San Francisco: Google isn't immune to setbacks caused by the global shift to mobile computing.
Costs are rising and Google has said that revenue, excluding sales passed on to partners, was $12.2 billion in the first quarter, another stumble as the company missed a projection by analysts for $12.3 billion, according to data.
Facebook, Intel and Microsoft are also struggling to change their businesses to appeal to consumers and businesses spending more money on smartphones and tablets.
Google's audience is migrating to smartphones, where the company gets less ad money for marketing spots than on desktops and tablets. While chief executive officer Larry Page boosted the number of promotions by 26 per cent, average prices slipped 9 per cent.
"Obviously mobile's growing faster than desktop," said Gene Munster, an analyst at Piper Jaffray who has the equivalent of a buy rating on the stock.
Net income rose to $3.45 billion, or $5.04 a share during the first three months of 2014, from $3.35 billion a year earlier. Google shares fell 3.7 per cent to $536.10 at the close in New York. Google's report was its first since a de facto split of the stock this month.
"Mobile is perceived as the single biggest risk over the near-term," said Scott Kessler, an analyst at S&P Capital IQ, who has the equivalent of a buy rating on the stock.
"Mobile is definitely helping Google and many others in the number of volume-related metrics, but mobile has also had a notable negative impact on pricing."
Facebook's stock by dropped more than half in the months after going public in 2012 due to investor concerns it wasn't making enough money from mobile ads. Microsoft recently changed its chief executive officer after stumbling in its efforts to deliver mobile products and services.
Intel mobile chips loss
Intel earlier this week reported that its mobile chips business, which chief executive officer Brian Krzanich has called critical to its growth, had an operating loss of $929 million in the latest quarter.
Google is also spending more to expand its services, with costs rising faster than total sales, which rose 19 per cent. Expenses climbed 23 per cent to $11.3 billion in the latest quarter.
Chief financial officer Patrick Pichette said on a conference call yesterday that the increase in operating expenses was largely tied to legal costs and other spending related to acquisitions, especially of home-automation service provider Nest Labs.