NEW YORK (CNNMoney.com) - It's official. The magic is back for Google.

The world's largest search engine reported first-quarter sales and earnings Thursday that were substantially higher than Wall Street's consensus estimates. Shares of Google (Research) shot up nearly 8 percent Friday morning, to about $447, in heavy trading on the Nasdaq.

Google CEO Eric Schmidt told Wall Street that Google has continued to gain market share in search.

Back on track? After a stumble earlier this year, Google's stock could be poised to make a run at $500 following its strong 1Q results.

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Several Wall Street brokerages upgraded the stock Friday morning and boosted their price targets for the stock. Analysts at JMP Securities, Stifel Nicolaus and Jefferies each upped their targets to $500. Merrill Lynch raised its price target to $540 and Citigroup boosted its target to $550.

"Google's numbers were phenomenal," said Stifel Nicolaus analyst Scott Devitt.

Google's results are the latest indication of just how strong the online advertising market is. Yahoo! (Research), Google's top rival, reported strong first-quarter sales and earnings on Tuesday. Shares of Yahoo! moved higher in extended-hours trading Thursday following Google's report, as did shares of IAC/InterActive (Research), which owns search firm Ask.com.

All of these companies are benefiting from robust demand for ads tied to specific keyword search queries but Google depends almost entirely on this market for its sales and profits.

Revenue for Google was $2.25 billion, up 79 percent from a year earlier. Excluding traffic acquisition costs (or TAC) that the company shares with advertising partners, Google reported sales of $1.53 billion, ahead of the $1.44 billion that Wall Street analysts were expecting.

"We're obviously very happy with the company's first-quarter results," said Google chief executive officer Eric Schmidt during a conference call with analysts Thursday. "We basically have good news across the business. It looks like to us that we have continued to gain market share."

The company reported net income of $592 million, or $1.95 per share, an increase of 60 percent from the same period last year. Earnings came in at $2.29 a share, excluding the cost of stock-based compensation and some other charges. That was well ahead of the $1.98 per share that analysts had forecast for the company on this basis.

"Google absolutely blew forecasts away. The company has tremendous momentum and clearly is leading the growth in this market," said Marianne Wolk, an analyst with Susquehanna Financial Group.

Nonetheless, shares of Google have been extremely volatile during the past few months. Before Thursday's results. the stock was still trading about 13 percent below its all-time trading high from mid-January. The company reported fourth-quarter results in late January that were below consensus forecasts. That was the company's first earnings miss in its short history as a public company and caused some to wonder whether online ad growth was cooling.

Investors were also upset by some investor relations mishaps made by the company. For example, analysts said a main reason why Google's fourth-quarter numbers missed forecasts was because Google's tax rate wound up being higher than analysts had expected it to be. Google compounded manners by accidentally posting slides during its analyst day Web cast in February that should not have been made public.

But the stock has skyrocketed more than 21 percent since late March on optimism about first-quarter results and the news that Google was being added to the benchmark S&P 500 index. Schmidt addressed some of investors concerns about Google's blunders earlier this year.

"Let us know how we are communicating," said Schmidt to analysts at the conclusion of the conference call.

The strong first-quarter results should lead to even more gains in the stock as well, Wolk said. Google does not give sales and earnings guidance, but Wolk said that analysts will likely raise their targets for the second-quarter and all of 2006 in the coming days.

Currently, analysts are forecasting sales, excluding TAC, of $1.55 billion for the second quarter and $6.57 billion for the full year. Earnings, excluding stock-option costs and other charges, are expected to come in at $2.06 per share for the second quarter and $8.74 a share for all of 2006.

Sasa Zorovic, an analyst with Oppenheimer, said he was impressed by the fact that Google's international revenue grew as much as it did. Revenue from outside the U.S. nearly doubled from a year earlier and accounted for 42 percent of total sales in the quarter.

China is one market where Google is hoping to significantly boost its presence. The Chinese online market is highly competitive, with companies such as Baidu (Research) and Netease (Research) enjoying strong market share.

Google recently announced that it was opening a new research center there and also renamed its Chinese search engine Gu Ge, which is Mandarin for harvest song. The company also has come under fire, though, for agreeing to censor certain search results at the behest of the Chinese government.

There has been speculation that Google might want to buy a Chinese Internet company. Google ended the first quarter with about $8.4 billion in cash but this figure does not include the $2.1 billion that the company raised from a secondary offering of stock earlier this month.

Schmidt said during the conference call that Google would invest more in China. "I think the China market is up for grabs," he said.

Zorovic added that it was encouraging to see Google's earnings grow as rapidly as they did. There were some concerns about profit being hit as a result of the company's heavy capital spending plans. Google has invested a sizable amount of money into new infrastructure such as servers and data centers.

"In spite of all the snickering about expenses, Google has some cost controls in place," he said.

The company has also rolled out several new products, including a finance site and online calendar, during the past few months. Sapna Satagopan, an analyst with tech research firm JupiterKagan, said she doesn't expect Google to slow down any time soon.

"Google is geared up for a lot more things coming up," she said. "I have an inkling they want to try and do more types of specified search such as autos and real estate." She added that Google is also likely to take more steps to move beyond simple keyword ads and move into video and other forms of online advertising.

And during the call, Google chief financial officer George Reyes pointed out that the company will continue to spend aggressively. He said that for the remainder of the year, capital expenditures were likely to grow at a faster rate than sales. The company has plans, for example, to build a free wireless broadband network in conjunction with EarthLink (Research) for the city of San Francisco.

"We believe investments will pay off in spades," Reyes said.

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Analysts quoted in this story do not own shares of companies mentioned and their firms have no investment banking ties with the companies.