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First quarter numbers for Yahoo came in mildly better than analyst expectations, and Yahoo cited this as evidence its management strategy works. But look at the non-recurring items.

"We believe we can significantly accelerate our revenue growth, return to our historically high margins, and double our operating cash flow by 2010. This quarter’s solid performance underscores the fact that we are executing on that plan," CEO Jerry Yang told attendees of Yahoo's earnings call this afternoon.

"Yahoo is beginning to realize the benefits of the very substantial and deliberate long-term investments we’ve made to capitalize on the opportunities ahead in display and to recapture momentum in search,” he continued, his remarks forming the confident-sounding opening to Yahoo's Q1 2008 financial report.

Yahoo pulled in $1.818 billion in revenue for the quarter, a nine percent boost over Q1 2007. Go a little deeper, and one sees where a pair of one-time events gave Yahoo a financial nudge. They touted cash flow of $786 million and free cash flow of $647 million, significant gains year over year.

However, the cash flow figures include a one-time payment of $350 million from AT&T. Cash flow becomes $436 million, net cash flow turns into $297 million, without that payment. Q1 2007 cash flow reached $435 million, while net cash flow at the time hit $369 million.

For those scoring at home, Yahoo had less net cash flow in Q1 2008, saved by AT&T's largess.

Net income for the first quarter of 2008 was $542 million or $0.37 per diluted share compared to $142 million or $0.10 per diluted share for the same period of 2007, the report noted. Another caveat is required: "Net income for the first quarter of 2008 includes the Company’s net non-cash gain of $401 million related to Alibaba Group's initial public offering of Alibaba.com, net of tax, which is included in earnings in equity interests.

Drop out Alibaba's IPO, and Yahoo loses a smidgen of ground year over year.

Earlier, Steve Ballmer of Microsoft shrugged off early analysis of potential Yahoo's gains. Given the report from Yahoo, it doesn't seem as though Q1 '08 performance merits an increased takeover bid from Microsoft.