The country's No. 3 car company posted net income of 25.5 billion yen ($270 million) in the July-September period after three straight quarters in the red. The result was 65 percent lower compared with last year but far better than Nissan's 16.5 billion yen loss in the April-June quarter.

Revenue, meanwhile, totaled 1.87 trillion yen ($19.57 billion).

The automaker sold 901,000 vehicles in the quarter, down 6.8 percent from the previous year.

"Our performance in the first half of fiscal 2009 is encouraging, demonstrating that Nissan's recovery plan is on track," President and CEO Carlos Ghosn said in a statement. "Our outlook will remain cautious until we see evidence that economic recovery can be sustained in world markets."

With its results better than originally expected, Nissan became the latest Japanese car company to boost its outlook for the year as automakers benefit from robust Chinese demand, aggressive cost cutting, and cash-for-clunkers programs around the world.

Nissan now expects a narrower net loss of 40 billion yen for the fiscal year through March 2010 compared with its previous estimate of a 170 billion yen loss. Revenues were pegged at 7 trillion yen.

The company also raised its global sales forecast to 3.3 million vehicles from 3.08 million. In the U.S., Nissan expected to sell 765,000 vehicles as opposed to its previous prediction of 750,000.

Rivals Honda Motor Co., Suzuki Motor Corp. and Subaru-maker Fuji Heavy Industries Ltd. have also upgraded their outlooks in recent days. Toyota Motor Corp, the world's top automaker, reports earnings Thursday.

The results underscored the growing importance of emerging markets like China, where massive government stimulus measures have buoyed demand at a time when more developed markets are slumping.

Nissan's sales in China surged 48 percent to 396,826 units in the six months through September compared to the year-ago period, whereas the company suffered declines in Japan, the U.S. and Europe.

"In term of units sold, China has become a major contribution to Nissan," said Philippe Barrier, an analyst at Societe Generale. "It's been a big success in China."

Executive Vice President Hiroto Saikawa credited the Yokohama-based company's performance in China to successful product launches and strong distribution channels among smaller inland cities.

"We believe that we will be able to raise our presence in this main market," Saikawa told analysts at an earnings briefing.

A new report Tuesday showed that the U.S. auto market may be brightening as well. Total U.S. sales of cars and light trucks rose 12 percent from a dismal September 2009, though were little changed compared to a year ago, according to Autodata Corp.

Nissan was one of the biggest winners of the month, posting a 5.6 percent gain in auto sales. Demand for Nissan models offset falling sales of its Infiniti model, the carmaker said.

In the longer term, Nissan is banking on electric vehicles to propel future growth. Its zero-emission vehicle, the Leaf, will go into mass-production globally in 2012.

The company has predicted such vehicles would account for 10 percent of the global auto market by 2020.

For the April-September half, Nissan booked net profit of 9 billion yen and revenue of 3.38 trillion yen.

It sold 1.69 million vehicles during the six-month period, down 10.5 percent from the previous year.

Shares of Nissan rose 1.7 percent to 661 yen on the Tokyo Stock Exchange. Earnings were released after market close.