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Google’s Sales Rose 17% in the Quarter, Fastest Pace in a Year

SAN FRANCISCO — Google may be in a turbulent confrontation with China, but the company’s online advertising business is picking up speed, helping Google to widen its lead over rivals.

And in the clearest sign that Google is now seeing the recession in the rear-view mirror, the company said Thursday that its net income in the fourth quarter jumped more than fivefold from a year earlier and that its sales grew 17 percent, their fastest pace in a year.

“We are back in business full-blast,” Eric E. Schmidt, Google’s chief executive, said in a conference call with investors. The fourth quarter was an “extraordinary end to a roller coaster year,” he said. “We are optimistic about the future as a result.”

Mr. Schmidt shed little new light on the company’s standoff with Chinese authorities but made it clear that he hopes the company will be able to continue doing business in China. Last week, Google said that it would no longer agree to censor its local Chinese-language search engine after discovering a series of security attacks originating in China that went after its computer systems, those of other corporations and the e-mail accounts of human rights activists. The company also said that it was prepared to shut down its China-based search engine, and if necessary to leave China altogether.

Mr. Schmidt said that Google was in discussions with the Chinese government about its position. He said that Google would like to reach a deal that would allow it to keep much of its business in China, even if it were forced to shut down the local search engine.

“We have made a strong statement that we would like to remain in China,” he said.

In an interview, Mr. Schmidt said that he was under no illusion that Google’s stand against censorship would help to promote free speech in China in the short term, but he said Google’s voice could be one of many that influence the country over time. “Obviously, we hope that the censorship will be ended by China at some point,” he said. “It does not follow that we think they are going to do that next week.”

In recent days, many analysts shifted their focus to Google’s situation in China. The possible exit of Google from the country is not expected to affect financial results in the short term, as China accounts for less than 2 percent of its revenue. But Google’s business in China, which already has more Internet users than any other country, is seen as important to long-term growth.

Google’s financial results topped the forecasts of Wall Street. Still, Google’s shares dropped more than 4 percent in after-hours trading, as many investors were hoping for even bigger gains. Analysts said that a series of recent reports from retailers and search marketers helped to set somewhat unrealistic expectations about Google’s performance.

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Google's headquarters in China. The company's clash there is unlikely to hurt the bottom line.Credit...Ng Han Guan/Associated Press

“The expectations got overinflated as the quarter progressed,” said Brian Pitz, an analyst with UBS. “But it really was a great quarter.”

Google reported net income of $1.97 billion, or $6.13 a share, up from $382 million, or $1.21 a share, a year earlier. Last year’s profit was weighed down by a charge of $1.1 billion to account for the declining value of some Google investments.

Revenue for the last three months of the year was $6.67 billion, up from $5.7 billion a year earlier. Net revenue, which excludes commissions that Google pays to marketing partners, was $4.95 billion, up from $4.22 billion a year earlier.

Excluding charges like stock based compensation, Google’s income was $2.19 billion, or $6.79 a share, up from $5.10 a share, a 33 percent jump.

On average, Wall Street analysts expected Google to report profit, excluding charges of $6.43 a share and net revenue of $4.87 billion.

Google’s results are not usually representative of the health of the overall Internet advertising market. The company’s revenue is largely driven by search ads, which have performed better than display ads and other types of online ads in good and bad times.

“Search happens to outpace growth in other categories,” said Youssef Squali, an analyst with Jefferies & Company. “Google controls roughly two-thirds of that market, so they disproportionately benefit from that growth.”

By way of comparison, analysts expect Yahoo, the No. 2 online advertising company behind Google, to report a slight decline in revenue when it releases fourth-quarter financial results next week.

Mr. Schmidt also said he was not surprised that other companies that were victims of the attacks have chosen to remain silent. He said that Google notified them of the attacks so they could protect themselves, and he said that the company had considered whether to “out them or not.”

“We decided that that would not be appropriate,” he said. “It was their drama, if you will.”

A version of this article appears in print on  , Section B, Page 3 of the New York edition with the headline: Google Posts Sharp Growth in Earnings. Order Reprints | Today’s Paper | Subscribe

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