Google Beats Wall Street Estimates for Q4 2008, Despite Profit Drop

Google announced their earnings today as planned (though a bit early, but not as early as Microsoft) – and the news was good. They reported net revenue of $4.2 billion, while analysts’ estimates were at $4.12 billion.

Adjusted earnings (see below) translated to $5.10 a share, whereas the Street predicted $4.95.

However, the good news comes with a caveat. Net income saw a sharp decline, year-over-year. The fourth quarter of 2007 saw a net income of $1.2 billion while Q4 2008 saw “just” $382 million.

Aggregate paid clicks for Q4 were up 18% year-over-year and up 10% over the third quarter of 2008.

β€œGoogle performed well in the fourth quarter, despite an increasingly difficult economic environment. Search query growth was strong, revenues were up in most verticals, and we successfully contained costs,” said Eric Schmidt, CEO of Google. β€œIt’s unclear how long the global downturn will last, but our focus remains on the long term, and we’ll continue to invest in Google’s core search and ads business as well as in strategic growth areas such as display, mobile, and enterprise.”

UPDATE (Kevin Newcomb): The huge dip in Google’s net income can be attributed to a $1.09 billion “impairment charge” Google took during the quarter, including charges of $726 million related to its investments in AOL, and $355 million related to its investments in Clearwire.

That basically means that Google is admitting it overpaid for those investments, and it’s using the turmoil in the broader economy to make up for that, without drawing too much fire from investors.

Without those charges, Google would have reported $1.62 billion in net income, or $5.10 per share, for Q4 2008, instead of the $382 million in net income and $1.21 earnings per share with the charges. That compares to $1.56 billion in Q3, and $1.20 billion in Q4 2007.

ClickZ News has more details in “Google’s Q4: Advertisers Keep Spending, Consumers Keep Clicking.”

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