Yahoo shares pop 6.8% after decent Q1

But Alibaba is the real star of the show

Yahoo shares were up 6.8% Wednesday morning to $36.54 following Yahoo’s A-Okay first quarter earnings results, posted Tuesday afternoon. While Yahoo maintained another quarter of meager growth, it was really Alibaba that shined.

Revenue minus traffic acquisition costs (ex-TAC) came in at $1.087 billion, which is up 1% from Q1 2013, when revenue was $1.074 billion. Meanwhile, non-GAAP earnings remained neutral at 38 cents a share, which is exactly where they were the same time last year. Yahoo’s earnings were in-line with analyst estimates.

Part of the renewed investor confidence can be attributed to the fact that Yahoo saw growth in its core business: display advertising. Display advertising revenue ex-TAC came in at $409 million, a 2% increase over the $402 million generated in Q1 2013.

Meanwhile, search revenue ex-TAC was up 9% to $444 million from $409 million in Q1 2013.

"I am really pleased by our first quarter performance, marking our best Q1 revenue ex-TAC since 2010. Buoyed by our 9th consecutive quarter of year-over-year growth in Search revenue ex-TAC and our first quarter of Q1 year-over-year growth in display revenue ex-TAC since 2011, Q1 was an early and important sign of growth in our core business," said Yahoo CEO Marissa Mayer, in a statement. "And, with mobile pivotal to our future growth, we're delighted to now see more than 430 million monthly mobile users accessing Yahoo's new products."

The real star of the show, however, is Alibaba, which is expected to go public very soon. The company is worth an estimated $100 billion in the U.S. market and is expected to have the biggest IPO since Facebook.

Yahoo owns a 24% stake in Alibaba—and Alibaba is now doing better than Yahoo. Between October and December 2013, the Chinese e-commerce company generated $3.06 billion in revenue—a 66% increase over the same quarter in 2012, when the company saw $1.84 billion in revenue. Net income increased a whopping 110% to $1.4 billion from $650 million in the same quarter the year before.

"Capital allocation is important, and we intend to continue to act as good stewards by allocating current capital and future cash in ways that maximize value for Yahoo shareholders in both the short and long term," said Ken Goldman, CFO of Yahoo, in a statement. "We continue to focus on repurchasing shares. Our total repurchases are at just under $6 billion since the beginning of 2012, including repurchases of $450 million in the first quarter."

Over the last year, Yahoo shares have climbed 53%.