Chief executive Carol Bartz said the latest results were a sign the business was returning to an even keel.
Bartz said: "With revenue coming in above our guidance and flat sequentially, we had a solid third quarter that signals our major businesses have stabilised."
Bartz said: "With revenue coming in above our guidance and flat sequentially, we had a solid third quarter that signals our major businesses have stabilised."
Operating costs dropped 18 per cent to $775 million, driven by measures including the laying off of around 2,000 of its employees in the past year.
The results show that Yahoo's owned and operated sites suffered a 15 per cent drop in revenues to $851 million, with affiliate site revenues down six per cent to $526 million.
Search advertising revenue was down 19 per cent and display revenue down eight per cent.
The company, which is currently running a $100 million global brand repositioning campaign, predicted revenues would rise to between $1.6 billion and $1.7 billion in the fourth quarter.
Yahoo this week brought in another agency to work on the US creative for the 'It's you' ad campaign, which was developed by Ogilvy to focus on how Yahoo helps consumers make the internet more relevant to them.
Yahoo said Goodby Silverstein & Partners would "assume lead responsibility to take the company's creative, advertising, digital marketing and strategic planning to the next level".
The portal this week launched an online treasure hunt across Yahoo sites in Singapore.
