NEW YORK ( TheStreet) -- Yahoo! ( YHOO) posted a drop in first-quarter earnings and sales on Tuesday, but the stock jumped 2.8% in after-hours trading Tuesday as the embattled Internet giant narrowly beat analyst expectations.

The Sunnyvale, Calif.-based firm posted adjusted earnings of $223 million, or 17 cents per share, compared with $310 million, or 22 cents per share, during the same period last year. Revenue fell 6% to $1.06 billion.

Analysts had expected adjusted earnings of 16 cents per share on revenue of $1.06 billion.

"We are solidly executing toward our plan for returning Yahoo! to sustainable revenue and profit growth," CEO Carol Bartz said in a press release.

Hired two years ago to restructure Yahoo! after several years of sluggish growth, Bartz has focused primarily on cutting costs through layoffs and the shutting down of non-core businesses like search site AltaVista.

In 2009, Bartz inked a deal with Microsoft ( MSFT) to power Yahoo!'s search business, but the transition has taken longer than expected. Yahoo! has said it won't see benefits from the partnership until the second half of this year.

Search revenue excluding traffic and acquisition costs fell 19% to $357 million.

Yahoo's display business, an area that has faced mounting competition from Google ( GOOG - Get Report) and Facebook, grew 10% to $471 million excluding traffic and acquisition costs, in line with analyst expectations.

Going forward, Yahoo! expects second quarter revenue of $1.075 billion to $1.125 billion. Analysts were expecting revenue of $1.1 billion.

--Written by Olivia Oran in New York.

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