What's happening:Shares of Google were up nearly 14% as of 10:30 a.m. Friday after the Internet search giant reported better-than-expected second-quarter results.
Why it's happening: Quarterly revenue jumped 11% year over year (or 18% on a constant-currency basis) to $17.73 billion, which resulted in adjusted net income of $4.83 billion, or $6.99 per diluted share. Analysts, on average, were expecting roughly the same revenue to translate to lower adjusted earnings of $6.75 per share.
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Of course, that might seem like an insignificant earnings beat. But keep in mind Google also fell short of expectations with each of its previous two earnings reports in 2015, in part due to high operating and capital expenditures to both run its ever-larger business and fund future growth. Even so, shares rose modestly the day after its first-quarter report in April after it became evident the core ad business was still strong.
Recently appointed CFO Ruth Porat made clear that's still the case today, stating "Our strong Q2 results reflect continued growth across the breadth of our products, most notably core search, where mobile stood out, as well as YouTube and programmatic advertising."
But equally exciting -- and lending credence to recent reports Google is curbing costs -- was another comment from Porat: "We will do so with great care regarding resource allocation." To be sure, operating expenses declined sequentially from last quarter (albeit only by 2.2%) to $6.32 billion, while growth in operating expenses decelerated on a year-over-year basis. During the subsequent conference call, Porat said investors can partly thank "discipline in expense management" as Google works to "control and manage the pace of expenses while still ensuring and supporting our growth."
Porat also stated Google is starting its 2016 budgeting process, and she intends to work closely with management to "identify ways to prioritize resources and really continue to extend the discipline that we've talked about."
In the end, given Google's strong results and despite the fact it now has almost $70 billion in cash on its balance sheet, I think investors are right to celebrate the tech titan's more deliberate efforts to balance growth with appropriate spending.
The article Why Google, Inc. Stock Skyrocketed Today originally appeared on Fool.com.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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