Revenue came in at US$1.2 billion in the quarter ended Sept. 30, 2012, down 1 percent year on year. Subtracting commissions paid to advertising partners, revenue hit $1.08 billion, matching the consensus expectation from analysts polled by Thomson Financial.

Net income ballooned to $3.16 billion, or $2.64 per share, thanks to a net gain of $2.8 billion related to the company's sale of part of its stake in Alibaba Group back to this Chinese company. That compares to net income of $293.3 million, or $0.23 per share, in 2011's third quarter.

Excluding the Alibaba shares transaction, Yahoo still increased its earnings to $0.35 per share and topped analysts' consensus expectations of earnings of $0.26 per share.

After subtracting partner commissions, display advertising revenue was $452 million, flat year on year, while search advertising revenue came in at $414 million, up 11 percent.

Mayer, who came to Yahoo in July after a sterling career as a top Google executive, described the quarter in a statement as "solid" and said the company is "encouraged" by what it considers a "stabilization" of the display and search ad revenue.