Eric Schmidt

Google reported Thursday its net income rose 27% in the third quarter as improved advertising sales raised revenue 7%.

In a conference call with analysts, Google CEO Eric Schmidt said that the worst of the recession was over and that the company was poised to begin a new phase of investment, hiring and acquisitions.

Schmidt said that while some uncertainty remained about the pace of the recovery, Google is“very optimistic about the future. We now have the business confidence to invest heavily in the next phase of innovation.”

Google reported revenues of $5.94 billion for the quarter ended September 30, 2009, an increase of 7% compared to the third quarter of 2008. Google reports its revenues on a gross basis without deducting traffic acquisition costs (TAC). In the third quarter of 2009, TAC, which refers to the AdSense advertising program, where external websites host Google ads, totaled $1.56 billion, or 27% of advertising revenues.

Revenues from outside of the United States totaled $3.14 billion, representing 53% of total revenues, compared to 53% in the second quarter of 2009 and 51% in the third quarter of 2008. Excluding gains related to foreign exchange, had foreign exchange rates remained constant from the second quarter of 2009 through the third quarter of 2009, revenues in the third quarter of 2009 would have been $166 million lower.

Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of AdSense partners, decreased approximately 6% over the third quarter of 2008 and increased approximately 5% over the second quarter of 2009.

Google's growth over the quarter was robust in the US, where revenue grew 4% from a year ago, compared to 2% growth in the second quarter.

Revenue from the UK another major market, fell 1% year-over-year compared to an 8% drop in the second quarter.

Google ended the quarter with 19,665 full-time employees , 121 fewer employees, compared to a 378 headcount reduction in the second-quarter. In the third quarter of 2008, the company added 519 employees.

Results detail

Gene Munster, an analyst at Piper Jaffray & Co., talks with Bloomberg' TV's Carol Massar about Google Inc's third-quarter earnings.