Google earnings soar 38%

NEW YORK (CNNMoney.com) -- Google posted quarterly sales and profit that trumped Wall Street expectations Thursday, boosted by a rebounding advertising market.

The search giant's net income was $1.96 billion, or $6.06 per share, in the first quarter, up 38% from $1.42 billion from the same period last year.

Excluding one-time charges, the Mountain View, Calif.-based company earned $2.18 billion in the first quarter, or $6.76 per share, up from $1.64 billion a year earlier. That easily beat analysts expectations, which called for earnings of $6.60 per share.

Google's revenue surged 23% to $6.77 billion. Excluding traffic acquisition costs, which are the advertising sales that Google shares with partners, the company reported sales of $5.06 billion, beating the $4.95 billion in revenue expected by analysts.

Sales were lifted by a recovering advertising market.

More Internet users clicked on ads in the first quarter, Google said. The number of paid clicks on ads served on Google's Web site and its partner Web sites increased 15% from last year and 5% from the fourth quarter of 2010.

Additionally, "large advertisers have come back in force," Patrick Pichette, Google's CFO, said in an earnings call.

Advertisers paid 7% more per click for ads on sites owned by Google and its partners in the first quarter than they did a year ago, though the cost per click was down 4% from the fourth quarter of 2009.

"Google performed very well in the first quarter," said Pichette in a statement. "Going forward, we remain committed to heavy investment in innovation -- both to spur future growth in our core and emerging businesses as well as to help build the future of the open web."

Ramped up hiring: The number of Google employees also grew during the quarter. The company employed 20,621 full-time employees as of March 31, 2010, up nearly 800 from Dec. 31, 2009.

"We expect to continue hiring aggressively throughout the year," Pichette said in the earnings call. "Now that this infrastructure is in place, you can expect to see us continue to invest heavily in this form."

China: Due to an ongoing dispute about government censorship of its search engine, Google announced last month that it would pull out of its mainland China office and operate an uncensored version of its site in Hong Kong.

To ease worries about the impact this decision may have on business, Pichette told investors that leaving mainland China was the "right call" and wouldn't affect future sales.

The decision "clearly has us staying in China; we have just changed our strategy," he said. "What we've really done is, we've stopped censoring, but the access to Google is still available."

Mobile growth: While Google declined to disclose details about the sales of its Nexus One phone, introduced in January, the company acknowledged that it has been "a profitable business."

"We're very happy with the device uptake and the kind of impact this has had on the industry," said Jeff Huber, senior vice president for engineering.

Huber added that Google is seeing more than 60,000 Android smartphones sold and activated daily.

AdMob: Last week, the Federal Trade Commission was reportedly preparing to challenge Google's merger with mobile advertising giant AdMob on grounds that it would violate antitrust laws.

In response to the accusation, Pichette said Thursday that the mobile advertising industry is "incredibly competitive" but that Google is working with the FTC and is "very positive about making this transaction happen."

Google agreed to buy AdMob, which provides display advertising technology for mobile Internet sites, for $750 million last November.

No more Schmidt: Pichette announced that Google CEO Eric Schmidt will no longer be participating in the company's earnings calls.

However, he said investors should not read into this decision.

"Eric is everywhere, he's very public," said Pichette. "The fact that we've decided to streamline our process just for earnings doesn't mean that [Eric] is not available."

Despite the company's positive first quarter results, shares of Google (GOOG, Fortune 500) were down more than 4% in after hour trading.

Investors will be eyeing Google's competitors Yahoo! (YHOO, Fortune 500) and Apple (AAPL, Fortune 500), which are scheduled to announce their first quarter earnings results next week.