Yandex N.V. (NASDAQ:YNDX) released third-quarter 2018 results on Monday morning, detailing accelerated revenue growth with the help of its healthy core advertising business, continued market-share gains on Android in Russia, and the broad success of its various supplementary businesses.

Perhaps unsurprisingly, there were no significant updates to recent reports that Russia's state-owned Sberbank may be interested in acquiring as much as a 30% stake in the company. But in the meantime, with Yandex shares little changed on the day, let's have a closer look at how the Russian internet search leader kicked off the second half.

Yandex English logo with red "Y."

IMAGE SOURCE: YANDEX N.V.

Yandex results: The raw numbers

Metric

Q3 2018

Q3 2017

Growth (YOY)

Revenue

32.57 billion RUR ($496.6 million)

23.438 billion RUR

39%

Net income attributable to Yandex

4.768 billion RUR ($72.7 million)

853 million RUR

459%

Earnings per share (diluted)

15.25 RUR ($0.23)

2.72 RUR

461%

DATA SOURCE: YANDEX, Figures in Russian rubles (RUR). YOY = year over year.

What happened with Yandex this quarter?

  • Excluding sales from Yandex.Market -- which was deconsolidated when Yandex and Sberbank formed a joint venture based on the platform earlier this year -- revenue climbed 44% year over year, accelerating from 39% adjusted growth last quarter.
  • Revenue excluding traffic acquisition costs (ex-TAC) and Yandex.Market climbed 50% to 27.277 billion RUR. 
  • Adjusted net income excluding Yandex.Market jumped 167% to 5.99 billion RUR ($91.3 million), or $0.27 per share.
  • Adjusted EBITDA excluding Yandex.Market grew 96% to 10.7 billion RUR.
  • Yandex's share of the Russian internet search (including mobile) was 55.9% this quarter, down from 56.2% in the second quarter but up from 54.9% in the same year-ago period.
  • Search share on Android in Russia increased 130 basis points sequentially from 47.8% last quarter, and rose from 41.2% in the same year-ago period.
  • Search queries in Russia grew 12% year over year.
  • Paid clicks grew 13% year over year (22% excluding Yandex.Market), and average cost per click rose 5% (2% excluding Yandex.Market).
  • Advertising revenue increased 18% to 21.881 billion RUR, including 22% growth from Yandex properties, to 19.965 billion RUR, and 7% growth from network member sites to 5.952 billion RUR.
  • Other revenue jumped 327% to 6.653 billion RUR, driven primarily by Yandex.Taxi, Classifieds, and the recently launched Yandex.Drive car-sharing service.

What management had to say

CEO Arkady Volozh stated:

It is hard to overstate the progress that Yandex has made over the past few years. The last time we grew at this rate was in 2012 when we were a quarter of the size we are today. All this became possible due to successful new product launches across all of our business units, our strong ecosystem, and our ability to attract and retain the best talent. In Q3 our ride sharing business gained considerable momentum and reached profitability in its core market -- Russia. We are committed to investing in the Taxi segment, including food tech, self-driving cars and new ride-sharing markets.

When asked during the subsequent conference call to elaborate on reports of Sberbank's potential interest in taking a large stake in the company, Yandex CFO Greg Abovsky added:

I would just reiterate what we said before, which is that we constantly receive various offers and proposals and expressions of interest from third parties. And I don't think we would ever be in a position to sort of provide specific comment on market rumors. And I also don't want to speculate about a scenario, which is purely hypothetical such as the one that you described. I think beyond that, there's nothing much else left to say.

Looking forward

Given its relative outperformance so far this year, and excluding Yandex.Market from its prior-year periods, Yandex increased its full-year guidance for ruble-based revenue to increase in the range of 35% to 38% in 2018, up from its previous range calling for 30% to 35% growth. This new range assumes 21% to 23% growth from Yandex's core search and portal business.

In the end, with its business seemingly firing on all cylinders and gaining momentum, this was as impressive a quarter as any Yandex investor could have asked for -- and that helps explain why shares traded as much as 6% higher early this morning. Still, with the broader market pulling back hard late in the day, and given the lingering cloud of Russia's state-owned bank potentially taking control, it's no surprise to see Yandex stock giving back its gains.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Yandex. The Motley Fool has a disclosure policy.