Yahoo Inc. (YHOO) shares rose 7% in premarket trading Wednesday after the Internet company's first-quarter report indicated progress with its advertising business and eased concerns about slowing growth at Alibaba, the e-commerce giant in which Yahoo owns a 24% stake.

Yahoo said Alibaba's revenue jumped 66% in the December quarter, the most recent quarter available, faster than the 51% increase reported in the September period. The Alibaba results were highly anticipated because the company is preparing for an initial public offering in New York later this year.

"The salient point of Yahoo's [first-quarter] results was the very strong December quarter results from Alibaba," Stifel Nicolaus analyst Jordan E. Rohan said. "Alibaba's results paint a favorable picture for a favorable IPO despite the recent period of weakness in the internet sector."

Alibaba's IPO could value the Chinese company at $100 billion, although Mr. Rohan said it could end up being more than twice that number.

Meanwhile, California-based Yahoo reported its revenue, minus commissions paid to partners for Web traffic, rose 1% in the first quarter after four straight quarters without growth. In addition, revenue from display ads, excluding the traffic costs, increased 2% to $409 million.

"Our advertising technology teams have been experimenting with a number of new and innovative ad formats," Yahoo Chief Executive Marissa Mayer said on a conference call Tuesday, "and we've seen some encouraging results."

Yahoo's growth, however small, is a positive mark for Ms. Mayer, who has faced scrutiny over her inability to jump-start the company's ad revenue. Since taking over as CEO nearly two years ago, Ms. Mayer has updated popular sites like Flickr and Yahoo Finance, created splashy new online magazines and slick mobile apps, and acquired dozens of small startups to inject new talent into the aging Internet giant.

"After making significant progress in addressing people, products and traffic, management seems to now be making progress towards growing revenues again," Cantor Fitzgerald analyst Youssef Squali said. "While still anemic, growth in search and display should continue to improve throughout 2014."

Yahoo shares early Wednesday were trading at $36.68, up from its close Tuesday of $34.21 but below its January high of $41.72. Mr. Squali said Yahoo's sum-of-the-parts valuation is $40. He figures the company's stakes in Alibaba and Yahoo Japan are worth a total of nearly $31 a share, while its operations and investments add about $9.

"Prospects for an imminent Alibaba IPO and further [share buybacks] should continue to support the stock," Mr. Squali said.

Write to George Stahl at george.stahl@wsj.com

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