IP Democracy: Google's Revenue Growth Slow-Down Is Inevitable

Google issued its Q2 08 earnings report today showing a 35% year-over-year jump in net income to $1.25 billion and a 39% spike in revenue to $5.37 billion -- all good news for an ordinary company. But Google is a vaunted growth juggernaut and investors had been expecting more out of the Mountain View search giant.

Why? Because Google's growth is slowing down and some evidence -- paid clicks declined sequentially from Q1 08 to Q2 08 -- is bubbling to the surface that Google could finally fall prey to the economic laws that affect ordinary companies.

As the chart above shows, Google's revenue growth from Q1 08 to Q2 08 was 3%, down from 6% from Q1 07 to Q2 07 and down from 9% the year before that.

Of course nothing expands forever and it was inevitable that Google would ultimately face this day. It doesn't help that a recession is underway and Internet advertising is under pressure. But still, as the chart indicates, Google was heading in this direction anyway.

Not that Google has anything to worry about. Even as revenue growth cools, the company gets richer by the day. Free cash flow, the monies left over after expenses and capital expenditures jumped 63% year-over-year and 14% sequentially to nearly $1.1 billion.

Posted by Cynthia Brumfield on July 17, 2008 11:48 PM to IP Democracy