SAN FRANCISCO — Already the Internet search leader, Google Inc. picked up more bragging rights yesterday when it surpassed Cisco Systems Inc. as Silicon Valley's most valuable company.

Then Google's third-quarter earnings provided another reminder of why the nine-year-old company is such a hot commodity.

In the latest in a long list of pleasant surprises, Google's profit soared 46 percent to surpass the high expectations that had elevated its stock price by more than $100 in the past month.

As it has been for years, Google reaped the benefits of running the Internet's most popular advertising network as more marketing dollars shift to the Web from television, radio, newspapers and magazines.

"We're strong and getting stronger," Google chairman Eric Schmidt said in an interview yesterday. "What I am most pleased about is our model works."

Long-established media are continuing to suffer. For instance, the third-quarter advertising revenue at three major newspaper publishers — Gannett Co., McClatchy Co. and Dow Jones & Co. — declined by a combined $125 million, or 6 percent, from the same period last year.

Chris Winfield, who runs the search engine ad firm 10e20, says Google has become the Internet's equivalent of the Beatles during that rock group's heyday in the 1960s. "It's pretty amazing, it's almost like they are in control of the world."

ROCKIN' UP THE CHARTS

Overcoming a traditionally slow season for Web surfing, Google said yesterday that it earned $1.07 billion, or $3.38 per share, for the three months ended in September. That was up from net income of $733.4 million, or $2.36 per share, at the same time last year.

If not for the cost of awarding stock to its steadily expanding workforce, Google said it would have earned $3.91 per share.

Revenue for the period totaled $4.23 billion, a 57 percent increase from $2.69 billion last year.

After subtracting commissions paid to its thousands of advertising partners, Google's revenue stood at $3.01 billion.

The performance represented a return to form for Google after its second-quarter earnings disappointed Wall Street.

Wall Street already had been counting on a stellar quarter from Google, especially after its smaller rival, Yahoo Inc., beat analysts' expectations with its third-quarter earnings released earlier this week.

Google shares added $6.14 yesterday to finish the regular session at $639.62, leaving the Mountain View-based company with a market value of just below $200 billion to eclipse Cisco.

Microsoft Corp., which started when Google co-founders Larry Page and Sergey Brin were still toddlers, is now the only high-tech company worth more than the Internet search leader.

EXPANDING ITS BUSINESS

Google's stock seems likely to reach new heights today after gaining another $3.88 in yesterday's after-hours trading.

Although it relies on complex technology, Google's business formula is fairly simple. As it processes a search request, Google also scans its database for text-based ads related to the same topic as the query and displays the commercial messages along the side and top of the results page.

Google gets paid when someone clicks on an ad on its pages or one of its partners' sites.

There's ample opportunity to display ads, with Google fielding about 1.2 billion search requests worldwide a day, according to data from comScore Inc. That's more than quadruple the number handled by Yahoo, the second-largest search engine.

While becoming even more dominant in search, Google also is branching in new directions that are creating new ways to sell ads and opening up potential new revenue channels in the software applications market.

In the past few months, Google has unveiled a way to show text-based ads across the bottom of videos supplied by its YouTube subsidiary and also began distributing ads within "widgets" — the interactive capsules that are becoming Internet staples.

"Each of these initiatives give advertisers new and interesting ways to build relationships with customers," Schmidt told analysts during a conference call.

In a sign of its ambitious expansion plans, Google added another 2,130 employees in the third quarter — more than in any three-month period in its history.

As of Sept. 30, the payroll totaled 15,916 people, including hundreds who have become millionaires as Google's stock has increased by more than sevenfold from its IPO price.