Analysts expressed few doubts that the company will post revenues in line with expectations of $275 million to $290 million for the quarter--putting Yahoo up about 5 percent from the previous quarter.
But anything less than a blowout quarter will likely leave investors cold and prod analysts to examine the results for hints of potential weaknesses down the road.
"What I'm most concerned about for Yahoo is its growth rate going forward," said Andrea Williams Rice, an equity analyst at Deutsche Banc Alex Brown.
In addition to being a so-called blue chip stock, Yahoo is one of the earliest companies to report earnings.
Because of the timing, Tuesday's earnings report could have a ripple effect on other Internet stocks. Investors are looking to Yahoo as a key indicator of where the sector may be headed--particularly in regard to companies that depend on advertising revenues, such as online advertising network DoubleClick, which also reports earnings this week.
Just last week, shares of Priceline.com plummeted after the company announced it would close its name-your-own-price gasoline and grocery service. E-commerce giant Amazon.com on Monday hit a new 52-week low of $27.38 per share--a far cry from its year high of $113.
There is no doubt that Yahoo is one of the most popular online sites in the world, but investors worry that the company may not continue to convert viewer numbers into strong revenue growth in the quarters to come.
A key concern is Yahoo's reliance on advertising, which accounts for some 80 percent to 90 percent of its revenues. Analysts worry that the portal will be unable to maintain its historical growth rate as Web start-ups fold or cut back on marketing budgets.
Rice said she will pay attention to Yahoo's international revenues, which she considers a signal for future growth of the company.
Yahoo's earnings come as the Wall Street high-flier flirts with its 52-week low. The stock turned around Monday, up $4.50, or about 6 percent, to $85.75 by the 1 p.m. PT close of regular trading. Yahoo has ridden the recent downward momentum along with many other Internet stocks.
Historically, Yahoo has beaten expectations soundly. Last quarter, for example, Yahoo reported earnings of 12 cents a share--far higher than Wall Street's consensus estimates of 10 cents a share.
While many analysts would be surprised if Yahoo repeats last quarter's triumph, Tuesday's report could shed light on some important figures. Namely, the earnings report could give a hint to whether Yahoo is beginning to attract more traditional advertisers to fill dot-com shortcomings.
The company is already gaining momentum in attracting non-advertising revenue sources. On Monday, Yahoo unveiled a marketing deal with credit card company Visa to give it default status on its shopping, travel and wallet services.
Yahoo also announced a new round of licensing deals for its Corporate Yahoo
These deals could give Wall Street more assurance that Yahoo is cushioning the decrease in dot-com ad spending.
"This quarter is going to be very informative as to how strong Yahoo's business is and how well insulated Yahoo's business has been in the weakness of the dot-coms," said Bob Hiler, an analyst at Credit Suisse First Boston. "We're going to learn a lot about the number of U.S. clients, the number of international clients, and spending for business services. We expect them to hold up pretty well."