In Internet time, Google, founded in 1998, is ancient. But its latest financial report suggested that it could successfully become more than a search engine and compete in a modern Internet world dominated by sharing real-time information with friends and on mobile phones. Continue reading after the jump.
Although Google, as usual, did not break out the numbers from different strands of its business, over all its results Thursday were so robust, easily blowing past Wall Street expectations, that analysts said they indicated growing strength in more areas than just search.
Part of what also gave Wall Street heart was that Larry Page, Googleâ€™s co-founder and chief executive, participated in the conference call with analysts, and made lengthy remarks about his vision for the companyâ€™s future for the first time since he took over in April.
â€˜â€˜Theyâ€™re firing on all six cylinders now,â€™â€™ said Jordan Rohan, an Internet analyst at Stifel Nicolaus, pointing to Googleâ€™s six businesses â€” search, display advertising, YouTube, the Chrome browser, the Android mobile operating system and Google+, its new social network. â€˜â€˜Googleâ€™s now officially a V6.â€™â€™
But other analysts said that while the results proved that Googleâ€™s core search business was even stronger than they thought, new businesses like Google+ and Android were far from generating revenue, yet the company continued to spend heavily on them.
Google reported second-quarter revenue of $9.03 billion, up from $6.82 billion in the year-ago quarter. Net revenue, which excludes payments to ad partners, was $6.92 billion, up from $5.09 billion. The company said its net income rose to $2.51 billion, or $7.68 a share, from $1.84 billion, or $5.71. Excluding the cost of stock options, Googleâ€™s second-quarter profit was $8.74 a share, compared to $6.45 last year.
Below is financial summary of Google’s second quarter. Click here for a more extensive report.
Q2 Financial Summary
Google reported revenues of $9.03 billion for the quarter ended June 30, 2011, an increase of 32% compared to the second quarter of 2010. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the second quarter of 2011, TAC totaled $2.11 billion, or 24% of advertising revenues.
Google reports operating income, operating margin, net income, and earnings per share (EPS) on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.
â€¢ GAAP operating income in the second quarter of 2011 was $2.88 billion, or 32% of revenues. This compares to GAAP operating income of $2.37 billion, or 35% of revenues, in the second quarter of 2010. Non-GAAP operating income in the second quarter of 2011 was $3.32 billion, or 37% of revenues. This compares to non-GAAP operating income of $2.67 billion, or 39% of revenues, in the second quarter of 2010.
â€¢ GAAP net income in the second quarter of 2011 was $2.51 billion, compared to $1.84 billion in the second quarter of 2010. Non-GAAP net income in the second quarter of 2011 was $2.85 billion, compared to $2.08 billion in the second quarter of 2010.
â€¢ 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. Non-GAAP EPS in the second quarter of 2011 was $8.74, compared to $6.45 in the second quarter of 2010.
â€¢ Non-GAAP operating income and non-GAAP operating margin exclude the expenses related to stock-based compensation (SBC). Non-GAAP net income and non-GAAP EPS exclude the expenses related to SBC and the related tax benefits. In the second quarter of 2011, the charge related to SBC was $435 million, 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.