In what some have called its most important earnings announcement to date, Internet services giant Yahoo! revealed an 8.7% increase in first-quarter revenue, beating estimates.

Yahoo’s (YHOO) beat the Street with an adjusted profit of 11 cents per share, flat from a year ago. Revenue increased to $1.82 billion from $1.67 billion in the first quarter of 2007. Shares of Yahoo rose slightly in after-hours trading.

The Sunnyvale, Calif.-based company could hardly afford disappointing its shareholders with another decline in quarterly profits, especially considering its argument that Microsoft's (MSFT) $44 billion buyout offer “significantly undervalues” Yahoo. It’s not clear yet what role the better-than-expected results on Tuesday will have in the two companies’ game of corporate brinksmanship -- but they likely can’t hurt Yahoo’s case.

Analysts polled by Thomson Reuters had estimated Yahoo would post earnings of 9 cents per share on revenue of $1.32 billion. Just a year ago Yahoo missed estimates in the first quarter, pushing the stock 13% lower that week, according to Thomson Reuters.

Before the results were even released, Microsoft CEO Steve Ballmer downplayed their significance, according to a Reuters report. "I wish Yahoo all the success with its results but it doesn't affect the value of Yahoo to Microsoft,” the news agency quoted Ballmer saying at a Microsoft event on Tuesday.

Yahoo, which is home to the world’s most visited homepage, went as far as seeking a combination with Time Warner’s (TWX) troubled AOL unit or a deal to merge with News Corp.’s (NWS) MySpace social networking site. Neither deal appeared to gain traction over the past few weeks.

Analysts had predicted Yahoo would do everything it could to beat the Street given the importance placed on these quarterly results. "We expect management to have pulled out all the stops to drive up Q1 performance, maximize their value, and make life generally as difficult/expensive for Microsoft as they can," a Bernstein Research analyst wrote, according to Thomson Financial.

Companies like IBM (IBM), Intel (INTC) and Google (GOOG) set the bar very high over the past week for Yahoo and other tech giants by reporting results above Wall Street’s expectations.