During the quarter ended March 31, revenue came in at US$1.21 billion, down 24 percent compared with 2010's first quarter. Yahoo said the revenue drop is in part due to a change in how it recognizes the part of its revenue derived from its search advertising agreement with Microsoft. That revenue isn't reported as gross revenue, but rather as part of the net revenue left after subtracting commissions paid to advertising and other partners.

Yahoo's net revenue was $1.06 billion, down 6 percent year on year but matching the consensus estimate from analysts polled by Thomson Financial.

Meanwhile, net income fell 28 percent to $223 million, while earnings per share dropped 23 percent to $0.17 per share, exceeding analysts' consensus estimate by one penny.