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Google delivers blowout Q2; Page 'super excited' about Google+

Google reported a blowout second quarter as CEO Larry Page touted a strong quarter and said the he was "super excited" about interest in Google+, the company's social networking effort.
Written by Larry Dignan, Contributor

Google reported a blowout second quarter as CEO Larry Page touted a strong quarter and said the he was "super excited" about interest in Google+, the company's social networking effort.

The company reported second quarter earnings of $2.51 billion, or $7.68 a share, on revenue of $9.03 billion, up 32 percent from a year ago. Excluding traffic acquisition costs of $2.11 billion Google's second quarter revenue was $6.92 billion. Non-GAAP earnings were $8.74 a share.

Wall Street was expecting earnings of $7.85 a share on revenue of $6.55 billion. For Google CEO Larry Page, the quarter represents a strong outing following a somewhat rocky debut in the first quarter. Page can allay a lot of concerns about his leadership with blowout quarters. For his part, Page said he was stoked about Google+. "I'm super excited about the amazing response to Google+ which lets you share just like in real life," said Page.

On a conference call, Page recapped his first full quarter as CEO and positioned himself as a leader with an eye for products as well as financial discipline. Regarding Google's product plans, Page said the idea was to put "more wood behind fewer arrows."

Also: Google's Page upbeat after 3 months on job: 10 million on Google+

On the product front, Page said Google has made a good start with creating new products, but has more work to do. He said:

We have substantially increased our velocity and execution this quarter, which is a key goal of mine since taking over as CEO. That is why I created a new product-focused management structure with a clear leader responsible for each area. The new management team is working together fabulously, and has already achieved a lot in just these three months.

Shares of Google surged in afterhours trading.

The search giant has had a busy quarter. For instance, Google launched Google+ in its latest attempt to tackle the social networking market and Facebook. Google also rolled out plans to offer Google Wallet and Offers, which is designed to take on Groupon. Meanwhile, the Federal Trade Commission opened an investigation into Google and Eric Schmidt agreed to testify before a Senate antitrust committee.

All of those moving parts had analysts worried about increased spending on talent and infrastructure---an ongoing concern---as well as distractions. But the financials for Google were strong across the board and many analysts appeared to be overly pessimistic about the quarter going into the results.

Also see: Moneywatch: Google Political Donations: Where Company Execs Put Their Cash

By the numbers for the second quarter:

  • Research and development spending was $1.23 billion, up from $898 million a year ago.
  • Google-owned sites delivered 69 percent of revenue in the second quarter, up 39 percent from a year ago. Network revenue---AdSense---was 28 percent of revenue in the second quarter and up 20 percent from a year ago.
  • The second quarter also delivered strong international results. Revenue from outside the U.S. was 54 percent of total revenue. A weak dollar helped Google's cause. Revenue from the U.K. was 11 percent of revenue in the second quarter.
  • Paid clicks, a worry area going into the earnings report, was up 18 percent from a year ago in the second quarter. Paid clicks were down 2 percent from the first quarter, but that was better than analysts expected.
  • Cost per click metrics also looked strong. Average cost per click increased 12 percent from a year ago and 6 percent sequentially.
  • As usual, Google's capital spending also surged. Google said data center expenses, content acquisition costs and credit card processing charges---collectively "other cost of revenues"---were $1.06 billion, up from $735 million a year ago.
  • Google said capital expenditures in the second quarter were $917 million.
  • Google had 28,768 full time employees, up from 26,316 at the end of the first quarter. Add it up and Google remains on a hiring spree, but the employee additions were in line with expectations.
  • The company ended the quarter with $39.1 billion in cash, cash equivalents and marketable securities.

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