GOOG Earnings: Not as Much Go-Go Growth

Updated from 8:50 a.m. with earnings results

Google (GOOG - commentary - Cramer's Take) reported pretty unspectacular results on Thursday, missing both top- and bottom-line estimates, posting earnings per share 2 cents light ($4.43) and revenue (ex-traffic acquisition costs) of $3.39 billion.

Because the company does not give any guidance, it's easy to see why the shares were trading some 7% lower after hours.

Gross revenue grew 51% year over year, while EPS grew 39%. Those figures continue the trend of a slight slowing in growth rates, but that is normal when the law of large numbers begins to catch up.

Google-owned sites posted revenue growth of 58%, which isn't bad. Also, margins were a touch lighter, with operating margins of 35%. The tax rate was low ,at 25%, which makes the earnings miss even less palatable.

AdSense revenue increased 37%, and the company said it again experienced good monetization. The only area it highlighted that didn't see good monetization was in social networking. But management said it was pleased with overall traffic growth, and that despite the chatter of an economic slowdown, it still sees ad dollars moving online in a trend that will benefit Google.

International revenue again totaled 48% of the mix, but the company didn't specify how fast international revenue grew in relation to domestic revenue (I am getting a little tired of the cryptic, veiled reporting).The company said Europe, Middle East and Asia was strong, as was Latin America, while U.K. slowed a bit.

Operating expenses were flat at 30% of revenue, while traffic acquisitions costs were slightly higher at 30%. Headcount finally looks like it slowed, as the company added 889 employees vs. 2,130 last quarter. Google now has 16,805 full-time employees. Wow. Paid clicks grew 30%, which is solid, but slower than in prior periods. Free cash flow grew a solid 87% from a year ago, and the company ended the quarter with $14.2 billion in cash on its balance sheet. I think they should buy back some stock.

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At the time of publication, Kahn was long Google.

Jordan Kahn, CFA, is a portfolio manager with Bevery Investment Advisors, a Beverly Hills, Calif., money manager. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Kahn appreciates your feedback; click here to send him an email.