Those who thought Google Inc. is on the wane must have got a jolt today as the Internet search giant posted robust financial results for the quarter ended June 30, 2011. In fact, the company had raced past Wall Street’s expectations and analysts’ forecast, with revenues that crossed $9 billion, an increase of 32 per cent compared to the second quarter of 2010.
And the results were good enough to get the company’s stock at NASDAQ soaring. It had closed at $528.94 on July 14, down $9.32 or 1.73 per cent. But at the time of this report (Jul 14, 7:59PM EDT), stock prices had shot up by 12.62 per cent after the trading hours.
“We had a great quarter, with revenue up 32 per cent year-on-year for a record-breaking over $9 billion of revenue,†said Google CEO Larry Page.
What also exceeded expectations was the number of people already on Google+, the company’s latest foray into the sizzling hot social networking arena, arguably ruled by Facebook. But in spite of its limited-trial launch, Page confirmed that more than 10 million users had already opted for the service. “I’m super excited about the amazing response to Google+ which lets you share just like in real life,†said Page during the earnings call announcing the company’s financial results.
Yet another skyrocketing achievement is the number of android devices which are activated daily. According to Page, it stands at 550,000 devices a day and as many as 135 million android devices have been activated so far.
So, it was not surprising that Page was more vocal than the last call this time around and spoke at length. And he had reason to be vocal. The company is sitting on cash, cash equivalents and marketable securities worth $39.1 billion, and according to Page, heavy investments in capex will continue. Google had also filed its first debt offering of $3 billion earlier this year. Just to give you a perspective, corporate spending has spiked over 54 per cent over the last couple of quarters while Google had bought 48 companies last year and another 14 companies this year. It has also stepped up hiring.
“I see more opportunities for Google today than ever before. Because, believe it or not, we are still in the very early stages of what we want to do. Even in search … which we’ve been working on for 12 years, there have never been more important changes to make,†said Page.
“I understand the need to balance the short term with the longer-term needs because our revenues and growth serve as the engine that funds our innovation.. But our emerging high-usage products can generate huge new businesses for Google in the long run, just like search. And we have tons of experience monetizing successful products over time,†he enthused.
You can read the full text on Page’s Google+ page.
Financial Highlights
Revenues: The company reported revenues of $9.03 billion for the quarter ended June 30, 2011, an increase of 32 per cent, compared to the second quarter of 2010 (Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs or TAC).
Google-owned sites generated revenues of $6.23 billion or 69 per cent of the total revenues in the second quarter of 2011. This represents 39 per cent increase over second quarter 2010 revenues of $4.50 billion.
Google’s partner sites generated revenues through AdSense programmes of $2.48 billion or 28 per cent of total revenues, in the second quarter of 2011. This represents 20 per cent increase from second quarter 2010 network revenues of $2.06 billion.
The company continues to generate a significant portion of its revenues from overseas. Revenues from outside the USA totalled $4.87 billion, representing 54 per cent of total revenues in the second quarter of 2011, as compared to 53 per cent in the first quarter of 2011 and 52 per cent in the second quarter of 2010.
Revenues from the UK totalled $976 million, representing 11 per cent of revenues in the second quarter of 2011, as compared to 11 per cent in the second quarter of 2010.
Income: GAAP operating income in the second quarter of 2011 was $2.88 billion or 32 per cent of revenues. This compares to $2.37 billion or 35 per cent of revenues in the second quarter of 2010.
GAAP net income in the second quarter of 2011 was $2.51 billion, as compared to $1.84 billion in the second quarter of 2010.
GAAP EPS in the second quarter of 2011 was $7.68 on 326 million diluted shares outstanding, compared to $5.71 in the second quarter of 2010 on 322 million diluted shares outstanding.
In the second quarter of 2011, the charge related to stock-based compensation (SBC) was $435 million, as compared to $309 million in the second quarter of 2010. The tax benefit related to SBC was $91 million in the second quarter of 2011 and $70 million in the second quarter of 2010.
Paid Clicks: Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its AdSense partners, had approximately increased 18 per cent over the second quarter of 2010 and decreased (approx.) 2 per cent over the first quarter of 2011. Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of its AdSense partners, increased around 12 per cent over the second quarter of 2010 and increased went up nearly 6 per cent over the first quarter of 2011.
Traffic Acquisition Costs (TAC): TAC or the portion of revenues shared with Google’s partners increased to $2.11 billion in the second quarter of 2011, as compared to the TAC of $1.73 billion in the second quarter of 2010. TAC as a percentage of advertising revenues was 24 per cent in the second quarter of 2011, as compared to 26 per cent in the second quarter of 2010.
Other Cost of Revenues: Other cost of revenues including data centre operational expenses, amortisation of intangible assets, content acquisition costs, as well as credit card processing charges, increased to $1.06 billion or 12 per cent of revenues in the second quarter of 2011, as compared to $735 million or 11 per cent of revenues in the second quarter of 2010.
Operating Expenses: Operating expenses, other than cost of revenues, were $2.97 billion in the second quarter of 2011 or 33 per cent of revenues, as compared to $1.99 billion in the second quarter of 2010 or 29 per cent of revenues.
On a worldwide basis, Google employed 28,768 full-time employees as of June 30, 2011, up from 26,316 as of March 31, 2011. Net headcount growth (excluding approximately 450 employees hired as part of the acquisition of ITA Software) was similar to the first quarter of 2011.
For our coverage of Google’s previous quarter results, please click here. Incidentally, Google does not give a break-up according to business units or regions.
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