UPDATE 4-Google defies economy to beat forecasts; shares rise

* Q3 EPS of $4.92 tops $4.75 avg Street forecast

* Shares surge more than 10 pct after-hours

* Added 500 employees in qtr, continues to hire cautiously

* IBM software and services gains offset hardware declines

* Chipmaker AMD beats estimates, further fueling tech stock rise (Adds executive and analyst comments, int'l details)

By Eric Auchard

SAN FRANCISCO, Oct 16 (Reuters) - Google Inc (GOOG.O) profits surpassed Wall Street quarterly forecasts, sending its shares up more than 10 percent as the Internet search and advertising leader held deepening economic gloom at bay.

Web traffic and revenue growth were strong in all major parts of the world and searches were up for almost every industry using Google, Chief Executive Eric Schmidt said.

But with uncertainty widespread among global business leaders, government officials and media commentators over where the economy is headed, Google is unsure what impact this could have on its advertising dependent business, the CEO said.

"We are all in uncharted territory," Schmidt said of the economy, adding that Google has taken expense control more seriously recently. "We are very realistic about the macro environment, but we are optimistic about Google's future."

Wall Street analysts were pleased by efforts to rein in expenses. Many have complained for years at how Google was "spending like drunken sailors" to hire new employees and install computer data center capacity as its growth exploded.

Google added just over 500 employees in the quarter, about half of them engineers, taking total staff to about 20,000, and the company said it would continue to hire, but cautiously.

Relieved investors said Google appeared to be alone in its ability to weather the economic storm.

"Even in a down market, advertisers are going to be seeking customers. These results separate out Google from the eBays (EBAY.O) and the Yahoos (YHOO.O)," said Colin Gillis, an analyst at Canaccord Adams. Ahead of the report, he had prayed aloud that Google results might shore up investor confidence.

Net income for the third quarter rose to $1.35 billion, or $4.24 a diluted share, from $1.07 billion, or $3.38 per share.

Excluding employee stock compensation costs and one-time items, profit rose to $4.92 per diluted share and topped Wall Street's target of $4.75, according to Reuters Estimates.