Google’s profits more than doubled in its second quarter as it continued to perform more strongly than its nearest rival Yahoo.

“The opportunities before us really are unlimited at present,” Eric Schmidt, Google’s chief executive, told analysts. “It’s another good day and a good quarter at Google.”

The internet search engine said it had net income of $721m, or $2.33 per diluted share, up from $343m a year earlier. Wall Street had expected earnings of $1.94 per share.

Google also beat revenue expectations of $1.631bn. Its reported revenues were $1.675bn after it had paid affiliates their share of ad revenues.

More than 99 per cent of Google’s revenues come from advertising, and the company said gross revenues increased 77 per cent on a year earlier and 9 per cent on the previous quarter as it became more proficient at placing ad contextually on its search results pages and other sites.

“We are very, very happy with having such a strong quarter in a seasonally weak period for us – it look as though our model continues to work extremely well,” said Mr Schmidt.

George Reyes, chief financial officer, said Google had a very healthy cash position of $9.82bn on hand at June 30. But he warned that margins may decline as it continued to invest aggressively in the business.

He said Google had spent $699m in capital spending in the quarter, including $319m in real estate deals. “We expect to hire aggressively around the world in sales and marketing and [research and development] in the third quarter,” he added. Google’s headcount grew 17 per cent in the second quarter to nearly 8,000 employees.

Sergey Brin, co-founder, told analysts that one of its latest products, Google Checkout, was seeing healthy adoption rates. It smoothes the checkout process for users clicking through to and buying from advertisers’ sites. “We believe these benefits will increase advertisers’ spending and bring more advertisers to Google,” he said.

Yahoo reported sales and profits slightly below expectations on Tuesday and said it would be a quarter late in introducing new ad technology that could help it to catch up with Google. It had a 28.5 per cent share of the US search market in May compared to Google’s 44.7 per cent, according to comScore Networks.

Google said it had net income of $721m, or $2.33 per diluted share, up from $343m a year earlier.

Sales jumped 77 per cent to $2.46bn.

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