NEW YORK (CNN/Money) - All eyes will be on Yahoo! Inc. Wednesday as the Internet media company releases its second-quarter results after the close of trading and sets expectations for the coming months.

At last count, the consensus estimate of analysts polled by earnings tracker First Call was for a profit of 2 cents a share on revenue of roughly $214.7 million. That would mark a substantial improvement over last year's second quarter, when the company -- one of the few in the Internet arena that has been generally profitable -- chalked up a loss of 4 cents per share on $182.2 million in revenue.

But many company watchers are expecting Yahoo! to log results that are even stronger than the most recent consensus estimates indicate, reflecting what they described as a more stable online advertising market and improvements in other areas of its business. Some also are expecting Yahoo! executives to raise their financial targets for the current quarter and the remainder of the fiscal year.

"From what we are tracking and looking at our models, the transactional revenues, that is non-advertising, seems to be pretty strong," U.S. Bancorp Piper Jaffray analyst Safa Rashtchy said.

Although online advertising sales still account for the bulk of its revenue, Yahoo! has been moving to diversify its revenue stream. The company has taken a number of steps including forging revenue-sharing agreements with partners such as pay-for-placement search-listing provider Overture Services Inc. and others.

Yahoo! also has stepped up its efforts to develop more services aimed at businesses. The company also has been building its portfolio of premium consumer services and has begun charging for certain consumer services it once provided free.

For example, Yahoo! recently bought HotJobs, a job-listing site that earns money by charging would-be employers listing fees. The company also collects payment for an assortment of "real-time" market information, and recently began charging Yahoo! e-mail users for remote access to their accounts.

Rashtchy said the strategy so far appears to be working, with the new focus helping to bolster Yahoo!'s second-quarter results while the online-advertising business -- which has been flagging for the past 18 months -- appears to have stabilized.

"We have hit the bottom of the advertising slump and are seeing a slow recovery," Rashtchy said. "Things are not getting worse, and they are getting progressively better."

Jordan Rohan of Soundview Technology said he expects some upside in Yahoo!'s earnings report based largely on a stronger-than-expected online advertising market, which he said was especially evident in May and June.

The spot market for online advertising actually showed signs of improvement during the last two months of the quarter, suggesting that Yahoo!, one of the key beneficiaries of that market, would have some upside to its numbers, Rohan said.

"In addition, the contract market, deals that Yahoo! has negotiated with Overture, Travelocity and a number of other players, seems to have firmed up as well," Rohan said.

But more important than the numbers Yahoo! reports for the just-completed second quarter will be the expectations executives set for the current quarter and the remainder of the year.

Both Rashtchy and Rohan, each of whom has an "outperform" rating on Yahoo!'s shares, expect them to raise the bar a little bit.

The most recent consensus estimate of analysts was for Yahoo! to log a profit of 2 cents per share in the third quarter on revenue of $231.7 million. For the year, the general expectation is for a profit of 10 cents per share and revenue of $901.2 million.

It remains unclear, however, whether even this will help to rekindle investors' love affair with their former dot.com darling.

Shares of Yahoo! (YHOO: Research, Estimates), which was one of the highest fliers during the Internet boom, have fallen more than 57 percent over the past 18 months. Ten of the 22 analysts at brokerages that cover Yahoo! currently rate its shares "hold," and many of them say that the stock remains overvalued even with the recent declines.

W.R. Hambrecht's Derek Brown advises his clients to stick to the sidelines and wait for Yahoo!'s shares to break the $10 mark before getting back in. By Brown's count, Yahoo! shares currently trade at roughly 55-60 times its estimated 2003 earnings.

"Those are rich multiples given where Yahoo! is in the turnaround of its business," Brown said.

Brown also said he expects Yahoo!'s second-quarter results to come in on the high end of Wall Street's expectations, but he remains cautious about the company's prospects because the online advertising market, while it may have stabilized, has not shown signs of a return to growth.

"There certainly has not been a true re-acceleration in the market for online advertising, and until that really happens, its highly unlikely that there will be a dramatic outperformance in Yahoo!'s business," he said.