Google reports strong earnings, propelling its stock

Growth in the company's revenue, however, has slowed in recent years

Inside Google's headquarters in Mountain View, California.

Inside Google's headquarters in Mountain View, California.

Google's stock jumped more than 7 percent in the after-market hours on Thursday, after the company reported strong earnings results for the second quarter.

Total income for the period ended June 30 was $US3.93 billion, up 17 per cent from $US3.35 billion in the second quarter of 2014, Google announced Thursday. Excluding certain expenses, Google reported earnings of $US6.99, beating analysts' estimates of $US6.71, as polled by the Thomson Financial Network.

The company's stock was trading at around $US620 after Google reported its earnings at the end of trading, up from closing at $US579.

Still, Google's growth has been slowing.

Advances in the Internet giant's crucial advertising sales have taken a hit the last few quarters. Revenue is still growing, but at a slower rate than in years past, as the company has made new investments in ambitious "moon shot" projects like self-driving cars and Internet balloons in the stratosphere.

The company's sales for the second quarter were $US17.73 billion, up 11 per cent, and coming in just shy of analysts' estimates of $US17.75 billion.

But the 11 per cent growth rate is the smallest revenue increase reported by the company since 2012.

The company reported mixed results in its ads business. Its paid clicks grew by 18 per cent, but the cost-per-click paid by advertisers fell by 11 per cent.

The company's operating expenses, meanwhile, grew by 13 per cent, to $US6.32 billion.

One concern among investors is that Google is struggling to grow its ad revenue on mobile devices. In comparison to the desktop, ads in mobile search results are smaller, and can yield fewer interactions from users, driving down their price.

Google has tried to attract more users to its ads on mobile by adding more information and functionality to them, like product ratings and store inventory information. Just this week, the company said it was rolling out a new way to let users make purchases directly from the ads in mobile search results.

Google is also competing with a rising number of apps made by other developers built around specific types of searches or online activities. In April, Google made a change to its search algorithm that prioritized sites that had been optimised for mobile. By prioritising higher quality sites, the effect, dubbed "Mobilegeddon," was aimed at getting more people to use Google search on mobile.

Google doesn't break out it's desktop versus mobile advertising sales. But Google might be making new strides in mobile. In its announcement , CFO Ruth Porat said mobile "stood out" in the context of the company's core search results.

Zach Miners covers social networking, search and general technology news for IDG News Service. Follow Zach on Twitter at @zachminers. Zach's e-mail address is zach_miners@idg.com

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Zach Miners

IDG News Service
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