Yahoo reported better-than-expected third-quarter earnings of 34 cents per share on revenue of $1.08 billion in the third quarter, when traffic-acquisition costs are stripped out.
Wall Street analysts had expected the tech giant to report a profit of 33 cents per share on revenue of $1.08 billion.
In the same quarter last year, Yahoo recorded a profit of 35 cents a share on revenue of $1.09 billion.
Yahoo also said Tuesday it has amended an agreement that reduces the maximum number of shares of Alibaba Group it must sell when the Chinese Internet company goes public.
Yahoo owns 523.6 million shares of Alibaba, and it agreed a year ago to sell 261.5 million at about the IPO price. The new agreement calls for Yahoo to sell only 208 million, allowing the company to benefit more when Alibaba, one of the biggest online retailers in the world, goes public. Analysts estimate that when that happens Alibaba could be worth as much as $120 billion, and Yahoo owns about a 24 percent stake.
Wall Street was bullish on the earnings and the Alibaba agreement, and shares of Yahoo were up as much as 6 percent in the after-hours session after falling 2 percent to $33.38 during regular trading hours.
Yahoo also disclosed that it spent $163 million on acquisitions during the third quarter, buying such companies as Bignoggins, Rockmelt, Qwiki and IQ Engines. The buying binge was far smaller than it was in the second quarter, when Yahoo spent $1.09 billion acquiring companies, though a single acquisition, Tumblr, accounted for the vast majority of that figure.
Yahoo on Tuesday also streamed from its Sunnyvale studio a discussion of its financials. It was a TV-style presentation starring CEO Marissa Mayer answering questions not only from analysts but also from anyone else who took Yahoo up on its offer to tweet or e-mail them ahead of time.
During the video presentation, Mayer entertainment and fantasy sports as big growers, and she said Yahoo boasts 390 million mobile users monthly, up 15 percent.
Yahoo reported that its display advertising revenue fell 7 percent but that the number of ads sold increased 1 percent. Search revenue, after traffic-acquisition costs, was up 3 percent and paid clicks rose 21 percent.
"Now, with more than 800 million monthly users on Yahoo -- up 20 percent over the past 15 months -- we're achieving meaningful increases in user engagement and traffic," Mayer said in Yahoo's earnings release.
Among the business highlights of the quarter listed by Yahoo was that it began offering more premium content through partnerships with ABC News and NBC Sports, and that it launched eight original comedy web shows. Yahoo also highlighted its Saturday Night Live clip archive as well as a deal allowing it to play clips from Viacom's Comedy Central and MTV, including from The Daily Show With Jon Stewart and The Colbert Report.
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