Yahoo beats Q2 revenue targets but its sales forecast is light

Marissa MayerAP PhotoYahoo CEO Marissa Mayer

Yahoo reported its Q2 earnings Tuesday afternoon.

It beat net revenue expectations but missed on EPS.

Here are the numbers:

Adjusted EPS: $US0.16 versus analyst expectations of $US0.18 (it reported GAAP net earnings loss of $US0.02)

Revenue ex-TAC: $US1.04 billion versus analyst expectations of $US1.03 billion

That’s 15% year-over-year ex-TAC revenue growth, which is greater than Yahoo’s seen in almost nine years.

However, that revenue growth came at a price:

Yahoo reported traffic acquisition costs of $US200 million, up from $US44 million Q2 of 2014, bringing it to a net loss of $US22 million. On the company’s earnings call, Yahoo CFO Ken Goldman said that Yahoo expects to continue to pay partners more heavily for search traffic.

Coupled with light guidance, those losses sunk Yahoo’s stock, although it was only down ~.8% during the company’s earnings call.

Mavens — what the company calls its mobile, video, native, and social group of businesses — grew to nearly $US400 million in revenue this quarter, up from $US363 million last quarter.

Revenue from its search and display ads businesses continued to decline, however. Non-Mavens revenue was $US725 million, down from $US742 million in Q2 last year.

The stock was down as much as ~2.4% on the report, likely on Yahoo’s low revenue guidance for next quarter: It’s forecasting ex-TAC revenue of between $US1 and $US1.04 billion, versus analyst expectations of $US1.07 billion.

Mayer partially attributed that lighter revenue on the fact that Yahoo plans to increase traffic to its “Gemini” search engine on mobile. Increased traffic will put pressure on prices, Mayer said on the companies earnings call, which will temporarily reduce search revenue.

Yahoo’s Gemini search engine for mobile is the key to our future, Mayer said.

Yahoo also signficantly cut its workforce this quarter, reporting a headcount of fewer than 11,000 full-time employees, a decrease of 11% year-over-year, and 32% since Mayer become CEO almost exactly three years ago. After last quarter’s earnings, Morgan Stanley called for even more layoffs than that.

On the earnings call, Yahoo CFO Ken Goldman also gave a brief updated on Yahoo’s Alibaba spin-off.

Back in January, it announced that it was going to spin off its remaining 15% stake in Alibaba into a public, independent investment company, and it just filed the initial paperwork with the SEC to do so last week.

“Much work still lies ahead, but remain committed to taking the steps necessary to execute the spin-off in Q4,” he said. “We are pleased with the progress so far.”

Goldman also said that Yahoo has spent a lot of time debating the best course of action for Yahoo Japan, but has “no specific plans to share at this time.”

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