Costs surge hits Google shares

Google shares have come under pressure after a surge in costs overshadowed the first set of results with co-founder Larry Page back at the helm.

The first quarter figures heightened Wall Street fears that Google's earnings might suffer because of the company's commitment to hire 6,200 workers this year, the most in the internet search company's 13-year history.

Mr Page, who replaced Eric Schmidt as chief executive earlier this month, has also expressed his desire to invest in long-term opportunities.

The company earned 2.3 billion US dollars (£1.4 billion) in the first quarter of the year - an increase of 17% - but investors noted that expenses grew faster than revenues in the period and this sent shares down nearly 5% in after-hours trading on Wall Street.

Google now employs more than 26,300 workers, with more than half of new staff working on products and services to supplement the search advertising network. New opportunities include video ads on Google's YouTube site, ads for smartphones and more banner advertising.

Operating expenses were 2.84 billion US dollars (£1.75 billion), equivalent to 33% of revenues and compared with 1.84 billion US dollars (£1.1 billion) a year earlier, when 27% of its revenues were taken up by operating costs.

The company reported revenues of 8.6 billion US dollars (£5.3 billion) for the quarter, an increase of 27% on a year earlier after paid-for clicks, relating to ads served on Google sites, increased by around 18%.

UK revenues totalled 969 million US dollars (£595 million), equivalent to 11% of all sales in the quarter, down from 13% in the first quarter last year.

Mr Page said: "I'm very excited about Google and our momentum, and I'm very, very optimistic about our future."

He is now overseeing day-to-day operations, while Mr Schmidt is handling government relations and potential acquisition targets in his new role as executive chairman.

Mr Page added: "It's clear that our past investments have been crucial to our success today - which is why we continue to invest for the long term."