Google, founded in 1998, is ancient. But on Thursday, its financial report suggested that it could successfully become more than a search engine and compete in a modern Internet world dominated by sharing real-time information with friends and on mobile phones.
Larry Page, chief executive, explained his vision for Google in a conference call.
Although Google, as usual, did not break out the numbers from different strands of its business, over all its results were so robust, easily blowing past Wall Street expectations, that analysts said they indicated growing strength in more areas than just search. In after-hours trading, Google’s stock price climbed 12.64 percent. It had been down 9 percent for the year.
Part of what also gave Wall Street heart was that Larry Page, Google’s co-founder and new chief executive, participated in the conference call with analysts, and made lengthy remarks about his vision for the company’s future for the first time since he took over in April.
“They’re firing on all six cylinders now,” said Jordan Rohan, an Internet analyst at Stifel Nicolaus, pointing to Google’s six businesses — search, display advertising, YouTube, the Chrome browser, the Android mobile operating system and now Google+, its new social network. “Google’s now officially a V6.”
But other analysts said that while the results proved that Google’s core search business was even stronger than they thought, new businesses like Google+ and Android were far from generating revenue, yet the company continued to spend heavily on them.
“There are some pretty sizable opportunities,” said Colin W. Gillis, a technology analyst at BGC Financial. “But you want to own the stock a little closer to the harvesting of the fruit that the expenses bring, and right now they’re still being planted.”
Mr. Page’s participation surprised analysts, who had grumbled after last quarter’s earnings call when he made brief and curt comments and declined to speak at length about his long-term vision. He is widely known to dislike the public aspects of the chief executive job. But on Thursday, it seemed as if he had attended corporate charm school, as he repeatedly said how excited he was to be on the call.
Google still earns the vast majority of its revenue from text ads on its search engine, but it has been trying to branch into mobile phones and social networking. Mr. Page said he became chief executive partly to speed up Google’s evolution. “We have substantially increased our velocity and execution this quarter, which was a key goal of mine in taking over as C.E.O.,” he said.
Google reported that in the second quarter revenue increased 32 percent and net income climbed 36 percent.
Google’s high-flying spending, which Mr. Page has made clear he intends to maintain, has concerned investors. Its operating expenses in the second quarter were $2.97 billion, up 49 percent from the year-ago quarter. Google spent more on advertising, including its first major television ad campaign, and hired 2,452 employees, bringing the total to 28,768.
It also spent money on professional services, including lawyers and lobbyists to fight the Federal Trade Commission’s broad antitrust investigation and other regulatory challenges that have worried Wall Street.
Mr. Page addressed spending concerns and others while outlining his plans for the company. He explained that he saw Google’s search and ad businesses as the core driver of its revenue, and YouTube, Android and Chrome as products that consumers liked but that needed more investment to become profitable long term. The social networking businesses, like Google+, and the local and commerce businesses, like Google’s new Groupon competitor, Offers, are in the earliest stages.
“People rightly ask how will we monetize these businesses, and of course I understand the need to balance the short term with the longer-term needs,” he said. “But our emerging products can generate huge new businesses for Google in the long run, just like search, and we have tons of experience monetizing successful products over time.”
“We want to make products that everyone uses twice a day, like their toothbrush,” he said.
He also spoke to investors’ concerns that Google throws money at wacky experiments, like cars that drive themselves. Those types of projects are small and few, he said.
Mr. Page said he was also trying to prioritize, putting “more wood behind fewer arrows.” For instance, last month Google shut the underperforming Google Health and PowerMeter. And he is emphasizing simpler, more intuitive designs, he said. He highlighted Google+’s clean interface as well as recent redesigns of the Google search page, Gmail and Google Calendar.
Google offered statistics for the first time about Google+, the first major release under Mr. Page’s leadership, saying that more than 10 million people had joined and were sharing a billion items a day, even though the social network has been open for just over two weeks and is still available only by invitation.
Without directly addressing Facebook, but implicitly speaking to investors’ concerns that Google was falling behind in the important realm of social networking, Mr. Page took a swipe at its competitor. He said Google+ was different from other products on the market because it mimicked real-life relationships by allowing people to share with limited groups of friends and serendipitously join video chats.
Google said that 550,000 Android phones were activated each day, and that 135 million Android devices had been activated over all; it also said 160 million people used the Chrome browser. Google reported second-quarter revenue of $9.03 billion, up from $6.82 billion in the year-ago quarter. Net revenue, which excludes payments to ad partners, was $6.92 billion, up from $5.09 billion. The company said its net income rose to $2.51 billion, or $7.68 a share, from $1.84 billion, or $5.71. Excluding the cost of stock options, Google’s second-quarter profit was $8.74 a share, compared to $6.45 last year.