Google will report its results for the latest quarter after the market closes Thursday. Investors will be looking for clues on whether an unexpected drop in its advertising prices late last year was just an aberration or the start of a trend that could slow the company's growth.
In the final three months of last year, Google Inc.'s net revenue fell nearly $300 million, or 3 percent, missing analyst estimates. Adjusted earnings per share missed Wall Street's target by 10 percent.
Investors were particularly concerned about an unexpected drop in Google's prices for search-driven ads.
Some analysts believe it reflects a shift to more searches on smartphones, where advertising rates are lower than on laptop and desktop computers. Others are worried the downturn in ad prices is a sign that marketers are becoming less reliant on Google. It faces competition from Internet social networking leader Facebook Inc., which can collect more personal information and use that to more easily target prospective customers most likely to buy a particular product or service.
Google's first-quarter expenses also are likely to be a focal point of the report. Investors have been scrutinizing Google's expenses more carefully since co-founder Larry Page became CEO a year ago. Page has pledged to make expensive investments in employees and projects that he believes will boost the company's long-term returns. That philosophy can depress the quarterly earnings that propel stock prices.
Analysts also will likely inquire about the status of Google's proposed $12.5 billion acquisition of cellphone maker Motorola Mobility Holdings Inc.
Analysts polled by FactSet expect earnings of $9.66 per share, excluding expenses for employee stock compensation, on revenue of $8.09 billion, after subtracting Google's ad commissions.
In the same period a year ago, Google earned $1.8 billion, or $5.51 per share, on revenue of $8.58 billion. The results were clipped by a $500 million charge to cover a settlement of a U.S. Department of Justice case alleging Google had illegally profited from selling ads to unlicensed pharmacies.
Excluding stock compensation and the charge, Google earned $8.08 per share on revenue of $6.54 billion, after subtracting ad commissions.
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