NEW YORK (CNN/Money) - Yahoo! Wednesday reported higher first-quarter earnings that topped Wall Street forecasts and raised its forecasts for sales and pretax earnings for 2003.

The Internet media company said it earned $46.7 million, or 8 cents a share, on sales of $283 million for the quarter. Wall Street was expecting earnings of 6 cents a share and revenue of $274 million, according to First Call. The company reported a profit of $10.5 million, or 2 cents a share, excluding a charge from an accounting change, on sales of $193 million a year earlier.

Yahoo!, along with many other Internet stocks, has performed extremely well this year due to expectations of strong earnings and sales growth. Shares of Yahoo! (YHOO: Research, Estimates) are up nearly 40 percent year-to-date.

The stock sank 3.9 percent ahead of the earnings report Wednesday but gained more than 3.5 percent in after-hours trading, according to Island ECN.

The company demonstrated strong results throughout its businesses. Advertising revenue jumped 38 percent from a year earlier on strength in sponsored searches (i.e., advertisers paying for higher placement in search results) and other forms of Internet advertising such as banners and pop-ups.

To that end, Yahoo! CEO Terry Semel said during a conference call Wednesday that traditional ad sales, those not from sponsored searches, also rose more than 10 percent from a year earlier.

Ad revenue accounted for more than two-thirds of Yahoo!'s revenue in the first quarter and the company has been renewing its focus on ad-dependent business, such as its searching capabilities, as the ad market continues to recover. Yahoo! unveiled improvements to its search engine on Monday.

Fees from services such as a DSL partnership with SBC Communications and premium e-mail products rose 61 percent, and revenue from listings, mainly through Yahoo!'s HotJobs.com site, soared 89 percent.

But Safa Rashtchy, an analyst with US Bancorp Piper Jaffray, said that fee-based revenues, which only increased 3 percent from the fourth quarter of 2002, were a bit weaker than he expected.

Looking ahead, Yahoo! said sales for the second quarter should $295 million to $315 million, above analysts' average forecast of $292 million. For the full year, Yahoo! gave revenue guidance of $1.22 billion to $1.28 billion, ahead of the consensus forecast of $1.21 billion.

The company did not provide earnings-per-share targets but said earnings before interest, taxes, depreciation and amortization -- watched by many investors -- would be about $85 million to $95 million for the second quarter and between $350 million and $380 million for the full year. The company's previous full-year EBITDA estimate was $295 million to $330 million.

During the conference call, Yahoo! Chief Financial Officer Susan Decker said that barring a big slump in the global economy, the company should be able to hit the higher end of its sales and EBITDA targets.

But is this solid performance already priced into Yahoo!'s stock?

Rashtchy thinks that the shares have more upside because analysts will likely raise their earnings estimates for the year due to the company's upbeat outlook. The current consensus is 30 cents a share. Rashtchy does not own the stock and his firm has no investment banking relationship with it.

Still, Yahoo! trades at 76 times 2003 earnings estimates. Derek Brown, an analyst with Pacific Growth Equities, thinks this is a bit rich, even though the company is doing extremely well.

"The new guidance makes the valuation a bit more palatable, but it is still a bit stretched right now," he said. Brown does not own the stock and Pacific Growth Equities does no investment banking for Yahoo!