Yahoo's Key Takeaways
• Operating income for Q3’10 and YTD 2010 grew 107% and
106% year-over-year to $189 million and $553 million,
respectively.
• We continue to deliver on goals to significantly expand
operating margins. Operating margin was 12% in Q3, up 600bps
year-over-year and 80bps quarter-over-quarter.
• Search transition is progressing well. We are on track to
complete the transition of paid search in the U.S. and Canada by
the end of October.
• We have repurchased over 7% of the Company’s stock so far
in 2010.
• Display advertising momentum remains strong. O&O display
revenue grew 17% year-over-year in Q3’10.
• We rolled out the first global platform for Yahoo! News.

YAHOO! REPORTS THIRD QUARTER 2010 RESULTS
Owned and Operated Display Advertising Grows 17% Year Over Year
Company Continues Strong Operating Income and Margin Expansion
SUNNYVALE, California, October 19, 2010 – Yahoo! Inc. (NASDAQ: YHOO) today
reported results for the quarter ended September 30, 2010.
Revenue was $1,601 million for the third quarter of 2010, a two percent increase from the third quarter of 2009. Income from operations for the third quarter of 2010 was $189 million, an increase of 107 percent year over year. Excluding restructuring charges of $17 million in the third quarter of 2009 and $6 million in the third quarter of 2010, income from operations increased 80 percent year over year.
Net earnings per diluted share for the third quarter of 2010 was $0.29, compared to $0.13 in the third quarter of 2009, a 126 percent increase. Net earnings per diluted share for the third quarter of 2010 included a benefit of $0.13 per diluted share related to the gain on sale of HotJobs, and net earnings per diluted share for the third quarter of 2009 included a benefit of $0.04 per diluted share related to the gain on sale of our direct investment in Alibaba.com.
“We delivered a solid quarter with good display advertising revenue growth, big gains in operating income, and margins that were double what they were last year,” said Carol Bartz, president and CEO of Yahoo!. “Because we recognize the tremendous value of our assets, we also dramatically stepped up our stock repurchases. We’ve now bought back more than 7% of the company’s stock this year alone.”

Financials at a Glance
Quarterly GAAP Results (in millions, except percentages and per share amounts)
Q3 2009 Q3 2010 Percent Change
Revenue $1,575 $1,601 2%
Income from operations $91 $189 107%
Net earnings $186 $396 113%
Net earnings per diluted
share $0.13 $0.29 126%

“We’ve made substantial progress this year toward executing our strategies for
enhancing profitability and resuming revenue growth. Margins are expanding; owned and operated display advertising is up 18% so far this year; product rollouts are accelerating thanks to modernization of our underlying platforms; and we continue to implement our search alliance with Microsoft on schedule,” continued Bartz. “We've disposed of non-core assets while making strategic acquisitions like Associated Content and Citizen Sports, and we’ve developed key partnerships with Facebook, Twitter, and Zynga to enhance the Yahoo! experience for our 600 million users."

Business Outlook
Revenue excluding traffic acquisition costs (Revenue ex-TAC) for the fourth quarter of 2010 is expected to be in the range of $1,125 million to $1,225 million. This business outlook assumes the paid search transition to Microsoft’s adCenter platform in the U.S. and Canada will be completed by the end of October. Based on the terms of the Search Agreement with Microsoft, Microsoft is entitled to a revenue share of 12 percent of the
net (after TAC) search revenue generated on Yahoo!’s Owned and Operated and
Affiliate sites in transitioned markets. As required under GAAP, Yahoo! will report the net revenue it receives under the Search Agreement as GAAP revenue and will no longer present associated TAC as part of our financial results. Accordingly, for transitioned markets Yahoo! will report GAAP revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. Microsoft’s revenue share in the fourth quarter of 2010 is expected to be approximately $30 million. GAAP revenue for the fourth quarter of 2010 is expected to be in the range of $1,400 million to $1,530 million. Total expenses (cost of revenue plus total operating expenses) for the
fourth quarter of 2010 is expected to be in the range of $1,200 million to $1,250 million.
Total expenses less TAC for the fourth quarter of 2010 is expected to be in the range of $925 million to $945 million. Income from operations for the fourth quarter of 2010 is expected to be in the range of $200 million to $280 million.
Business outlook for Revenue ex-TAC is being provided to reflect the underlying
dynamics of the business during the Microsoft transition and to facilitate comparisons to prior periods.