Google Announces Q2 Results: Stock Plummets 12%

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Google announced their Q2 results today after the market had closed. Shares are down by as much as 12% as earnings growth reported was below analysts expectations. Net income for the quarter was $1.25B, up from $925M. The company reported a profit of $4.63 per share, which was slightly below the $4.72 average expectation from Wall Street analysts.

Todays fall is an indication that the economic slowdown is affecting Google, which has experienced its largest one-day fall in stock price since it went public in 2004. The US economy grew only 1% in the last quarter, down from 3.4% from a year ago. The ad market is expected to only grow at a rate of 2% this year – and with Google and Yahoo together making up 95% of the search market, the impact is expected to be felt throughout the web sector. Google has a high reliance on their search advertising revenues, with no other formidabble revenue streams. For that reason the company, and its growth expectations, are heavily affected by the slightest changes in the vulnerable advertising market.

The good news for Google is that web and search spending continue to take up a higher proportion of a shrinking ad market. The bad news is that the growth rate of web spending as overall ad spending is not adequate to make up for the high expectations set on Google. The company is also yet to realize real revenues from its application suite, which is where it has set out to compete directly with Microsoft and their profitable Office suite of products. While Google has won large contracts for email hosting, it is still just a drop in the ocean compared to the larger office and enterprise markets.

Related: Meanwhile IBM Q2 beats expectations >>

  • Randy Ksar

    Economic downturn or poor management? I guess both could be factors. We’ll see how this affects the rest of the industry.

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  • Meme

    What a load of hogwash. This was Google’s best Q ever. The fall is a result of analysts being wrong (again). Had the analysts erred in the other direction, the stock would have skyrocketed…

    Past experience shows that Google earns more in times of global crisis, e.g. after Sep 11 airliners spent more on Google ads. Since Google ads deliver better focused results expect more business in financial difficulty to spent more ad money with Google.

    At the moment, GOOG is a strong buy opportunity.

  • Nik Cubrilovic

    Meme: they are still a media company

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  • Michael VanDeMar

    Actually, this was their second largest 1 day fall, afaik. Today is 2 days shy of the one year anniversary of them losing $46 in after hours trading.

  • Nik Cubrilovic

    Good point Michael – im going back to the charts for my wrap up post later today

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