Google quarterly results disappoint

Google announced quartery results that were below what the market had hoped for. Their revenue growth was lower than the previous quarter, though still very impressive, and their earnings were considerably below expectations as they invested in new products and international expansion, while also experiencing a jump in their tax rate.

The market reacted badly, initially sending their shares down 19%, but since they have stabilised in after market trading to 15% below were they were at the close of the bell. So, Google's unbroken run of beating analysts expectations has come to a dramatic end. And some would argue that Google is growing up.

Google reported gross revenues of $1.919bn, an increase of 86% from the year before and a slowdown from the 96% of the previous three months. Net revenue, after deducting traffic acquisition costs paid to other websites that carry its search results, was $1.29bn, in line with estimates. In its previous five quarterly earnings reports as a public company, Google's revenues beat estimates by between 6-15%.

Google earned $372.2 million, or $1.22 per share, in the quarter. That represented an 82% increase from net income of $204.1 million, or 71 cents per share, in the previous year.

Earnings per share, on the pro-forma basis, were $1.54, below the $1.76 that the stock market expected. The company said its tax rate had jumped to 41.8% because the proportion of expenses allocated to its international operations was higher than it had expected.

The big question everyone will be left asking is whether and when these huge investments/bets in new products and international expansion are going to pay off.