Google profits back on track as annual revenue hits record

Google has reported a rise in profits with a jump in revenues, as it ploughed more money into advertising and research and development.

Net profit for the final three months of last year was $2.89bn (£1.83bn), up 7% on a year earlier. Revenues were up by more than a third at $14.4bn.

Google shares rose by almost 5% in after-hours trading, following the better-than-expected results.

Separately, computer maker IBM reported a modest rise in profits.

In the third quarter of 2012, Google's profits fell sharply from a year earlier. The final three months of the year marked a return to profit growth.

"We ended 2012 with a strong quarter," said the internet giant's chief executive Larry Page.

"And we hit $50bn in revenues for the first time last year - not a bad achievement in just a decade and a half.

"In today's multi-screen world we face tremendous opportunities as a technology company focused on user benefit. It's an incredibly exciting time to be at Google."

The fourth quarter figures are not directly comparable with a year earlier, as they include Motorola Mobility, which Google bought in May 2012. The subsidiary made a loss in the latest three month period.

Analysts were impressed by Google's performance.

"Business looked really strong, especially from a profitability perspective - they really grew their margins in the core business, which is quite amazing," said Sameet Sinha from B Riley.

"Most of that strength seems to be coming from international markets, which grew revenues quite substantially - up 23%, year-over-year."

Google's strong performance came as another technology giant, IBM, revealed its earnings grew 6% in the fourth quarter, as it benefited from lucrative software businesses, such as internet-based computing.

IBM earned $5.8bn between October and December, compared to $5.5bn over the same period a year earlier.

It is the 40th consecutive quarter that IBM has enjoyed growth in earnings per share, compared to a year earlier.