Yahoo Profit Exceeds Forecasts, but Sales Fall Short

Yahoo delivered tepid third-quarter revenue growth and forecast weaker-than-expected sales in the fourth quarter as it continues to lose market share to rivals like Google.

Yahoo!'s headquarters in California.
Paul Sakuma
Yahoo!'s headquarters in California.

The company said it earned $396 million, or 29 cents a share in the third quarter, against 13 cents a share last year.

Revenue for the quarter came in at $1.12 billion, excluding traffic-acquisition costs, versus $1.13 billion last year.

Traffic-acquisition costs (TAC) include money that Web sites pay to advertisers and that they spend to draw traffic. Analysts factor TAC into their earnings estimates.

Equity analysts who follow Yahoo expected the company to turn in a profit of 15 cents a share on sales of $1.13 billion, according a consensus estimate from Thomson Reuters.

Yahoo, the No. 2 U.S. search engine behind Google , projected fourth-quarter revenue, excluding traffic acquisition costs, of $1.125 billion to $1.225 billion. Analysts were looking for revenue of $1.26 billion, according to Thomson Reuters.

"The revenues were a little bit light and the guidance is also sort of uninspiring," said Clay Moran, an analyst with The Benchmark Co. "The display business is up 17 percent, which is below expectation and, of course, the total revenues aren't growing. Not that surprising but certainly not inspiring or shows any noticeable change in operating trends."

After initially popping higher in extended trading Tuesday, Yahoo shares reversed course to move lower. Get after-hour quotes for Yahoo here.

That decline added to a more than 2.5 percent slide from the regular Nasdaq session .

Yahoo shares have gained more than 6 percent since reports last week that a variety of private equity firms, including Silver Lake Partners, were exploring a potential buyout of the company.

Excluding one-time items, Yahoo earned 17 cents a share, but analysts who follow the company have a history of including unusual items in their Yahoo estimates, including gains on sales of assets and one-off charges.