Marissa Mayer’s vision for the future of Yahoo is starting to unfold

For the first two and a bit years in charge of Yahoo, Marissa Mayer had an incredibly powerful force supporting her.

Yahoo’s stake in Alibaba bolstered its stock price, giving Mayer the breathing room she needed to rethink its core business. Investors effectively ignored the fact that Yahoo’s search engine was becoming irrelevant and its display advertising business was struggling, treating it instead as a proxy for the Chinese e-commerce colossus.

Those days are over. Alibaba has gone public, and although Yahoo retains a sizeable stake in the business (worth about $34 billion, according to its latest accounts), investors seeking exposure to the Chinese e-commerce giant and its growth story can simply buy shares in Alibaba.

Luckily for her, Mayer seems to be convincing investors that she has a plan to revive Yahoo. This afternoon the company reported stronger-than-expected earnings and shares were up as much as 3% in after hours trade. Although display advertising revenue fell by 4%, search revenue grew by 6%. And revenue from mobile, a huge priority of Mayer’s, finally shined: The company generated $200 million in mobile revenue during the quarter and is expected to surpass $1.2 billion this fiscal year.

The company said it banked about $7 billion from the partial divestment of its stake in Alibaba, and expects to pay $3.3 billion in taxes on that in the first quarter of next year.

Yahoo has recently been linked with a small strategic investment in ephemeral photo messaging company Snapchat and a $700 million purchase of ad tech platform Brightroll. During the earnings conference with analysts, Mayer said strategic acquisitions were under consideration. “We will continue to seek opportunities and we will be smart about it,” she said.

She also revealed that Tumblr, her biggest acquisition yet, is expected to generate $100 million in revenue, and positive operating earnings, in 2015.

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