Google beats analysts' first quarter expectations
Published: 21 Apr 2006 10:15 BST
Google beats analysts' first quarter expectations As an Arkansas judge approved a $90m click-fraud settlement as the search firm announced first quarter profits of $592m
Google's first-quarter revenue rose nearly 80 percent and, along with an increase in profit, beat analyst expectations as the search giant continued to increase its market share, the company said on Thursday.
Net income for the quarter ended March 31 was $592m (£332m), or $1.95 per share, compared with $369.2m, or $1.29 a share, during the same quarter a year ago. Excluding one-time items, including $115m in stock-based compensation, earnings per share were $2.29.
Revenue rose to $2.25bn from $1.26bn a year earlier. Excluding traffic acquisition costs — or commissions paid to content partners — of $723m, revenue was $1.5bn. Nearly all Google's revenue comes from advertisements that appear on its search results pages and partner Web sites.
Excluding traffic acquisition costs and stock-based compensation, analysts had been expecting net income of $1.97 per share and revenue of $1.4bn, according to Thomson Financial.
Shares of Google rose nearly 8 percent in after-hours trading following the earnings announcement, to $447.06 a share from a close of $415 a share.
"We are obviously very happy with our Q1 results," Google's chief executive, Eric Schmidt, told analysts during a conference call. Google has improved its search quality and increased end user traffic, which has boosted its market share, he said.
"Our own internal estimates show we are gaining share in all our key markets," Schmidt said. Meanwhile, local targeted ads and mobile-related search and advertising are expected to contribute to revenue growth in coming quarters, he added.
Google saw increased revenue from ad sales on its own Web site through its AdWords keyword search advertising platform and on publisher partner sites through its AdSense contextual ad platform, said George Reyes, chief financial officer.
"We are also very happy with the continued growth in our Google site revenues, which were up 97 percent over Q1 of '05," Reyes told analysts. "We also benefited from favourable traffic trends during the [first quarter] as well as continued gains in monetisation. Our network business also performed well. AdSense revenues grew 59 percent year over year."
Piper Jaffray analyst Safa Rashtchy said the stock rise was due to the "positive tone" from Google executives and the good earnings results.
"I thought it was a very strong quarter, very clean results," he said. "They saw strength across the board, both in the US and internationally, and with [ad] partners and on their own sites. Also, I think they sounded quite positive about the growth potential, both in search from advertisers and market share gains, as well as new areas like mobile, their ad network and Google Base."
For the full fiscal year, Google said it expects stock-based compensation charges for grants to employees prior to 1 April, 2006, to be $370m.
The company had cash of $8.4bn at the end of the quarter and 6,790 full-time employees worldwide, up from 5,680 at the end of last year.
Google is gaining market share on its closest rivals, with 42.7 percent share for searches in the US last month, up from 36.4 percent a year ago, according to ComScore Networks. Yahoo had 28 percent market share last month, down from 30.6 percent a year ago, and Microsoft had 13.2 percent, down from 16.5 percent, the figures show.
Also on Thursday, an Arkansas judge approved a preliminary settlement worth up to $90m between Google and advertisers who claimed the world's leading Web search provider overcharged them for their ads. Under the settlement, Google will be required to pay up to $60m in credits for future advertising on Google, and up to $30m is available to pay lawyers for those making claims against Google. "We are pleased that we were able to reach an agreement and are pleased the judge has granted preliminary approval," Google said in a statement.
Reuters contributed to this report.
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