Google again had some pretty spectacular earnings. Google reported revenues of $8.58 billion for the quarter ended March 31, 2011, an increase of 27% compared to the first quarter of 2010. GAAP net income in the first quarter of 2011 was $2.30 billion, compared to $1.96 billion in the first quarter of 2010. Non-GAAP net income in the first quarter of 2011 was $2.64 billion, compared to $2.18 billion in the first quarter of 2010.

Operating expenses, other than cost of revenues (which are essentially just a revenue split with sites showing Google ads), were $2.84 billion in the first quarter of 2011, or 33% of revenues, compared to $1.84 billion in the first quarter of 2010, or 27% of revenues. The growth in expenses and reduction in the profit margin is the biggest concern for invests and why Google’s stock is down 6% today.

GAAP operating income in the first quarter of 2011 was $2.80 billion, or 33% of revenues. This compares to GAAP operating income of $2.49 billion, or 37% of revenues, in the first quarter of 2010. Non-GAAP operating income in the first quarter of 2011 was $3.23 billion, or 38% of revenues. This compares to non-GAAP operating income of $2.78 billion, or 41% of revenues, in the first quarter of 2010.

Google-owned sites generated revenues of $5.88 billion, or 69% of total revenues, in the first quarter of 2011. This represents a 32% increase over first quarter 2010 revenues of $4.44 billion. Google ads on other companies web sites grew at a 19% rate. Revenues from outside of the United States totaled $4.57 billion, representing 53% of total revenues in the first quarter of 2011, compared to 52% in the fourth quarter of 2010 and 53% in the first quarter of 2010.

From 2006 to 2010 Google’s revenue grew at a 29% annual rate, as did net income. The price of the stock was $460 on December 31, 2006. For 2006 per share earnings were $9.94. At the end of 2010 Google sold at $594 and in 2010 earnings per share were $26.31. Today the price is $535. Yes it is likely earnings will not grow at a 29% annual rate over the next 5 years (and this quarter they grew at 17% – so slower than the previous 4 years). 17% is hardly a bad performance.

The concern of expenses growing to quickly I think is a valid concern, but I think investors are being far too pessimistic. With earnings gain of 17% includes the large increase in expenses. Growing earnings by 17% considering the already large earnings base they are growing and the large increase in expenses is very impressive in my opinion. There certainly is room to debate what the future holds, but I think the price of the stock is very attractive and I added to my position today.

As of March 31, 2011, cash, cash equivalents, and marketable securities were $36.7 billion. I do think Google should pay a dividend. I think they are likely to blow the cash on crazy purchases otherwise. They avoided overpaying for Groupon and Twitter so far – and I hope they don’t change that. Cisco provides an example of the mistakes companies make when they have too many billions – they recently closed down Flip video that they bought for $590 million a few years ago.

I also worry about Google giving away excessive amounts of options. I don’t worry about the 10% across the board raises Google gave. But I do worry about giving away hundreds of millions in stock to a handful of people. It is too easy for companies to think of this as not a real cost (because no cash goes out the door). But giving away portions of the company are very costly to long term investors.

Related: Google Posts Good Earning But Not Good Enough for Many (April 2010) – Great Google Earnings April 2007 – Is Google Overpriced? (July 2007) – Investing: Looking at Microsoft

Comments