Google reported second-quarter revenue on Thursday of $5.52 billion, a 3 per cent increase from a year earlier but still ahead of analyst estimates.
Net income excluding one-time charges was $1.71 billion, or $5.36 per share, up from $1.47 billion, or $4.63 per share, in the same quarter last year, the company said.
Analysts had expected earnings of $5.05 per share, according to Thomson Reuters.
Subtracting commissions and fees that Google pays to advertising and distribution partners, revenue came in at $4.07 billion, ahead of the consensus forecast of $4.06 billion, Thomson Reuters said.
"We had a good quarter," CEO Eric Schmidt said on a conference call. "Google's business appears to have stabilized despite the still-weak economic environment."
For its first quarter, reported in April, Google's revenue declined sequentially for the first time in its history. This time, the second-quarter revenue was slightly above that of the previous three months.
The company's executives sounded particularly pleased with the performance of YouTube. Google doesn't provide financial figures for the online video site, but most analysts believe it does not make money for Google despite its popularity. That may be changing, however.
Thanks to deals with media companies and the introduction of brief advertisements, or "pre-rolls," in front of premium content, the number of clips that Google makes money from tripled compared to a year ago, executives said.
"We're really pleased with the trajectory of YouTube in terms of both its revenue growth, which is really material, and in the not-too-distant future we actually see a very profitable and good business for us," Nikesh Arora, Google's president of global sales and business development, said on the call.
Large advertisers "seem to have come back to the table," Schmidt said, and Google's display advertising business, traditionally a weak area for Google, performed "very well" this quarter, he said.
Google faces competition from Microsoft's new search engine, Bing, which has garnered positive reviews. Jonathan Rosenberg, senior vice president of product management for Google, said it was too early to say what effect Bing might have on Google's market share. "We certainly haven't seen any large shift in share today," he said.
Google is also on the offense, designing a new operating system, the Chrome OS, aimed initially at netbooks but also eventually full-fledged PCs. The Linux-based OS is due on the market late next year and will compete with Microsoft Windows.
Google will produce a "reference design" for the OS, Schmidt said -- basically a set of instructions for building Chrome devices. "Our primary focus for that product will be speed -- in particular speed of boot, speed of computing and the seamless use of all the Web services that are the promise of cloud computing," he said.
Because the OS will be open source, companies will also be able to design whatever products they want with it, he said. Several matters have yet to be decided, he said, such as whether the OS will be available for download to install on existing computers.
The income figures above exclude one-time charges. On a GAAP (generally accepted accounting principles) basis, net income was $1.48 billion, or $4.66 per share, Google said.
Revenue from Google-owned Web sites accounted for two-thirds of its total revenue, or $3.65 billion, a 3 per cent increase from last year. Revenue from partner sites, realized through its Ad Sense program, accounted for most of the remainder, and increased 2 per cent from last year to $1.68 billion.