Opera Boosts 2025 Revenue Forecast to $582M on Robust Q1 Ad Growth

Insights from the Earnings Call: Opera Limited (OPRA) First Quarter 2025

Management View

Co-CEO Song Lin emphasized a significant 40% increase in yearly revenues reaching $143 million, exceeding the earlier forecasted range of 28% to 31%. The surge can be mainly credited to advertisements, with e-commerce ads seeing an impressive more than 100% rise compared to last year. These ad earnings amounted to $96 million, accounting for approximately two-thirds of all income.
The adjusted EBITDA amounted to $32 million, representing a margin of 23%, which underscores enhanced profit margins concurrent with sped-up revenue expansion.
Opera made notable advancements with innovative features such as AI-powered browsing tools like the "browse agent" for proactive navigation and an enhanced version of its Opera ARIA AI assistant integrated into Opera Mini. Additionally, the newly launched Opera Air browser, centered around mindfulness concepts, attracted 0.5 million downloads in just two months after release.
CFO Frode Jacobsen mentioned that marketing expenditures dropped to $34 million from $41 million in the fourth quarter, whereas cash compensation outlays rose to $18 million. Additional operational expenses amounted to $8 million.
The management highlighted how Opera’s business stands out for being both resilient and expandable, especially within the realm of advertising. This sector continues to operate based on performance metrics and shows lesser impact from broader economic fluctuations.

Outlook

The revenue forecast for 2025 has been updated to range between $567 million and $582 million, indicating an average yearly increase of 20%, compared to the previous estimate of $555 million to $570 million. The adjusted EBITDA outlook has also been lifted to $135 million to $140 million, keeping a consistent margin of 24%.
The projected income for Q2 2025 is anticipated to be within the range of $134 million to $138 million, accompanied by an adjusted EBITDA of $30 million to $32 million and a margin of around 23%.
The management expects marketing expenses to stay consistent during the second quarter but predicts an uptick later in the year. However, they believe that expanding operations should help offset these margin effects.

Financial Results

Advertising income jumped by 63% compared to the previous year, reaching $96 million, largely due to the expansion of e-commerce. Additionally, search-related revenues climbed by 8%, totaling $47 million.
The operating cash flow amounted to $16 million, which equates to 49% of the adjusted EBITDA. Meanwhile, the free cash flow totaled $12 million, accounting for 37% of the same metric.
Year-over-year, the annualized ARPU increased by 44%, indicating an emphasis on attracting high-value users in western regions.

Q&A

Naved Khan of B. Riley Securities questioned the slowdown in search growth and the decrease in GX ARPU. In response, Song Lin clarified that the emphasis on intent-based advertising has somewhat redirected attention away from traditional search activities. Additionally, he mentioned that both seasonal patterns and strategic decisions have impacted theGX ARPU figures.
Lance Vitanza from TD Cowen asked about the seasonal patterns in e-commerce and the consistency of monthly active users. The CFO, Jacobsen, stated that the growth in e-commerce compensated for the usual seasonal trends. Management also emphasized their concentration on high-revenue-per-user individuals instead of solely focusing on overall monthly active user numbers.
Eric Sheridan from Goldman Sachs asked about the focus on e-commerce sectors and geographical reach. Jacobsen pointed out that the U.S. e-commerce market still has considerable untapped potential, offering substantial opportunities for expansion.
Mark Argento, Lake Street: Explored advertising growth drivers and geographic focus. Song Lin emphasized success in direct partnerships with major e-commerce players and strong growth in Western markets.

Sentiment Analysis

Analysts were positive about Opera’s advertising growth and raised guidance but expressed concerns about search revenue and user metrics. Questions were pressing but constructive.
The management showed assurance, especially regarding advertising and advancements in artificial intelligence, as they tackled issues using pragmatic approaches. The prepared statements came across as more assured compared to their answers during the question-and-answer session, wherein they sometimes elaborated on the subtleties of their strategic direction.
The sentiment from the prior quarter indicated greater optimism regarding ad and e-commerce expansion, yet more restrained forecasts for search performance.

Quarter-over-Quarter Comparison

The revenue growth sped up from 29% in the fourth quarter of 2024 to 40% in the first quarter of 2025, largely due to advancements in advertising, notably within the realm of e-commerce.
The adjusted EBITDA margin stayed constant at 23%, even with the expansion of operations. Marketing costs declined compared to the previous period, indicating precise modifications in expenditure.
The management's attitude toward advertising expansion was more hopeful, though they recognized economic instabilities.
Experts concentrated on the expansion of e-commerce and advertising, as they have in previous periods, yet also voiced new worries regarding search performance and user statistics.

Risks and Concerns

The management recognized the possible fluctuations caused by macroeconomic factors, especially within the U.S. online shopping sector.
The high reliance on advertising income for performance-based channels might be risky should advertisers reduce their spending.
Experts emphasized the significance of keeping MAU stable and broadening growth sources beyond just e-commerce.

Final Takeaway

In the first quarter of 2025, Opera Limited experienced substantial increases in both revenue and profit margins, largely due to advancements in e-commerce advertising along with new AI-powered browser functionalities. The firm has consequently upgraded its annual forecasts, reflecting their trust in an adaptable business strategy and promising expansion prospects, notably within western regions and through performance-oriented advertisements. Despite hurdles concerning the rise in search-related income and maintaining stable monthly active users, leadership continues to prioritize engaging high-value customers and streamlining operational scalability.

Review the complete earnings call transcript here.