Alibaba

Yahoo reports modest earnings, but Alibaba shines

April 16, 2014: 7:15 AM ET

Yahoo's quarterly revenues fail to impress, but Alibaba growth rides in as a dark horse.

Yahoo CEO Marissa Mayer at the 2014 World Economic Forum in Davos

Yahoo CEO Marissa Mayer at the 2014 World Economic Forum in Davos

FORTUNE -- Yahoo (YHOO) slightly edged out Wall Street expectations on Tuesday after it posted 2014 first-quarter earnings of 38 cents per share on revenue of $1.087 billion, a tiny increase from the same period a year ago.

Analysts were looking for earnings of 37 cents per share on revenue of $1.08 billion. Shares were up 6% in after-hours trading.

A big part of that result came thanks to Alibaba, the Chinese e-commerce company in which Yahoo holds a 24% stake, which posted a 66% year-over-year increase in revenue to $3.06 billion (and a 110% increase in net income) for its fiscal fourth quarter.

For Yahoo, the narrative remains the same: Lackluster financials bolstered by Alibaba, which is preparing for an initial public offering later this year. The company under chief executive Marissa Mayer has worked hard in the last year to distinguish itself as a media company: It has launched two digital magazines (Yahoo Food and Yahoo Tech), deployed new versions of its mobile and web applications, and hired high-profile media talent in technologist David Pogue, broadcaster Katie Couric, and fashion fixture David Zee.

MORE: This Flickr co-founder wants to rid the world of e-mail

But the investment hasn't yet paid off. Revenue for Yahoo's display advertising business came in at $409 million for the quarter, a 2% increase compared to $402 million at the same time a year ago and the first such increase since 2011. Revenue for Yahoo's search advertising business was $444 million, a 9% increase from the year-ago quarter's $409 million.

In terms of outlook, the company predicted revenue of between $1.12 billion and $1.16 billion. Is Yahoo finding its way out of the woods? It's still too early to tell, but at least the company isn't moving in the wrong direction.

"I am really pleased by our first-quarter performance, marking our best Q1 revenue ex-TAC since 2010," said Mayer, using the acronym for traffic acquisition costs. "Q1 was an early and important sign of growth in our core business."

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