Early Release of Google Earnings Shocks Investors, Sends Shares into Tailspin

Twitter was abuzz with the hash tag #PendingLarry today after Google’s quarterly earnings were released with the Securities and Exchange Commission by mistake. Investors quickly took note and Google’s stock dropped almost 10 percent before trading was halted.

Google blamed the error on publisher R.R. Donnelley & Sons, which it said released an unauthorized rough draft of the earnings, containing “pending Larry quote” at the top, where Google planned to include a quote from chief executive officer Larry Page. Google quickly released a statement acknowledging the error.

“Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization,” Google said in its statement. “We have ceased trading on Nasdaq while we work to finalize the document. Once it’s finalized we will release our earnings, resume trading on Nasdaq and hold our earnings call as normal at 1:30 p.m. Pacific Time,” the company said.

RR Donelly also responded to the error, without admitting any fault in the matter.

“We are fully engaged in an investigation to determine how this event took place and are pursuing our first obligation – which is to serve our valued customer,” a spokesman for RR Donnelly said.

The early release of $14.1 billion third-quarter revenue stunned investors, and Google’s stock quickly fell more than 9 percent—$68 a share—before Nasdaq stopped trading Google’s shares early this afternoon. Google later stated it would release a final earnings report and hold a conference call with Wall Street analysts after the market closed.

Although the early release indicated the third-quarter revenue was a 45-percent increase over the same quarter last year, and net revenue—including payments to Google’s advertisers—was up $7.51 billion, net income dropped to $6.53 a share, or $2.18 billion. Analysts attribute the loss to Google’s purchase of Motorola Mobility and declining Google ad prices.

Although net revenue was up in the third quarter, it still fell short of analysts’ expectations. The figures were most shocking because Google’s shares had increased by 35 percent in the past quarter. In fact, Google had moved ahead of Microsoft to make it the second-most valuable technology company—behind Apple. It has since fallen once again behind Microsoft.

According to the earnings report, Google’s paid clicks increased 33 percent from the third quarter last year, but cost per click decreased 15 percent year-over-year. Google’s traffic acquisition cost hit $2.77 billion in the third quarter, an increase of $500 million. At the same time, Google-owned Web site ad revenue jumped 15 percent to reach $7.7 billion. International revenue was $6.1 billion in the third quarter—53 percent of Google’s total revenue. The early report did not detail earnings from Google’s Android operating system or Nexus tablets.

At 3:05 p.m. Google filed an updated earnings release, including the intended statement from Page.

“We had a strong quarter,” Page noted. “Revenue was up 45 percent year-on-year, and, at just 14 years old, we cleared our first $14 billion revenue quarter. I am also really excited about the progress we’re making creating a beautifully simple, intuitive Google experience across all devices.”

At 3:24 p.m. Google resumed trading and jumped back to $695 per share, although still down 8 percent.