Google Inc. revved up its fourth-quarter Internet advertising sales and approached $2 billion in quarterly profit for the first time, providing the strongest sign yet that Internet search leader has shaken off the recession's doldrums.
The earnings announced Thursday topped analyst estimates, but revenue only matched forecasts. Investors evidently were hoping Google's revenue would accelerate even faster, and the company's shares fell more than 4 percent in extended trading.
Google earned $1.97 billion, or $6.13 per share, in the final three months of 2009. That was up dramatically from income of $382 million at the same time in 2008, when Google's earnings were deflated by charges to reflect the eroding value of some investments.
Fourth-quarter revenue totaled $6.7 billion, a 17 percent increase.
Google's revenue growth had bogged down to just 5 percent through the first nine months of 2009. The company's quarterly growth had never fallen below 10 percent until last year.
"Given that the global economy is still in the early days of recovery, this was an extraordinary end to the year," said Eric Schmidt, Google's chief executive.
The performance is likely to give people something to talk about other than Google's threat to shut down its China-based search engine and perhaps pull out of the world's most populous country in a dispute over censorship and computer security.
Schmidt didn't say anything new about Google's uncertain future in China during a conference call with analysts. He reiterated Google's hope to find a way to maintain a presence in China while emphasizing the company intends to stop censoring search results in the country within "a reasonably short time." That plan conflicts with China's restrictions against showing content that the government deems subversive or pornographic.
The fourth quarter is usually Google's most prosperous period because advertisers tend to spend more during the holiday shopping season while consumers conduct more searches for merchandise and deals.
That could indicate the overall online advertising market is regaining vigor after losing steam through most of 2009. But Google isn't widely considered a bellwether for the entire Internet ad market because its dominance of online search has put it so far ahead of the pack. One of those rivals, Yahoo Inc., is expected to report a drop in fourth-quarter revenue when it releases its results Tuesday.
Investors had been expecting big things from Google, largely because management had already signaled its belief that the worst of the recession was over. Google had clamped down on spending to offset its decelerating revenue growth, but the company said in October that it felt confident enough to begin hiring more people and buying more companies.
Google added 170 workers in the fourth quarter, bringing its payroll to 19,835 employees. Schmidt also told investors in the conference call that the company will likely make at least one acquisition per month, "some big, more small."
For the full year, Google earned $6.5 billion, or $20.41 per share, on revenue of $23.65 billion. In 2008, Google earned $4.2 billion, or $13.31 per share, on revenue of $21.8 billion.