Yahoo reported a net loss for the quarter of $24.1m (£16.6m), the fourth quarterly loss in a row. At the same time last year, it showed a profit of $47.7m (£32.9m).
Earnings per share were down from 13 cents for the same period last year to 1 cent this year. Yahoo! blamed falls in advertising, especially in Europe, as well as the September 11 attacks in the US for the decline.
The falls were, however, in line with expectations and the market reacted positively, with the share price climbing by 8% from $10.16 (£7) to $10.93 (£7.54) in regular trading on Nasdaq. The price rose another 37 cents (25p) to finish at $11.30 (£7.79) in after-hours trading.
Terry Semel, Yahoo!'s chairman and CEO, said that the company found itself in "an unprecedented environment of economic uncertainty".
"We remain focused on opportunities that will strengthen our leadership position, provide essential services to our users and partners, and drive profitable growth," he said.
Staff levels have fallen since the beginning of the year, from 3,510 worldwide to 3,256. However, in a conference call, Semel said the company would be reorganised around key business areas, a move that might lead to a reduction in staff. He failed to specify what kind of job cuts the company might be facing.
Yahoo! reported that it had increased its unique users to 210m people worldwide in September, up from 166m in September last year, with traffic standing at a record 1.25bn page views per day.
This included traffic over the period of the World Trade Center attacks, where Yahoo! said that parts of the site attracted more than 60 times the normal daily user streams.
If you have an opinion on this or any other issue raised on Brand Republic, join the debate in the .