IP Democracy: Google's A Free Cash Flow Machine

If anybody had any qualms about Google based on last quarter's surprising dip in the search giant's growth, the company's Q3 07 earnings report, issued today, should put those doubts to rest. By now everybody reporter and blogger in the tech sector has spread the news that Google's net income soared year-over-year by 46% to $1.1 billion during Q3 07, beating Wall Street's estimates. Revenues jumped by 57% year-over-year and 9% sequentially to reach $4.2 billion.

The search giant managed to pull off this robust growth even though it didn't really keep its promise that it would cool its torrid hiring jag. The number of Google employees jumped 15% sequentially from 13,786 in Q2 07 to 15,916 in Q3 07.

What has been less reported is just how much pure and clear cash Google generated during the quarter. Google's free cash flow (cash flow minus property and equipment purchases) skyrocketed by 113% year-over-year and 65% sequentially to top $1 billion.

Google's cash flow margin reached an enviable 39%, up from 32% in Q2 07. Google is now sitting atop a mountain of $13.1 billion in cash (enough, arguably, to buy Facebook, even at the gross overvaluations being bandied about, without going into debt), despite a spate of acquisitions during the quarter. Now matter what challenges arise for Google, it has enough cash to throw at any problem and the very strong capability of generating even more cash into the foreseeable future.

Posted by Cynthia Brumfield on October 19, 2007 12:14 AM to IP Democracy