SAN FRANCISCO — Yahoo reported flat revenue and profits Tuesday for the first quarter of the year, but Wall Street really didnt care about that.
All that investors could think about was China, where Yahoos investment in Alibaba, Chinas leading e-commerce company, is flying high. Yahoo shares were up nearly 8 percent in after-hours trading.
Despite turnaround efforts by its chief executive, Marissa Mayer, who was appointed nearly two years ago, Yahoo has continued to report lackluster financial results for its core business. Mayer initially focused on creating new products and regaining lost user traffic, but she has largely let advertising, the companys principal source of revenue, languish.
Still, the stock has more than doubled since she was named to the job in July 2012, a rise that has been tempered only slightly in recent weeks as investors have widely pulled back from Internet stocks.
Shareholders are far more excited about what the company owns a 24 percent stake in Alibaba and a 35 percent stake in Yahoo Japan than anything it does with its Web portal, email or news offerings.
Alibaba is expected to file paperwork as early as next week to sell stock in an initial public offering. When the IPO occurs later this year, Yahoo will cash out big, selling about 40 percent of its stake in the Chinese company.
Depending on the valuation of Alibaba, which analysts predict could range from $100 billion to $150 billion or more, Yahoo would reap at least $10 billion before taxes.
For the first quarter, Yahoo reported net income of $312 million, or 29 cents a share, on revenue of $1.13 billion. In the same quarter a year ago, it reported net income of $390 million, or 35 cents a share, on $1.14 billion in revenue.
Excluding one-time items and expenses for stock compensation, the company reported a profit of 38 cents a share in the first quarter, the same as a year ago. That essentially matched analysts expectations for 37 cents a share in profits on revenue of $1.08 billion.
Eventually, Yahoos core business will matter to investors, and Mayer has begun a series of initiatives to rebuild the companys advertising business.
In January, the company revamped its technology and food sites, abandoning Yahoos traditional hodgepodge of text and links in favor of large, visually rich panels that are reminiscent of magazines. Mayer is expected to announce similar digital magazines in categories like travel, entertainment and beauty in the coming weeks.
Yahoo is also trying to become a bigger player in online video, developing new shows for its digital magazines and talking to Hollywood about original entertainment content.
Advertisers welcome that spirit of experimentation, said Bob Rupczynski, vice president of media, data and customer relationship management at Kraft Foods Group.
In March, Kraft Singles cheese was the first brand to use Yahoos new motion ad format, in which the image in the ad appears to be moving. When Yahoo users went to their login page, they saw an image of a grilled-cheese sandwich with steam wafting from it.
Rupczynski said the motion helped the ad stand out, and Kraft intends to try other new Yahoo ad formats, such as sponsored articles on Yahoo Food. Were excited about the platforms were testing out with them, he said.