Google's earnings and sales both rose but fell short of analyst expectations, and shares of the company fell in extended trading.
The world's top Internet company said it expected to continue to make "significant capital expenditures'' after spending $678 million in the fourth quarter on data centers, servers and other equipment.
Wall Street is also keen to see how a U.S. economic slowdown will hit Google, which generates nearly all of its revenue from advertising.
Clayton Moran of Stanford Group said the results were disappointing given the Web search leader's track record of beating expectations.
"There was a slight softness in revenue which perhaps portends softness going forward due to the ... U.S. economy,'' he said.
The online advertising and search company reported fourth-quarter earnings of $4.43 a share, excluding commissions paid to the company's advertising partners, and sales of $3.39 billion. Last year Google reported a per-share profit of $3.18 and a topline of $2.23 billion.
Analysts polled by Thomson Financial expected Google to report adjusted fourth-quarter earnings of $4.44 a share on revenue of $3.45 billion, minus commissions.
Shares of Google lost more than 8 percent in extended trading after rising almost 3 percent to $564.30 during regular market hours Thursday.
The disappointment will likely amplify concerns that Google won't be able to sell as much online advertising -- the main source of its profit -- as consumers clamp down on their spending amid ominous signs of a recession in the United States.
Those worries already have contributed to a nearly 20 percent decline in Google's stock price this month.
Optimistic on '08
Google sees revenue coming from a growing range of businesses and also international expansion, fueling optimism about the year ahead, Chief Executive Eric Schmidt said Thursday.
"We're optimistic about 2008. We have growing revenue streams across a broad range of verticals and markets,'' Schmidt, who is also the company's chairman, told analysts on a conference call following Google's quarterly earnings report.
Chief Financial Officer George Reyes said on the same call that the 51 percent growth in Google's fourth-quarter revenue reflected strong growth across its three main businesses: Web search, online advertising and Web-based software applications it has nicknamed "apps.''
However, he said Google is having trouble making inroads selling advertising into what is now the hottest market on the Internet -- social networking sites such as Facebook and MySpace.
"We have found social networking inventory is not monetizing as well as expected,'' he cautioned.
- Wire services contributed to this report.