NEW YORK - GOOGLE Inc posted quarterly earnings ahead of Wall Street forecasts as strong advertising sales on its self-branded websites helped the Internet leader defy the gloom pervading the tech sector.

The results, which sent Google shares up 2.6 per cent in after-hours trading, were a relief for investors who had been stunned by a series of dismal earnings from Microsoft Corp and other tech titans this quarter.

'At least we have something to feel good about with this Google news in what has been shaping up to be a gloomy earnings period,' said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, which manages US$22 billion (S$33 billion).

'It tells me that Google is very focused on their franchise and execution as a marketing, advertising and media company. It speaks highly to their business focus.'

Google said net income for the fourth quarter fell to US$382 million, or US$1.21 a diluted share, from US$1.21 billion, or US$3.79 a share, a year earlier due to impairment charges on its investments in Clearwire Corp and Time Warner Inc unit AOL.

Excluding one-time charges, profit rose to US$5.10 a share, beating the average analyst forecast of US$4.95 according to Reuters Estimates.

Total revenue, including commissions paid to affiliated advertising sites or so-called traffic acquisition costs (TAC), was US$5.7 billion, up 18 per cent from the year-earlier quarter, and up 3 per cent from the third quarter. TAC was US$1.48 billion, Google said.

'Net revenue exceeded our expectations in large part because advertising on Google's proprietary sites was up 22 per cent year-over-year, which topped our forecasts, and also because its traffic acquisition costs were lower than expected,' said Derek Brown, analyst at Cantor Fitzgerald, which has a buy rating on Google and makes a market in its shares.

'It's clear that macroeconomic challenges continue to rob Google of growth, but it seems equally clear that the company continues to make headway in this market, and take share in this market, and seems to be adjusting reasonably well - and certainly better than some had feared.'

Paid clicks - a measure of how often Google gets paid for advertisements alongside its web search results - rose 18 per cent from the year-ago quarter and 10 per cent from the third quarter.

Chief Executive Eric Schmidt said in a statement that Google had performed well 'despite an increasingly difficult economic environment.'

Investors have been concerned that Google's paid search business would face keyword pricing deflationary pressures due to the worsening economic environment, but the company said search query growth was strong with revenues up in most verticals.

Google's stock has fallen by more than half in the last year as investors expected its pay-per-click advertising format to be hit by the wider advertising market slump.

Google shares rose to US$314.51 in after-hours trading from their Nasdaq close of US$306.50.

Just 13 months ago, Google's stock hit an all-time high of US$747 as investors bet moves into new advertising formats such as mobile phones and YouTube would bring in huge returns. -- THOMSON REUTERS