Yahoo last night posted quarterly results in line with Wall Street expectations on strong display advertising and surprise growth in its Web search audience, sending shares up 6 per cent.
Yahoo forecast second-quarter revenue behind some Wall Street estimates but stood by its target for the full year.
Analysts saw the results as good news in the company's battle with its main rival, Google, which leads in paid search advertising while Yahoo leads in graphical, or display advertising, such as online banners.
"The display advertising business is holding up strong and Yahoo is benefiting," said Hoefer & Arnett analyst Martin Pyykkonen. "It is offsetting some of the negative impact of Google having gained some in paid market share."
Reflecting the impact of higher stock compensation costs, Yahoo said net income for the first quarter fell to $160 million, or 11 cents per diluted share, from $204.6 million, or 14 cents per diluted share, a year earlier.
Net earnings per share were in line with the Wall Street consensus.
Gross revenue rose 34 per cent to $1.57 billion. Excluding traffic acquisition costs, revenue rose to $1.09 billion, just ahead of the consensus. Traffic acquisition refers to the cut affiliated Web sites take out of Yahoo revenue for running Yahoo advertising on their own sites.
The company said its monthly audience of users rose 27 per cent to 402 million, excluding Japan and China, where Yahoo holds minority stakes. Including them, Yahoo's global audience exceeded half a billion.
"One of every two Internet users around the world is using a Yahoo service each month," chairman and chief executive Terry Semel said of services ranging from e-mail and instant messaging to music, travel and news.