Yahoo reported first-quarter earnings that topped forecasts, but revenue fell short and shares fell after-hours.
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The company posted earnings excluding items of 38 cents a share, up from 24 cents a share in the year-earlier period.
Revenue remained flat at $1.074 billion to $1.077 billion a year ago.
Analysts had expected Yahoo to report earnings excluding items of 24 cents a share on $1.10 billion in revenue, according to a consensus estimate from Thomson Reuters.
Display advertising revenue declined 11 percent to $402 million from a year earlier.
"People were disappointed by the display advertising because that's Yahoo's key business. We were looking for display to be down about 9 percent, and they came in at negative 11," said Sameet Sinha, an analyst at B. Riley Caris. "When you compare this to what it was down last quarter—it was 4.5 percent— you can see acceleration in the decline. We'll be looking for reasons behind that."
Despite softer results in the first quarter Yahoo's outlook remained unchanged for 2013.
"They left the guidance unchanged, and the first quarter was a little weaker, so they need a bigger lift in the second half," said Stacy Rasgon, analyst with Bernstein Research. "That scares the hell out of me."
Yahoo removed ads from its homepage, a move that CFO Ken Goldman said may hurt revenue but will boost engagement.
"I'd like to see us grow search click volume more by making the search experience more immersive—we'll be working on that in the coming quarters," Yahoo CEO Marissa Mayer said on the earnings call.
Mayer, a former Google executive, is trying to revitalize Yahoo's business. While the company was once among the Internet industry's most powerful companies, it has lost its appeal among consumers and advertisers to rivals such as Google and Facebook.
Mayer has said that building better online products that entice consumers to spend more time on Yahoo properties, and developing new services for smartphones and other mobile devices, are key to turning the company around.
"We are moving quickly to roll out beautifully designed, more intuitive experiences for our users," Mayer said in a statement. "I'm confident that the improvements we're making to our products will set up the company for long-term growth."