However, sales still rose 19% to $1.58bn in the three months to September and the third-quarter results were in line with market expectations with Yahoo's shares dipping only marginally in trading.
"While we are tremendously excited about many things happening at Yahoo, we are not satisfied with our third quarter financial performance," Yahoo chairman Terry Semel said.
Yahoo warned the market last month that they expected profits would be lower, citing weakness in the car advertising market as the reason.
