Google profit beats forecasts, stock rallies

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Google Corporate Headquarters And Logo

Shares in Google rose around 12% yesterday after the search engine company’s profit beat forecast for the first time in 6 quarters. It was boosted by strong ad revenue, as well as comments by its new chief financial officer on more disciplined spending.

The stock rallied to $673.50 in extended trading, after first closing at $601.78 on the NASDAQ. That’s an all time high for the stock in regular trading if it closes at the same level on Friday, and would add $40 billion to its value.

Google shares rally

After Apple, Google is the most valuable publicly traded US company.

The company’s expenses rose 10% to $12.9 billion in Q2 ending June 30th, from the year-ago quarter, and held steady at 73% of revenue. Expenses grew by only $91 million from Q1, and as a percentage of revenue fell by 1%.

“The decline in quarter-over-quarter operating expenses reflects, in part, discipline in expense management and, in part, lower legal expenses than in comparable periods”, CFO Ruth Porat told analysts.

The rally in Google’s stock reflected Porat’s comments, and was up by around %7 after the close of regular trading and rose throughout the call as she said that expenses are being kept under control. Ad revenue grew %11 to $16.02 billion from the same time last year, while the number of paid clicks rose 18%.

Advertisers only pay Google if a user clicks on an ad. The cost per click, or the average price of online ads, fell 11% but it was offset by the increase in ad volumes.

Google’s revenue has been under pressure as users access its services on mobile devices, where ad rates are lower. The company’s consolidated revenue rose to $17.73 billion in the quarter.

Excluding one-time items, Google earned $6.99 per share.

SOURCE: Reuters.

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