Yates' time of 41 minutes 37 seconds over the 34.5km course from Trento to Roverto was only 22nd on the day but enough for the 25-year-old Mitchelton-Scott rider to keep the race lead by 56 seconds from defending champion Tom Dumoulin of Team Sunweb.
The president of world cycling's governing body has told The Times that he has relished Simon Yates's domination of the Giro d'Italia and has no doubts about the Briton's performance.
Yates' monumental efforts over the 16 stages so far have earned him well-deserved praise from all sides, but there was concern Tuesday's time trial would impact severely in the two minute and 11-second lead he had built up.
The four-time Tour de France champion is 3min 50sec behind Yates but only 39 seconds behind Pozzovivo and a spot on the podium. Yates also had a very good day so all in all it's disappointing for us but it is what it is.
Ireland's Ryan Mullen endured Giro d'Italia frustration as cramp with 10km to go scuppered his time-trial stage hopes heading into Rovereto. I gave everything today ...More news: Jared Kushner granted permanent security clearance
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Chris Froome finished fifth, 35 seconds behind Dennis, to move into fourth overall.
"I think there could be some guys hurting". This stage was a big target for me as well.
"To come here and repay the team for all their hard work, and jump back into the top 10 is a big day for me".
"It's pretty good to beat time-trialists like Tony Martin and Tom Dumoulin", Dennis said. For the (general classification), it will be hard. "I had a good rhythm", said Yates. But it looks to be a day for the breakaway as the GC guys save their legs for the final three mountain stages before Sunday's ceremonial finish.
Three decisive summit finishes in the Alps precede the final processional stage into Rome - but before then there's a potential banana-skin of a stage from Riva del Garda to Iseo.