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Is Google the Teflon stock?

SAN FRANCISCO — Are Google shares made of Teflon?

Google missed Wall Street revenue targets on Thursday amid rising concern about slowing growth in its search business.

It was the fifth straight miss for the technology giant.

Yet investors took the disappointing news in stride. Shares initially fell as much as 3% in after-hours trading then bounced back.

Bottom line, says BGC Partners analyst Colin Gillis: "The business is slowing, but it's still a fantastic business."

Google shares have declined in recent months as Wall Street frets about a slowdown in its search business as well as a sharp increase in operating costs and capital spending and the squeeze from a strong U.S. dollar.

The stock fell 9% in the past 12 months ahead of Thursday's earnings, underperforming the Nasdaq.

The technology giant's lucrative advertising business is facing pressure from the consumer shift to smartphones from desktop and personal computers. Ad prices are declining because marketers pay less to reach consumers on smaller screens.

In the fourth quarter, Google had a 3% decline in cost per click, the average price for the ads that appear next to search results and other online content. This was the 13th straight quarter in which Google's cost per click fell from the previous year. And the number of paid clicks rose 11% in the fourth quarter, much less than the 17% analysts expected.

Also of concern to Wall Street: growing competition in the search market. Yahoo recently won market share from Google after clinching a deal with Mozilla to include its search engine in the Firefox browser. Speculation is also growing Apple may not renew a mobile search deal.

On a conference call with analysts, Google Chief Financial Officer Patrick Pichette said revenue was undercut by the strong U.S. dollar, a Nexus 6 inventory shortfall and "unusual charges," including compensation charges and real estate write-downs.

"We faced a few real challenges," Pichette said.

Google reported $18.1 billion in revenue in the fourth quarter, which includes the holiday shopping season, a 15% increase from the same period a year ago.

Net revenue, which excludes payments Google makes to advertising partners, was $14.5 billion, a 10% increase.

Google posted fourth-quarter adjusted earnings of $6.88 a share. Analysts had expected Google to report earnings of $7.11.

Google's operating expenses are growing faster than its revenue. Operating profit margin was 24% in the fourth quarter, down from 28% in the fourth quarter of 2013.

Google added some 2,000 employees in the quarter to reach a total of 53,600.

The technology giant has said it expects to continue to aggressively invest in new markets such as driverless cars.

2014 was "a year of significant investment growth," Pichette said, adding the company would continue to seek "a healthy balance between growth and discipline."

BGC Partners' Gillis counseled patience.

"If you are concerned about the core business slowing down, don't you want to see them investing?" he said. "They are not going to run the business for any particular quarter."

Source: usatoday.com