Yeah, even though revenue increased a modest amount, the drop in income / profit should have investors worried.

It's mostly driven by changes to Other Income (+12b to -3b), which is dominated by shares Google owns in other companies being marked to market. Basically this exaggerates both the good times (unrealized gains boost the net income, even though it's all on paper) and the bad times (the inverse). The operating income is probably a better way to reason about how sound the core business is.