Analysts: Google Overspending?

BANGALORE (Reuters) – Analysts flagged Google Inc’s aggressive spending and a spike in headcount that led to the search giant missing profit estimates for the first time in two years.

On Thursday, Google reported second-quarter earnings that missed estimates in spite of a 24 percent jump in revenue.

The company, however, said it would keep investing in new businesses to drive long-term growth.

“It is clear that Google is in investment mode in search, mobile and display,” Stifel Nicolaus analyst Jordan Rohan wrote in a note to clients.

This growth in spending pressured EBITDA margins, which fell below 60 percent for the first time in six quarters, Rohan said.

Shares of Google were down 4 percent to $474.1 in trading before the bell.

“The key item likely to spook investors this morning was the sharp rise in headcount, opex spending and capital spending — major investments to driver longer term growth dampening margins,” said Susquehanna analyst Marianne Wolk in a note to clients.

J.P. Morgan cut its price target on the stock to $558 from $566, Susquehanna cut its target to $650 from $665 and Kaufman Bros trimmed it to $630 from $640.