Opera Limited (NASDAQ: OPRA)

Opera's financial performance in Q1 2025 demonstrated significant growth across all key metrics. Revenue increased by an impressive 40% year-over-year to $142.7 million, substantially exceeding the company's guidance range. This growth was primarily driven by advertising revenue, which surged 63% to $95.6 million, now accounting for 67% of total revenue. Search revenue also showed healthy growth, increasing 8% to $46.6 million (33% of total revenue).

Operating profit rose to $21.1 million, representing a 15% margin, compared to $19.6 million and a 19% margin in Q1 2024. The slight margin compression reflects Opera's strategic investments in scaling operations and marketing, along with increased share-based compensation expenses. Operating expenses increased 47% to $121.6 million, with the largest component being the cost of inventory sold at $47.5 million, reflecting the significant scale achieved by Opera Ads during the quarter.

Net income grew 23% to $18.3 million, representing a 13% margin. Adjusted net income, which excludes items not indicative of underlying business performance, increased 37% to $24.2 million, maintaining a consistent 17% margin year-over-year. The company's adjusted EBITDA showed robust growth of 29% to $32.3 million with a 23% margin, demonstrating Opera's ability to scale efficiently while investing in growth.

Opera reported 293 million average monthly active users (MAUs) across its products in Q1 2025, though year-over-year growth was not disclosed. The Opera GX gaming browser continued to show strong momentum with 34 million average MAUs across PC and mobile, representing a 14% increase compared to Q1 2024. This specialized gaming browser remains a key growth driver and differentiator in the competitive browser market.

The company's monetization efficiency showed remarkable improvement, with annualized average revenue per user (ARPU) increasing 45% year-over-year to $1.94. This substantial ARPU growth reflects Opera's successful execution of its monetization strategy, particularly through the Opera Ads platform, which has been established as a platform of global relevance in the broader mobile advertising ecosystem.

The combination of a stable user base with significantly improved monetization is driving Opera's overall revenue growth, with particular strength in advertising revenue. The company's ability to generate higher revenue per user while maintaining user engagement demonstrates the effectiveness of its product strategy and the value it provides to both users and advertisers.

Opera's revenue breakdown for Q1 2025 highlights the continued dominance and acceleration of advertising revenue, which grew an impressive 63% year-over-year to $95.6 million and now represents 67% of total revenue. This growth underscores the success of the Opera Ads platform, which has achieved significant scale and established itself as a platform of global relevance in the broader mobile advertising ecosystem.

Search revenue, the company's second-largest revenue stream, showed healthy growth of 8% year-over-year to $46.6 million, accounting for 33% of total revenue. Opera noted that search-related functionality also serves as an entry point for direct advertising monetization of high user intent, creating synergies between its two main revenue streams.

Technology licensing and other revenue, while a small portion of overall revenue at $0.5 million, grew substantially from $0.1 million in the prior year. The overall revenue mix continues to shift toward advertising as the company leverages its user base and platform capabilities to capture a larger share of the digital advertising market.

Opera's balance sheet remains strong, with cash and cash equivalents of $103.5 million as of March 31, 2025, though this represents a decrease from $126.8 million at the end of 2024. The reduction in cash is primarily attributable to the $35.4 million dividend paid in January 2025 under the company's semi-annual dividend program ($0.40 per share).

Net cash flow from operating activities was $15.9 million for Q1 2025, down 49% from $31.0 million in Q1 2024. The company noted that working capital items were affected by the continued growth acceleration within the first quarter, which impacted cash conversion. Despite this, free cash flow from operations improved by 45% year-over-year to $12.0 million, representing 37% of adjusted EBITDA compared to 33% in the prior year period.

The company continues to expect fluctuations in cash conversion on a quarterly basis, as is typical for the business, with stabilization expected on a year-to-date basis as the year progresses. Opera's strong free cash flow generation combined with its healthy cash balance provides financial flexibility to invest in growth initiatives while continuing to return value to shareholders through its dividend program.

Opera has significantly raised its full-year 2025 guidance following the strong Q1 performance. The company now expects revenue of $567-582 million, representing 20% year-over-year growth at the midpoint, and adjusted EBITDA of $135-140 million with a 24% margin at the midpoint. This update reflects both the Q1 overperformance and incremental uplifts in what Opera had previously assumed for the remaining quarters of the year.

For the second quarter of 2025, Opera guides revenue of $134-138 million, representing 24% year-over-year growth at the midpoint, with adjusted EBITDA of $30-32 million and a 23% margin. The sequential decrease in revenue from Q1 to Q2 likely reflects some seasonality in the advertising business, though the year-over-year growth rate remains robust.

Management highlighted the company's diversified geographic footprint and ability to quickly seize growth opportunities as products scale as key advantages in navigating volatile market environments. The raised guidance demonstrates confidence in Opera's continued monetization momentum, particularly through the Opera Ads platform, which has become a significant driver of the company's growth.

Opera continues to innovate and differentiate its browser offerings through specialized products and advanced features. The preview of the Browser Operator represents a significant step in Opera's AI strategy, enabling the browser to act autonomously and perform tasks for users using local AI capabilities. This innovation aligns with the broader industry trend toward more intelligent, assistive software that can reduce user friction and increase productivity.

The launch of Opera Air, a mindfulness-oriented browser, demonstrates the company's strategy of creating specialized browsers for specific user segments and use cases. This approach has proven successful with Opera GX, the gaming browser that has grown to 34 million MAUs and continues to show healthy growth of 14% year-over-year.

These product innovations, combined with Opera's strong monetization capabilities, particularly through the Opera Ads platform, position the company well for continued growth and differentiation in the competitive browser market.