Shares of Google Inc. rose in after-hours trading Thursday after the Internet search company said its first-quarter profit climbed 8.9% and topped Wall Street's forecast, amid a tough advertising environment.
Net income for the three months ended March 31 totaled $1.42 billion, or $4.49 per share, compared with $1.31 billion, or $4.12 per share, a year ago.
Results included charges of 67 cents per share for special items. Without the charges, earnings were $5.16 per share for the Mountain View, Calif.-based company.
A consensus estimate of analysts polled by Thomson Financial, who typically exclude one-time items from their estimates, predicted $4.93 per share.
Sales rose almost 6% to $5.51 billion from $5.19 billion last year. Excluding commissions paid to advertising partners, sales totaled $4.07 billion, which missed analysts' forecast of $4.08 billion.
In the previous earnings period, Google posted its first-ever drop in quarterly profit.
Google (GOOG, Fortune 500) stock was trading almost 1% higher to $392.24 in after-hours action Thursday after rising as high as 5.7% following the earnings release.
"It's not an expensive stock, and stocks are rallying even on bad news," said Jeff Rath, analyst at Canaccord Adams. "There's a building belief that the worst is behind us."
January and February were difficult months for Web search, but the trends started to improve in March and may be stabilizing, Rath said.
'Feeling the impact'
"Despite the tough economic climate, we had a good quarter," chief executive Eric Schmidt said in a conference call. "But no company is recession-proof, and Google is definitely feeling the impact."
Consumers are still searching on Google, but they're buying less, Schmidt said. "The shift to online gives us an advantage, so we're well-placed for the recovery when it occurs," he said.
But the company did make cuts, as "cash isn't exactly burning a hole in our pockets," Schmidt noted.
The company's gains were primarily driven by expense management, said Clayton Moran, analyst at The Benchmark Group.
"Those types of gains are not sustainable, and Wall Street tends to discount those kinds of business moves," he said.
In March, Google completed an offer to exchange certain employee stock options for lower-priced stock options. The company also cut both its radio and newspaper advertising programs.
Google eliminated almost 300 positions in the first quarter. The company employs more than 20,000 workers worldwide, but the moves were notable because they marked the company's first-ever job cuts.
While Google has dominated text-based search advertising, the company announced it will begin testing display advertising, putting it in direct competition with rival Yahoo (YHOO, Fortune 500).
Google emphasized that it expected slow second and third quarters, which is historically common but will likely be more pronounced because of the recession, said analyst Moran.
Moran expects single-digit growth numbers in the coming months, he said,
"The company's business model is extremely resilient, and while this was a good result, Google is not immune to the recession," he said.