Yahoo earnings for Q3 2015 were released after the bell today (Tuesday). The company reported earnings per share of $0.15 on revenue of $1.23 billion. Analysts had expected (EPS) of $0.17 and revenue of $1.26 billion.
EPS was down 71% from the same period a year ago, and revenue was up 7%.
Yahoo stock was down more than 2% in after-hours trading.
Yahoo officials have already announced that the company engaged with roughly 1 billion users in Q3. About 600 million of those came from mobile devices. The company has reported that 1.8 billion devices around the world accessed Yahoo's products in Q3.
CEO Marissa Mayer will continue to face questions about several of the company’s recent departures. Since September, both Marketing Chief Kathy Savitt and Acquisitions Head Jacqueline Reses have left the firm. Reses has moved to Square Inc., while Savitt departed for STX Entertainment.
The departures have raised some questions among Wall Street analysts about possible morale issues within the company.
While the earnings numbers disappointed, the thing on the forefront of investors' minds is the Alibaba spin-off.
The Yahoo stock price has been volatile in 2015, having dropped 34.6% year to date. But since Oct. 1, YHOO stock has climbed 14.3% after the company announced that it would be pushing forward with the Alibaba spin-off.
In the earnings report, company officials said that the Alibaba spin-off is their top priority at the moment. They also said that they are striving to complete the spin-off as quickly as they can.
Here's why the spin-off is so important to Yahoo stock...
Watch for Alibaba Spin-Off News During Yahoo Earnings Today
On Sept. 29, Yahoo officials announced that they will be moving forward with spinning off the company's 384 million shares of Alibaba Group Holding Ltd. (NYSE: BABA). Yahoo has previously said it plans to spin off those shares through a tax-free deal during Q4.
Wall Street pundits had some questions about the eligibility of the deal's tax-free status. In an ambiguous letter, the IRS wrote in September that it would issue neither a favorable nor an unfavorable ruling on the deal's tax-free status.
Still, Yahoo's board believes the deal should move forward without any issue from the IRS...
You can see how important the Alibaba stake is to Yahoo when you compare it to Yahoo's total market cap of $31.5 billion. At Monday's opening price of $71.80, those Alibaba shares are worth more than $27.5 billion.
When the spin-off was first announced, company officials said the proceeds would be used for a major stock buyback program.
While shareholders will receive billions from the spin-off, they're hoping the deal takes place sooner rather than later. Over the last year, shareholders have watched the value of that Alibaba stake decline steadily.
Alibaba stock has fallen more than 40% after hitting a high of $120 in November 2014. That has cut the value of the spin-off by nearly $20 billion.
Yahoo stock has almost been in lock-step with Alibaba stock during that decline. Since last November, Yahoo stock has fallen more than 31%.
With the Chinese economy reporting slowing growth every quarter, U.S. investors continue to worry about Alibaba stock. Those who are invested in Yahoo stock want the Alibaba spin-off to take place as soon as possible, as many believe BABA will continue to fall.
Since the deal could mean more than $27 billion in cash for Yahoo shareholders, any update on the deal during this week's earnings report will have a major impact on the Yahoo stock price.
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