The web portal achieved revenue of $1.25bn in the financial quarter ending 30 June and posted net income of $755m.
When corrected for fees paid to marketing partners, the $875m in revenue fell short of analyst expectations. The figure is a key metric in gauging the company's financial health because it ignores revenue from sales that Yahoo made for partners.
Premium services such as Yahoo Personals grew by 45 per cent to $159m. The figure is another key metric that shows Yahoo's success in becoming less dependent on the advertising business.
The company's profit included $563m following the sale of Google shares acquired as part of an early investment in the search provider. Corrected for the one-time sale, Yahoo posted income of $192m.
Yahoo stock fell 10 per cent following the news release. As investors had expected a stronger growth in advertising revenue, the results increased pressure on Google which is scheduled to release its results on 21 July.
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