Google shareholders are licking their wounds in after-market trading tonight after the company surprised Wall Street by missing expectations on both the top and bottom lines.
And when I say "surprised," I really mean "shocked." I've spoken to a two analysts since the numbers came out who can't talk publicly until they release their own research to clients, but they're stunned by the miss. Such is the price for a company that doesn't offer guidance. And investors are the ones stuck paying it.
Google reported $3.39 billion in revenue, excluding traffic acquisition costs, or TAC, compared to Wall Street estimates in the category of $3.45 billion. Google also reported $4.43 in non-GAAP earnings per share, the apples-to-apples comparison to the Street consensus of $4.44.
The "miss" immediately took its toll on Google shares, sending them lower by almost 5 percent after the company spent much of the day erasing earlier losses and going positive by 4 percent just as the market closed.
Most shocking is the steep decline in paid clicks, one of the best metrics to measure Google's underlying advertiser strength. Yes, Google posted a 30 percent gain, year over year for the fourth quarter, but only a 9 percent sequential improvement from the company's third quarter. Bear Stearns, for one, anticipated a 10 percent increase; Piper Jaffray was at 14 percent; Citigroup was at 20 percent.
For comparison purposes, Google posted a 22 percent sequential paid click growth improvement from third to fourth quarter last year. The 9 percent move this year could suggest a marked slowdown in consumer interest ahead of holiday shopping; and does not bode well for those who might have thought Google was more insulated against an economic slowdown than others.