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Google Profit Jumps 30%, Blows Past Expectations

Published: Thursday, 17 Apr 2008 | 6:35 PM ET
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By: CNBC.com

Google reported earnings that rose 30 percent and handily beat analysts' expectations, and the company's shares jumped in late trading.

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The leading online search and advertising company reported a profit of $4.84 excluding items, and said it garnered sales of $3.7 billion excluding commissions paid to the company's advertising partners.

Net income for the company hit $1.31 billion, up from $1 billion last year. Last year Google earned $3.68 a share on sales of $2.539 billion.

Analysts polled by Thomson Financial expected adjusted earnings of $4.52 per share on revenue, excluding commissions paid to the company's advertising partners, of $3.608 billion.

Google shares [GOOG  Loading...      ()   ] leaped 18 percent to near $530 in extended trading. The stock finished regular market hours down 1.21 percent at $449.54. The shares hadn't been above the $500 mark for more than a month.

The company's results defied recent predictions that the company is having trouble converting Web searchers into advertising viewers. Significantly, Google said more than half of its revenue came from outside the United States.

"It's a good time to be a Google bull. The boys delivered. They posted very strong results and the opportunities for Google remain tremendous internationally," said Colin Gillis, an analyst with Canaccord Adams. "The thing about Google is it's very direct marketing focused. They deliver a clear return on spend to the clients. It shows that as long as the virtuous spread is intact, advertisers will be allocating Google spend to the Google platforms."

(See Jim Goldman's take on Google earnings in the CNBC video at left.)

Traffic acquisition costs — the cut of advertising revenue Google pays out to affiliated sites that run its ads — amounted to 29 percent of ad revenue in the first quarter. A year ago, the proportion was 31 percent.

In addition to its own site, Google supplies Web search advertising to partners ranging from Time Warner's AOL and IAC InterActiveCorp's Ask.com to News Corp's MySpace.

Gloomy Predictions Refuted

In February, analysts and investors reacted with concern after data from comScore indicated Google's January domestic Web search paid clicks were basically flat year over year but down sequentially. The next month, concern was again sparked when analysts, citing comScore data, said Google's click-through rate grew 3 percent in February year over year.

The Mountain View, Calif., company gets paid when users click on sponsored ads that come up along with results of a Google search.

"It's clear to us that we're well positioned for 2008 and beyond, regardless of the business environment that we find ourselves surrounded by," Chairman and Chief Executive Eric Schmidt told investors on a conference call.



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