A year after Google announced that its co-founder, Larry Page, would take over as chief executive, the search giant posted record-breaking quarterly revenue of $10.58 billion, its highest ever for a single quarter. But Wall Street had expected Google to do better, and shares dropped 9 percent in after-hours trading.
Though its core search business is stronger than ever, analysts said 2012 could be a bumpy year for Google as it navigates antitrust investigations, intellectual property litigation over Android, competition from Facebook and the acquisition of Motorola Mobility, the struggling handset maker.
“Google seems to be outperforming online advertising as a whole, which is pretty amazing,” said Jordan Rohan, an analyst at Stifel Nicolaus. “The retailers went nuts on paid search, consumers seemed to exhibit frugality fatigue, and the Internet was one obvious area for them to show that newfound gusto.”
Still, he said, “Google has big-company problems now, or more specifically, huge-company problems.”
Google, based in Mountain View, Calif., reported that net income in the fourth quarter rose 6.4 percent, to $2.71 billion, or $8.22 a share, from $2.54 billion, or $7.81 a share, in the period a year earlier. Excluding the cost of stock options and the related tax benefits, Google’s fourth-quarter profit was $9.50 a share, up from $8.75 a year ago. Analysts had expected $10.49 a share.
The company said revenue climbed 25 percent, to $10.58 billion, from $8.44 billion a year ago. Net revenue, which excludes commissions paid to advertising partners, was $8.13 billion, up from $6.37 billion. Analysts had expected net revenue of $8.4 billion.
Shares of Google rose 1 percent in regular trading, to $639.57, but fell 9 percent shortly after the results were announced.
“Google had a really strong quarter ending a great year,” Larry Page, Google’s chief executive, said in a statement. “I am superexcited about the growth of Android, Gmail and Google Plus, which now has 90 million users globally — well over double what I announced just three months ago.”
Mobile searches also increased and advertisers followed, though they pay a 20 to 50 percent discount for ads on cellphones, according to Goldman Sachs. Google does not break out revenue by source, but Goldman predicted that mobile ads accounted for 9 percent of Google’s revenue last year and could reach 13 percent this year.
Despite Google’s announcement Thursday that its social network, Google Plus, has 90 million users, advertisers are still throwing their money at Facebook instead, in large part because they are not convinced that Google Plus will become popular enough to compete with Facebook and Twitter, analysts said.
“The engagement levels on Google Plus are pathetic compared to the larger platforms on social media,” Mr. Rohan said. “The company will argue with different statistics, but most would discount what they say as an overly optimistic view.”
Motorola Mobility on Jan. 6 announced disappointing fourth-quarter earnings, telling Wall Street that device sales were down and that its financial results missed analysts’ expectations.
Though the acquisition has not yet been approved by regulators, analysts say absorbing the handset maker would be a punch in the gut to Google’s business. “Motorola really is going to be a tough one to swallow,” said Colin Gillis, an analyst at BGC Partners. “It’s going to wreck their income statement.”
Analysts also kept a close eye on Google’s operating expenses, which climbed 35 percent, to $3.38 billion in the fourth quarter, in part because of Google’s aggressive hiring and increased spending on advertising.
“If you ask me to sum up Larry Page’s tenure as C.E.O., it’s one thing: downward margins,” Mr. Gillis said.
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