A net income of $142 million, or 10 cents per share, is lower than the 11% per share predicted by analysts.
Despite the introduction of its new Panama advertising platform, designed to boost its position against Google, Yahoo!'s profits dropped by 11% to $142m (£71m). Revenues rose 7% to $1.67m compared with $1.57m for the same period last year.
Panama, which was introduced in the third quarter of 2006, places ads based on price and relevancy to target audience, allowing media buyers to build campaigns that link ads to multiple keywords.
Yahoo! had previously warned investors that it did not expect a return on Panama until the second quarter of 2007.
In March, Google held a 48% share of the US search market compared with 27.5% for Yahoo!, according to comScore.
Following the announcement, Yahoo!'s stock plummeted by 8% in trading after the market closed, before recovering. Google will report first-quarter figures tomorrow.
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