Google Inc reported second-quarter results short of Wall Street's estimates as weakening prices for the internet company's ads and widening losses from its Motorola mobile phone business weighed on the bottom line.
Shares of Google, which had risen to all-time highs in recent weeks, were down more than 5 per cent at US$863 (NZ$1000) in after-hours trading on Thursday, having earlier closed at US$910.68 (NZ$1092) on the Nasdaq.
The average price of Google's online ads decreased 6 per cent year-on-year in the second quarter, compared with the first quarter's 4 decrease, even as the overall number of internet user clicks on Google ads increased 23 per cent during the quarter.
"Most of these incremental clicks (on ads) are either coming from international or mobile (users), which are not as high-priced as domestic or desktop clicks," said Sameet Sinha, an analyst with B. Riley & Co. "International and mobile don't monetise as well. That's the main concern. Those businesses are less profitable."
Google, the world's top internet search engine, said net income in the quarter was US$3.23 billion (NZ$3.84b), or US$9.54 (NZ$11.5) per share, compared with US$2.79 billion (NZ$3.2b), or US$8.42 (NZ$9.75) per share, in the year-ago period.
Excluding items, Google earned US$9.56 (NZ$11.56) per share, lower than the US$10.78 (NZ$12.8) expected by analysts, according to Thomson Reuters I/B/E/S.
Google's consolidated revenue, which includes results from its Motorola mobile phone business, was US$14.11 billion (NZ$16.9b) in the second quarter, versus US$11.81 billion (NZ$13.2b) in the year-ago period. Analysts expected US$14.4 billion (NZ$17.2b).
Revenue for its core business rose 20 per cent to US$13.11 billion (NZ$15.8b).
Operating margins dipped to a lower-than-expected 28 per cent in the quarter from 33 per cent a year earlier. Motorola, a money-losing handset manufacturer Google acquired in 2012, racked up a loss of US$218 million (NZ$26om) before items, more than four times the US$49 million (NZ$59m) it lost a year earlier.
"It's a little bit of a concern. Maybe they are not getting enough early traction with enhanced campaigns.
The trajectory with CPCs should be getting a little better," said Kerry Rice, an analyst at Needham & Co. The operating margins miss, partly on Motorola's swelling losses, were another cause for worry. CPC stands for cost per click.
"Google outsourced the Motorola manufacturing and sold the home business, so I would have expected Motorola's margin to be higher."