Despite Poor Economy, Google Shows Financial Growth in Q1

Google released its Q1 2009 results last week and (as usual) everyone was paying attention. Investors, analysts, SEMs, etc.; there are few tech companies that draw this much attention when it’s time to report their earnings.

Considering the many questions looming about the state of the economy and what may lie ahead, all eyes were fixed on Google as it did what it has always done.

Google beat analyst estimates and reported a net income of $1.42bn last quarter, up from the same period last year by 8.9%. Revenue was in line with analyst estimates at $4.07bn, excluding traffic acquisition costs. Google did resort to cost-cutting measures and prudent spending to help it meet it’s target estimates.

With Google standing as a tech bellwether, many regard it’s health as a significant sign of the Internet as a whole. Sticking with that standard, parts of the Internet economy clearly have performed admirably, such as search advertising.

But there is cause to view this quarter as both a glass half full and half empty, despite Google’s solid performance in this tough market. After-hours trading perhaps exemplified this appropriately with Google shares rising early only to fall back later on.

On the half full side, easily beating an expected 13% increase, paid clicks were up 17%. And Google delivered $5.16 earnings per share when analyst expectations were down at $4.93.

But, on the half empty side, it must be noted that Google’s quarter expectations had been lowered to match the economy. Many view it like Google was fighting an opponent that had one arm tied behind its back. Clearly revenue growth is slowing and, for the first time, Google reported a decline in net revenue. Executives for Google did point out that it is typical for the company to see slower growth in Q2/Q3, perhaps providing a not-so-subtle glimpse into the next couple of quarters for the company.

Google CEO Eric Schmidt admitted that the company is “absolutely feeling the impact” of the recession. To curb losses, Google has cut products that were not producing results and reduced staff for the first time quarter-to-quarter. Schmidt claims the company is taking a long-term approach and notes the company’s “priority remains investing for the long term to drive future growth in our core and emerging businesses”.