Google revenue dips from Q4, but year-over-year profit up

— -- The sky isn't falling at Google. While the search giant's first quarter revenue of $5.51 billion slipped 3% compared to the last quarter of 2008, year over year revenue rose 6%.

And first quarter net profits hit $1.42 billion, an 8% climb over the same year-ago period.

"We think Google had a good economic quarter," CEO Eric Schmidt said during a telephone call with investors while acknowledging that the company is still in "uncharted territory."

"People are searching more but buying less," he said.

"The bottom line based on the numbers is it appears things have stabilized," says Piper Jaffray analyst Gene Munster. "People were bracing for the worst and it turned out for the better.

Schmidt says the results "demonstrated the resilience of our business model."

But Google warned of seasonal challenges ahead, which could well result in more tepid quarterly numbers come June. And the company is hardly recession-proof. Google has kept costs in line, Munster says, by cutting several projects since the beginning of the year, including Dodgeball, a location-based mobile social network.

And Google employed 20,164 full-time employees as of March 31, down from 20,222 full-time employees at the end of the year.

"Our priority remains investing for the long term to drive future growth in our core and emerging businesses," Schmidt said.

Google is betting on the Android mobile operating system, among other initiatives, but the company's core is still built around search and advertising.

On Wednesday, the comScore research firm reported that Google expanded its lead in the U.S. search market to nearly 64% of the more than 14 billion US searches.

Runner-up Yahoo had just a 20.5% share.

Google's financials suggest that "the consumer is still alive," says Munster. "But it's hard to say alive and well."