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Yahoo reported first-quarter earnings and revenue that missed Wall Street's expectations on a stalling display ad business.
The tech giant said Tuesday after the bell that its first-quarter adjusted earnings came in at 15 cents per share on $1.04 billion in revenue. Analysts had expected Yahoo to report earnings of about 18 cents per share on $1.06 billion in revenue, according to a consensus estimate from Thomson Reuters.
Both the top and bottom line figures fell from the year-ago period when the company had posted earnings of 38 cents per share on $1.09 billion in revenue.
The company's stock dropped about 1.5 percent in after-hours trading immediately following the announcement. But by the time the earnings webcast conclude, shares traded more than 1 percent above Tuesday's close.
"Yahoo is amidst a multi-year transformation to return an iconic company to greatness," CEO Marissa Mayer said in the company's earnings release.
Ironfire Capital's Eric Jackson told CNBC he believed Mayer's turn around of the company had thus far proven disappointing, especially since activist investor Starboard Value began agitating for changes.
"It's been six months [since Starboard began speaking up] and these results are very underwhelming," Jackson said. "I think investors are wanting to know when do we actually start to see a 'Marissa premium' built into these shares rather than a 'Marissa discount.'"
Display advertising revenue (excluding traffic acquisition costs), an area of focus for the company, fell 7 percent from the year ago to $381 million. Total GAAP display revenue saw a 2 percent gain—which would mark the first Q1 growth in this metric since 2011, Mayer said on the firm's earnings webcast.
Yahoo said its price-per-ad fell about 17 percent compared to the same period in 2014.
Mayer revealed on the webcast that Yahoo is working to develop a plan for its stake in Yahoo Japan (a joint venture with SoftBank), and that the company had been advised not to include that stake in its proposed Alibaba spin-off. She said the options "require careful study," and that the company would share the details of any eventual plan on future earnings calls.
Following the earnings release, Yahoo said it expected to see its second-quarter revenue (excluding traffic acquisition costs) between $1.01 billion and $1.05 billion. The guidance midpoint was slightly below the consensus estimate of $1.04 billion.
There were some bright spots for the tech giant, however, as search revenue increased 20 percent from a year ago, to $956 million. Search volume rose to a five-year high on the strength of a partnership with Mozilla, Yahoo said. Mayer called this a "high-quality" deal.
"We are even more excited about that partnership today than we were when we signed it," she said of the Mozilla deal. Still, she added, future deals would need to be similarly profitable.
Mobile user growth and GAAP revenue also saw sizable gains, the CEO said, adding that the company's more than 20 percent year-over-year growth for mobile monthly active users underscored its commitment to being "mobile-first."
Mayer also boasted on the earnings webcast that the company was seeing increased interest from prospective hires, receiving about 43,000 applications for the first-quarter alone.
On the product side, Mayer revealed on the webcast that Yahoo is working on a daily fantasy sports product that it plans to launch this summer.
In January, along with reporting its fourth-quarter earnings results, Yahoo announced that it intended to spin off its remaining stake in Alibaba. The tax-free deal would spin off Yahoo's 384 million shares in the Chinese e-commerce giant into a new company, with its shareholders receiving stock pro rata.
"This level of capital return is historic, especially for a company of our size," Mayer said at the time.
Yahoo CFO Ken Goldman said on Tuesday's webcast that the company was still on target for a fourth-quarter spin off of the Alibaba shares. After the spin, Yahoo expects to distribute $41 billion to its shareholders, he added.
But the significant spin off could end up costing Mayer her job, according to former Yahoo interim CEO Ross Levinsohn. He told CNBC last week that the absence of the Alibaba stake will mean it is make or break time for the chief executive.
"This is all at the feet of Marissa Mayer; she's the one that decided to increase costs at Yahoo by $500 million over the last couple of years and she really needs to start to answer some tough questions," Jackson said.
Elsewhere in Yahoo's portfolio, April featured a series of headlines about the company's 10-year search partnership with Microsoft's Bing. These included that Yahoo , and that a to the deal struck 5 years ago.