Yahoo! Reports Second Quarter 2005

July 20, 2005; 12:00 AM

SUNNYVALE, Calif. – July 19, 2005 - Yahoo! Inc. (Nasdaq: YHOO) today reported results for the second quarter ended June 30, 2005.

“Yahoo! continued to see solid growth in the second quarter as a result of our strength in both search marketing and brand advertising, increased engagement from our large, global audience, and our ability to execute and perform according to plan,” said Terry Semel, chairman and chief executive officer, Yahoo!. “We have a healthy business model that we believe will enable us to take advantage of future growth opportunities and we remain dedicated to providing our users with the very best services on the Internet.”

Consolidated Financial Results
• Revenues were $1,253 million for the second quarter of 2005, a 51 percent increase
compared to $832 million for the same period of 2004.
o Marketing services revenue was $1,094 million for the second quarter of 2005, a
51 percent increase compared to $723 million for the same period of 2004.
o Fees revenue was $159 million for the second quarter of 2005, a 45 percent
increase compared to $109 million for the same period of 2004.
• Revenues excluding traffic acquisition costs (“TAC”) were $875 million for the second quarter of 2005, a 44 percent increase compared to $609 million for the same period of 2004.
• Gross profit for the second quarter of 2005 was $767 million, a 43 percent increase
compared to $535 million for the same period of 2004.
• Operating income for the second quarter of 2005 was $261 million, a 75 percent increase compared to $149 million for the same period of 2004.
• Operating income before depreciation and amortization for the second quarter of 2005 was $368 million, a 57 percent increase compared to $234 million for the same period of 2004.
• Cash flow from operating activities for the second quarter of 2005 was $404 million, a 62 percent increase compared to $250 million for the same period of 2004.
• Free cash flow for the second quarter of 2005 was $300 million, a 55 percent increase compared to $194 million for the same period of 2004.
• Net income for the second quarter of 2005 was $755 million or $0.51 per diluted share (including net income of $563 million, or $0.38 per diluted share, related to the sale of an investment). This compares with net income of $113 million or $0.08 per diluted share for the same period of 2004.

“We are very pleased with our second quarter results as they clearly underscore two fundamental business model strengths: excellent growth and great balance,” said Susan Decker, chief financial officer, Yahoo!. “We see this as a terrific combination, leading to the quarter’s strong organic revenue growth, robust profitability, and substantial free cash flow.”

Segment Financial Results
• United States revenues for the second quarter of 2005 were $870 million, a 39 percent increase from the $624 million reported for the same period of 2004.
• International revenues for the second quarter of 2005 were $383 million, an 84 percent increase from the $208 million reported for the same period of 2004.
• United States segment operating income before depreciation and amortization for the second quarter of 2005 was $291 million, a 47 percent increase from the $198 million reported for the same period of 2004.
• International segment operating income before depreciation and amortization for the second quarter of 2005 was $77 million, a 116 percent increase from the $36 million reported for the same period of 2004.

Cash Flow Information
Free cash flow was $300 million in the second quarter of 2005 compared to $194 million for the same period of 2004. Cash, cash equivalents and investments in marketable debt securities grew by $1,073 million from $3,852 million at March 31, 2005 to $4,925 million at June 30, 2005.

In addition to free cash flow of $300 million, Yahoo! generated $212 million from the issuance of common stock as a result of the exercise of employee stock options, and $959 million in proceeds from sales of marketable equity securities. These increases were offset by a net $264 million used in structured stock repurchase transactions, and $122 million used for acquisitions and investing activities.

Please refer to the “Note to Unaudited Condensed Consolidated Statements of Operations” for definitions of certain key financial measures used here and in the “Business Outlook” attached to this press release.

Quarterly Conference Call
Yahoo! will host a conference call to discuss second quarter results at 5:00 p.m. Eastern Time today. A live webcast of the conference call, together with supplemental financial information can be accessed through the Company's Investor Relations website at http://yhoo.client.shareholder.com/earnings.cfm. In addition, an archive of the webcast can be accessed through the same link. An audio replay of the call will be available following the conference call by calling 877-213-9653 or 630-652-3041, reservation number: 11995938.

About Yahoo!
Yahoo! Inc. is a leading global internet brand and one of the most trafficked Internet destinations worldwide. Yahoo! seeks to provide online products and services essential to users’ lives, and offers a full range of tools and marketing solutions for businesses to connect with Internet users around the world. Yahoo! is headquartered in Sunnyvale, California.

This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: revenues excluding traffic acquisition costs, operating income before depreciation and amortization, and free cash flow. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. See “Note to Unaudited Condensed Consolidated Statements of Operations” and “Reconciliations to Unaudited Condensed Consolidated Statements of Operations” included in this press release for further information regarding these non-GAAP
financial measures.

This press release and its attachments contain forward-looking statements that involve risks and uncertainties concerning Yahoo!'s expected financial performance (as described without limitation in the Business Outlook section and quotations from management in this press release), as well as Yahoo!'s strategic and operational plans. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance.

The potential risks and uncertainties include, among others, the Company’s ability to compete with new or existing competitors; reduction in spending by, or loss of, marketing services customers; the demand by customers for Yahoo!'s premium services; acceptance by users of new products and services; risks related to the integration of recent acquisitions; risks related to the Company’s international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims; the Company’s ability to
protect its intellectual property and the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content and distribution; and general economic conditions. All information set forth in this release and its attachments is as of July 19, 2005. Yahoo! undertakes no duty to update this information. More information about potential factors that could affect the Company's business and financial results is included under the captions, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," in the Company's Annual Report on Form 10-K for the year ended December 31, 2004 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 which are on file with the SEC and available at the SEC's website at www.sec.gov.

Additional information will also be set forth in those sections in Yahoo!’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, which will be filed with the SEC in the third quarter of 2005.

Yahoo! and the Yahoo! logos are trademarks and/or registered trademarks of Yahoo! Inc. All other names are trademarks and/or registered trademarks of their respective owners.