London arm a $1bn star for Google

Mixed result: the company's Victoria HQ is prospering but overall profits have failed to keep pace with sales growth

11 April 2012

Google's London subsidiary generated almost $1 billion in revenues in the first three months
of the year as it continues to grow at double-digit pace - up 15% on a year earlier.

The Victoria-based HQ turned over $969 million (£592 million), up from $842 million, chiefly from search advertising. The internet giant controversially diverts most of that revenue via Ireland to avoid British corporation tax.

Google's group results disappointed Wall Street as profits failed to keep pace with sales growth.

Revenues surged 27% to $8.58 billion but profits rose only 17% to $2.3 billion.

Traders sent the shares tumbling nearly 5%.

Analysts are worried how costs are rising as chief executive Larry Page, the co-founder who has just taken back the reins from Eric Schmidt, battles to compete with rivals such as Facebook and Twitter.

Operating expenses jumped by $1 billion to $2.84 billion. Page is hiring 6000 staff this year.

"Some people were caught by surprise by the willingness of the company to spend," said BGC Partners analyst Colin Gillis. But Google chief financial officer Patrick Pichette insisted: "It's clear that our past investments have been crucial to our success today - which is why we continue to invest for the long term."

Google UK, the biggest operation outside the US, contributed 11% of revenues against 13% a year earlier.