Google Inc is expected to deliver stellar fourth-quarter results on Thursday, but investors will be seeking insight into a disagreement with China that has cast its future in the world's largest Internet market into doubt.

A strong online holiday shopping season, improving advertising rates and market share gains should help Google, the world's No. 1 Internet search engine, deliver its most robust revenue growth in a year, analysts say.

And with Google's shares down 8 percent since hitting a 52-week high of $629.51 on the first trading day of 2010 -- hurt by the simmering spat with the world's No. 3 economy -- some say its shares have room to rise.

The buy side is looking for pretty strong results on the quarter, said Kaufman Brothers analyst Aaron Kessler. He noted that the unofficial whisper numbers among investors have Google's fourth-quarter net revenue growing between 13 percent and 15 percent from the third quarter's $4.38 billion.

That's better than the 11.9 percent sequential growth expected on average, which pegs Google's fourth-quarter revenue at $4.9 billion, excluding traffic acquisition costs.

Google, which has beaten Wall Street expectations in each of 2009's first three quarters, has weathered the economic recession and ad spending slump better than many of its peers, even as the company's once-supercharged growth suffered a sharp slowdown last year.

But while other Internet companies like Yahoo Inc and AOL Inc are still looking for light at the end of the tunnel, Google regained its momentum in the third quarter with a better-than-expected earnings report that sent its shares up 3.7 percent the following day.

Google is expected to post $6.45 in fourth-quarter earnings per share, excluding special items, according to Thomson Reuters I/B/E/S. According to SmartEstimates from Thomson Reuters StarMine, which place more weight on recent forecasts by top-rated analysts, Google should earn $6.51 per share in the December quarter.


Google's decision to stop self-censoring its search results in China, and to potentially shut down operations in the country, is of little financial consequence in the short term. Analysts estimate annual revenue from China of $200 million to $600 million.

But executives' comments on the potential to reach a compromise with Beijing, and their strategy for international expansion outside of China, will be closely watched by investors worried about longer-term growth prospects.

On Monday, the company postponed the launch of two mobile phones in the country, manufactured by Motorola Inc and Samsung Electronics <005930.KS>, in the first sign that its business there is starting to take a hit.

While Google has been reluctant to share details about its operations outside its core Internet business, analysts and investors are expected to press for more information.

The analysts will have an opportunity to get some direct answers on these things at Google right now that are very topical, said portfolio manager Ryan Jacob of Jacob Internet Fund which owns Google stock.

They'll take advantage of it.

More immediately, the fourth quarter may provide further signs of improvement in Google's cost per click -- the price advertisers pay Google when Web surfers click on an ad -- which could increase 4 percent year-over-year after losing ground for several quarters, according to a recent UBS note.

While Google CEO Eric Schmidt has signaled that spending and hiring could soon increase, Jacob said the company would continue to manage costs judiciously, magnifying the effect of revenue growth.

Even a very modest exceeding of expectations on the top line could show a much larger increase in earnings, Jacob said.

But investors will be most eager for insight into Google's expansion plans in China and in the mobile phone market.

Google's plan to sell its new Nexus One smartphone directly to consumers isn't likely to juice the company's revenue in the near term, analyst said. But the costs associated with wading into the electronics retailing business, as well as the longer-term sales and mobile advertising potential, will have serious implications for Google's future performance.

(Reporting by Alexei Oreskovic; Editing by Edwin Chan and Richard Chang)