Google shares jump as profits handily beat expectations

Google shares jumped Thursday after the company reported quarterly profit that easily topped analysts' expectations, helped by growth in advertising revenue.

The stock climbed more than 11 percent in extended trading after the Internet and technology giant posted adjusted second-quarter earnings of $6.99 per share on $17.73 billion in revenue. Sales were up from $15.96 billion.

Analysts expected Google to post earnings of $6.70 per Class A share and $6.74 per Class C share on $17.75 billion in revenue, according to a consensus estimate from Thomson Reuters.

"I think absolutely this is just the beginning of what could be a very good move for Google," said Colin Gillis, a technology analyst at BGC Partners, on CNBC's "Closing Bell."

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Market watchers have monitored trends in Google's crucial advertising metrics as well as how much the company spends relative to its sales growth. Aggregate cost per click, or what companies pay for an average ad, fell 11 percent year over year.

Aggregate paid clicks, however, helped offset the drop as they rose 18 percent.

Google headquarters in Mountain View, California.
Kimihiro Hostino | AFP | Getty Images
Google headquarters in Mountain View, California.

The quarterly earnings report marks the first for Chief Financial Officer Ruth Porat, a former Morgan Stanley executive who took over the post in May. She was expected to bring financial discipline to the tech giant and possibly accelerate efforts to return more money to shareholders.

"Our strong Q2 results reflect continued growth across the breadth of our products, most notably core search, where mobile stood out, as well as YouTube and programmatic advertising," Porat said in a statement Thursday.

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Revenue jumped 11 percent year over year. Google, like many American companies, cited negative effects from a stronger U.S. dollar, noting that sales would have grown 18 percent in the period on a constant currency basis.

Operating expenses as a percentage of revenue rose slightly to 36 percent from 35 percent a year earlier. Traffic acquisition costs, though, fell to 21 percent of advertising revenue from 23 percent.

"If (Porat is) able to fulfill her mandate to control costs, that will be a catalyst for this year," Gillis said.

Google Class A shares have climbed more than 13 percent this year, edging a gain of more than 8 percent in the Nasdaq Composite.