Google's third quarter results shine, Google+ hits 40 million users

The search giant's quarter was really about its owned and operated sites, which accounted for 69 percent of revenue in the third quarter.
Written by Larry Dignan, Contributor

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

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

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

The search giant's quarter was really about its owned and operated sites, which accounted for 69 percent 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 $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."
  • Page said "YouTube is just tremendously successful and it's growing gangbusters in every way." He said YouTube is "a very small percentage of peoples overall video usage still, so we see opportunities for tremendous growth there."
  • Nikesh Arora, chief business officer, said Google continues to see "revenue acceleration in our enterprise business" and recent Google Apps wins include Bank of Japan. The Chromebook is "beginning to see lots of interest and good uptake from business and educational institutions." No specific customers were named.

Among the key numbers to note:

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

Investors pushed Google higher in afterhours trading.


Google Q3 earnings preview: Eyes on economy, Motorola Mobility hit

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