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Why have google shares jumped 11% this month?


Google Inc.’s earnings topped analysts’ estimates amid slower spending, sending the stock up as much as 14 percent in late trading on investor optimism that the Internet search giant can keep costs in check.

Second-quarter profit before certain items was $6.99 a share, the company said Thursday in a statement. Sales, minus revenue passed on to partners, rose 13 percent to $14.4 billion. Analysts on average projected $6.73 a share in profit on $14.3 billion in sales, according to data compiled by Bloomberg.

Operating expenses climbed 13 percent from a year earlier, a smaller rise than the 21 percent jump in the first quarter. The arrival of new Chief Financial Officer Ruth Porat in May has assuaged investor concerns that Chief Executive Officer Larry Page’s spending on projects outside the main search-advertising business — from driverless cars to computerized spectacles — would keep accelerating without paying off in higher revenue.

“The focus has been increasingly shifting towards spending and the ability to rein that in,” said James Cakmak, an analyst at Monness, Crespi, Hardt & Co.

Stock Jumps

Google shares rose as high as $683.65 in extended trading after the report. The stock gained 3.1 percent to $601.78 at the close in New York, and has soared 11 percent since the start of July.

“The priority is revenue growth,” Porat said on a conference call. “We have a breadth of opportunity, but pursuing revenue growth is obviously not inconsistent with expense management.”

Second-quarter net income was $3.93 billion, compared with $3.35 billion a year earlier, Mountain View, California-based Google said. Revenue in the recent period would have been $1.1 billion higher had foreign-exchange rates stayed constant, the company said.

The number of clicks on ads in the second quarter rose 18 percent, compared with a 13 percent increase in the first quarter, while the average cost per click fell 11 percent after declining 7 percent in the first quarter. Mobile cost-per-click is climbing, Porat said on the call. Watch time on YouTube, the company’s video-sharing site, was up 60 percent, with mobile watch time more than doubling, she said.

Porat, who came to Google after holding the CFO post at Morgan Stanley, brings extensive experience with Wall Street. She replaced Patrick Pichette, who also had emphasized during recent quarterly earnings calls that the company is committed to managing costs.

Porat inherited an increasingly complex company that has been slow to break out more financial details about key services, such as YouTube and mobile advertising.

The company has expanded its reach through investments in fledgling businesses, such as self-driving cars and Google Glass eyewear, and sometimes-hefty acquisitions like Nest Labs, which makes Internet-connected gear for the home. Google also has devoted money to improving its core advertising services, including new tools to enable purchases directly from ads and features that aim to make the buying process simpler for marketers.

(Source: Bloomberg)