Google profit up 26 per cent

Google’s third quarter results have shown profit increased 26 per cent from the third quarter of 2007.

Profit for the third quarter rose to $1.35bn and the company’s overall revenue is now $5.54bn, of which 51 per cent comes from non-US markets. The UK contributed $776 million to the company, around 14 per cent of its revenue.

“Thanks to everyone’s hard work we’ve had a good year,” said chief executive Eric Schmidt.

“These results reflect that as marketing budgets are squeezed targeted advertising is more attractive. Similarly consumers are using the web to search for lower prices online helps drive business.”

Although growth has slowed somewhat from the last quarter Google's net income was $1.35bn or $4.28 per share, up 26 per cent from the same period a year ago.

Some specific industries were showing signs of weakness due to economic conditions, notably real estate and home financing. However others were picking up, such as home equipment and job vacancies.

"It is pretty clear the economic situation today globally is worse than people were predicting a month ago," Schmidt said.

"When I talk to other chief executives, in Europe and in America, it is clear that the economic situation is so fluid that we're all sort of in uncharted territory."

The company has however taken a hit by movements in the currency markets according to chief financial officer Patrick Pichette. The company had paid $80 million in hedging costs, primarily against the euro, Canadian dollar and British pound, and this would be rolled out to other currencies next quarter.

“Currency was working against us this quarter,” he said.

“But the hedging programme is working well. It’s essentially an insurance policy.”

In order to further streamline the company expenditure was being kept low, with an 18 per cent cut this quarter, with the bulk of spending going on modernising data centres. The company employed just 500 more staff this quarter, predominantly engineers, bringing headcount up to 20,123 full-time employees.

“We’re managing costs very closely,” said Schmidt.

“Sergey likes to say that scarcity focuses clarity. But overall we’re optimistic about future power of the web.”

The stock markets reacted well to the financial report and Google shares rose over eight per cent.