Colin Gillis said.
Revenue was nearly $16 billion, a 22% jump from a year ago.
Excluding the commissions paid to Google’s advertising partners, revenue was $12.8 billion, nearly $500 million more than analysts had projected.
Another bright spot: The proliferation of more than 1 billion Android devices has spurred sales of apps, movies, music and books in the Play store.
Google doesn’t disclose Play store sales, but it’s the major source of revenue after ads. Google revenue not from ads was $1.6 billion in the second quarter, a 53% jump from last year.
Google also touted ad sales on its video-sharing website YouTube but did not provide specifics. Research firm eMarketer expects YouTube’s ad revenue to total $5.6 billion this year, a 51% increase from last year.
But the Internet giant continued to spend heavily as it moves into new experimental businesses such as driverless cars and Internet-connected eyewear and hires more workers. And the report released Thursday showed that Google’s advertising prices are still falling.
Google posted net income of $3.42 billion, or $4.99 a share, up from $3.23 billion, or $4.77 a share, a year earlier. Excluding stock-based compensation and other expenses, Google said it would have earned $6.08 a share.
Analysts had expected Google to earn $6.24 a share on revenue of $15.61 billion.
In the second quarter, operating expenses rose to $5.58 billion from $4.45 billion a year ago. Much of that was spending on research and development, which jumped to $2.24 billion from $1.77 billion.
Capital expenditures reached $2.65 billion in the second quarter. Google added 2,200 employees in the quarter for a total of about 52,000.
Google Chief Financial Officer Patrick Pichette said the company is focused on gathering “the long-term assets to win.”
Investors are concerned about ad prices, which have been in a three-year slump.
As people shift from computers to smartphones and tablets, demand is shrinking, and prices are falling for Web advertising. The smaller screens of smartphones have less space for advertising, and advertisers are less willing to pay for mobile ads.
In the second quarter, the amount of money Google got paid when people clicked on ads decreased 6% from a year earlier.
Google does not break out its mobile ad revenue from desktop ad revenue.
Google also said its chief business officer, Nikesh Arora, was leaving to join SoftBank, as vice chairman of SoftBank Corp. and CEO of SoftBank Internet and Media.
Google’s stock has lagged the market this year. Shares had gained 4% as of Thursday’s close, compared with a 6% increase for the year by the Standard & Poor’s 500 index.
Shares, which closed down $8.93 to $573.73, rose about 1% to $580.35 in extended trading.
Source: Usatoday
