Last week, when Google CEO Eric Schmidt described the economy as "pretty dire" and said Google was "not immune," some analysts argued that Eric's comments were not new and should not be taken to mean that Google's business is deteriorating.
That interpretation seemed like wishful thinking. According to sources, it was.
The search business has deteriorated markedly this quarter, industry sources say, especially in the past month. A source at Google said the company's revenue has decelerated rapidly in the same period.
Wall Street estimates already call for a severe slowdown in Google's revenue growth this quarter, from 25% year-over-year growth in the fourth quarter to 11% in the first quarter. Some of the revenue deceleration, therefore, is likely in the stock.
The revenue weakness has reportedly gotten worse in the past month, however, so the second quarter is likely to be affected more than the first.
Wall Street expects Google's revenue growth to stabilize at about 10% for the next three quarters and then accelerate in the fourth quarter. Based on recent trends in the business, we think that, too, is wishful thinking. We expect Wall Street estimates to continue to come down.
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Henry Blodget is editor in chief of Silicon Alley Insider.