Google Earnings: Margins Shrink as Net Income Drops, Stock Sells Off Hard

Rising costs hurt S&P 500 (NYSE:SPY) component Google Inc. (NASDAQ:GOOG) in the third quarter as profit dropped from a year earlier. Google provides search and advertising services and makes this information freely available to anyone with an Internet connection.

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Google Inc. Earnings Cheat Sheet

Results: Net income for the internet services fell to $2.18 billion ($6.53 per share) vs. $2.73 billion ($8.33 per share) a year earlier. This is a decline of 20.3% from the year-earlier quarter.

Revenue: Rose 18.6% to $11.53 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Google Inc. reported adjusted net income of $9.03 per share. By that measure, the company fell short of mean estimate of $9.31 per share. It beat the average revenue estimate of $8.41 billion.

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 27.4%, with the biggest boost coming in the second quarter when revenue rose 35.3% from the year earlier quarter.

Last quarter’s profit decreases breaks a four-quarter run of profit increases. In the second quarter, net income rose 11.2% from the year earlier, while the figure increased 60.7% in the first quarter, 6.3% in the fourth quarter of the last fiscal year and 25.9% in the third quarter of the last fiscal year.

After beating analyst estimates for the two previous quarters, the company fell short of forecasts. In the second quarter, it topped the mark by 6 cents, and in the first quarter, it was ahead by 51 cents.

Looking Forward: Over the past sixty days, the outlook for the company’s performance next quarter has become increasingly unfavorable. The average estimate for the fourth quarter is $10.52 per share, a drop from $10.61. For the fiscal year, the average estimate has moved down from $37.65 a share to $37.37 over the last sixty days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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