Yahoo Inc (NASDAQ:YHOO) missed Wall Street's revenue and profit forecasts as slight growth in its online advertising businesses was outweighed by higher payments to websites which send readers to Yahoo.
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The company's shares fell about 1 percent at $44.09 in extended trading. Yahoo Chief Executive Marissa Mayer has revamped products and acquired a string of companies in the past two years, without reviving revenue growth.
Yahoo said display advertising revenue rose 2.3 percent to $463.7 million in the quarter, accounting for roughly 40 percent of its total revenue. Search business revenue was up 19.5 percent year-on-year to $531.7 million.
Yahoo said its recent deal to become the default search engine on Mozilla's popular Firefox browser boosted search volume and costs.
Both display and search revenue fell after factoring in sharply higher traffic acquisition costs paid to Mozilla and other websites.
"There is no turnaround," said Pivotal Research Group analyst Brian Wieser. "There will be no turnaround other than that which they buy."
Overall revenue growth has stalled in recent years as Yahoo's once-hot Web portal and email service have lagged those of rivals such as Google Inc and Facebook Inc.
Net income attributable to Yahoo fell to $21.2 million, or 2 cents per share, for the quarter ended March 31, from $311.6 million, or 29 cents per share, a year earlier.
On an adjusted basis, earnings were 15 cents per share.
Revenue, after deducting fees paid to partner websites, fell to $1.04 billion from $1.09 billion.
Analysts on average had expected a profit of 18 cents per share on revenue of $1.06 billion, according to Thomson Reuters I/B/E/S.
The company plans to spin off its 15 percent stake in China's Alibaba Group Holding Ltd, responding to pressure to hand over to shareholders its prized e-commerce investment valued at roughly $40 billion.
(Reporting by Bill Rigby and Lehar Maan; Editing by Saumyadeb Chakrabarty and Richard Chang)