Opera's Gross Margins May Improve with Neon Subscription Premium

Opera's gross margins may decline due to factors such as higher content costs and increased competition. However, the company's subscription premium service, Neon, is expected to boost revenue and reaccelerate growth. Despite ongoing headwinds, Opera remains attractively valued, with potential for reacceleration through Neon's subscription service.

Opera Limited (OPRA) reported its second-quarter 2025 earnings, revealing a mixed bag of results amidst broader market volatility. The company exceeded both revenue and earnings per share (EPS) forecasts, with an adjusted EPS of $0.26, surpassing the forecast of $0.20, marking a 30% surprise [1]. Revenue reached $143 million, outpacing the expected $137.44 million [2].

Key Takeaways

- Revenue Growth: Opera's Q2 revenue grew 30% year-over-year, surpassing guidance. Advertising revenue increased by 44%, driven by e-commerce growth. The company's search revenue returned to double-digit growth, increasing by 11% year-over-year.
- Stock Performance: Following the announcement, Opera’s stock rose 5.06% in premarket trading, reaching $17.87. However, the stock subsequently dropped, reflecting broader market volatility.
- Guidance: Opera raised its full-year revenue guidance to $585-$597 million, representing a 22-24% growth. The company also projects continued margin expansion in the second half of 2025.
- Strategic Initiatives: Opera plans to launch its AI browser, Opera Neon, in fall 2025. The company's MiniPay stablecoin wallet has already reached 9 million activated wallets.

Market Reaction

Analysts maintain a strong buy consensus with a high target of $33, suggesting significant upside potential. Opera's financial health metrics are impressive, with a current ratio of 2.17 and an Altman Z-Score of 18.12, indicating strong financial stability [1].

Risks and Challenges

- Tariff-related headwinds in e-commerce could impact revenue growth.
- Increased marketing and compensation costs may pressure margins.
- Competitive landscape in AI and browser markets poses challenges.
- Regulatory changes in stablecoin markets could affect MiniPay’s growth.

Future Outlook

Opera's earnings report highlighted the company's focus on growth and its ability to adapt to changing market conditions. The company's strategic initiatives, such as the upcoming launch of the Opera Neon AI browser and expansion of MiniPay, could boost its average revenue per user (ARPU). However, gross margins may decline due to factors such as higher content costs and increased competition. Despite ongoing headwinds, Opera remains attractively valued, with potential for reacceleration through Neon's subscription service.

References

[1] https://www.nasdaq.com/articles/compared-estimates-opera-limited-opra-q2-earnings-look-key-metrics
[2] https://www.investing.com/news/transcripts/earnings-call-transcript-opera-ltd-q2-2025-beats-expectations-stock-surges-93CH-4200219