Why Opera Limited came together this week

Web Browser Company Actions Opera (OPRA 10.13%) were up 23.3% this week as of 11:25 a.m. ET Friday, according to data from S&P Global Market Intelligence.

Opera delivered great news for shareholders this week, reporting strong second-quarter earnings that beat analysts’ expectations. In addition, comments on the potentially positive impact of recent European and US regulations may have attracted investors with a long-term upside.

Search and ad growth has been strong, but is it just the beginning?

In the quarter, Opera posted a 17% increase in revenue to $109.7 and earnings per share of $0.22, up 46.7%, both numbers beating analysts’ estimates. Opera also raised guidance for the full year.

Opera is an internet browser company, and it’s a small, independent fish in a very, very large pond dominated by tech giants. However, management has recently been able to target customers in higher-income territories such as the US, Europe and Latin America, and move away from its original target markets in low-income emerging markets.

While total MAUs actually decreased, the company’s average revenue per user, derived from both digital advertising and browser search revenue, increased 25% in the quarter.

And the opportunity in these top markets can only get bigger. New laws such as Europe’s Digital Markets Act are cracking down on technology “gatekeepers” who have the power to push their preferred or proprietary browser or search engine. Alphabetowner of the Chrome browser, has just been declared a monopoly by a US federal judge

While it’s hard to say exactly how this will open up opportunities for Opera, the tech giants may be forced to offer users more options for default browsers on PCs and smartphones. Opera’s results indicate that it has made several forays into these geographic areas.

Could it really be Opera’s advantage?

During the conference call, Opera management noted that changing regulatory regimes as well as the transition to artificial intelligence (AI) open opportunities for growth. Co-CEO Lin Song said:

We have a few percent of the market share with the browser, but if you look at a bigger player like Google, like (a) $2 trillion company, even 1% of it is $20 billion right? We’re just like a billion dollars. So we feel like there’s at least a 10, 20x potential that we can do if we capture these changing paradigms, which is our focus.

To this end, Opera has invested in new technologies, such as investing $19 million in a large AI cluster in Iceland. That AI cluster has only been running for a few months, but management has spoken positively about it. One use case, for example, is to allow users to tune non-open-source AI models with AI Opera.

While it’s early days for this particular investment, Opera’s status as a neutral browser, its popularity among gamers, and its commitment to staying current with AI technology bode well for its future.