Investors are starting to see Google’s Glass as half empty.
Hopes for a future in devices like Google Glass ran into the reality of second-quarter earnings yesterday that showed the core advertising business is maturing.
Over the past year, coinciding with the buzz over Google Glass, shares in the company rose about 50 percent to more than $900.
But Google’s results tempered that ride when the company missed earnings expectations for the second quarter and the stock dropped about 5 percent in after-hours trading.
Wall Street started to wonder if expectations of big gains from innovative projects such as Glass and a new Motorola X phone would offset the speed bump from lower ad prices and slowing growth.
CEO Larry Page continued to present the case for investing in the future and revolutionary technology like self-driving cars, Wi-Fi balloons and Google glass during a conference call with analysts.
People tend to “overestimate the short term and underestimate the long term,” Page said.
Since its purchase of Motorola Mobility last year, Google has been trying to develop its hardware business. It acknowledged the new Moto X phone is coming.
For now, Motorola is a big drain and cost Google $342 million in losses last quarter.
“There’s all this excitement around Google Glass, Google Maps and Android, but it’s the core business that matters,” said analyst Colin Gillis of BGC Partners. “The worst part is Motorola.”
The core business saw its fourth straight quarter of sub-20 percent growth.
“Google’s a grown-up company,” Gillis said. “It should be working on margin expansion not margin contraction.”
Google’s $14.1 billion in revenue came in below analyst estimates, as did its profit of $9.56 a share.
The search giant’s shares fell to $873 at 6:20 p.m., down 6 percent from its $928 high this year.