Yahoo disappointed shareholders Tuesday with mixed results in its second-quarter earnings, which showed solid growth from the company's mobile revenue and a stabilization of its desktop display unit but a decrease in the company's search advertising business. As a result, the company's share price was down about 2 percent in after-hours trading.
Yahoo's second-quarter revenue minus traffic acquisition costs came in at $1.04 billion, barely edging analysts' estimates of $1.03 billion. However, the Sunnyvale, California, tech company's earnings for the period ending in June were just 16 cents per share, below the estimated 18 cents per share.
The biggest culprit behind the disappointing revenue appears to be Yahoo Search, which saw its revenue minus traffic-acquisition costs fall to $406 million, down more than 5 percent compared to the same period last year. Those results seem to show that Yahoo's November deal to become Firefox's default search engine is costing the company more money than advertising sales are generating.
Fortunately for Yahoo shareholders, not all is bad. The company reported a 54.6 percent year-to-year increase for its mobile revenue, which came in at $252 million for the period. The company's so-called MaVeNS group -- which includes its mobile, video, native and social network advertising units -- also saw solid annual growth of 60.24 percent for the second quarter.
Yahoo also showed investors that it seems to have finally put a stop to the decline in its desktop display advertising business, which had been struggling for quite a while. PC revenue came in at $872 million for the quarter, up 5.31 percent compared to the same period last year. Yahoo said this was the most substantial growth in revenue its display business has seen since 2010.
"Overall this has been a really solid quarter, even display is up and this seems like Yahoo is on good footing for the Alibaba tax exit and cash distribution. [CEO Marissa Mayer] has consistently shown growth out of Yahoo without the acquisition gimmicks of ad-tech and publishers," said Johnny Won, founder of Hyperstop, a consultancy firm.