- Associated Press - Thursday, July 15, 2010

SAN FRANCISCO (AP) - Google Inc.’s second-quarter earnings missed analysts’ target as higher expenses and the fallout from the European debt crisis dragged down the Internet search leader.

The letdown announced Thursday stemmed from Google’s expanding payroll and a run-up in the U.S. dollar that has been driven by fears that the euro will crumble if governments in Greece, Spain, Portugal and Italy default on their perilously high debts.

The worries hurt Google because about one-third of the company’s revenue comes from Europe, and customer payments made with the euro translated into fewer dollars than a year ago.

Google added nearly 1,200 employees in the second quarter to end June with more than 21,800 workers.

Despite the currency squeeze and rising expenses, Google’s net income and revenue still rose at a fast clip. But the earnings growth wasn’t quite as robust as analysts had hoped, a factor that seemed to amplify investor concerns that had already been weighing on Google’s stock price.

Google shares fell $19.79, or 4 percent, in extended trading Thursday after the release of results. Earlier, the company finished the regular session at $494.02, up $2.68.

The report wasn’t entirely bad news. In a positive sign for the overall economy, marketers were willing to pay more for the online ads that generate virtually all of Google’s income, and people are clicking on the commercial messages more frequently. Those trends provide another indication that more companies and shoppers are feeling a little better as they recover from the worst economic downturn in more than 70 years.

Google, which is based in Mountain View, earned $1.84 billion, or $5.71 per share, in the April-June period, up 24 percent from $1.48 billion, or $4.66 per share, a year ago.

If not for expenses covering employee stock compensation, Google said it would have made $6.45 per share. That figure was below the average estimate of $6.52 per share among analysts polled by Thomson Reuters.

Revenue climbed 24 percent to $6.82 billion, from $5.52 billion a year earlier. After subtracting commissions paid to its ad partners, Google’s revenue stood at $5.09 billion _ about $10 million above analyst projections.