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Google earnings: What investors will be watching

Google's stock price appears on the NASDAQ MarketSite in New York.
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Google's stock price appears on the NASDAQ MarketSite in New York.

Google is expected to post another strong quarter of earnings after the bell Thursday. But investors looking for clues to the search giant's long-term growth prospects should look beyond profits to a few other key numbers in its third-quarter report.

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Mobile

Google has made inroads into a number of new businesses, but its core business remains advertising. And while the company owns the search space—it captures more than 70 percent of global search ad revenue—and more users are clicking on ads, the money it makes per click is being driven down by mobile.

For the past several quarters Google's cost per click (CPC), which is the average price it gets paid each time a user clicks an ad, has been decreasing. Last quarter, Google's CPC dropped 6 percent year over year, and it is expected to drop about 4 percent again this quarter, said Colin Gillis, a technology analyst at BGC, in a recent note to clients.

Google doesn't share how much it makes from desktop ads versus mobile ads, but just like its competitors, Google has struggled to get advertisers to pay more for its mobile advertisements.

However, Gillis, who has a price target of $650 for the stock with a "buy" rating, said in his note that he does not expect this trend to continue. "We also expect that the click pricing declines seen since 2011 should reverse in the relatively near future (fall of 2015?) as mobile monetization improves and location based marketing gains traction," Gillis said.

He also said he estimates paid clicks, which consist of the clicks on ads shown on Google's own websites and other sites that use its technology, will grow by 24 percent in the third quarter. In the second quarter, paid clicks grew by 25 percent year over year.

Operating margins

Analysts estimate the company will post earnings of $6.53 per share on revenue of $16.57 billion. Year over year, that's a 22 percent and 11 percent increase, respectively.

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While organic revenue for the company has risen about 20 percent year over year for the last 18 months, margins have been under some pressure in recent quarters, said Mark S. Mahaney, an analyst at RBC Capital Markets, in a recent note to clients.

Google's many science projects (known as "moonshot" projects) make great headlines, but the company's spending on the sale of hardware goods and investments in this research has caused margins to slow.

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In the second quarter, non-Gaap operating margins of 40.6 percent was flat quarter over quarter, but was down slightly year over year. The fear is the cost of traffic acquisition among other things will continue to rise and hurt margins, Mahaney said in his note. However, he said sacrificing margins now may be the best bet in the long run.

"We are in favor of this kind of long-term investment and so have been willing to look past decreasing margins in recent quarters," he said.

In the third quarter Mahaney, who has a $730 price target on the stock with an "outperform" rating, said that he estimates a 180 bps year over year decrease for the third quarter.

By CNBC's Cadie Thompson.