Google Inc is expected to report a 22 percent jump in fourth-quarter revenue thanks to a busy holiday season, though it will face questions about long-term growth when it unveils results on Thursday.
Shares of the world's No.1 Internet search engine underperformed the market in 2010 but have gained roughly 6 percent in the past three weeks as investors anticipate that Google will benefit from healthy online advertising spending.
Any kind of pickup in activity in e-commerce should translate into strong search advertising, said Yun Kim, analyst at Gleacher & Company.
Looking further ahead, its money-making efforts outside of its flagship search business may prove increasingly important to investors.
Google, which is facing increased competition from social networking giant Facebook and iPhone maker Apple Inc, has embarked on a recruiting and acquisition spree, adding more than 3,500 employees to its payroll in the first nine months of 2010 and buying dozens of companies.
In October, Google gave investors what it said was a one-time peek at some of its businesses beyond search, showing that it was generating $2.5 billion in revenue from display advertisements on an annualized run rate, and $1 billion from its mobile business.
That update helped reassure investors that the company's efforts to diversify revenue beyond search advertising were bearing fruit, and Google's shares jumped roughly 10 percent following the earnings conference call in which the company gave the figures.
While Google's Android smartphone software has emerged as one of its most successful new initiatives, the company has yet to find its footing in social networking. Last year, Facebook displaced Google to become the most visited Web site in the United States, according to Experian Hitwise.
Google tried unsuccessfully to acquire Groupon, an online coupon site with strong social networking features, for $6 billion in December, according to media reports.
Google's shares were down 1 percent to $625.45 in late morning trading on Thursday.
Analysts polled by Thomson Reuters I/B/E/S expect Google to generate net revenue, which excludes fees that Google pays to partner Web sites, of $6.06 billion in the fourth quarter, with earnings per share of $8.09, excluding certain items.
Google has beaten Wall Street revenue expectations for the past five consecutive quarters, missing profit targets once in that period.
(Editing by Anshuman Daga and Tim Dobbyn)