Yahoo Inc. yesterday reported sharp increases in sales in the third quarter, driven by the continued surge in Internet advertising in the United States and abroad.

The Sunnyvale, Calif., firm, which has more computer users tapping into its e-mail and entertainment offerings than any other Internet service, reported a profit of $254 million.

Third-quarter revenue rose to $1.3 billion and cash flow was $440 million, compared with revenue of $907 million and cash flow of $267 million in the third quarter last year. That quarter's $253 million profit included a one-time gain of $129 million from the sale of an investment.

Chief executive Terry S. Semel said the company's financial performance was influenced by an increase in search-related advertising by the major automobile companies, financial services firms and other large corporations. It is becoming increasingly apparent to those advertisers that consumers do a lot of their product research through Internet searches, even though they typically buy big-ticket items in retail stores or auto showrooms, Semel said during a conference call with Wall Street analysts.

"Fifty of our top 200 brand advertisers are also in our top 200 search advertisers," Semel said. "What advertisers are finding is that the more they utilize both forms of advertising on the Yahoo network, the better they do with each."

Yahoo, which ended the quarter with about $4.8 billion in cash, announced a new partnership to jointly market high-speed Internet access, search and other services this week with BellSouth Corp. That deal, Semel said, means that Yahoo has partnerships with Internet services with the potential to reach about 92 percent of U.S. consumers. Abroad, where Yahoo showed strong growth, its most important long-term move in the quarter was a decision to combine its efforts in China with Alibaba, a Chinese Internet site, rather than tackling that market alone. In terms of users, China has the biggest Internet market after the United States, though online commerce is much smaller there than in the United States and Europe.

Semel declined to comment on reports that Yahoo is among the suitors considering buying a stake in Dulles-based America Online from its parent, Time Warner Inc.

Yahoo CEO Terry S. Semel says brand and search ads build on each other.