Google Inc eased fears that big spending would erode margins as its results blew past Wall Street’s targets, and the Web search leader revealed for the first time the strength of its fledgling mobile and online display ad businesses.
Analysts said strong growth across Google’s core advertising business led to a 25% surge in net revenue in the third quarter, sending its shares 9% higher.
CFO Patrick Pichette said its YouTube video site was now “monetizing” over 2 billion views a week, a rise of 50% from a year earlier
Investors had feared that Google, seeking new sources of growth, was spending recklessly on initiatives such as its Android mobile software, acquisitions, renewable energy projects and even automated cars, with uncertain returns. In July, Google’s second-quarter earnings fell short of Wall Street expectations, marking the first time in two years that the company had missed profit estimates.
But executives on Thursday (Oct. 14) offered investors what they said was a one-time glimpse of sales generated by its mobile and display advertising businesses. Those operations generated annualized revenue run rates of more than $1 billion and $2.5 billion, respectively — underscoring the outcome of investments into smartphones and online projects.
Google CEO Eric Schmidt, who participated in Thursday’s earnings conference call for the first time in several quarters, said the company was also working to make its search results more personal.
Google has been on an acquisition spree, buying more than 20 companies in 2010, including several companies that were developing social networking technology.
The company added more than 1,500 employees to its payroll in the third quarter — which some analysts said was a record pace for the company — and its operating expenses totaled $2.19 billion, up from $1.64 billion in the year-ago quarter.
The world’s largest Internet search engine posted a third-quarter net income of $2.17 billion or $7.64 a share, excluding items, surpassing Wall Street’s average estimate of $6.69 a share, according to Thomson Reuters I/B/E/S. Net revenue, which excludes fees that Google pays to partner websites, came to $5.48 billion, versus expectations for $5.27 billion. Net revenue in the 2009 third quarter was $4.38 billion.
