Despite a drop in revenue and a still-struggling display advertising business, Yahoo was able to avoid first-quarter disaster by showing investors that it is continuing to make progress in mobile, which saw a more then 61 percent increase in revenue year over year.
The Sunnyvale, California, company's results came in at just over $1.04 billion in revenue with earnings at 15 cents per share, missing analysts' estimates of 18 cents per share with $1.06 billion in revenue. But the progress Yahoo showed in its mobile, video, social and native advertising businesses -- up 58 percent compared with the first quarter of 2014 -- kept investors from panicking (Yahoo's stock price increased a little more than 1 percent in after-hours trading).
"It's clear that whatever transition they're in the midst of they're still in the midst of it,” said Andrew Frank, an analyst for Gartner. "The good mobile news kept this from being much worse than it was, and I think there is something to that. As long as they can show that they're making progress on their goals, people are willing to give them a little bit more slack than they would otherwise."
Additionally, the company's search traffic reached a five-year high as a result of its new partnership with Mozilla as the search engine for the Firefox Web browser, but that growth came at a price. Search revenue fell 3 percent year to year, but during the company's earnings call, President and CEO Marissa Mayer said revenue would have been up if not for a few one-time charges.
The biggest miss was in the company's display advertising business, which declined 7 percent year over year. Mayer consistently has said it is working to slow and stabilize this decline, but Yahoo will need to turn this around soon lest investors worry, according to several analysts.
"It is a risk for Yahoo not to be firing on all cylinders when it comes to advertising," Frank said.