Google earns US$2.7bn in Q3, talks up Plus

Google handily topped expectations with its third quarter results and allayed concerns about the economy's effect on search advertising.

(Credit: Google)

Google reported third-quarter earnings of US$2.73 billion, or US$8.33 a share, on revenue of US$7.51 billion, excluding traffic acquisition costs of US$2.21 billion. Non-GAAP earnings were US$9.72 a share in the third quarter.

Wall Street, which focuses on non-GAAP earnings, was looking for earnings of US$8.74 a share on revenue of US$7.22 billion.

The search giant's quarter was really about its owned and operated sites, which accounted for 69 per cent of revenue in the third quarter.

Going into Google earnings, analysts were primarily concerned about the Motorola Mobility deal, the economy and Facebook's traction. Google has put off those concerns with its earnings report — for now.

On Google's earnings conference call, CFO Patrick Pichette also addressed the economic picture as it related to Google. He said:

I know that many of you have had questions about general economic outlook. What we're seeing is not terribly surprising or different from what you're all seeing watching on TV and reading in the press. While obviously we don't control the economy or the exchange rates, we do very much control our own operating agenda, and that's why we will as always stay focused on what we control.

Larry Page, CEO of Google, called the quarter "great" and talked up Google+, which now has 40 million users.

Among the key points from Page on Google's earnings conference call:

• Page said Google+ has seen 3.4 billion photos uploaded since launch. "Our ultimate ambition is to transform the overall Google experience, making it beautifully simple, almost automagical as we understand what you want and can deliver it instantly," said Page. Yes folks, he said automagical.
• Chrome has more than 200 million users.
• Android has 190 million devices in the fold and can be found in 130 countries. Google's mobile business is at a run rate topping US$2.5 billion.
• "I'm super excited about the soon-to-be-released new version of Android called Ice Cream Sandwich. That's right, Ice Cream Sandwich. You don't believe what we've managed to get done in this release," said Page.
• Google's headcount growth is at the "edge of what's manageable".

(Credit: Google)

Among the key numbers to note:

• Research and development spending was US$1.4 billion in the third quarter, or 14 per cent of revenue. Sales and marketing expenses were 11 per cent of revenue.
• Operating income in the third quarter was US$3.06 billion, up from US$2.55 billion in the same quarter a year ago.
• Google's network revenue — AdSense — was US$2.6 billion, up 18 per cent from a year ago. Google's revenue breakdown includes traffic acquisition costs.
• International revenue was US$5.3 billion, or 55 per cent of the total revenue pie. In the international unit, United Kingdom revenue was 11 per cent of sales.
• Cost per click increased 5 per cent in the third quarter from a year ago, but fell 5 per cent sequentially. Paid clicks were up 28 per cent in the third quarter compared to a year ago.
• Other cost of revenue — datacentres, content acquisition and credit card processing among other items — was US$1.17 billion in the third quarter, up from US$747 million a year ago.
• Google ended the quarter with 31,353 employees, up from 28,768 three months earlier.
• Google had US$13.63 billion in cash and cash equivalents and another US$21.3 billion in marketable securities.

Investors pushed Google higher in after-hours trading.

Via ZDNet US