Marissa Mayer has brought the "yippee!" back to Yahoo. Under a company reboot, the Internet pioneer reported earnings that beat analyst forecasts after the close of markets on Monday.
Shares of Yahoo initially jumped 4.5% to $21.22 in after-hours trading following the report.
Yahoo reported fourth-quarter profit of $272 million on revenue of $1.22 billion, compared with a profit of $295 million on revenue of $1.17 billion a year ago.
The revenue uptick marks a first year-over-year gain in four years as CEO Mayer has begun turnaround efforts at Yahoo.
Yahoo's adjusted earnings per share of 32 cents beat the 27-cent average of analyst estimates from Thomson Reuters.
"There's a lot of work to be done," Mayer said on a conference call with investors and analysts. "Mobile will be key to our business."
A huge exodus of consumers from PCs as they're spending more time on mobile devices is causing companies such as Google, Facebook, Zynga and Yahoo to scramble to meet new advertising needs.
Shares of Yahoo have shot up 30% since Mayer took the role in July on optimism that the former Google executive can turn around the company's fortune as it battles for advertising.
Yahoo reported a 14% increase in search revenue in the quarter compared with last year.
"Theoretically, there's a lot of growth potential if they can boost search," says IDC analyst Karsten Weide, a former Yahoo employee.
Google holds 66.7% of the search market, trailed by Microsoft, with 16.3%; Yahoo, 12.2%; Ask.com, 3%; and AOL, 1.8%, according to market researcher ComScore.
Despite gains, Yahoo had a 5% decline in display advertising revenue from a year ago. Yahoo has been dogged by a need for better tools to serve advertisers.
"Agencies are increasingly looking for more automation -- Yahoo is kind of tepid in that regard," Weide says.
He thinks "that's one of the ways that Yahoo can get out of a crisis."
Yahoo is the No. 2 most-visited U.S. Internet destination behind Google, according to ComScore. Ranking after Yahoo: Microsoft, Facebook, Amazon.com and AOL.
Yahoo said Flickr usage is up 25% since the company refreshed the online photo service in the quarter.
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