Google released its Q1 2009 results yesterday. As usual, everybody was watching. From analysts to investors to SEMs, few tech companies command the attention of so many groups when they report their earnings.

Given the questions about the economy and where it may be headed, all eyes were on Google yesterday and as it has done in the past, it didn’t disappoint.

Google reported a net income of $1.42bn last quarter, beating analyst estimates. This was up 8.9% from the same period last year. Revenue, excluding traffic acquisition costs, was $4.07bn, a figure in line with analyst estimates. Prudent spending and cost-cutting measures played a crucial role in helping Google meet the Wall Street’s targets.

The results gave many people reason to breathe a sigh of relief. Google is a tech bellwether and many naturally look at Google’s health as a key indicator of the health of the internet economy at large. By that standard, there are clearly parts of the internet economy that have held up relatively well, namely search advertising.

But despite Google’s seemingly strong performance in a tough market, this was definitely a half glass full/empty quarter. The rise of Google’s shares early on in afterhours trading only to fall back perhaps exemplified this best.

On the glass half full side, paid clicks were up 17%, handily beating expectations of a 13% increase. And Google beat earnings per share estimates handily as well, delivering $5.16 when analyst expectations were $4.93.

On the glass half empty side, expectations for Google’s quarter had been lowered to match the economy, so one could argue that Google simply beat lowered expectations. Revenue growth is clearly slowing and quarter-to-quarter, Google reported its first decline in net revenue. Several Google executives pointed out that the company traditionally sees slower growth in Q2/Q3, providing a not-so-subtle hint about what we should expect from Google over the next couple of quarters.

According to Google CEO Eric Schmidt, Google is “absolutely feeling the impact” of the recession. In response, the company has done a good job at cutting products that weren’t delivering results, and it reduced staff for the first time quarter-to-quarter. But Schmidt is still taking a long-term approach, stating that the company’s “priority remains investing for the long term to drive future growth in our core
and emerging businesses

The question now for Google is how it goes about that. Obviously, Google is a maturing company and the days of wild growth were bound to come to an end. Even if the online ad market, and search marketing in particular, eventually resumes healthy growth, Google is an 800 lb. gorilla and moving the needle will require bigger and bigger gains. Where it finds the next billion-dollar cash cow remains to be seen.

So is Google’s glass half full or half empty? No matter what your perspective, there are a lot of companies that would kill to have Google’s Q1 and in the long run, being humbled by the recession and being forced to spend more wisely may be a blessing in disguise for the company; one that puts it in better stead once things do turn around.

Photo credit: dannysullivan via Flickr.