SAN FRANCISCO » Gannett Co., the largest U.S. newspaper publisher and owner of the Honolulu Advertiser, used sharp cost cuts to deliver a higher-than-expected second-quarter profit yesterday and offered a wisp of hope that the industry's advertising drought may be subsiding.

The report showed Gannett's revenue continuing to slide in the last quarter, but its executives indicated advertisers are gradually spending a little more money on newspapers. Gannett's long-sagging shares spiked 29 percent.

Gannett's total revenue, which includes newspaper sales and revenue from its television stations, dropped 18 percent to $1.41 billion.

With less money coming in, McLean, Va.-based Gannett has been cutting costs relentlessly during the past year. The company has eliminated thousands of jobs and forced most U.S. employees to take two unpaid weeks of leave during the first six months of this year.

Gannett's frugality paid off with a second-quarter profit of $70.5 million, or 30 cents per share. That contrasted with a loss of $2.3 billion, or $10.03 per share, in the same period last year, when Gannett absorbed a large write-down to account for its diminished market value.

Gannett shares gained $1.01 to close at $4.50. The stock has fallen by more than 90 percent since the newspaper industry's ad revenue began to crumble at the end of 2005.

Investors probably wouldn't have been so excited about the modest progress that Gannett reported yesterday if its management hadn't stressed that the advertising downturn started to ease in June and that the trend has continued this month.