Display advertising, which has traditionally been a minor business for the company, is also growing at Google, thanks in part to the integration of DoubleClick and to increased placement of this type of graphical and rich media ads in Google sites like YouTube, Schmidt said.

"We're very realistic about the [current] economic climate but we're optimistic about the future," Schmidt said.

Google's new CFO, Patrick Pichette, echoed that assessment. "Our core business continues to demonstrate strength despite a challenging economic environment. While we're focused on operational efficiency, we have and will continue to make crucial investments that are needed to drive value for our users, advertisers and partners," Pichette said.

Sergey Brin, Google co-founder and president of technology, said that for the second quarter in a row, the company has rolled out more than one hundred enhancements to its search technology, in areas like index size, performance, result quality and ad matching.

Google has also beefed up its software and hardware systems, so that services like its online calendar will perform better, Brin said.