A receptionist works at Google's Hong Kong officeTYRONE SIU
Google Inc. posted strong first-quarter numbers, beating analyst expectations and indicating a return to the kind of sprawling investment in myriad technology sectors that marked its pre-2009 days.
Google - which has beaten earnings expectations in every quarter but one in the past two years - posted net income of $1.96-billion, or $6.06 a share, up from $1.42-billion, or $4.49 a share, in the year-earlier period.
Excluding certain items, Google said it earned $6.76 a share, beating the $6.60 average forecast by analysts polled by Thomson Reuters I/B/E/S.
Whispernumber.com, which collects earnings expectations from professional and individual investors, said the outlook for Google's earnings per share was $6.74.
The web search giant reported revenue of $6.77-billion (U.S.) for the quarter ended March 31, 2010, an increase of 23 per cent compared to the first quarter of 2009.
Net revenue, which excludes costs that Google pays to partner web sites, was $5.06-billion, up 2.2 per cent from the seasonally strong fourth quarter and above analysts' average estimate of $4.95-billion.
"Google performed very well in the first quarter, with 23 per cent year-over-year revenue growth driven by strength across all major verticals and geographies," said chief financial officer Patrick Pichette. "Going forward, we remain committed to heavy investment in innovation - both to spur future growth in our core and emerging businesses as well as to help build the future of the open web."
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However, the company's shares, which have risen roughly 5 per cent since Monday, slid 3.1 per cent to $576.92 each in after-hours trade on Thursday. They had gained 1.1 per cent during the regular session on Nasdaq.
"They've had a strong last few days with the shares up 5 per cent, and some investors expected Google to beat by a wider margin and price-per-click to come in a bit higher than 7 per cent growth," said Edward Jones analyst Andrew Miedler.
Because of high expectations, anything short of stellar first-quarter numbers was likely to move the stock lower. This is the first quarter in which sales of Google's branded smart phone, the Nexus One, show up on the balance sheet.
Google also said it increased its head count by nearly 800 employees - the biggest increase in staff since the first quarter of 2008.
After a difficult 2009 that saw the company lay off employees for the first time in its history, Google bounced back with strong numbers around the Christmas shopping season. As the recession lifted, consumers began spending again, and although relatively few people spend money directly via Google, many consumers use the web site to search for information about purchases.
The company made news earlier this year when it effectively severed ties with the Chinese market over a dispute about cyber-spying and censorship. However, the Chinese market only constitutes a tiny fraction of Google's overall balance sheet, and any potential impact is likely in future growth opportunities, rather than any immediate losses.
Indeed, some analysts suspected that the biggest downside for Google might have been too good a quarter - something that could cause the company to abandon the discipline it enforced during a very lean 2009.
"Google powered through the down cycle as the company found discipline on new hiring, capital expenditure, and an allocation of its resources to its core products," said Colin Gillis, director of research and senior technology analyst at BGC Financial, in a note before Google announced its numbers.
"Now the company is back in reinvestment mode, and we expect this is the first full quarter to reflect the impact of these reinvestments. This includes several small but dilutive acquisitions, an expected lift in head count and capital spend, and several questionable new products (Buzz, Wave, Google Fiber, and Nexus One to name a few).
"The period of 'Scarcity Brings Clarity' and 'More Wood Behind Fewer Arrows' appears to be clearly over as Google races to have a presence in every facet of the Internet, in our opinion."
With files from Reuters