Google second-quarter profit rises 35 percent

updated 5:22 p.m. ET July 17, 2008

MOUNTAIN VIEW, California - Google Inc.’s earnings growth slowed more than investors anticipated during the second quarter — an indication that sluggish U.S. economy is starting to weigh on the Internet search leader.

The results released after the stock market closed Thursday caused Google shares to plunge by about 7 percent.

The company said it earned $1.25 billion, or $3.92 per share, during the three months ended in June. That represented a 35 percent increase from net income of $925.1 million, or $2.93 per share, at the same time last year.

If not for costs incurred for employee stock compensation, Google said it would have earned $4.63 per share. That figure missed the average earnings estimate of $4.74 per share among analysts surveyed by Thomson Financial.

It marked just the fourth time that Google hasn’t exceeded analyst expectations in its four years as a public company.

Investors quickly expressed their dismay as Google shares plummeted $36.14, or 6.8 percent, in Thursday’s extended trading after closing at $533.44, down $2.16.

Google’s second-quarter revenue fared slightly better than earnings, rising 39 percent to $5.37 billion from $3.87 billion at the same time last year.

After subtracting commissions paid to its ad partners, Google’s revenue totaled $3.9 billion — about $30 million above the average analyst estimate.

Google offset some of the economic weakness in the United States by showing more ads to Web surfers overseas. International markets accounted for $2.8 billion, or 52 percent, of Google’s second-quarter revenue.

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