For Google, Even A $16.5 Billion Earnings Report Is A Miss

Analysts were expecting more, but Google's ad growth slowed on the quarter, and the company is spending more of its money.
Posted at 9:50 AM, Oct 17, 2014

Google missed Wall Street expectations with its Thursday earnings report.

The company reported $16.5 billion in revenue with earnings per share of $6.35. Analysts had been looking for $16.6 billion on $6.53 a share.

Google kept plenty busy this quarter — even announcing the official release of Android 5.0 and new hardware as recently as Thursday. (Video via The Verge)

But headlines like this one in The New York Times show investors are more worried about Google's core product — the ads it sells against its search business.

"The problem was that in the earnings report, the Internet giant showed signs that its ultraprofitable business in search advertising was starting to slow."

"Paid clicks, a key measure of ad volume, rose 17 percent against expectations of 22 percent growth. That was the slowest growth rate in three years." (Video via CNBC)

In other words, says GigaOM, the revenue might still be growing — but it's less quickly than Wall Street would like.

"At the same time though, the consumer move to mobile raises the question whether Google will be able to adapt over the long term and keep growing its revenue while maintaining its profit margins."

"They're going through the same sort of transformation Facebook went through a couple years ago, as they try and make the shift from being a largely desktop product to increasingly or even largely a mobile product." (Video via Bloomberg)

There's also no question: Google's spending more of the money it brings in.

Operating expenses are up, and it dropped $2.65 billion — 14 percent of quarterly revenue — on research and development for projects like driverless cars and delivery drones.

If that means Google misses expectations on the quarter, says TechCrunch, so be it. "Building out new revenue streams, and investing in future products that won't monetize for some time isn't cheap."

Google shares were off following the news, dipping as much as 5 percent in after-hours trading. On Friday before the markets opened, they were down less than 1 percent.

This video includes images from Getty Images.