Google shares dropped more than 6% at the opening Friday and recovered only slightly in trading, after the company's Q2 results issued after the market close on Thursday shocked investors by coming up short of expectations. CEO Eric Schmidt insists all is well, saying he was happy that the company paid out more than expected to hire top-notch new employees. At the end of Q2 Google had a payroll of 13,786, up 13% from Q1.
But what about revenues? Google still has lots of cash rolling in. Revenues of 2.72 billion in Q2 were slightly ahead of Wall Street expectations. But, of interest to RBR readers, there were concerns that the revenue growth rate for Google's advertising partner programs slowed to 36% from a year ago, compared to Q1 growth of 45%.
RBR observation: Google isn't going away by any stretch of the imagination. It is still a very profitable company, still a pretty fast growing company and its stock price is still way over 500 bucks. But because of its astounding success, Google faces lots of competition. The bigger you get, the harder it is to sustain double digit growth rates. That explains why Schmidt is willing to pay up to hire top talent instead of letting them go to those new competitors. That's also why Google has been so acquisitive, buying dMarc, YouTube and, if regulators approve, DoubleClick, just to name a few.