Yahoo has promised to pay its shareholders at least half the proceeds from Alibaba Group Holding's forthcoming mega US flotation, alongside news the US internet giant will retain a larger stake than initially thought in Alibaba after it goes public.
Yahoo has a near 24% stake in the world's largest Internet retailer.
On 15 July, Yahoo said Alibaba had agreed to reduce the number of shares the US firm is required to sell at the planned initial public offering (IPO), to 140 million shares from 208 million previously.
Yahoo Finance Chief Ken Goldman said in a statement that the firm was committed "to return at least half of the after-tax IPO proceeds to shareholders."
The news helped offset the struggling US Web portal's disappointing second-quarter results on 15 July.
Yahoo's stock was down 2.22% to $34.82 in after-hours trading in New York on 15 July.
Yahoo has forecast third-quarter net revenue, excluding fees paid to partner websites, of between $1.02bn and $1.06bn (£618bn, €782bn), less than the $1.1bn analysts had expected on average.
The firm's net revenue, which excludes fees paid to partner websites, slipped 3% on an annual basis to $1.04bn in the April-June second-quarter. Analysts polled by Thomson Reuters I/B/E/S predicted net revenues of $1.084bn.
Alibaba has picked the New York Stock Exchange (NYSE) over rival Nasdaq for its planned US listing, expected this fall.
Alibaba valued itself at $130bn in a recent regulatory filing, up from an earlier $116bn.
Investors have valued the firm, which handles more e-commerce than Amazon.com and eBay combined, at as much as $200bn.
"What you see is the fundamentals at core Yahoo continue to deteriorate, but there's at least some good news on the Alibaba front," said Macquarie Research analyst Ben Schachter.
"The idea is that Yahoo shareholders can participate and benefit from the upside to Alibaba post the IPO, as opposed to just having to sell more stock in the IPO," Schacter told Reuters.