Yahoo posted an adjusted profit of 38 cents per share, flat from a year ago. Wall Street analysts, on average, had expected Yahoo to report a profit of 37 cents a share on revenue of $1.08 billion.
"I am really pleased by our first quarter performance, marking our best Q1 revenue ex-TAC since 2010," said CEO Marissa Mayer in the earnings release.
Mayer has repeatedly stated that Yahoo's return to sustained growth will take several years, and first-quarter revenue fell within the range of the company's modest guidance. Still, the falling ad sales reportedly cost ex-COO Henrique de Castro his job in January, with his responsibilities divided among other executives.
The 2% gain in display ad sales to $453 million in the quarter, excluding payments to partners, marked a clear improvement after four quarters of declines, including a nearly 6% drop in the fourth quarter of 2013, and a 7% slip in the third quarter. That may suggest Mayer’s efforts to revamp key Yahoo properties and add new ones over the last two years is starting to pay off, not only with higher engagement but better ad results as marketers increase spending on the site.
Still, revenue growth was again stronger on the search side of Yahoo's business, where ad sales increased 9% to $444 million. The number of paid clicks increased about 6% from a year ago, while the price-per-click increased about 8%. The gain in paid clicks was down from the 17% gain in the fourth quarter, but the price-per-click rebounded from a 3% drop in the previous quarter.
During the earnings conference call, Mayer highlighted Yahoo's mobile growth. She noted that the number of monthly active mobile users has increased to more than 430 million. Tumblr, the blogging service Yahoo acquired last year for $1.1 billion, saw its number of monthly mobile users increase 71% in the first quarter from a year ago.
While Yahoo did not discuss ad sales so far on Tumblr, Mayer noted that the average sponsored post on the site gets re-blogged 10,000 times compared to 14 times for regular posts. She also noted that 150 of the top 350 brands worldwide have a presence on Tumblr.
Yahoo shares were up about 8% to almost $36 a share in after-hours trading following the company's earnings report. The stock closed Tuesday at $34.21, up 2.3%.
Yahoo's shares likely got a boost mainly from financial information the company revealed showing strong revenue growth at Alibaba -- the Chinese e-commerce giant in which it has a 24% stake. Alibaba is expected to go public in the U.S. this year, which analysts estimate would give it a value of more than $100 billion.