Google's profit rises, but ad sales slow

/ Source: The Associated Press

Google Inc. showed off its moneymaking prowess again with a second-quarter profit that exceeded analyst estimates, shaking off its slowest revenue growth yet as the recession caused Web surfers to click on fewer ads.

The performance disappointed investors as shares in the Internet search leader fell by nearly 3 percent in Thursday's extended trading after the results were released.

Google is the most profitable company on the Internet, thanks to its dominance of the online advertising market. That means its lackluster revenue growth could foreshadow even more significant sluggishness among other Internet companies that rely on advertising and e-commerce when they report their second quarter result in the next couple weeks.

The Mountain View-based company earned $1.48 billion, or $4.66 per share, during the three months ended in June. That compared with income of $1.25 billion, or $3.92 per share, for the same period last year.

Revenue rose just 3 percent to $5.52 billion. It marked Google's lowest growth rate since the went public five years ago. It was also the second consecutive quarter of single-digit revenue growth for the company, which had never fallen below a 30 percent pace until late last year.

If not for stock compensation expenses, Google said it would have made $5.36 per share. That topped the average estimate of $5.09 per share among analysts polled by Thomson Reuters.

After subtracting ad commissions, Google's net revenue totaled $4.1 billion — about $40 million above analyst estimates.

Google relied on cost cutting and an unusually low tax rate to boost its profits amid the slowing ad sales.

The financial discipline resulted in the biggest quarterly reduction in Google's payroll since Larry Page and Sergey Brin started the company in a Silicon Valley garage nearly 11 years ago. Google ended June with 19,786 employees, 378 fewer than at the end of March.

Google's second-quarter tax rate was 20 percent, well below the more typical range of 25 percent.

The company's shares fell $12.40, or 2.8 percent, after finishing the regular session at $442.60, up $4.43. The stock has surged by about 50 percent since it last traded below $300 in early March, reflecting investors' faith in Google to weather the recession better than most companies.