Revenue minus traffic acquisition costs is down 1%. EPS is down 13%. The display ad business is down 7%. The search ad business is down 3%.
And yet… the stock is flat after hours. What gives?
Two things: First, Yahoo’s results were pretty much as expected. And second, Yahoo owns 24% of Alibaba, and Alibaba is crushing it right now. Alibaba’s net income was up 145%. Its revenue was up 61%.
Below is the slide from Yahoo’s earnings that’s keeping investors happy.
In addition to Alibaba’s strong results, Yahoo announced that it gets to keep more of its Alibaba shares when Alibaba IPOs, which means more upside for Yahoo in the long run:
Yahoo also announced today that it has entered into an amendment to the share repurchase and preference sale agreement with Alibaba Group. The amendment reduces the maximum number of shares of Alibaba Group that Yahoo is required to sell in connection with a qualified initial public offering of Alibaba, from 261.5 million shares to 208 million shares.
So, while Yahoo’s numbers looks ugly, the stock is holding steady thanks to its Alibaba investment.
Hopefully, Yahoo can bottom out on its core business while people are excited about Alibaba, then start rebuilding its ad business and start growing when the Alibaba high wears off.
Here’s the slide from the earnings that has everyone excited:
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