Yahoo Stock Down Despite 31 Percent Jump in Earnings

This is Yahoo’s first earnings report since CEO Marissa Mayer fired COO Henrique de Castro

Yahoo’s stock suffered in after-hours trading after investors were disappointed with revenue decreases in the company’s fourth quarter earnings report. Yahoo’s earnings per share jumped 31 percent compared to the same quarter a year ago, and its Q4 figure of $0.46 is 17 percent better than what analysts forecast.

Yahoo’s annual earnings in 2013 also increased over fiscal 2012, but the number that troubles investors is revenue. Revenue declined in the fourth quarter and over the full year, as display advertising revenue dropped nine percent. Though Yahoo’s stock rose steadily over the past year, that was due to its holdings in Yahoo! Japan and Alibaba, China’s eBay. Yahoo’s share of the display advertising market continues to shrink, hence the declines in revenue.

CEO Marissa Mayer has remade Yahoo in the past year, acquiring start-ups like Tumblr and Summly, redesigning its websites and apps, and reorganizing its advertising division. Yet that has not improved its financial performance in the United States. Mayer trumpeted the increase in traffic to Yahoo’s sites on an earnings call with analysts, and said that the shift in the years to come would be to monetizing that growing traffic. Its focus on “people, products and traffic” positioned the company well for revenue growth.

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“I’m encouraged by Yahoo’s performance in Q4 and 2013 overall,” Mayer said in a statement. “We saw continued stability in the business, and our investments allowed us to bring beautiful products to our users and establish a strong foundation for revenue growth. In Q4, we launched the new Yahoo Mail, Yahoo Finance, and our new Flickr photo books, while quickening our pace of experimentation. We are extremely heartened by the year-over-year traffic increase we experienced in 2013, an early sign of return on our investments and the acquisitions we’ve made.”

This is Yahoo’s first earnings call since Mayer fired COO Henrique de Castro, a top executive she poached from Google whose relationship with Mayer quickly soured. She told analysts de Castro “was not a fit” and that his termination was a “regrettable conclusion.” Yahoo will not replace that position.

“It gives me the opportunity to be more involved with revenue as we drive towards revenue growth,” Mayer said.