Fears that the economic slowdown in the US has infected advertising spending were assuaged last night after Google beat Wall Street expectations with a 42 per cent surge in revenues for the first quarter of the year. The figures, which came after the New York stock market had closed, saw shares in the internet search engine rise 18 per cent in after-hours trading. Wall Street had worried that Google might have shown weakness in US advertising spending as the world’s biggest economy grapples with recession.

The group’s performance was in part boosted by overseas business, which for the first time contributed a bigger portion of revenues than Google’s US operations. With advertisements bought using currencies such as the euro and sterling which are stronger than the US dollar, transactions result in more dollars for Google.

Eric Schmidt, Google chairman and chief executive, said last night: “It is clear to us that we are well positioned for 2008 and beyond, regardless of the business environment.”

During the first quarter, net income rose to $1.31 billion (£658 million), up from $1 billion in the same period the year before. Revenue rose 42 per cent to $5.19 billion, above Wall Street expectations. But that rate has slowed compared with 63 per cent revenue jump in the same quarter of 2007. Concerns about the sensitivity of Google’s business model to a US slowdown have seen its shares fall from about $700 each at the end of last year to $449.54 at the formal close last night.

Some Wall Street analysts were hoping that the performance of Google during the first quarter will help Yahoo!, its smaller rival to elicit a higher offer price from Microsoft which is seeking to buy the search engine for about $41 billion in cash and shares.

The figures from Google also underline the urgency of such a deal for Microsoft which is trying to compete better with Google over the $40 billion a year online advertising market.

Mr Schmidt added that Google was excited to be testing out a partnership to run some of rival Yahoo’s web search advertising sales. While Mr Schmidt failed to be drawn on whether such a venture could lead to a more lasting tie-up, its move towards Google forms part of Yahoo!’s attempt to explore deals with other companies to avoid a Microsoft takeover.

Times Recommends

• Brown targets fat cats after nationalising banks
• US shares soar on global banking rescue
• Europe follows Brown to head off meltdown