Can Google match this wild expectation? It has not had a problem before, as it seems the company outdoes itself every single quarter, one after the other. What is fueling all this earnings growth? Is it just text-based advertising that Google seems unstoppable at when it comes to serving advertising to search-based customers on the web? Or is Google making more money within other areas within some of its acquired properties as of late?
Something I have said for years now is that Google's growth is grand, but can't continue over and over into the stratosphere on the back of one revenue source: text ads (Google AdSense as well). The company's recent rash of high-profile acquisitions has sent a signal that it wants to be the leader in the search business across all platforms, devices and types of content. It needs to monetize all that activity as well, and if it can figure out how, there will be no stopping Google. Yahoo!, on the other hand, is still not able to figure this out, but it has made baby steps in that arena.
With that, here we go. Remember to use the "Refresh" button on your web browser to refresh this post every few minutes as updates happen. All times below are in PDT.
1:33pm -- non-GAAP net income for the quarter was $1.12 billion, with operating income of $1.35 billion for the quarter.
1:34pm -- the complete Q2 hit list overview:
- GAAP operating income for the second quarter of 2007 was $1.10 billion, or 29% of revenues. This compares to GAAP operating income of $1.22 billion, or 33% of revenues, in the first quarter of 2007. Non-GAAP operating income in the second quarter of 2007 was $1.35 billion, or 35% of revenues. This compares to non-GAAP operating income of $1.41 billion, or 38% of revenues, in the first quarter of 2007.
- GAAP net income for the second quarter of 2007 was $925 million as compared to $1.0 billion in the first quarter of 2007. Non-GAAP net income in the second quarter of 2007 was $1.12 billion, compared to $1.16 billion in the first quarter of 2007.
- GAAP EPS for the second quarter of 2007 was $2.93 on 315 million diluted shares outstanding, compared to $3.18 for the first quarter of 2007 on 315 million diluted shares outstanding. Non-GAAP EPS in the second quarter of 2007 was $3.56, compared to $3.68 in the first quarter of 2007.
- Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP EPS are computed net of stock-based compensation (SBC). In the second quarter of 2007, the charge related to SBC was $242 million as compared to $184 million in the first quarter of 2007. Tax benefits related to SBC have also been excluded from these non-GAAP measures. The tax benefit related to SBC was $43 million in the second quarter of 2007 and $27 million in the first quarter of 2007. Reconciliations of non-GAAP measures to GAAP operating income, operating margin, net income, and EPS are included at the end of this release.
1:37pm -- CEO Eric Schmidt takes the call over. He begins by saying that core Google.com revenues increased even in a seasonally weak quarter. Yeah, I would agree with that.
1:40pm -- Schmidt is now saying that Google continues to grow as a seasonal downturn that never materialized helped Google's revenues this quarter. CFO George Reyes then takes the call and begins going over the financials mentioned already above.
1:44pm -- Reyes is talking about Google's headcount, which now stands at 13,786 globally. He reiterates Schmidt's comment earlier that Google will be closely monitoring headcount in future quarters to make sure it scales with Google's growth. In other words, Google hiring may be slowing down a bit. Just a guess.
1:48pm -- Company co-founder Sergey Brin takes the call. He explains that search remains Google's key core area (well, duh!) and mentions the launch of Google "Universal Search" this past quarter. He mentions that this may look simple, but has taken much infrastructure investment to make this happen. In other words, searching for "Apple pie recipes" will now turn up text search results, video clip results, blog results and more -- all from a single search.
1:51pm -- Brin is now talking about iGoogle (Google personal home page), and how 'gadgets' are making it possible to have many types of information on a single page. Well, that's great, but other portals did this years ago, right? Oh yes -- Google is a portal.
1:53pm -- Brin hands the call over to co-founder Larry Page. Page starts by saying that YouTube's progress was really great this past quarter. He is talking about locally-generated content on YouTube, which makes video search personal in addition to global. He mentions Apple's iPhone YouTube experience being the best available for what it is.
1:58pm -- Page is talking about Google developers, which brings to mind Microsoft's CEO Ballmer talking about the same contingent many years ago. Check the sweaty YouTube remix. Page turns the call back over to CEO Schmidt.
2:02pm -- the analyst Q&A begins after a short preamble by Schmidt. First question: Was Google's revenue drop from the Q1 period due to employee bonus accrual? Schmidt says that he does not break out that amount into the financials, but that Google hired more people in the quarter than it had planned.
2:04pm -- second question: will headcount growth slow down now that Google over-hired in the most recent quarter? Schmidt gives the same answer from the first question (see above). Also, why was paid-click growth slower this quarter? Rosenberg answers: seasonally, Q2 is always the weakest quarter, which is no different from prior years.
2:06pm -- next question: how did Google overhire in domestic and international circles? Will revenue reflect that in the various global markets soon? These analysts continue to ask many questions instead of limiting themselves to one. Sigh. Schmidt answers that headcount rates against productivity levels across all sales force areas globally as well as other areas and that this area continues to be monitored.
2:10pm -- next question: there are a lot of regulatory issues for the company right now. What are the top issues? Answer: Schmidt says that the book scanning litigation and the Viacom lawsuit are the top two issues, and that Google thought "it was doing right," but that Google does not see a long-term threat from these issues. I guess Google thinks it can steamroll over the publishing industry (book scanning) as well as the television copyright area (Viacom). Wow, Google sued over copyright problems -- say it isn't so!
2:13pm -- next question: can Google give color on the monetization of YouTube and other non-search properties? Great question, and one I have wondered many times. Answer: tests with advertisers and publishers have gone well (no specifics), although it is too early for Google to give a material impact for these operations. Sigh. Maybe in 2008.
2:17m -- next question: has there been any acceleration of revenues (or deceleration) based on the recent ad spat with eBay? Google says that it prioritizes ads from eBay and others to present the best alternative to the customer, eBay or not.
2:20pm -- next question: what is Google's telecom strategy (as in, a "Google phone")? Schmidt says that it does not comment on rumors, but when Google enters the wireless network (if it enters), it will be on an "open network" premise. In other words, Google probably can't stand the walled garden nonsense of traditional telecom operators like telephone and cable companies. No surprise there.
2:24pm -- next question: what is Google doing to digitally fingerprint content for the protection of copyright holders? Schmidt defers to Brin, who talks that Chad Hurley (co-founder of YouTube) needs to answer, but his answer is that Google is working on ways to ensure content is protected like almost every copyright holder requires that it be. No details on where Google is on this at the current time, though.
2:28pm -- last question: Google has been more aggressive in China. Are efforts going well there? Schmidt: Google has invested heavily in China even with all the challenges it has faced with the government, and has excellent Chinese-language capabilities, although it is not yet #1 in the market (Baidu.com is at the moment).
2:28pm -- that's it! Google's Q2 presentation is over, and again, the company quashed analyst estimates in perfect Google fashion (with a giant, virtual sledgehammer). Will Google shares start heading towards $560 in the morning? You never know.