Google has announced a drop in profits in the second quarter of 2007, despite a 58 per cent increase in revenue. 

Net income at the search giant, using Generally Accepted Accounting Principles, totalled $925m, down from $1bn in the first quarter of 2007.

Non-GAAP net income in the second quarter of 2007 reached $1.12bn, compared to $1.16bn in the first quarter.

Google chief executive Eric Schmidt said that the company's performance showed the strength of its core search and ads businesses.

"The growth in our global traffic, combined with ongoing improvements in monetisation, resulted in solid revenue growth even in a seasonally slow quarter," he said.

Meanwhile, Microsoft announced revenues of $51.12bn for the past 12 months, and $13.37bn for the second quarter of 2007. 

This represented a 13 per cent improvement year on year, despite Microsoft's decision to put aside $1.15bn to deal with faulty Xbox games consoles. Profit for the second quarter was up 11 per cent at $3bn. 

"Surpassing $50bn in annual sales is a testament to the innovation and value that our product groups delivered into the marketplace, as well as the outstanding execution by our field sales, marketing teams and partners to bring that value to life with our customers," said Kevin Turner, chief operating officer at Microsoft.