Yahoo Earnings Exceed Expectations as Merger, Security Breach Loom

Marissa Mayer - Getty - H 2016
Getty Images

In most categories, Yahoo reported rising revenue, an exception being its display advertising business.

Yahoo managed to beat expectations Tuesday by reporting an adjusted quarterly profit of 20 cents per share — about 6 cents more than analysts had projected — on revenue of $1.3 billion, which was in line with expectations.

The financial report comes as Yahoo is set to be acquired by Verizon, though a recent hack of the pioneering internet company has the telecommunications firm on edge over the planned merger.

Verizon said in July it would acquire Yahoo for $4.8 billion, with the deal expected to close early next year. Since then, Yahoo disclosed that 500 million user accounts were stolen two years ago and 200 million accounts were stolen two months ago.

Some outlets reported that the revelation of security breaches amount to a material impact that could result in Verizon pulling out of the deal, but Verizon CEO Lowell McAdam said at a conference this month that such a notion was "total speculation."

"We still see a real value to the asset," McAdam said at the Internet Association's Virtuous Circle conference in Menlo Park, Calif. "We're still understanding what was going on, to define whether it's a material impact to the business or not. But the industrial logic of doing this merger still makes a lot of sense."

Because of the pending merger, Yahoo didn't bother with a conference call to discuss its financial results.

"We take deep responsibility in protecting our users and the security of their information," Yahoo CEO Marissa Mayer said in a statement accompanying the earnings report. "We're working hard to retain their trust and are heartened by their continued loyalty as seen in our user engagement trends."

In most categories, Yahoo reported rising revenue, an exception being its display advertising business, where revenue fell 7 percent to $476 million. The price per ad, though, increased 1 percent quarter over quarter.