Yahoo whiffs on earnings, stock drops

Yahoo just reported its first quarter earnings results after the bell today.

Here are the key numbers:

  • $US1.04 billion net revenue, compared $US1.06 billion expected by analysts.
  • $US0.15 non-GAAP EPS versus $US0.18 expected by analysts.
  • Mobile GAAP revenue grew 61% year-on-year to $US234 million.
  • Yahoo’s GAAP search revenue increased 20% to $US532 million. Yahoo noted that it is recognising revenue from its recent search deal with Web browser-maker Mozilla on a gross basis, therefore increasing GAAP revenue and traffic acquisition costs.

Yahoo’s stock dropped as much as 2% in after-hours trading.

Yahoo said that search volume reached a five-year high thanks to its recent deal with Mozilla. And the company continued to show progress in its so-called “Mavens” group of businesses — mobile, video, native and social — which totaled $US363 million.

But the company’s overall business continues to struggle. Search revenue ex-TAC fell 3 per cent, while display advertising revenue ex-TAC fell 7 per cent.

“We’re deep in the turnaround and there’s no turn,” said Colin Gillis, an analyst with BGC Financial. “They missed on the bottom line. They missed on the net revenue line.”

Yahoo is trying to reverse a multi-year erosion of its revenue due to weakness in its display advertising and search businesses. CEO Marissa Mayer took a big step to change its fortunes in Web search this month by renegotiating the terms of its 10-year search partnership with Microsoft, which has served as the exclusive provider of the search results and search ads on Yahoo’s desktop PC website since 2010. The revised deal terms give Yahoo the flexibility to sell its own search ads 49% of the time.

Yahoo forecast that net revenue in the second quarter would range between $US1.01 billion and $US1.05 billion. Analysts were looking for $US1.04 billion.

Investors are also keen for more details on Yahoo’s plans to spin off its 15% stake in Chinese e-commerce giant Alibaba Group as well as the potential for Yahoo to monetise a 35.5% stake in Yahoo Japan.

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