Yahoo misses earnings estimate, revenue beats

July 24 01:58 2015

Yahoo delivered a second-quarter earnings report Tuesday that missed analysts’ forecasts for earnings, but it surpassed revenue expectations. And right now, that’s exactly the kind of surprise that Wall Street wants to see, because revenue matters. Yahoo reported adjusted earnings of 16 cents per share, falling short of analysts’ forecasts of 18 cents per share, according to FactSet.

However, Yahoo’s adjusted revenue rose about 0.3% to $1.043 billion, surpassing analysts’ expectations of $1.032 billion. Adjusted revenue excludes traffic acquisition costs, or payments made to other firms to direct traffic to them. Shares were down about 1% in after-hours trading; the stock was up 0.48% at the close of regular trading Tuesday to $39.73.

But contrast that with what happened to shares of IBM (IBM) on Tuesday. Big Blue’s stock took a major bruising, falling nearly 6% after it reported second-quarter results late Monday in which it beat analysts’ estimates for its profits, but also fell short of what Wall Street was expecting for its revenue. Yahoo reported a net loss for the quarter of $22 million. A key factor: traffic acquisition costs rose more than 350% to $200 million in the quarter.

Analysts have been upbeat about Yahoo and its planned spinoff of its stake in Chinese tech giant Alibaba Group. That deal, expected to happen in the fourth quarter of this year and valued at about $30 billion, will create a new firm Aabaco Holdings that will own about 384 million shares, an ownership interest of approximately 15% in Alibaba Group. One good sign was that the number of display ads shown in the quarter increased about 9% and ad prices also increased about 10% — only the second time prices rose in the last 10 quarters, Gillis said.