Updated from 6:05 p.m. ET

Internet portal Yahoo! (YHOO:Nasdaq - news) exceeded Wall Street's earnings expectations by a penny, while racking up a 90% increase in revenue that indicates the online advertising market may yet have life. But investors continued to fret about the company's outlook.

Yahoo!'s shares were up initially in after-hours trading, but then they began to fall, trading recently at $75.63 each, according to Island. They finished regular trading Tuesday at $82.69.

For the third quarter, net earnings, excluding certain items, rose to $81 million, or 13 cents a share, from $38.5 million, or 6 cents a share, a year earlier. The consensus estimate of analysts polled by First Call/Thomson Financial was 12 cents. The results exclude a one-time charge related to acquisitions, as well as other items.

Revenue rose to $295.5 million from $155.9 million a year ago. The majority of Santa Clara, Calif.-based Yahoo!'s revenue is derived from advertisements. There had been fears that the company, a barometer of the Internet economy, would suffer from a slowdown in ad spending by beleaguered dot-coms. However, Yahoo! decisively beat the consensus revenue expectation of $280 million and the whisper number of $290 million.

In an effort to allay worries over the financial condition of its client advertisers and merchants, Yahoo! disclosed that pure-play Internet companies represented a high of 47% of its worldwide revenue base in the second quarter. That number decreased to just over 40% in the third quarter. At the same time, there was growth in advertising from "more traditional" marketers, the company said in a conference call.

"Financially questionable" companies still account for less than 10% of revenue, and that number has gone down since the second quarter. Yahoo! declined to provide more specifics.

But Yahoo! also continued to express caution, which is what investors focused on. In an interview, Yahoo! Chief Operating Officer Jeff Mallett said, "It's clear the market as a whole is going to be challenging for the next couple of quarters." He added, "Maybe some investors were hoping it would all just go away. That's very shortsighted. It will take a while before this settles a bit."

In addition, the euro's weakness could affect net revenue over the next couple of quarters, he said. "We're flying into a headwind on this one," he said. Net revenue from outside the U.S. rose to 16% of the company's total in the third quarter from 15% in the second quarter.