NEW YORK (CNN/Money) - Yahoo!, a leading Internet media company, posted better-than-expected increases Wednesday in first quarter sales and earnings. The strong results are yet another indication of the online advertising market's resurgence. Shares of Yahoo! surged after hours on the news.

Yahoo! also raised its sales guidance for the second quarter and remainder of the year and announced a two-for-one stock split that will take effect on May 11.

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The Sunnyvale, Calif.-based company reported net income of $101 million, or 14 cents a share, compared to net income of $47 million, or 8 cents a share a year ago. This year's results include a one-time penny per share gain. Excluding that, Yahoo! reported earnings of 13 cents a share, two cents better than analysts' prediction of 11 cents a share, according to First Call.

Yahoo!'s sales rose 94 percent from a year ago to $550 million. The consensus forecast was for $500.6 million in revenue. This figure excludes traffic acquisition costs, or TAC, that Yahoo!'s Overture Services subsidiary pays to affiliates.

Last year, Yahoo! acquired Overture, which supplies paid search listings to other Web sites and shares advertising revenue with them. Microsoft's MSN is one of Overture's largest customers. Including TAC, Yahoo!'s revenues were $758 million.

Shares of Yahoo! (YHOO: Research, Estimates) soared nearly 10 percent in after-hours trading, after falling about 1 percent in regular trading on the Nasdaq Wednesday. The stock, which is up nearly 10 percent this year, hit a new 52-week high Monday.

The online search market has become one of the hottest growth areas in tech. Many large companies are finding that sponsored keyword searches are a more effective way of advertising than pop-ups and banner ads. But there has also been a pickup in these "traditional" forms of online advertising as well.

Yahoo! and smaller rivals such as Ask Jeeves (ASKJ: Research, Estimates) and LookSmart (LOOK: Research, Estimates) have gained ground in recent weeks on the hopes of strong first quarter results and continued strength for the remainder of the year. But Yahoo!'s results and raised guidance appear to be better than even the biggest Internet bulls could have hoped for.

"If you're wondering, I have a big smile on my face," said Terry Semel, Yahoo!'s chairman and chief executive officer during a conference call with analysts.

The company said it now expects second quarter sales to come in at a range of $580 million to $615 million, excluding TAC. The $597.5 million midpoint of this range is well above the current consensus revenue estimate of $533.8 million.

Yahoo! said it expects sales for 2004 to be between $2.405 billion and $2.52 billion, for a midpoint of $2.462 billion. Wall Street had been expecting Yahoo! to generate sales of $2.24 billion.

The company does not discuss earnings guidance. Analysts are currently expecting the company to report earnings of 12 cents a share for the second quarter and 54 cents a share for the full year. But given the boosts to sales guidance, analysts will probably need to raise their earnings estimates.

Mark Mahaney, an analyst with American Technology Research, said the sales guidance was the most important data point that investors were looking at for this quarter. He said that shares of Yahoo! have fallen in the past after the company raised guidance slightly. But that doesn't seem likely this time around because Yahoo! raised the bar substantially.

Looking at the first quarter results in more detail, Yahoo!'s marketing services revenues, which includes all its advertising-based businesses, increased 235 percent from a year ago. That figure was boosted by acquisitions, including Overture. But excluding incremental sales gains from acquisitions, Yahoo! said organic marketing services revenue grew at a robust rate of 48 percent.

Safa Rashtchy, an analyst with Piper Jaffray, said he was most pleased by the fact that Yahoo!'s fee-based businesses, such as a co-branded DSL offering with telecom SBC and online personal ads, showed strong revenue gains as well. Revenue from fee-based businesses increased 39 percent from a year ago and accounted for 12 percent of Yahoo!'s total gross sales.

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Still, many Yahoo! observers are keeping a close watch on the one major search company that isn't public yet: Google. The company, which is widely expected to file for an initial public offering in the near future, announced plans last week to offer Internet users a free e-mail account with 1,000 megabytes of storage.

That's raised some concerns about how much longer Yahoo! will be able to charge users for premium e-mail services, part of its fee-based business. A Web-based e-mail box with just 100 megabytes of storage costs Yahoo! users about $50 a year.

Google has also stepped up its efforts against Yahoo! and MSN by recently unveiling a comparison shopping service, Froogle, and a beta version of a local search engine, kind of like an online Yellow Pages.

But Yahoo! has been busy as well. The company bought Kelkoo, a European comparison shopping site, last month and rolled out its own local search service. In addition, Semel confirmed during the conference call that Yahoo! will be unveiling a new marketing campaign later this week in order to increase awareness of the Yahoo! brand.

Analysts quoted in this story do not own shares of Yahoo! and their firms have no investment banking relationships with the company.