Yahoo! destroyed analysts' expectations yesterday by returning a profit of $8.1m (£4.9m), or 15 cents a share, on sales of $41.2m (£25.1m) in its second quarter. Yahoo! shares fell 4 13/16 to 186 3/16 ahead of the earnings report.
First Call consensus expected the search engine firm to return a profit of 9 cents a share in the quarter. Even optimistic "whisper" numbers winding through Wall Street Wednesday only had Yahoo! earning 12 cents a share in the quarter.
Yahoo! also announced a 2-for-1 stock split and has entered into an agreement for a $250m (£152.4m) private placement of common stock to Softbank Holdings.
"It's just another fantastic quarter," said Derek Brown, an analyst at Volpe Brown Whelan & Co. "Once again, they've finished well ahead of all the expectations."
Yahoo!'s traffic improved to an average of 115 million page views per day in June, up from 95 million page views per day in March.
The surprisingly good earnings report continues Yahoo!'s streak as one of the few Internet companies that consistently beats Street estimates. Many analysts had predicted that missing or merely meeting the consensus number would result in a broad-based Internet selling frenzy.
But once Yahoo!'s numbers hit the wire, all the major Internet stocks including Amazon.com, Excite, Netscape and Lycos soared in after-market trading.
Yahoo! shares have nearly doubled in the past five weeks, surging from 100 in early June to a 52-week high of 207 last week. The stock was trading at 22 9/16 one year ago.
"While we maintained our leadership position in audience reach among work users and continued to experience popularity among home users, we had significant growth in the number of registered Yahoo! members during the quarter," CEO Tim Koogle in a prepared release.
Last quarter, Yahoo! earned $4.2m (£2.56m), or 8 cents a share, on sales of $30m (£18.3m). In the second quarter of 1997, it lost $21m (£12.8m), or 50 cents a share, on sales of $14m (£8.53m).
Analyst expect Web advertising revenue to increase to more than $8bn (£4.88bn) by 2003.
SoftBank Holdings also has a controlling influence in Ziff-Davis, the owners and publishers of ZDNet UK.