SAN FRANCISCO (AP) — The pressure is on Google to deliver stellar third-quarter earnings to justify a sharp rise in its stock price during the past three months.
WHAT TO WATCH FOR: Investors probably will be focusing on how much Google's advertising revenue grew. Wall Street has been operating under the assumption that the Internet search leader has been continuing to devour a bigger slice of the marketing pie as more merchants and other businesses promotes their products online.
The optimism is the main reason Google's stock price has climbed by about 25 percent since the company's last earnings report in July. The shares closed Monday at $740.98, not far from the all-time high of $774.38 reached earlier this month.
The overall results, due out after the stock market closes Thursday, may be more difficult to decipher because this marks the first full quarter that Google Inc. has owned Motorola Mobility since completing its $12.4 billion acquisition of the device maker in May.
Motorola Mobility is expected to boost Google's total revenue by more than $3 billion and drag down the company's earnings. That's because Motorola Mobility has been sustaining substantial losses. Google is attacking that problem by laying off about 20 percent of the Motorola Mobility's workforce — a total of 4,000 employees — and closing about one-third of the device maker's 90 offices and plants. Those cutbacks will trigger about $340 million in accounting charges in the third quarter.
Besides poring through the numbers, investors will be tuning into Google's webcast of management's discussion of the result to hear if CEO Larry Page is well enough to speak for an extended period.
Page, 39, missed the second-quarter earnings conference call because of a mysterious throat problem that the company said made it difficult for him to talk. The company, which is based in Mountain View, Calif., has repeatedly said Page's ailment isn't serious. But if Page doesn't participate in Thursday's call, it may alarm Wall Street.
Google's advertising revenue has increased by at least 21 percent from the previous year in each of the past 10 quarters, so it will be viewed as a disappointment if the company doesn't at least maintain that pace.
Investors had been fretting about a decline in the average price for ads that appear alongside Google's search results, but those concerns have dissipated as it became apparent that the company is more than making up for the decrease with a higher volume of clicks on the commercial links and an influx of revenue from video-driven marketing. YouTube, the popular video site owned by Google, is expected is generate about $2.6 billion in revenue this year, estimates J.P. Morgan analyst Doug Anmuth.