Google: Slowing Quarterly Revenue Growth

While Google generally weaved, bobbed, and successfully skirted the issue on its conference call tonight, the main data point behind Google’s weaker than expected results is shown in the following graph:


Granted, the law of large numbers applies to Google as any company, so revenue growth is always going to decline over time. But after not having had revenues decline more than 7-percentage-points year-over-year in any previous quarter, Google turned in a 10-percentage-points decline in growth in the current quarter. While Google management insisted on the call that the company beat its internal growth estimates, that’s like your kid getting a C grade versus your B+ expectation, and then attempting to explain it away by saying that he/she had thought they were going to do worse.


  1. thefamilyguy says:

    I think this is the end of GOOG (share price levels) as I see it. An year or two until the economy gets its mojo back to support such lofty valuations and I honestly anticipate that MSFT would have come on pretty strong in these two years in advertising, if not as much in search.
    Display advertising is the trump Eric tried to play today too and I think Yahoo and MSFT are attacking this very thing with their aggressive acquisitions(Blue lithium, Right Media and Aquantive respectively) and perhaps also a realization that GOOG is/will be the search leader after all. I see GOOG having a very tough competition to earn display ad dollars — and it will have 1/3rd the revenue of it at best (even with DCLK acquisition.

  2. Are you really suggesting that 52% yoy growth is a C?
    If the stock were priced for 60% growh, perhaps I would agree. On the other hand, at 40x earnings I think it’s okay for growth to decel from 60 towards 40.
    This, and future growth slowing, is probably already priced in.

  3. thefamilyguy says:

    I see the growth that matters — profit. This quarter’s profit grew just 17% compared to last year’s. PE of 44 (or even a forward PE of 27) is not justified with those earnings, in my view.

  4. @Paul — you can make the drop even more dramatic by starting the y-axis at 45% or 50% rather than 40% (seriously, why did you do that?)
    Unless you are only counting the part that isn’t due to the click fraud networks.