Yahoo! Profit Doubles

The Net bellwether beats estimates by 2 cents.
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Updated from 5:15 p.m. EDT

The market turned to

Yahoo!

(YHOO)

for a bit of cheer this dour earnings season -- and Yahoo! delivered.

For its first quarter ended last month, the Sunnyvale, Calif., Internet giant beat Wall Street's expectations Tuesday and gave hope that there may yet be strong growth in the Internet sector after all. Revenue grew 55% from the year-ago quarter, not bad for a 10-year-old company, which in Internet time qualifies as middle age.

Yahoo! posted earnings of $205 million, or 14 cents a share, up from the year-ago $101 million, or 7 cents a diluted share, a year earlier. Excluding a penny-a-share gain on the sale of investments, latest-quarter earnings were 13 cents a share. Revenue rose 49% from a year ago to $821 million on a so-called net basis, excluding the money Yahoo! shares with its paid search partners.

Wall Street analysts had forecast earnings of 11 cents a share on revenue of $797 million.

Just as impressive were the reasons behind Yahoo!'s growth that CEO Terry Semel gave in a conference call -- not only are more users visiting Yahoo! in the U.S. and around the world, they also are spending more time on the site each time they do. Some 372 million people visited Yahoo! in March calling up more than 100 billion pages from the site, pushing average daily page views up 34% on year.

And the deeper Yahoo!'s users get drawn in, the more attractive the site becomes to advertisers. "Some of the largest advertisers spend between 2% and 4% of their marketing budgets on the Internet," said Semel. "But consumers are spending 15% of their media time online."

As the gap between those two figures narrows, Yahoo! expects to capitalize on its clear lead as the premier advertising venue on the Internet. Already offering big advertisers both branding advertisements such as banner ads and sponsored ads on search results, the company is working on fusing those two ad models closer together.

"We will make it easier for advertisers to use all of our marketing services, giving more opportunities for advertisers to get their message in front of consumers," Semel said.

Revenue from marketing services rose 54 percent to $1.03 billion in the quarter, while revenue from fees for premium services gained 61% to $149 million. Revenue from business outside the U.S. grew a strong 124% to $355 million, or more than three times as fast as domestic revenue, which grew 37% to $819 million. Most of the overseas revenue is coming from higher-margin search advertising, said CFO Susan Decker.

Yahoo! also boosted its guidance for full-year revenue to a range between $3.565 billion and $3.715 billion, excluding traffic acquisition costs. The previous guidance called for revenue between $3.365 billion and $3.565 billion. For the second quarter, Yahoo! says revenue ex-TAC will come in between $855 million and $895 million.

The company also guided its operating profit before depreciation and amortization to a range of $1.5 billion to $1.575 billion, up from its previous range of $1.39 billion to $1.49 billion. For the current quarter, Yahoo! said it expects operating profit to be between $340 million and $360 million. By contrast, Yahoo!'s first-quarter operating profit before depreciation and amortization was $345 million.

Decker said that the second quarter should show strong growth over the year-ago period but noted that a seasonal weakness in search-related advertising is likely to be offset by a seasonal strength in branded advertising.

After

IBM

(IBM) - Get Report

sent shudders through the tech sector with last week's warning, biggies ranging from

Texas Instruments

(TXN) - Get Report

and

EMC

(EMC)

have made reassuring comments this week. Yahoo!'s report seems to keep that trend going, at least for now.

Yahoo!'s strong quarter bodes well for

Google's

(GOOG) - Get Report

earnings report due Thursday, but it's unclear whether the strength seen in the Internet portal will translate into good news for e-commerce companies such as

eBay

(EBAY) - Get Report

, which reports Wednesday, and

Amazon.com

(AMZN) - Get Report

, slated for its earnings next week.

After rising 67 cents in regular trading Tuesday, Yahoo! recently added $1.44 in postclose action to $34.66. Google was trading more than 4% above its Tuesday close of $191.40, and eBay was 2.6% above its Tuesday close of $32.17.