Google shares plunge after earnings miss the mark

Revenue was up, but income took a 20% drop

Google accidentally released its third quarter earnings Thursday morning, hours before its scheduled call, and the results aren’t pretty. 

Revenue grew, but not as quickly as the Street had hoped, while net income took an unexpected fall.  Google reported revenues totaling $14.1 billion, up 45% from $9.72 in Q3 2011, but it missed analysts’ expectations of $14.6 billion.  Non-GAAP operating income also came up short, totaling $3.8 billion while analysts were expecting $4.23 billion.  Additionally, non-GAAP earnings per share came in at $9.03, while the Street was anticipating $10.57.

And then there’s the sharp drop in net income, which came in at $2.18 billion—a 20% drop from Q3 2011, when net income came in at $2.73 billion.  Q3 2010 saw net income of $2.17 billion.

Citi analyst Mark Mahaney said that while results came in “light,” the poor earnings report is “not thesis changing.”  In one particularly glorious example of netspeak, Mahaney noted that “paid click trends decel…CPCs get less worse (tho not as less worse as expected).”  In other words, while paid clicks were up 33% from last year, cost-per-click (the amount advertisers pay Google per click) was down 15%--marking the third consecutive quarter in which CPCs were down.

“We had a strong quarter. Revenue was up 45 percent year-on-year, and, at just fourteen years old, we cleared our first $14 billion revenue quarter,” said CEO Larry Page, in a statement. “I am also really excited about the progress we’re making creating a beautifully simple, intuitive Google experience across all devices.”

The early release of Google’s earnings results prompted a massive sell-off of Google shares.

Shares fell some 9% in two hours, from $755 to $685.  They’ve since picked back up a smidge to close at $695. 

Google actually suspended trading until its earnings call at 4:30 pm ET.  It also pinned the blame for the early release on its financial printer R.R. Donnelly, who evidently filed the release without authorization.

In Google’s earnings call, Page said that 19 products were sunsetted last quarter, which falls in line with Page’s clean-up strategy since his return as CEO.  

Google's mobile run rate was up to $8 billion, compared to $2.5 billion last year. 

Image source: guim.co.uk