Google Shares Jump as Profits Impress

Updated from 10:48 a.m. EDT

Google's ( GOOG) stock soared Friday, a day after the Internet giant solidly beat Wall Street's estimates for the company's first quarter.

Shares of Google were surging $93.97, or 21%, to $543.51 -- their highest level since February. Google's stock is still roughly 20% lower for the year.

"The stock went on a dramatic 25% round-trip," said Citigroup analyst Mark Mahaney in a research note issued late Thursday. "Recessionary concerns were one factor behind the hyper volatility."

For the quarter, net income grew to $1.31 billion, or $4.12 a share, from $1 billion, or $3.18 a share, a year earlier. Adjusted for certain items, Google earned $4.84 a share. Analysts were expecting $4.52 a share.

Google Is Bulletproof, Sort Of

Revenue climbed 42% from a year ago to $5.19 billion. Adjusted for traffic acquisition costs, revenue came in at $3.70 billion, above analysts' consensus expectation of $3.61 billion.

"Our ongoing innovation in search, ads and applications helped drive healthy growth globally across our product lines, yielding another strong quarter for Google," said CEO Eric Schmidt, in a statement. "As we integrate DoubleClick into our advertising platform, we see exciting new ways to improve the user experience and increase value for our advertisers and partners."

Google said that the overall impact of the DoubleClick - which received regulatory approval from the European Commission on March 11 - was immaterial to revenue and only slightly diminished net income and earnings per share.

Google-owned sites generated $3.4 billion, or 66% of total revenue during the quarter, as compared to 49% of revenue for the same period a year ago and 9% in the fourth quarter.

The company's partner sites -- known as the AdSense network -- generated $1.69 billion, or 33% of total revenue during the quarter -- a 25% growth in network revenue compared to the same period last year, and a 3% rise since the fourth quarter of 2007.

International revenue accounted for 51% of total revenue during the quarter, compared to 47% during the same period last year and 48% during the fourth quarter of 2007.

Paid clicks (the frequency at which users click on Google-site advertising), meanwhile, grew 20% compared to the same period a year ago and 4% compared to the fourth quarter of 2007. In last year's first quarter, however, paid clicks had grown 52% year over year.

That metric has come under increasing scrutiny this year, culminating with research firm comScore saying Tuesday that March clicks grew just 2.7%, resulting in first-quarter growth of only 2%.

"Paid click growth in the U.S. remains healthy, and other markets are showing strong growth as well," said CFO George Reyes during the company's conference call.

Though the rate of increase in paid clicks is decelerating, Citigroup's Mahaney noted that cost-per-click growth is still healthy. "We believe investors were pleasantly surprised by the growth given negative third-party data intraquarter," the analyst wrote in his report. "However, we continue to remain concerned at the rate of deceleration in paid clicks. On the other hand, cost-per-click growth remained strong."

Google also reiterated on the call that its business wasn't hampered by the economic slowdown. "It's clear to us we're well-positioned for 2008 and beyond" regardless of the economic situation, Schmidt said. "We're well-positioned should economics change. We'll continue to do well because our advertising is so targeted."

"The problem for investors is that management does not provide specific financial guidance, so there is no benchmark to gauge such comments," said American Technology Research analyst Rob Sanderson in a note. "Such comments do, however, give us some comfort that business is not rapidly deteriorating as we believe the stock reflects."

Sergey Brin, Google's co-founder and president of technology, said that mobile searches are "growing very rapidly" due to market growth. Brin added that the entire library of the company's YouTube video-sharing service is available for mobile users, and that Google has seen "mobile playbacks increase tremendously."

Regarding Google's failed auction bid for a block of the Federal Communications Commission 700-MHz spectrum, Brin said he was still satisfied in that the open access of the spectrum's prime C-block will benefit developers and consumers alike. "I know we did not come back with any wins, but I feel it's been an important experience for us," Brin said.

Because the sale price of the C-block topped the $4.6 billion reserve, auction winner Verizon ( VZ) must use the spectrum as an open network, allowing any mobile device to run on it. Google had pushed for the development of the C-block into an open network in hopes it would increase wireless competition, as the company plans to launch its free Android cellphone software platform for several manufacturers later this year

As usual, the company did not provide any guidance for the second quarter or the full year.

Google's earnings release comes a week after rival Yahoo! ( YHOO) reached out to Google to outsource some of its search ads. Yahoo! said it will begin a limited test of Google's AdSense, which will deliver relevant Google ads alongside Yahoo!'s search results.

The news of Yahoo!'s arrangement with Google put a snag in Microsoft's ( MSFT) quest to acquire the Internet search engine. A day after Google last reported quarterly results, Microsoft offered more than $44 billion for Yahoo!. Should that deal, which Yahoo! hasn't embraced, actually close, it would create a major challenger to Google's dominance in the Internet space.

Thus far, this has been a generally upbeat week for big technology stocks, in terms of their results. In recent days, chipmaker Intel ( INTC), hardware and software developer IBM ( IBM) and Internet auction house eBay ( EBAY) have all topped analysts' quarterly earnings estimates.