Google, in what is increasing becoming a ‘dog bites man’ story, blew past estimates in the first quarter, as it reported 63% revenue growth and threw another billion dollars of cash into its vault.
I’m ecstatic, said Eric Schmidt, Google’s chief executive, on a conference call.
The company’s revenue for the three months to March 31 was $3.66bn. Profit growth was basically flat sequentially, but was up 69% on last year at the GAAP level.
Its net income under GAAP was an even $1bn, compared to $592.2m a year earlier. Non-GAAP income was $1.16bn, or $3.68 per share, $0.38 better than analysts had been predicting.
The company added $1.22bn of new cash to its balance sheet over the period. It invested $597m in building out its already substantial IT systems and networks, and expects to carry on doing so.
If there was any cause for concern in the numbers it came from traffic acquisition costs, or TAC, which reduce gross profit and were up sequentially in Q1 for the first time in two years.
TAC is the portion of advertising revenue paid to distribution partners. With small partners, Google gives itself a more generous share than with large sites that have more negotiating power.
It was at 31% of revenues in the first quarter, up from 30.7% in the fourth quarter but down from 32.5% in the comparable year-ago period.
TAC was up in Q1 because a few of these larger partner deals kicked in, Schmidt and CFO George Reyes said. Reyes added that this trend will continue.
TAC as a percentage of revenue are going to increase given the deals we are doing these days, he told analysts. He declined to name the new partners that caused Q1’s uptick.
Schmidt also said that he was particularly impressed with the company’s performance outside the US, where Google continues to make progress toward its goal of having half of revenue non-US.
He highlighted Germany, France, Spain, Japan and Australia as strong performers.
But he also warned that Google is entering its seasonally slower summer growth period with the current second quarter.
This is what passes for financial guidance at Google.
How much weight analysts will give the comments is debatable — last year the seasonally slower second quarter saw a 110% jump in profit and 77% revenue growth. Its third quarter to September 2006 similarly saw 92% profit growth on revenue up 70%.