Yahoo's earnings for its second quarter came in one cent lower than expectations, with net income declining 19 percent and revenue also declining slightly.
However, the company described the quarter as "strong".
Using Generally Accepted Accounting Principles (Gaap), the company's net income decreased 19 percent, from $161m (£81m) in the year-earlier quarter to $131m. Excluding various charges, the internet pioneer reported earnings of 10 cents per share, less than the 11 cents per share that analysts surveyed by Thomson Reuters expected.
Revenue increased eight percent to $1.346bn, excluding commissions, called traffic-acquisition costs, that are paid to advertising partners. Analysts had expected $1.37bn.
Embattled chief executive Jerry Yang remained optimistic about his company's fortunes.
"Yahoo saw benefits in the second quarter from a number of the strategic initiatives that we have been delivering against, including the rollout of innovations in search and the announcement of a number of important partnerships," Yang said in a statement accompanying the financial results.
"We are seeing validation that we have the right strategy as we continue to make transformational investments that position us to take advantage of pivotal trends driving growth on the internet," Yang added.
The California-based company is in the midst of tremendous changes: a slowing economy; nearly half a year spent fending off Microsoft's acquitision attempt; a deal under which top rival Google will supply search ads and as much as $800m in new revenue; a major reorganisation and executive exodus; and settling its differences with activist investor Carl Icahn. Despite the turmoil, Yahoo is also trying to seize the initiative.
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Investors punished Google last week for its financial results because its profit, although not its revenue, was lower than analysts expected. Google issued words of caution about the overall economy hurting its advertising business, although the company did not provide much evidence besides some reduced spending in the real-estate sector.
Wall Street seemed more partial to Yang's optimistic view. In after-hours trading, Yahoo stock rose 36 cents, or two percent, to $21.76, erasing most of the 27-cent drop from earlier in the day before the market closed.
Yahoo chief financial officer Blake Jorgensen praised the company's performance in a slowing economy.
"Despite a difficult economic environment, we posted solid results in line with the ranges we indicated in April... Our diverse advertiser base and compelling value proposition for our customers were key factors behind Yahoo's strong second-quarter performance," Jorgensen said.
The company forecast gross revenue of $1.78bn to $1.98bn for the third quarter and operating cash flow of $405m to $465m, excluding costs associated with Microsoft's buyout attempt.
