UPDATE 2-Google Q1 revenue misses Wall Street targets

Wed Apr 16, 2014 4:39pm EDT

(Adds analyst comment, details on margins)

By Alexei Oreskovic

SAN FRANCISCO, April 16 (Reuters) - Google Inc's first-quarter revenue fell short of Wall Street targets and margins narrowed as the price of its ads continued to decline, pushing its shares sharply lower.

Shares of Google were down 5.7 percent at $525 in after-hours trading on Wednesday.

The number of "paid clicks" by consumers on Google's ads increased by 26 percent in the first quarter, disappointing some analysts that had hoped for stronger volume growth. And the average "cost per click" declined 9 percent, extending a downward trend as mobile advertising, typically cheaper than traditional online ads, make up a bigger slice of its business.

"It's an average quarter from a great company," said BGC Partners analyst Colin Gillis. "It's the same old story. Paid clicks were a little lighter than people might have hoped, CPC declines were a little higher than people would have liked, expenses continued to rise."

Operating income slipped to 32 percent of revenue on an adjusted basis, from 34 percent in the year-ago period.

Google's core Internet business revenue climbed 19 percent to $15.42 billion in the first quarter from $12.95 billion in the year-ago period.

It posted $3.45 billion in net income, or $5.04 per share, in the three months ended March 31, compared to $3.35 billion, or $4.97 per share, in the year-ago period. Excluding certain items, Google earned $6.27 per share.

Google reported a $198 million net loss from "discontinued operations," which includes the Motorola smartphone business. Google announced plans in January to sell the money-losing business to China's Lenovo Group for $2.91 billion. (Reporting by Alexei Oreskovic; Editing by Richard Chang)