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San Francisco, July 20: Web search leader Google Inc. reported today a 28 per cent rise in profits that fell short of consensus expectations, as a recent jump in operating expenses offset market share gains against rivals.

Shares tumbled 5.5 per cent in extended trade after Google said net income rose to $925 million, or $2.93 a diluted share, compared with the year-ago quarter's $721.1 million, or $2.33 per share. Excluding one-time items and stock option expenses, Google posted a profit of $1.12 billion or $3.56 per share, which was 3 cents per share short of Wall Street targets.

However, second quarter net income dropped from the $1 billion reported in the first quarter of 2007.

Gross revenue rose 58 per cent to $3.87 billion matching Wall Street's consensus forecast. Revenue included $1.15 billion in payments to affiliated Web sites who run Google Web search advertising, so-called traffic acquisition costs.

Other expenses, including the costs of operating its computer data centers, credit card processing costs and the cost of acquiring programming, jumped to $412 million from $345 million in the first quarter of 2007. These costs represented 11 per cent of revenue from 9 percent earlier this year.

Wall Street was looking for a net profit, on average, of $3.01 per diluted share, according to Reuters Estimates. Excluding one-time items and stock option expenses, the consensus analyst forecast was $3.59 per share.

Forecasts ranged between $3.77 billion to $3.97 billion, according to Reuters Estimates. As a matter of policy, Google declines to provide financial guidance to Wall Street.

Shares of Google fell to $514.50 in after-hours trade, down from a close of $548.59 in regular session trade on Nasdaq.

Reuters