Jul 16, 2014 · 3 minutes

While Yahoo was reporting its second quarter earnings today, its chief development officer Jaqueline Reses was at Fortune's Brainstorm Tech conference saying that the company won't spend any money from Alibaba's coming IPO on a Google Ventures like investment arm.

Which was ironic - and maybe even too bad. Yahoo's protracted and still unproven turnaround is being supported in good measure by returns on earlier investments it made in companies like Alibaba. If past is prolog, Yahoo might consider bringing back Jerry Yang to oversee such investments. Because Yahoo has been making more money by investing in successful Internet companies than trying to become one again.

Here's a stark example. Yahoo said its revenue last quarter fell 3 percent to $1.04 billion, below the modest $1.08 billion analysts had been forecasting. Its GAAP operating profit declined 73% to $38 million from $137 million a year ago. Luckily, Yahoo recorded $256 million from its investments in Alibaba, Yahoo Japan and other entities. So for every dollar Yahoo made from its own business, it made nearly seven from owning part of others.

The most recent quarter was not an aberration. In the first quarter, Yahoo's operating profit was $30 million and its take from Alibaba et al was $301 million. And earnings from the company's equity interests have surpassed the profits from Yahoo's own operations for each of the past six quarters.

Yahoo's investment arm is the one part of the company keeping investors happy. Its stock has risen 126 percent over the past two years, more than double the Nasdaq Composite's 51 percent rise. Much of that rise has to do with the money Yahoo made from selling off 523 million of its 1.047 billion shares in Alibaba in late 2012. Yahoo returned a good part of that largesse with its own shareholders.

The two-year turnaround that Marissa Mayer has been engineering in Yahoo's operations, however, isn't going so well. Revenue in Yahoo's display ads fell 7 percent in the quarter, thanks to a delay in the rollout of a new ad-buying program.

In addition, premium ads didn't sell as well as Yahoo hoped, a particular concern since Yahoo's push into native ads and in-house content was intended to boost these higher-priced ads. In fact, price per display ads fell 24 percent in the quarter (on a brighter note, price per click on search ads rose 19 percent.)

In Mayer's words, she was “not satisfied with our results this quarter.” She then uttered the cry of the defensive turnaround CEO, saying “a transformation of this size and scale will take multiple years” and overlooking the fact that it has already been multiple years since the turnaround began.

Mayer, though, has a luxury previous Yahoo CEOs didn't – the shiny distraction that is the Alibaba IPO, expected next month. Yahoo was originally obligated to sell 261 million of its Alibaba shares in an IPO, a figure it negotiated down to 208 million last October. In previous SEC filings, Yahoo had indicated that, if it sells the 208 million Alibaba shares, it wouldn't continue to record their value in its income statements, a move that would drastically reduce its earnings per share.

Today, Yahoo said it would only sell 140 million Alibaba shares in the IPO, although it didn't indicate whether this would affect its earnings in the future. The news was enough to make Yahoo's stock briefly rise 3 percent in after-hours trading. But soon enough, Yahoo's stock was trading 2.7 percent below its Tuesday close as other concerns emerged to weigh it down.

Reducing the number of Alibaba shares Yahoo must sell in the IPO will give Alibaba a smaller float and increase the chances of a sustained post-IPO rally. It will also help Yahoo hang onto more Alibaba shares that increase in value as the company continues to grow. Yahoo may not be able to sell shares after the IPO for as long as a year due to lockup requirements.

Either way, it's a mixed bag for Yahoo investors. They now have to wait longer for a full Alibaba payout, but that payout may be larger over time. Yahoo sold its 523 million Alibaba shares in 2012 back to Alibaba for $13.54 a share – a steep discount to the price the stock will surely list for next month. Mayer left a lot of money on the table by selling so many shares so soon, but it did buy her more time for her turnaround.

Judging from the tepid guidance Yahoo gave investors for the current quarter, the turnaround may not be bearing fruit soon. That's okay for Yahoo investors, as long as the company keeps recording its investments in Alibaba and Yahoo Japan in ways that shore Yahoo's increasingly anemic bottom line.

One day, Yahoo will have to stand on its own without Alibaba. And two years into Mayer's effort to fix Yahoo, it's still not clear how that that's going to happen.