World Business

Google's Q2 earnings rise 24%, but miss target

(Agencies)
Updated: 2010-07-16 11:51

Two office workers walk out of Google's head office in Beijing July 9, 2010. [Agencies]

SAN FRANCISCO - Google Inc's second-quarter earnings missed analysts' target as higher expenses and the fallout from the European debt crisis dragged down the Internet search leader.

The letdown announced Thursday stemmed from Google's expanding payroll and a run-up in the US dollar that has been driven by fears that the euro will crumble if governments in Greece, Spain, Portugal and Italy default on their perilously high debts.

The worries hurt Google because about one-third of the company's revenue comes from Europe, and customer payments made with the euro translated into fewer dollars than a year ago. Even so, the currency squeeze wasn't as severe as some analysts anticipated.

Meanwhile, Google is spending more to maintain its commanding lead in Internet search while it also tries to diversify by developing products in other promising niches such as online video and mobile devices. To help achieve its goals, the company added nearly 1,200 employees in the second quarter to end June with more than 21,800 workers.

Despite the rising expenses, Google's net income rose at a fast clip as second-quarter revenue came in slightly above analysts' forecasts. But the earnings growth wasn't quite as robust as analysts had hoped, a factor that seemed to amplify investor concerns already weighing on Google's stock price.

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Google shares fell $19.56, or nearly 4 percent, in extended trading Thursday after the release of results. Earlier, the company finished the regular session at $494.02, up $2.68.

Although Google remains the Internet's most profitable company, investors have been fretting about signs of decelerating growth amid stiffer competition from Apple Inc, Facebook and Microsoft Corp.

Thursday's report offered some encouraging news, though.

In a positive sign for the overall economy, marketers were willing to pay more for the online ads that generate virtually all of Google's income, and people are clicking on the commercial messages more frequently. Those trends provide another indication that more companies and shoppers are feeling a little better as they recover from the worst economic downturn in more than 70 years.

"We are really pleased with the way we are performing in this economy," Patrick Pichette, Google's chief financial officer, said during a Thursday conference call with analysts. "That's why we feel confident about the future."