SAN FRANCISCO — Investors have spent most of the last year pestering Google to give them some of their money back. On Thursday, they got their wish.
In its third-quarter earnings report on Thursday, Google, now called Alphabet, announced that its board of directors had authorized the company to spend $ 5.1 billion buying back company shares starting this year, a move that should add more life to a stock that has already had a recent surge.
The search giant also reported third-quarter revenue of $ 18.7 billion, up 13 percent over the period last year.
Net income in the third quarter was $ 4 billion, compared with $ 2.7 billion a year ago.
Excluding the cost of stock options and related tax benefits, Google's profit was $ 7.35 a share, compared with $ 6.25 a year ago. Analysts had expected $ 7.20 a share according to Bloomberg.
Google’s stock activity over the last year.
Those numbers represent the closing act for a company that we can now call "old Google." The company this month reorganized into the holding company Alphabet. Starting next year it will separate the financial results of Google's traditional search and advertising businesses from the dizzying number of appendages — A to Z — that includes, among other things, a pharmaceutical company, two venture capital arms and a project to build self-driving cars. (The exact value of the stock buyback was $ 5,099,019,513.59 which mirrors the square root of 26, as in 26 letters of the alphabet.)
The company's shares were up nearly 11 percent in early after-hours trading Thursday.
The third quarter serves as a sort of a waypoint before investors finally see what Google's core business looks like without long-term projects that aren't bringing in much or any money. "This is the appetizer, and the main meal comes next quarter when they report the new corporate structure," said Ben Schachter, an analyst with Macquarie Securities.
Larry Page, the Google co-founder and Alphabet chief executive, announced the reorganization in August, pitching it as a way to help the company speed up its innovation by giving individual companies more independence.
Whether or not that happens, the move toward more detailed disclosure — along with a more investor-friendly tone from Ruth Porat, the company's new chief financial officer — has already restored vigor to Google's stock price.
The price of Google shares, which trade under the name Alphabet Inc. but still have the GOOG ticker symbol, are up about 25 percent this year, in part because investors think Google's core business will look a lot more impressive once the company breaks off the money-losing projects.
"The stock is up because there is hope that the new disclosures will do for Google what it did for Amazon," said Mr. Schachter.
Alphabet has deftly positioned itself at the center of every major computing trend, including mobile phones, online video and the Internet-connected thermostats made by the company's Nest Labs unit. But the core business is still inside Google, which extracts a kind of Internet toll in the form of consumer-targeted advertising that runs alongside free services like search and maps.
The company continues to generate tens of billions of dollars a year from its original desktop search business and owns the world's largest mobile operating system, Android. The Google Play Store, where Android users buy games and mobile applications, generates billions in revenue, while the YouTube video site is poised to grab advertising dollars from television.
The main concern of investors about the company was that it could not seem to find enough new ways to spend money. But lately Google's spending appetite appears to have waned. It still spends billions of dollars for research and development, including $ 3.2 billion in the third quarter, but the company's staffing growth has slowed and profit margins are increasing for the first time in years.
The company's relative austerity began under its chief financial officer, Patrick Pichette, but analysts are now giving glowing reviews to Ms. Porat, who has studiously courted Wall Street, a big change for Google, which has never given financial guidance to analysts before its quarterly earnings releases.
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