Google Inc (NASDAQ:GOOG) announced its first quarter results yesterday. The search engine giant’s earnings handily beat Wall Street estimates. Google Inc (NASDAQ:GOOG) earned $11.58 per share on revenues of $14 billion for the quarter ended March 21. Analysts were expecting $14.3 billion in revenues with $10.70 in earnings.

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Bank of American Merrill Lynch said in its latest research report that the company is still in transition. Google Inc (NASDAQ:GOOG)’s standalone revenue growth was almost stable at 19 percent YoY, compared to 20 percent in the fourth quarter of 2012. But the profit margin growth of 14 percent continues to lag behind revenue growth. Though rapidly growing businesses Nexus, YouTube, and Google Play kept the revenues strong, these businesses have much lower gross margins. Motorola remains a headache for the company’s earnings and gross margins.

Some of the key projects of Google Inc (NASDAQ:GOOG) like Google Glass, self-driving cars and fiber are in the development phase and continue to require tons of money. Additionally, BAML analysts said that the search engine giant doesn’t give enough figures to estimate the impact of YouTube, mobile, PLA’s and Network policy changes on its results.

Due to lower gross margins, Network policy changes and FX pressure (US$ depreciation lowering revenues), Bank of America Merrill Lynch has lowered its full-year revenues and EPS estimate for Google Inc (NASDAQ:GOOG) standalone to $42.57 billion and $44.87 from the previous guidance of $42.90 billion and $46.63 respectively.

But analysts remain positive about the stock in the second half of this year as Google Inc. (NASDAQ:GOOG) continues to develop strong mobile products. The company is improving mobile ad pricing with the help of Enhanced Campaigns. Potential product launches from Motorola in the fourth quarter will also help boost revenues. Bank of America Merrill Lynch maintains its Buy rating on the stock, but has lowered its price target from $920 to $875. 

Excluding the impact of currency exchange rate, the company’s international revenues increased 26 percent YoY. Additionally, Google Inc (NASDAQ:GOOG) said its operating expenses declined on QoQ basis. That’s unusual as the company added 1,200 new employees during the quarter. Analysts believe that the company accrued less bonuses during the quarter.

However, BAML remains cautious on certain things. Changes in Google Product Search didn’t have any notable impact on the company’s revenues, and revenues from Google network also decelerated during the quarter.

Google Inc (NASDAQ:GOOG) shares were up 2.83 percent to $787.56 at 12:42 PM EDT.