October 15, 2010

Google Earnings Soar 32 percent

Jessica Mintz  /  Post and Courier

SEATTLE – Google's third-quarter earnings climbed 32 percent to beat Wall Street's expectations as companies spent more to advertise to Web surfers.

The Web search leader clocked an impressive performance despite adding 1,500 workers in the quarter, for a total of 3,500 new employees so far this year. Google also spent more than four times as much on data centers and other equipment than it did a year ago.

Investors sent shares of Google jumping more than 9 percent, to $590.60, in extended trading after the release of results Thursday.

Google's net income for July through September rose to $2.2 billion, from $1.6 billion a year earlier.

For July through September, the Web search leader's net income rose to $2.2 billion, or $6.72 per share, from $1.6 billion, or $5.13 per share, a year earlier.

Excluding certain expenses, Google earned $7.64, topping the $6.69 analysts expected.

Revenue rose 23 percent to $7.3 billion from $5.9 billion a year earlier.

After subtracting commissions paid to its ad partners, Google's revenue stood at $5.5 billion, about $200 million more than analysts predicted, according to a Thomson Reuters survey.

Google said its average cost per click rose 3 percent from a year ago, meaning companies paid more to place ads. People clicked on ads 16 percent more than they did in the same period last year.

During a conference call with analysts, Google said sales of its display ads, which include those on YouTube, are on a pace that would translate to $2.5 billion annually.

Its mobile advertising businesses are on pace to bring in $1 billion in revenue annually. The figures are the most specific Google has released about the two emerging businesses.

Google's capital expenditures – what it pays for data centers, servers and networking equipment to keep its growing number of Web services online – increased to $757 million from $186 million a year earlier.

The company, which is based in Mountain View, Calif., indicated it would keep hiring and spending.

"Our core business grew very well, and our newer businesses – particularly display and mobile – continued to show significant momentum," said CEO Eric Schmidt in a statement. "Going forward, we remain committed to aggressive investment in both our people and our products as we pursue an innovation agenda."

Before the release of results, shares closed down $2.37 at $540.93.