As we noted in our earnings preview, Google has done very well over the past couple of years, and the company has outpaced analyst estimates each of the past seven quarters.
That all changed Thursday when the company reported that it had earned $5.71 for its second quarter, well below the $6.59 that analysts had been expecting to see.
Revenues in the quarter were strong, with the company reporting $6.82 billion, well above the $4.99 billion that analysts had expected.
Rising expenses, and fallout from the European debt crisis really took its toll on the company during the quarter. For the three months ended June 30, Google added an additional 1,200 employees, taking its total up to 21,800.
One thing that disappointed analysts was that the average cost per click on Google ads rose by just 4% in the period.
Search revenue still represents the largest portion of the company's business, accounting for around 90% of its revenues.
Faced with increased competition and sluggish ad revenue growth, analysts are waiting to see what the company is able to do next. And the market is becoming increasingly impatient. Over the past three months the stock has dropped around 17%.
Sandeep Aggarwal, a senior analyst with Caris & Co., stated that "search has slowed down and Google has more competition, but Google's non-search business is not enough to move the needle."
In October 2006, Google purchased the video site YouTube.com for $1.65 billion, and many analysts hoped that the company would announce the video site had finally turned a profit, but that did not happen.
Here is a three-month chart on the stock to get a better idea of just how poorly it has been doing recently: