Google (NASDAQ:GOOG) reported earnings for the third quarter of 2014, reporting $16.52 billion in revenue and $2.81 billion in profit. This represents a 20% increase year-over-year for revenue, but a decrease of 5% profitability over the same quarter a year ago. Google reported an EPS of $6.35 which is lower than what was expected of $6.53 and a fairly significant miss of Thomson Reuters’ consensus expected price.
Part of the reason why Google missed on earnings was due to the fact that a lot of Google’s foreign earnings grew very well, but as a result of a strong dollar those revenues didn’t translate to as much profit. Google also saw smaller growth in paid clicks, which was 17% rather than the expected 23.5% from Wall Street, additionally the cost per click continued to go down. In the quarter Google reported a decrease of 2% in cost per click which is also why Google may have appeared to not look as good as previous quarters. However, analysts expected that Google’s cost per click would actually go down 4% quarter over quarter, so Google actually outperformed expectations there.
Overall, Google still appears to be a very solid company with very solid profitability with operating profit still representing 23% of revenues at $3.72 billion, which is nothing to balk at. Google also announced three new Nexus devices, the Nexus 9, Nexus 6 and Nexus Play devices yesterday with the Nexus 9 and Nexus Play going on pre-order tomorrow. While it remains to be seen how this new hardware will affect Google’s earnings for the 4Q of 2014, they will very likely be very successful with the Nexus 9 and Nexus 6 as both devices have been long awaited. And realistically, the Nexus devices will mostly sell in the fourth quarter and many will very likely be purchased for the holiday season so we could see Google’s revenue take a slight bump. But even so, it is merely a drop in the bucket in terms of Google’s $16 billion+ in revenue per quarter.
For the company’s 4Q 0f 2014, the biggest earnings will come from increased spending from retailers and advertisers for this holiday season and consumers go to Google to search for things to buy. Since the majority of Google’s revenue and profitability still come from traditional Google search, this holiday season should result in a fairly strong quarter if people are actively searching for products to buy.