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Google Earnings Handily Beat Wall Street Expectations

Googleshares leaped in extended trading Thursday as the company reported an adjusted profit that blew past what analysts expected, despite rising expenses.

Google Headquarters
AP
Google Headquarters

The online search and advertising giant said it earned $7.64 a share excluding one-time items in the third quarter, against $5.89 a share last year.

Net revenue excluding traffic-acquisition costs for the most recent period rose to $5.5 billion, from $4.385 billion a year ago.

Traffic-acquisition costs (TAC) include money that Web sites pay to advertisers and that they spend to draw traffic. Google's TAC for the quarter totaled $1.81 billion.

Equity analysts who follow Google expected the company to turn in a profit of $6.69 a share on sales of $5.27 billion, according to Thomson Reuters.

Google stock jumped almost 5 percent in late trading. Get after-hour quotes for Google here.

The stock finished Wednesday's Nasdaq session slightly lower at $540.93.

"Looks like a great number. We were high on the Street and they beat our number pretty handily," said UBS analyst Brian Pitz. "There are some currency benefits on the cost-per-click side. They hedged part of that, so that doesn't include any currency. Those are just raw numbers, so you're going to see some benefits to pricing from currency."

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.

Google had 23,331 full-time employees as of Sept. 30, up from 21,805 on June 30. It also more than quadrupled spending on data centers and other technology versus it did a year ago.

Investors worry that the company, seeking new sources of growth, is spending recklessly on initiatives such as its Android mobile phone software, acquisitions, renewable energy projects and even automated cars, with uncertain returns. At the same time, social networking giant Facebook poses a growing threat to Google's online advertising business.

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.

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."

- AP and Reuters contributed to this report.

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