In after-hours trading, shares of Google fell about 7 percent to $507.60. In regular trading, the stock closed at $548.59.
Excluding one-time items such as employee stock-based compensation, income was $3.56 a share. Analysts polled by Thomson Financial were expecting income of $3.59 a share excluding items.
Total revenue was $3.87 billion. Excluding traffic acquisition costs, or commission paid to content partners, revenue was $2.72 billion, greater than the $2.68 billion analysts were expecting. Google paid $1.15 billion in traffic acquisition costs.
Google's earnings are in sharp contrast to those reported by rival Yahoo on Tuesday. Yahoo saw earnings drop from a year ago on slowing growth in its display advertising business and warned that revenue for the remainder of the year would be lower than expected.Click here for full story.