Google earnings rise 35% year on year in first quarter

After the close last night, internet search company Google (GOOG ) said first-quarter revenue was $5.06 billion and net income rose to $1.96 billion, or $6.06 a share, from $1.42 billion or $4.49 a share in the same period in 2009. Excluding special items, earnings for the 1st quarter were $6.76 a share against analyst expectations of $6.60. Google's rate of paid clicks, or the number of times users clicked on its advertisements and generated revenue, rose 15% from the same quarter last year. It had posted 13% growth in paid clicks in the prior fourth-quarter report. Analysts had been looking for first-quarter paid click growth in the range of 12% to 14%.

Some analysts were concerned that it had begun to hire aggressively again in the first quarter, meaning that its total costs and expenses rose to $4.3 billion from $3.6 billion in the same period last year. This drove the share price down 26 dollars to $569, a drop of over 4%, after hours. When out of 27 analysts, 25 have it as buy or overweight this shows the weight of expectation on Google's shares. Although the company beat estimates, the earnings outlook for the rest of the year has moved the share price down. It must be a legitimate concern, whether GOOG can continue driving earnings growth at the same rate if costs rise, its "bread and butter" search engine ads slows down, its exit from China curtails future growth and its acquisitions such as YouTube continue to disappoint in terms of monetization.

It seems the hypothesis that ad spending was going to increase substantially in 2010 is playing out. Companies such as ITV in the UK are already seeing the benefits of this rebound in their share prices with it touching 69p today, 20p higher than the point in March when Sky offloaded its stake. Frustrating to have sold out at 60p!