Yahoo made $1.14bn revenue in the quarter ending September 30, 2013 – a 5% fall compared with the same period a year ago.
Income from operations was 39% down on the 2012 figures at $93m, the earnings per share figure was down 89% at $0.28, and display revenue was down 7% at $407m despite a 1% increase in sales.
Search revenue was also down at $426m, an 8% drop compared with the same period in 2012.
Attempting to put a positive spin on the quarter, Yahoo chief executive Marissa Mayer said: "I'm very pleased with our execution, especially as we've continued to invest in and strengthen our core business."
The former Google executive tasked with reversing market share losses, pointed to the launch of several “new user experiences” in the quarter, including Yahoo Screen, My Yahoo, and Fantasy Sports.
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“Now with more than 800 million monthly users on Yahoo -- up 20% over the past 15 months -- we're achieving meaningful increases in user engagement and traffic,” she said.
In July 2013, Yahoo recorded the most traffic of any web property for the month, beating Google for the first time since May 2011.
Yahoo properties attracted 196.6 million visitors compared with Google’s 192.3 million, according to internet analytics firm ComScore, which tracks unique visitors to US sites.
But with decreased revenue and in the wake of several acquisitions, Yahoo has less cash in hand – $3.2n as of September 30, 2013 compared with $6 billion as of December 31, 2012.
However, chief financial officer Ken Goldman said in the third quarter, Yahoo generated free cash flow of $249m and returned $1.7bn to shareholders through buybacks.
"As we exit the third quarter, we are extremely pleased with the strength of our balance sheet, with nearly $3.2 billion in cash and securities, and we are well positioned with ample liquidity to fund our future investments for growth,” he said.
Yahoo also announced it will keep a bigger stake in China's e-commerce giant Alibaba than originally planned, after the Chinese firm sells shares on the stock market. Yahoo initially agreed to sell 261.5 million shares, but now plans to sell a maximum of 208 million of its 523 million shares.
Alibaba is expected to launch its share sale next year and could be valued at more than $100bn, according to the BBC. Analysts said Yahoo is looking to cash in on the listing, mainly because of Alibaba's continued growth. According to Yahoo, Alibaba’s sales grew 61% in the April-to-June period to $1.74bn and net income jumped 160% to $717m.