Yahoo reported quarterly earnings and revenue that beat analysts' expectations on Tuesday, sending shares as much as 4 percent higher.
The Internet firm reported earnings of 52 cents per share on $1.09 billion in revenue, easily beating expectations of 30 cents per share on $1.05 billion in revenue.
"We achieved this revenue growth through strong growth in our new areas of investment—mobile, social, native and video—despite industry headwinds in some of our large, legacy businesses," CEO Marissa Mayer said. "In Q3, we saw mobile revenues in excess of $200 million on a GAAP basis."
Mayer said the company's search business is growing at 6 percent year-over-year pace. She expects gross revenue in mobile will exceed $1.2 billion in revenue this year.
Yahoo forecast fourth quarter ex-TAC revenue of between $1.14 billion and $1.18 billion, virtually in line with Wall Street estimates. Analysts polled by StreetAccount expect the firm to hand in fourth-quarter earnings 31 cents per share on $1.17 billion in revenue.
The company said ex-TAC display revenue, which accounts for nearly 40 percent of its overall revenue, decreased 6 percent, year-over-year, to $396 million. The number of ads sold rose about 24 percent from the year-earlier period, while the price-per-ad decreased by the same margin.
Search revenue ex-TAC was $450 million for the third quarter of 2014, up 6 percent from a year ago and price-per-click increased about 17 percent.
Michael Block of Rhino Trading Partners said the upbeat results were not enough to convince investors.
One quarter of better display ads isn't enough, Block said. "People want to hear about capital and outside players are doing. Even if this turns out to be a fundamental beat, it's going to take at least one more quarter if not more to get people excited."
"It looks like the basic business is a little better but there's a lot of financial engineering here. They have a smart CFO. I want to see if the house is made of bricks or straw," Larry Haverty of Gabelli Funds said.
As of Sept. 30, the company's cash pile was $12 billion, up from $5 billion on Dec. 31, 2013, but those figures do not reflect Yahoo's involvement with Alibaba Group.
Earlier this month, the Internet firm headed by Marissa Mayer cut 3 percent of its global staff with 400 layoffs in Bangalore, India. In order to spur "sustainable growth, we're looking at ways to achieve greater efficiency, collaboration and innovation across our business,'' the company told CNBC in a statement.
Starboard, which said it acquired a significant stake in Yahoo, urged the deal could help both companies navigate the ongoing industry changes, such as the growth of programmatic advertising and migration to mobile.
Yahoo's market share of digital advertising market has declined steadily.
In 2013, the company received nearly 3 percent the total global digital ad market, but that figure is expected to shrink to 2.4 percent this year, research firm emarketer projects.
On the other hand, Google and social media giant Facebook will grab 32 percent and 8 percent of the market in 2014, respectively, emarketer said.
Yahoo currently has a market valuation of around $40 billion, in comparison to industry leader Google's nearly $200 billion market cap.
Yahoo has slightly outperformed the Nasdaq composite. As of Tuesday's close, the Internet company had gained around 18 percent over the last year, while the Nasdaq rose about 13 percent during the same period.
Yahoo acquired mobile analytics and advertising firm Flurry at the end of August.
(Disclosure: CNBC has a content-sharing partnership with Yahoo's finance site.)
—CNBC's Evelyn Cheng and Lee Brodie contributed to this report.