MOUNTAIN VIEW (dpa-AFX) - Google Inc. (GOOG) Thursday reported a better-than-expected increase in third-quarter profit, on continued growth in advertising revenue and better margins. Following the announcement, shares of the search engine giant gained about 8 percent in after-hours trade on the Nasdaq.
The results come as investors keenly observe how Google manages to shore up payment it receives from advertisers, which has been ebbing of late.
During the quarter, Google said its advertising revenues were robust as usual, with aggregate paid clicks up 26 percent from last year. On a sequential basis, this was up 8 percent.
Nevertheless, payment from advertisers - average cost-per-click - fell 8 percent year-over-year, and down 4 percent sequentially.
The past quarters have seen lower payment from advertisers as traffic increasingly shifts to less-remunerative mobile devices. Another reason is the increase in traffic to emerging markets that are not that profitable.
But as CEO Larry Page has avowed, Google sought ways to boost mobile-ad rates and embarked on new initiatives on this front.
Mountain View, California-based Google posted third-quarter net income of $2.97 billion or $8.75 per share, compared with $2.18 billion or $6.53 per share a year ago.
Excluding items, adjusted earnings for the quarter were $3.64 billion or $10.74 per share, compared with $2.96 billion or $8.87 per share a year ago.
On average, 40 analysts polled by Thomson Reuters expected Google to report earnings of $10.34 per share for the quarter. Analysts' estimates typically exclude special items.
Google's total revenue for the third quarter was $14.9 billion, up 12 percent from $13.3 billion last year. Core Google revenue - including advertising and other streams - was $13.77 billion, up 19 percent from $11.53 billion last year.
Twenty-nine analysts had a consensus revenue estimate of $14.79 billion for the quarter.
Google said its traffic acquisition costs - the portion of revenue that Google shares with partners - aggregated $2.97 billion in the quarter, compared with $2.77 billion a year ago.
Meanwhile, revenue from its struggling Motorola Mobility dropped to $1.14 billion from $1.8 billion last year.
Google has been facing pressures from the Motorola Mobility business it acquired for $12.5 billion in May 2012. In August, Motorola unveiled its smartphone Moto X in a bid to regain its market share lost to Apple Inc. (AAPL) and Samsung Electronics Co. (SSNLF.PK, SSNNF.PK).
Results for the quarter were also helped by 2.4 percentage point improvement in operating margin to 23 percent. Income tax expense decreased to $513 million from $647 million last year.
In July, Taiwanese semiconductor company Himax Technologies Inc. (HIMX) revealed that Google agreed to invest in its display unit, Himax Display Inc. Under the deal, Google will initially buy a 6.3 percent stake in Himax Display, with an option to buy a stake of about 14.8 percent.
Earlier this month, HP and Google launched a fascinating 11-inch Chromebook, aptly dubbed as the HP Chromebook 11.
Meanwhile, smaller rival Yahoo! Inc. (YHOO) on Tuesday said its third-quarter profit plunged from a year ago, when it recorded huge gains from sale of shares in Alibaba Group. Revenue came in almost flat, with display business under pressure and prices for clicks and advertisements down.
Google closed Thursday at $888.65, down $9.38 or 1.04%, on a volume of 2.74 million shares. In after hours, the stock gained $69.10 or 7.77% at $957.89. In the past 52-week period, the stock traded in a range of $636.00 - $928.00.
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