Investors were also caught off guard by the company's announcement that Chief Executive Eric Schmidt would no longer take part in quarterly earnings conference calls, as it aims to "streamline" the process.
Google said the decision should not be interpreted as having any other meaning about Schmidt's role at the company.
Analysts said key indicators for the quarter — including a 7 percent rise in average cost-per-click, the price that advertisers pay when Web surfers click their search ads — appeared strong, even if investors had hoped for more from a company that had beaten earnings forecasts in seven of the past eight quarters.
With a brightening economic backdrop and encouraging signs from the retail industry, some investors had hoped that Google's cost-per-click would remain flat or even increase from the seasonally strong fourth quarter, instead of declining 4 percent, said UBS analyst Brian Pitz.
"The trend looked more favorable based on the industry data that was floating around," he said.
The stock, which has risen about 5 percent since Monday, gave up those gains to trade at $566.20 after hours on Thursday. The stock had gained 1.1 percent during the regular Nasdaq session.
"They've had a strong last few days ... and some investors expected Google to beat by a wider margin and price-per-click to come in a bit higher than 7 percent growth," said Edward Jones analyst Andrew Miedler.
Google executives said the company experienced strong growth during the first quarter across the board, with improvements in paid search, display advertising and in its nascent mobile business.
"Large advertisers have come back in force versus last year," Google's Pichette said during the call.
Google provided few details about its business selling ads that appear on mobile phones, but said its Android smartphone software was available on 34 different devices on the market and that the number of software apps designed to run on Android phones had grown to 38,000.
Executives declined to say how many of the Nexus One smartphones - which Google sells directly to consumers on its website - have been sold since being introduced in January, but said the company was pleased with the phone's "uptake." Google faces an increasing threat from iPhone-maker Apple Inc, in the mobile advertising business.
Other long-term challenges also face Google as it tries to sustain its rapid growth, including increasing regulatory headaches and the company's withdrawal from China - the world's largest Internet market by users - in a row over censorship.
In an interview with Reuters, Pichette said Google still has a sales force in mainland China catering to local advertisers, even though Google's Chinese-language website is now based in Hong Kong.
"We have partners we can monetize in mainland China as well and we'll continue to have them," Pichette said. Asked how advertising by Chinese companies has fared since Google moved its Chinese-language search site to Hong Kong, Pichette said he could not comment.
HIRING AGAIN Google, which controls roughly two-thirds of the US search market, said revenue in the first quarter totaled $6.77 billion, compared with $5.51 billion in the year-ago period.
Net revenue, which excludes costs that Google pays to partner websites, was $5.06 billion, up 2.2 percent from the seasonally strong fourth quarter and above analysts' average estimate of $4.95 billion.
To drive growth going forward and potentially fend off mounting competition from the likes of Microsoft Corp's Bing for the lucrative Internet search business, Google pledged to keep investing heavily.
Google said it increased its headcount by nearly 800 employees - the biggest increase in staff since the first quarter of 2008. Pichette said the company will keep acquiring companies and hiring aggressively throughout 2010.
Google posted net income of $1.96 billion, or $6.06 a share, up from $1.42 billion, or $4.49 a share, in the year-earlier period.
Excluding certain items, Google said it earned $6.76 a share, beating the $6.60 average forecast by analysts polled by Thomson Reuters I/B/E/S.
Whispernumber.com, which collects earnings expectations from professional and individual investors, said the outlook for Google's earnings per share was $6.74.
During the conference call, an analyst asked whether there was any tension between Schmidt and co-founder Sergey Brin over the decision to exit China, and whether that might be related to Schmidt's absence on the conference call.
The question elicited chuckles from Google executives on the call, and a denial from Pichette.
"I have heard every rumor, so thank you for asking the question so candidly," Pichette said. "The answer is no, there is nothing going on at all."
