Yahoo's Q3: Earnings good enough; amends Alibaba share repurchase deal

UPDATED: Yahoo's user base grew by 20 percent over the last 15 months to more than 800 million users.
Written by Rachel King, Contributor

Yahoo hovered just around the targets, leaning toward the positive side of the spectrum with its third quarter earnings report published after the bell on Thursday.

The technology company reported a net income of $93 million, or 28 cents per share (statement).

Non-GAAP earnings were 34 cents per share on a revenue of $1.139 billion, including traffic acquisition costs (TAC).

Excluding TAC, revenue was $1.081 billion, down one percent compared to the same time last year.

Still, that's good enough considering Wall Street was looking for earnings of approximately 33 cents per share with $1.08 billion in revenue. As a result, Yahoo earnings were up by approximately five percent in after-hours trading.

For the second quarter in a row, Yahoo executives, led by CEO Marissa Mayer, will be delivering commentary about the quarter's results in a live video webcast from a studio at the Sunnyvale headquarters.

But before the call, Mayer reflected on the past three months in prepared remarks:

I'm very pleased with our execution, especially as we've continued to invest in and strengthen our core business. Q3, we launched new user experiences across many of our digital daily habits -- Yahoo Screen, My Yahoo, Fantasy Sports, and more. 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.

While display and search revenues were up and down all over the board compared to the year-ago quarter, Q3 looked rather pleasant overall for Yahoo.

Here's a glance at some of the highlights from the last three months:

  • The M&A momentum continued with eight acquisitions for talent as well as mobile and social solutions continued. The list consisted of Bignoggins, Qwiki, Xobni, Admovate, Ztelic, Lexity, Rockmelt and IQ Engines.
  • Yahoo launched revamped versions of several of its core products (frequently dubbed as the "daily habits" by Mayer during interviews). The updates included a refreshed My Yahoo portal as well as a new camera experience on Flickr for iPhone.
  • Yahoo extended Stream Ads to Mail and mobile media properties.
  • Yahoo inked a deal, amending the share repurchase and preference sale agreement with Alibaba Group. The amendment reduces the maximum number of shares of Alibaba that Yahoo is required to sell in connection with a qualified initial public offering of Alibaba. Specifically, the figure dropped from 261.5 million shares to 208 million shares.

For the fourth quarter, Wall Street is looking for Yahoo to deliver earnings of at least 41 cents per share with revenue of $1.25 billion.

Yahoo is expected to deliver its outlook for Q4 and the full year during the conference call on Tuesday, starting at 2PM PT/5PM ET.

UPDATE: Yahoo shares took a turn for the worse amid a disappointing outlook. For Q4, Yahoo offered an adjusted revenue guidance range of $1.18 billion to $1.22 billion.

For the full year, Yahoo is projecting revenue to fall between $4.4 billion and $4.45 billion. But analysts are looking for revenue of at least $4.8 billion.

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