The results were ahead of analysts' modest expectations, however, and investors rewarded the company with a small bump in its share price.

Yahoo's income for the quarter ended Sept. 30 was US$293 million, down 26 percent from the same period last year. Revenue was $1.22 billion, a decline of 24 percent, Yahoo said.

Subtracting the advertising commissions and fees it pays to partners, Yahoo's revenue came in at $1.07 billion, down 5 percent from last year and slightly ahead of the analyst forecast, according to Thomson Reuters. Earnings per share before one-time items, at $0.21, were also ahead of expectations.

The year-over-year declines were due primarily to the revenue share Yahoo collects from its search and advertising partnership with Microsoft. Under that deal, brokered several years ago, Yahoo uses Microsoft's technology to provide its search results, and pays some of its search ad revenue back to Microsoft.

Yahoo's display advertising business -- traditionally one of its strongest areas -- also suffered. Revenue from display ads, excluding traffic acquisition costs, was $449 million, flat from the same quarter last year. Including the acquisition costs, display ad revenue dropped 2 percent.