Internet search engine Google Inc. (GOOG) said Thursday its second-quarter profit increased 24% over last year, driven by double-digit growth in advertising revenues. However, non-GAAP earnings failed to meet the analysts' expectations. Following the news, the company's shares lost more than 4% in the after-hours trading.
Looking ahead, the company said it plans to continue to invest aggressively in core areas of strategic focus.
Mountain View, California-based Google reported GAAP net income of $1.84 billion or $5.71 per share for the second quarter, up from $1.48 billion or $4.66 per share in the prior year quarter.
Excluding items, non-GAAP net income grew to $2.08 billion or $6.45 per share from $1.71 billion or $5.36 per share in the year-ago quarter. On average, 36 analysts polled by Thomson Reuters expected the company to report earnings of $6.52 per share for the second quarter. Analysts' estimates typically exclude special items.
GAAP operating income rose to $2.37 billion, or 35% of revenues, from $1.87 billion, or 34% of revenues, in the previous year quarter. Non-GAAP operating income was $2.67 billion, or 39% of revenues, compared to $2.17 billion, or 39% of revenues, in the second quarter of 2009.
Second quarter gross revenues increased 24% to $6.82 billion from $5.52 billion in the same quarter last year. Excluding Traffic Acquisition Costs or TAC, revenues grew 24% to $5.09 billion from $4.07 billion a year earlier. Thirty-three analysts had a consensus revenue estimate of $4.99 billion for the second quarter.
Eric Schmidt, CEO of Google, said, "Solid growth in our core business and very strong growth in our emerging businesses drove 24% revenue growth year over year."
Total advertising revenues grew 23% to $6.56 billion, and other revenues rose 39% to $258 million over a year ago.
Google-owned sites generated revenues of $4.50 billion, a 23% increase from a year earlier. Google's partner sites, which are run through AdSense programs, generated revenues of $2.06 billion, up 23% from last year.
Revenues from outside of the United States totaled $3.53 billion, representing 52% of total revenues in the second quarter of 2010, compared to 53% in the second quarter of 2009. Excluding gains related to foreign exchange risk management program, revenues in the second quarter of 2010 would have been $24 million lower.
Revenues from the United Kingdom were $770 million, representing 11% of revenues, compared to 13% in the year-ago quarter.
Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of AdSense partners, increased about 15% over a year earlier.
Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of AdSense partners, grew by about 4% from last year.
Total costs and expenses for the second quarter increased to $4.46 billion from $3.65 billion in the prior year quarter.
As of June 30, 2010, cash, cash equivalents, and short-term marketable securities were $30.1 billion, compared to $26.5 billion at March 31, 2010.
Google, which has been the undisputed leader among search engines for several quarters, continued to lead the U.S. core web search rankings in June 2010, according to data published by Internet data tracking firm comScore Inc. (SCOR).
Google sites accounted for 62.6% of the searches conducted in June, followed by sites of Yahoo! Inc. (YHOO) with a share of 18.9% and Microsoft Corp. (MSFT) sites with a share of 12.7%. However, Google's share of searches was down 1.1 points from 63.7% in May 2010, while Yahoo and Microsoft witnessed slight improvement.
Further, the company said its board has authorized debt financings of up to $3 billion through the issuance of commercial paper. In conjunction with this program, the company established a $3 billion revolving credit facility. The company will use the net proceeds from the program for general corporate purposes.
For the first-half of 2010, Google posted GAAP net income of $3.80 billion or $11.77 per share, up from $2.91 billion or $9.15 per share in the previous year period.
Gross revenues for the period increased to $13.60 billion from $11.03 billion in the prior year period.
Among recent major events, Google last Friday revealed in a blog posting that Chinese government renewed the company's Internet Content Provider or ICP license to continue operating its web site in mainland China. The license renewal ends months-long standoff between Beijing and Google and avoids a possible shutdown of the company's service in China, the world's largest Internet market.
The company had said in January that it may exit China, citing tough Chinese censor laws as well as massive cyber attacks on its U.S. computers from there.
On July 1, Google agreed to acquire ITA Software Inc., a flight information software company, for $700 million in cash, making its entry into travel related business. ITA provides technically advanced solutions for organizing flight information.
In May, the U.S. Federal Trade Commission cleared Google's acquisition of privately-held mobile advertising network company, AdMob, for $750 million in stock. This transaction is expected to be the third largest for the search engine giant, having picked-up advertising specialist DoubleClick for $3.1 billion and video-sharing website YouTube for $1.65 billion in October 2006. The company also acquired visual search engines maker Plink.
Google's rival, Yahoo is set to announce its results for the second quarter on July 20. Wall Street analysts are of the view that the company will earn $0.14 per share on revenues of $1.16 billion.
For the second quarter of 2010, Yahoo anticipates income from operations in the range of $155 million to $195 million, and revenue of $1.600 billion to $1.680 billion. Excluding TAC, the company's revenue is estimated to be between $1.125 billion and $1.185 billion for the quarter.
Another peer, AOL Inc. (AOL) is scheduled to report its results for the second quarter on August 4. Analysts project quarterly earnings of $0.42 per share on revenues of $601.28 million.
Google closed Thursday's regular trading session at $494.02, up $2.68 on a volume of 4.83 million shares. However, in the after-hours, the shares lost $20.22 or 4.09%.
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