Google Misses Expectations, Aftermarket Punishes Stock

Google Inc. announced its fourth quarter earnings report on Thursday, and while the company posted a significant increase year-over-year revenue and earnings, it wasn’t enough for Wall Street. The after hours market punished the stock—the same after market that often over reacts to Apple’s earnings reports—pushing it down almost nine percent.

Google and a Pile of Money

Google announced revenues of US$8.13 billion for the December quarter, up 27.6 percent over the year ago quarter. Wall Street had been expecting revenues of $8.4 billion. The company posted earnings of $2.71 billion, or earnings per share of $8.22. While up slightly from the year ago quarter’s earnings of $2.54 billion ($7.81), it was well behind Wall Street’s expectations of $10.49 per share.

The company reported solid results in the U.S., but said that its European operations were weak. Europe has been in the midst of an ongoing financial crisis for some time, which contributed to Google’s weaker results in that part of the world.

On the other hand, Google said it now has 90 million users for Google+ and claimed that some 60 percent of them now engage with the online social networking service on a daily basis. The company said that 80 percent of its members do so on a weekly basis. This suggests that the Facebook competitor is gaining at least some traction.

Be that as it may, the biggest problem Wall Street had with Google’s report may have been the company’s expenses. Operating costs increased to 32 percent of revenue during the December quarter, up from 30 percent year-over-year.

Analyst Kim Forrest put it succinctly when he said to Reuters, “You’ve got to ask yourself, ‘Where is the money going? What are they spending it on?’ I have a feeling it is on platforms like Chrome and Android, and things like that.”

The after hours market is often far more volatile on either direction than regular session trading, and it remains to be seen until Friday morning how the broader markets treat the company’s results.