(Bloomberg) — Google Inc.’s earnings topped analysts’ estimates amid slower spending, sending the stock up as much as 14 percent in late trading on investor optimism that the Internet search giant can keep costs in check.
Second-quarter profit before certain items was $6.99 a share, the company said Thursday in a statement. Sales, minus revenue passed on to partners, rose 13 percent to $14.4 billion. Analysts on average projected $6.73 a share in profit on $14.3 billion in sales, according to data compiled by Bloomberg.
Operating expenses climbed 13 percent from a year earlier, a smaller rise than the 21 percent jump in the first quarter. The arrival of new Chief Financial Officer Ruth Porat in May has assuaged investor concerns that Chief Executive Officer Larry Page’s spending on projects outside the main search-advertising business — from driverless cars to computerized spectacles — would keep accelerating without paying off in higher revenue.
“The focus has been increasingly shifting towards spending and the ability to rein that in,” said James Cakmak, an analyst at Monness, Crespi, Hardt & Co.
Stock Jumps
Google shares rose as high as $683.65 in extended trading after the report. The stock gained 3.1 percent to $601.78 at the close in New York, and has soared 11 percent since the start of July.
“The priority is revenue growth,” Porat said on a conference call. “We have a breadth of opportunity, but pursuing revenue growth is obviously not inconsistent with expense management.”
Second-quarter net income was $3.93 billion, compared with $3.35 billion a year earlier, Mountain View, California-based Google said. Revenue in the recent period would have been $1.1 billion higher had foreign-exchange rates stayed constant, the company said.
The number of clicks on ads in the second quarter rose 18 percent, compared with a 13 percent increase in the first quarter, while the average cost per click fell 11 percent after declining 7 percent in the first quarter. Mobile cost-per-click is climbing, Porat said on the call. Watch time on YouTube, the company’s video-sharing site, was up 60 percent, with mobile watch time more than doubling, she said.
Porat, who came to Google after holding the CFO post at Morgan Stanley, brings extensive experience with Wall Street. She replaced Patrick Pichette, who also had emphasized during recent quarterly earnings calls that the company is committed to managing costs.
Porat inherited an increasingly complex company that has been slow to break out more financial details about key services, such as YouTube and mobile advertising.
The company has expanded its reach through investments in fledgling businesses, such as self-driving cars and Google Glass eyewear, and sometimes-hefty acquisitions like Nest Labs, which makes Internet-connected gear for the home. Google also has devoted money to improving its core advertising services, including new tools to enable purchases directly from ads and features that aim to make the buying process simpler for marketers. – Bloomberg
Investors love new CFO Porat’s slower spending signal
(Bloomberg) — Google Inc. stock rallied in late trading after new Chief Financial Officer Ruth Porat signaled plans to bring more restraint to spending at the Internet search giant.
Profit and sales topped analysts’ estimates in the second quarter, and operating expenses rose at the slowest pace since 2013. On a conference call after the results were released Thursday, Porat — who joined the company in May from Morgan Stanley — said she was focused on cost controls.
As the company seeks ways to boost revenue growth in its main Web search-advertising business and beyond, Chief Executive Officer Larry Page has been investing in new — and sometimes expensive — projects, from driverless cars to fast Internet service. Porat has bolstered investor confidence that the company will balance spending on such initiatives with the need to keep a tighter rein on expenses.
“People are realizing it’s a new era,” said Colin Gillis, an analyst at BGC Financial LP. “She’s coming in and she’s expressing what investors wanted — that’s there’s going to be cost rationalization, a degree of discipline.”
Google shares rose as much as 14 percent to $683.65 in extended trading after the report. The stock gained 3.1 percent to $601.78 at the close in New York, and has soared 11 percent since the start of July.
Porat’s Priorities
Profit before certain items in the recent period was $6.99 a share, the company said in a statement. Sales, minus revenue passed on to partners, rose 13 percent to $14.4 billion. Analysts on average projected $6.73 a share in profit on $14.3 billion in sales, according to data compiled by Bloomberg.
“The priority is revenue growth,” Porat said on the call, her first at Google, after the report. “We have a breadth of opportunity, but pursuing revenue growth is obviously not inconsistent with expense management.”
Second-quarter net income was $3.93 billion, compared with $3.35 billion a year earlier, Mountain View, California-based Google said. Revenue would have been $1.1 billion higher had foreign-exchange rates stayed constant, the company said.
Porat said Google is still investing in new businesses, just as it always has under co-founders Page and Sergey Brin. Pursuits have included the introduction of a new wireless-phone service and tests of delivery drones and Google Glass wearable computer, as well as forays into products like contact lenses that can track glucose levels and kites designed to deliver clean energy.
“The founders are still in control and that dynamic still exists, so she’ll have to deal with that going forward,” said Josh Olson, an analyst at Edward Jones & Co. “The fact that she was hired indicates that Larry and Sergey are looking for a change in the approach around expenses.”
Advertising Business
Google also has devoted money to improving its core advertising services, including new tools to enable purchases directly from ads and features that aim to make the buying process simpler for marketers. The company has a wide lead in the digital-advertising market over rivals such as Facebook Inc., Apple Inc. and Twitter Inc.
In the recent quarter, the number of clicks on ads rose 18 percent, compared with a 13 percent increase in the first quarter, while the average cost per click fell 11 percent after dropping 7 percent in the prior period. Google’s mobile cost- per-click is climbing, helping to close the gap with desktop ads, Porat said on the call.
Watch time on YouTube, the company’s video-sharing site, was up 60 percent, with mobile watch time more than doubling, she said.
