Google Misses Estimates, Triggers Sell Off
Internet behemoth Google earned $8.08 per share in the first quarter of 2011, missing consensus expectations of $8.10 cents and prompting an initial sell-off in afterhours trading.
Google, the first big name in the tech sector to post earnings for the first quarter, reported that revenues were up 27% to $8.58 billion in the first quarter, excluding traffic acquisition costs (TAC), which totaled $2.04 billion or 25% of advertising revenues.
Non-GAAP net income came in at $2.64 billion, up from $2.18 billion for the first quarter of 2010. Earnings per share came in substantially above the non-GAAP $6.76 posted in the first quarter of 2010 but came under Wall Street consensus forecasts.
UPDATE: See what Larry Page said in his first earnings call as CEO here.
Investors and analysts were looking to costs and margins to understand Google’s performance this quarter. Traffic acquisition costs were down up to $2.04 billion, but fell as a percentage of advertising revenues to 25% from 26% a year earlier.
Operating expense were $2.84 billion, or 33% of revenues. This represents an increase both in raw and percentage terms from Q1 2010’s $1.84 billion in operating expenses, or 27% of revenue. Total costs and expenses rose to $5.78 billion from $4.29 billion. “Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 8% over the first quarter of 2010 and decreased approximately 1% over the fourth quarter of 2010,” read the release. (Read Google Extends Lead In Search As AOL Creeps Up In Online Video).
Google stock was down $27.31 or 4.7% to $551.10 in the first 20 minutes of afterhours trade on very heavy volumes. (Read Apple To Dominate Tablet Market Through 2015, Google Takes Smartphones).
Google CEO Larry Page’s Lightning Appearance On The Earnings Call
The billionaire co-founder of the internet giant was on the call for about three minutes and constantly told analysts and investors how excited he was about everything Google.
After highlighting what a tremendous quarter they had had, growing revenues 27%, Page noted there were still huge improvements to be had with core products and businesses, noting how excited they were about that.
See the breakdown of Google’s earnings at Google Misses Estimates, Triggers Sell Off.
Page, who went on the call at about 4:33 PM eastern time and left at around 4:36, said the management re-shuffling, in which he replaced Eric Schmidt as CEO, had gone according to plan “I’m very excited about the progress we have had there,” explained Page. (Read Google Extends Lead In US Search As AOL Creeps Up In Online Video).
Google’s co-founder also noted that both Schmidt and Sergey Brin were working on their respective projects, with the former CEO now engaging governments as the company’s chairman. After expressing optimism as to what lays ahead for Google, Page handed the call over to CFO Patrick Pichette.
After posting an EPS of $8.08 for the first quarter of 2011, below consensus forecasts of $8.10, the internet search giant’s stock dropped precipitously. By 5:10 PM, the stock was trading down 5.1% or $29.56 to $548.95.