Google Reports Significant Fall In Profits

Google shares value dipped by more than three percent overnight after the company revealed it had fallen below expectations in its latest financial set of financial results.

Hot on the heels of the company’s launch of its latest Android software and two new mobile devices yesterday, the search giant revealed it had recorded $2.8bn (£1.7bn) in profits over its third quarter 2014, a five percent fall from the previous year.

Google also missed its predicted revenues targets for the quarter, but still saw a 20 percent rise over the previous year to record $16.52bn (£10.28bn).

Counting the cost

The company said a range of factors had contributed to the lower than expected results, including the cost of its continued global expansion, which saw it hire over 3,000 new staff and open several new offices.

“We continue to be excited about the growth in our advertising and emerging businesses,” Patrick Pichette, Google CFO said in a statement announcing the results.

“We continue to attract and hire the best talent from the best colleges and universities around the world,” he added in a later conference call on Thursday.

“It’s very clearly an extraordinary quarter from a hiring perspective.”

Profits were also affected by the rising global cost of real estate, such as data centres, and hardware inventory costs, which increased by 37 percent to $3.35bn from the same period a year earlier.

Google also revealed that its revenues from advertising had suffered, with the company seeing a two percent drop-off in the average “cost-per-click”. However, this was still an improvement from the 6 percent decline in “cost-per-click” seen in the previous quarter, as the company battled with the likes of Facebook and Twitter for control of the online advertising market.

Overall, the total number of ads, or paid clicks, expanded by 17 percent in the third quarter, down from the 25 percent growth rate Google saw in the second quarter.

Google also announced that it had appointed Omid Kordestani its new chief business officer, replacing Nikesh Arora, who left to join Japanese bank Softbank a few months ago. This role is seen as extremely important within the company, overseeing all the company’s revenue-generating activities and serving as a liaison to investors and Wall Street.

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