Google Inc.'s 36-per-cent revenue surge smashed Wall St.'s expectations and eclipsed concerns about mounting expenses, sending the Internet giant's shares up more than 12 per cent.
Google's profit also topped forecasts in a quarter that showed the company is powering ahead in areas outside of its dominant Internet search business, including mobile and online video. The next challenge is whether it can duplicate that success in social networking.
Executives told analysts on a conference call the company had signed up more than 10 million people for Google+: the company's biggest foray into the hot social networking arena and the vanguard of its battle with Facebook and Twitter for websurfers' time and attention.
Over 135 million Android smartphones or tablets - made by the likes of Motorola and Samsung Electronics - had been activated in total. And its Chrome browser is now employed by more than 160 million users, CEO and co-founder Larry Page said.
Shares of Google were up 12.3 per cent at $594.50 in after-market trading, or just a whisker above levels at which the stock began 2011.
"Google should be viewed as a growth company again this quarter," said Stifel Nicolaus analyst Jordan Rohan. "The combination of mobile search, Android, ad exchange, YouTube, and the core search businesses, they're all doing well. Google is no longer a one-trick pony.
"The number to focus on is really the GAAP earnings number. Google spent aggressively, hiring just as many people this quarter as the did last quarter."
Investors had feared Google's ever-increasing spending would eat into margins. Operating expenses leaped 49 per cent to $2.97 billion in the second quarter, to about one-third of revenue.
Analysts said the big increase in sales more than compensated for the rise in costs, but Google might find it increasingly difficult to shore up margins while it continues to hire, acquire and invest.
"Revenue growth overrides the hiring and the expense issues," BGC Partners analyst Colin Gillis said in response to the share price jump.
"Nice quarter from the guys, but you still have a situation of declining margins," he added.
However, Page said the company may now be "a little ahead of where we need to be with head-count growth." Google had 28,768 employees as of the end of June 30.
Read more: http://www.montrealgazette.com/technology/Google+surge+smashes+expectations/5105850/story.html#ixzz1SB3UW5aY
