Google’s 2Q Signals New Era of Austerity with New CFO

After years of big spending on risky projects that CEO Larry Page proudly hails as "moonshots," Google may be launching into a new orbit of financial discipline.

Investor hopes for a more austere Google are largely tied to the arrival of a new chief financial officer, Ruth Porat (pictured). She joined Google in late May, about two-thirds of the way through the Internet company's second quarter. Thursday's release of Google's report covering that period indicates that Porat already may be shaking things up.

Excluding stock compensation expense and several other items, Google earned $6.99 per share -- topping the average estimate of $6.70 per share among analysts surveyed by FactSet.

That ended six consecutive quarters in which Google's earnings missed analyst estimates, which steer investors' perceptions about publicly held companies.

Investors were delighted with the breakthrough and Porat's encouraging remarks about reining in Google's expenses. Google's stock soared $68.25, or 11 percent, to $670.03 in extended trading after the numbers came out. If the shares behave similarly in Friday's regular trading, it would mark a new high for the stock, which reached its previous peak of $615.03 nearly 17 months ago.

"It's like, 'Wow, look Ruth is already doing her thing,'" said BGC Financial analyst Colin Gillis.

Google could have been making more money all along if the growth in its expenses hadn't consistently been rising faster than its revenue, Gillis said.

The company's rising costs have been driven primarily by a hiring spree and its commitment to "moonshots" that have little or nothing to do with its main business of Internet search and advertising. The list of far-flung projects include self-driving cars, Internet-beaming balloons, medical research and even a recently launched initiative to change the way cities operate.

Google's operating expenses climbed 13 percent from last year in the second quarter, slightly eclipsing an 11 percent increase...

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