Despite continuing to lose market share on its home turf, Yandex N.V. (NASDAQ:YNDX) released yet another stronger-than-expected quarterly report on Thursday. The Russian internet search leader remains happy with its growth, crediting its performance to a combination of macroeconomic improvements and continued advancements in its advertising technologies.

With shares closing up nearly 6% on Thursday as the market celebrated the news, let's have a closer look at what drove Yandex's business as 2016 came to a close.

Man using a laptop computer

Image source: Getty Images.

Yandex results: The raw numbers


Q4 2016

Q4 2015

Year-Over-Year Growth


22.119 billion RUR

18.094 billion RUR


Net income

1.213 billion RUR

2.851 billion RUR


Earnings per share (diluted)

3.76 RUR

8.82 RUR


Data source: Yandex N.V. Figures in Russian rubles. 

What happened with Yandex this quarter?

  • Revenue excluding traffic acquisition costs -- which Yandex likens to sales commissions -- grew 24% year over year, to 17.845 billion RUR.
  • Adjusted net income -- which adds perspective by excluding items like stock-based compensation -- declined 10.5% year over year, to 3.632 billion RUR, or 11.11 RUR per diluted share.
  • Adjusted earnings before interest, taxes, depreciation and amortization increased 2.1% year over year, to 6.56 billion RUR.
  • Yandex's share of the Russian search market, including mobile, averaged averaged 55.4% during the quarter, down from 55.9% last quarter, 57% in Q2 2016, and 57.6% in the first quarter of last year, respectively.
  • Desktop comprised 69% of total search traffic during the quarter, with Yandex's market share in Russia remaining steady at roughly 64%.
  • Mobile comprised 31% of total search traffic, up from 30% last quarter. Overall mobile search share remained in the low 40% range and, similar to last quarter, Yandex management stated the company has seen "limited distribution opportunities" on both Android and iOS.
  • Search queries in Russia grew 3% year over year.
  • Top-line increases were broad-based, including:
    • 21% growth in search and portal revenue, to 20.095 billion RUR
    • 39% growth in e-commerce revenue, to 1.406 billion RUR
    • 91% growth in taxi revenue, to 753 million RUR
    • 52% growth in classifieds revenue, to 398 million RUR
    • 99% growth in "experiments" revenue, to 282 million RUR, driven primarily by media services including KinoPoisk, Yandex.Radio, Yandex.Music, Yandex.Tickets, Yandex.Afisha, and Yandex TV programs.
  • Online advertising revenue increased 20% year over year, to 21.005 billion RUR, including:
    • 20% growth in revenue from Yandex websites, to 15.487 billion RUR
    • 19% growth in ad network partner revenue, to 5.518 billion RUR
  • "Other" (non-advertising) revenue increased 93% year over year, to 1.114 billion RUR, primarily from Yandex.Taxi.
  • Aggregate paid clicks increased 12% year over year.
  • Average cost per click grew 8% year over year.
  • Regarding Yandex's ongoing antitrust complaint against Alphabet's Google, Yandex reiterated that Russia's Federal Anti-Monopoly Service (FAS) issued a decision telling Google to cease anti-competitive practices last year, followed by another positive ruling upholding that decision three quarters ago. But despite a hearing in August with which Yandex says the "FAS ruling came into force," Google has still not fully complied with the ruling.
  • Yandex COO Alexander Shulgin elaborated, "The case is now at cessation stage, and we believe we are confident that FAS will take the necessary actions to bring competition back to the market."

What management had to say

"Yandex delivered 27% revenue growth in 2016, driven by improving macro conditions and continued innovation across the technology stack," stated CEO Arkady Volozh. "Our deep experience with AI and machine learning is enabling us to make significant advancements in advertising technologies and continually enhance user experience."

"We were pleased with the strong growth in Q4, especially given tough comparisons with last year," Shulgin added. "Yandex.Taxi was a real highlight, growing ride volumes in December 2016 by 452% year-over-year thanks to investments made in geographic expansion and technological infrastructure. Based on the potential we see in Taxi, E-commerce and Classifieds, we will continue to invest for growth in 2017."

Looking forward

For the full year of 2017, Yandex anticipates revenue to grow in the range of 16% to 19% year over year, equating to a range of roughly $88 billion RUR to $90.3 billion RUR.

In the end, this was indeed a strong quarter despite the continued slipping of Yandex's market share of Russian internet search. And as the company continues its quest to level the playing field with other industry juggernauts like Google, its continued investments in other high-potential businesses like Yandex.Taxi offer the happy consequence of more consistent, diversified growth. So given Yandex's solid end to the year, it's no surprise to see investors bidding Yandex stock up as a result.