Opera Ltd Q1 FY2026 Earnings Call

Welcome to the Opera Limited First Quarter 2026 Earnings Call. Please be advised that today's call is being recorded. I would now like to turn the call over to your speaker today, Matt Wolfson, Head of Investor Relations. Please begin.

Thank you for joining us. This morning, I am joined by our CEO, Song Lin; and our CFO, Frode Jacobsen. Before I hand over the call to Song Lin, I would like to remind you that some of the statements that we make today regarding our business, operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially as a result of various factors, including those set forth in today's earnings press release and in our most recent annual report on Form 20-F filed with the SEC. We undertake no obligations to update any forward-looking statement. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of IFRS to non-IFRS measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our Investor Relations website at investor.opera.com. Our comments will be on a year-over-year comparison unless we state otherwise. With that, let me turn the call over to our CEO, Song Lin, who will cover our first quarter operational highlights and strategy, and then Frode Jacobsen, who will discuss the details of our financials and expectations for the second quarter and full year. Song?

Sure. Thank you, Matt, and good day, everyone. It's been less than two months since we reported our fourth quarter 2025 results with the trajectory for 2026 well ahead of internal expectations. And today, we announced that we surpassed even those recent forecasts. Q1 revenue exceeded the high end of our guidance range by $4 million and adjusted EBITDA exceeded the high end of our guidance range by $2 million. That translated to year-over-year revenue growth of 23% to $176 million with $42 million adjusted EBITDA or a 24% margin. It is also worth noting that revenue growth was comparable across advertising and query revenue at 24% and 23%, respectively, both contributing to an excellent starting position for the remainder of the year. On the advertising side, first quarter revenue was a new all-time high of $117 million. Our momentum and underlying growth was strong enough to more than offset seasonality. Our advertising partners run performance-based campaigns, so we would not see this level of growth if our partners were not also experiencing success. As a result, we are able to continue increasing our share of wallet with a continued focus on scaling our e-commerce partnerships. As an example, just two weeks ago, we were awarded Affiliate of the Year from AliExpress. And in late 2025, we received a similar recognition from Shopee, another key partner. We are humbled by the appreciation shown and operate Opera Ads with their continued success as our North Star. Our partners appreciate the three core pillars of Opera Ads. First is a unified media technology ecosystem that combines our own ad inventory augmented with the wider programmatic landscape and advanced targeting algorithms to deliver hyper-relevant placements at the precise moment of user intent. Second is consistent execution that delivers daily volume without sacrificing quality. And finally, a deep collaborative alignment that fosters a transparent, closely aligned working relationship with our partners. Working with such global partners will translate demonstrated performance in active markets to continued regional expansion. And while e-commerce opportunities will only increase as the year progresses, I'm also excited about taking our learnings from that vertical and applying it more broadly. For example, as we enter the travel-heavy second and third quarters, we see a clear potential to establish Opera Ads as a source of well-targeted audiences for the travel industry. All in all, there is no shortage of opportunity and it's all about execution to deliver the best results for our partners. Within the 23% growth of query revenue, search revenue growth continued expanding and reached 14% in the quarter, a level we have not seen since 2024. The remainder of query growth was driven by non-search query revenue, which continues to be multiple times larger than the year-ago quarter with underlying growth also offsetting seasonality. In total, query revenue was $58 million in the first quarter and represented 33% of our revenue. As we've discussed before, the AI age comes with completely new monetization potentials for our browsers, both from conversation with the native Opera AI assistant and as it relates to the back-end understanding of a user's intentions, presenting relevant products and services natively in the user interface. The browser is unlike any other app. It's a gateway to almost every service available online. And as the browser gets smarter, the user can more efficiently act on their intentions. For example, if the user starts formulating a query in the URL bar, the browser can understand the intention and expand the interface to present relevant destinations, or if a user was interrupted during a session, the browser can organize that history and enable a seamless continuation later on. In fact, AI unlocks both advertising and query revenue opportunities for us. On the advertising side, deep learning and agentic AI are leading to greater optimization and better targeting of user intent, resulting in greater conversion rates for our advertising partners. On the query side, we are witnessing an evolution in search. Historically, search has been limited to the keywords users are searching for. But over the past few years, we have seen it transform from simple keywords to more complex and longer question-based queries and more recently to chat conversations. As a browser with control of the URL bar and omnibox, we are well positioned as an entry node to search and AI chats. As these more complex searches and conversations begin to be monetized, we are in an excellent position to benefit. Now turning to our products and recent innovations, I want to comment on the key topic of AI potentials for the browser. We recently introduced Browser Connector available both in our subscription-based agentic browser, Opera Neon, and in our mainstream browsers, Opera One and GX. Browser Connector allows users to plug their favorite AI tools directly into their live browser sessions via a protocol known as MCP, providing the AI platform of their choice with full real-time context of open tabs and active content. Think of this as bring-your-own-AI. The MCP protocol is the open standard that enables a secure connection between the browser host and AI models, giving users the freedom to choose their preferred combination of browser and AI back end. With Browser Connector, the user no longer needs to act as the personal secretary of their own online AI tools, copying and pasting links and context. Instead, the browser enables the AI of choice to access and re-page content, understand open tabs and even take screenshots to analyze images or graphs. Beyond the technical upgrade, Browser Connector reinforces Opera's long-standing advocacy for user choice over ecosystem lock-in. Product innovation translates to user appreciation and increased usage of our browsers, which again translates to revenue tailwinds. Looking at key Western markets, we see users who engage with AI within our browsers spend over an hour more per day in the browser and even perform 50% more traditional searches than comparable users who are not yet engaging AI, all of which directly contributes to ARPU growth. Our broad approach to monetization puts us in a differentiated position as most companies that are monetizing AI today are either chip and compute providers or those relying exclusively on subscriptions and usage-based models. In terms of our user base, we added four million users during the first quarter, bringing our total monthly average users to 288 million. We added 400,000 Western users on top of the seasonally strong fourth quarter and we benefited from both continued Android adoption and PC platform growth and one million new Opera GX users globally. In total, our annualized ARPU was $2.43, a 25% increase year-over-year. The final topic I would like to discuss is MiniPay, our noncustodial stablecoin wallet with deep ecosystem roots. MiniPay is the leading stablecoin wallet in Africa, appreciated for its technical ease and seamless integrations. We see great opportunities and real-life benefits with access to stablecoins, both within emerging markets and as a global payment framework. Just last week, we announced a USD 1 million incentive for local developers of mini apps that take advantage of the transaction opportunities of MiniPay and we are using our on-the-ground presence in Africa and Latin America to provide in-person support. This supports the continued expansion of mini apps available in MiniPay, covering a broad range of services from finance, shopping, entertainment and utility tools. MiniPay has now activated over 15 million wallets and processed over 430 million total transactions. With that, I would like to turn the call over to Frode Jacobsen, our CFO, to discuss our financial results, guidance and capital allocation in greater detail. Frode?

Thanks, Song. As Song Lin mentioned, we are very pleased with the start of 2026 and the trajectory we are on now well into the second quarter. Yet again, we overperformed our estimates and delivered an incremental $4 million of revenue on top of the guidance range with over 50% conversion to incremental adjusted EBITDA. This level of outperformance is particularly impressive in the face of seasonal headwinds following the holiday-heavy fourth quarter. Instead of a seasonal dip, our underlying commercial momentum overpowered those trends and drove sequential advertising revenue higher in the first quarter. Q1 also marks our 20th consecutive quarter as a Rule of 40 company and we are well on track for 2026 to be the sixth consecutive year where we meet that high bar. In fact, our average annual revenue growth or CAGR stands at 21% over the past 10-year period, a feat few public companies achieve, even more so for companies that have been around for over 30 years like Opera. In these times, filled with innovation and opportunity, we continue to benefit from the resilience and agility of our business model, disciplined execution and our consistency in pairing rapid and organic growth with healthy profitability. Our outperformance continues to be broad-based with total revenue growth of 23% as opposed to the midpoint guidance of 19% growth. Within our total quarterly revenue of $176 million, advertising was $117 million or 67% of the total and query revenue was $58 million. Advertising revenue grew at 24% and the evolution of our search business into a broader query approach resulted in query revenue growth of 23%, a level we haven't seen since the post-COVID rebound in 2021 as we better monetize high-intent user actions across the browser interface. In terms of costs, I want to highlight the fact that we scaled the business beyond expectations while also improving gross margin by about 60 basis points versus the prior quarter. Cost of revenue items combined represented 36.8% of revenue, down from the 37.4% we saw in Q4 and according to margin expectations from our prior cost commentary. Also, as expected, cash-based compensation ticked slightly down from the Q4 level to $21.5 million. Marketing spend came in just below what we had built into guidance at $38.5 million, while the balance of all other OpEx items, pre-adjusted EBITDA, came in at $9 million or just above expectations, resulting in a slight net benefit. All in all, our continued cost discipline underpinned our adjusted EBITDA overperformance, coming in at $42 million for the quarter, or a 24% margin. Operating cash flow was also $42 million in the quarter, representing a 100% conversion of adjusted EBITDA as strong net collection more than offset the limited tax payments we incurred. Free cash flow from operations was $35.5 million or 85% of adjusted EBITDA. We continue to expect fluctuations quarter-to-quarter due to the size and timing of tax and bonus payments as well as other working capital movements, though I will reiterate my statement from last quarter that the full year conversion ratio of EBITDA to these cash flow metrics as achieved in 2025 continue to be reasonable expectations also for 2026. Turning to capital allocation and return of cash to our shareholders, where we combine a recurring dividend program of $0.80 per year with our recently launched $300 million buyback program. The dividend is paid out semiannually with $0.40 or $36 million paid out in January. In terms of the buyback, we repurchased 1.14 million shares in March for a total spend of $17 million pro rata distributed between public buybacks and repurchases from our majority shareholder at the same price per share, $14.88. This reduced the total number of shares outstanding as of 31 March to 89.55 million. You'll see $12.8 million of the spend in our Q1 cash flow with the settlement of the remaining $4.1 million taking place in Q2. Now turning to our guidance. In terms of our full year outlook, our solid start to the year allows us to raise revenue guidance to $727 million to $740 million or 18% to 20% growth for the year as a whole. With that, we are raising the low end of guidance by $7 million and the high end by $5 million from the range we provided just two months ago, adding about one percentage point of growth to our expectations. Still, in line with our guidance logic, this range continues to allow for later upside potential in the second half of the year. We let just over 40% of the incremental revenue flow through to our adjusted EBITDA guidance and update our annual range to become $170 million to $174 million or a 23.4% margin at the midpoint. That means that our prior high end of the range has now become the midpoint. For the second quarter, we guide revenue of $176 million to $178 million or 23% to 25% growth. The quarter is already well underway and both our operational and commercial performance supports the nice step-up versus prior implicit expectations. We guide adjusted EBITDA of $40 million to $42 million, representing a 23.2% margin and 28% adjusted EBITDA growth at the midpoint. In terms of costs, we then implicitly guide to a full year OpEx base pre-adjusted EBITDA of $562 million at the midpoint, of which $136 million in Q2. We continue to expect cost of revenue items combined to represent about 38% of revenue for the year, with midyear coming in around the annual average before we go slightly higher in Q4 with its seasonal advertising peak. As discussed before, Opera Ads has a different gross margin profile compared to our O&O revenue streams, resulting in a greater cost of revenue component in our overall results even as our Opera Ads gross margin is ticking up. Apart from the business mix effect, we continue to see the Opera Ads gross margin expanding as the platform scales and our optimization algorithms evolve in addition to benefiting from low marketing costs and limited OpEx base. Cash-based compensation expense is expected to grow just above 10% for the year as a whole, which is slightly lower than our earlier expectation of growth in the low teens. We expect costs to increase modestly in Q2 with annual salary adjustments effective as of April. Post Q2, compensation cost is expected to show smaller movements quarter-to-quarter. Full year marketing costs remain expected to grow by about 10% from the 2025 level with Q2 costs quite similar to Q1, followed by a slightly higher spend level in the later quarters. In sum, cash-based compensation and marketing will then decline from representing 36% of revenue in 2025 to representing about 33% of revenue in 2026. For all other OpEx items, pre-adjusted EBITDA, we increased our full year estimate to represent just over 20% growth year-over-year, up from our earlier expectation at about 15% growth. This is explained by hosting costs and the effects of our rapid business scaling, increased AI usage and pricing impact of constrained supply, while other items included in the total remained stable overall. We expect the cost category to increase quite linearly as the year progresses. In sum, while we continue to focus on building scale over accelerating margin expansion, as we refresh our estimates, we see a slight further widening of the gap between revenue and cost growth, allowing us to lift our adjusted EBITDA margin by about 15 basis points at the midpoint of full year guidance two months after providing the first color on 2026. In light of our performance and outlook, we remain very pleased with having expanded shareholder returns beyond our recurring dividend program to also include our new buyback program. We repurchased 1.3% of shares outstanding in the program's first month at an attractive $14.88 per share, accelerating ROI upside for our shareholders. While it's only been a couple of months since our last release, we've been excited to share today's updates with you and look forward to keeping you posted on our progress. With that, I'll turn the call back over to the operator for your questions.

We'll take our first question from Eric Sheridan with Goldman Sachs.

Wanted to know if we go a little bit deeper into the learnings you have to date with respect to the adoption of AI tools across your user base and when you look longer term, what do you see as the opportunity set either at the browser level or maybe even for the rise of agentic commerce behavior by users that could bode well for both user growth as well as monetization opportunities?

Sure. So yes, I'll try to answer. High level, number one, we are strong advocates for AI and we try to embed it in many aspects within the browser. As we also talked about in our prepared remarks, we have AI from the URL bar and omnibox to the Opera AI assistant in the sidebar and further on to allow users to bring their own AI via Browser Connector. That's consistent with our offerings. In general, we see that once we provide AI in the right context at the right moment, users are very happy about it. As we mentioned, users who engage with AI often spend about one hour more per day in desktop browsers, which is already a very long session time compared with other apps. They also typically perform significantly more searches and engage with AI in different ways. Those behaviors generally translate to better opportunities to capture user intent and subsequent monetization opportunities. I would also emphasize that user-first design is critical. Opera never tries to push users to something they don't want. Priority one is giving users what they want. It's equally important to respect that sometimes users browse for leisure, not just efficiency. Whoever wins in this space will respect user behavior, provide AI in the right context and time, and enable users to use their own tools rather than locking them into a single ecosystem. That philosophy is driving our product decisions and, we believe, contributes to growth in both AI feature adoption and overall user base. You can see that even though Q1 is traditionally a bit softer seasonally, we saw strong user growth, including notable MAU growth on desktop, which we believe is related to our AI work.

We'll move next to Naved Khan with B. Riley Securities.

Two questions from me. One is on the metric you shared about users who engage with AI spending an hour more per day and you seeing a 50% increase in searches. I'm curious what percentage of your base is engaging with the AI chat features that you currently have? And what are the levers that you control to drive this higher? And the second question I have is just on the Google renewal that's coming up at the end of the year. How are those conversations going? Are you confident about renewing it? Or just give us your thoughts there.

I'll capture the last question first on Google. We discussed this at our Q4 release and we are very pleased to be among the first to sign the renewed agreement following the DOJ requirement in the U.S. We have a very constructive dialogue with Google and do not expect surprises. We continue discussions and see potential for expanded cooperation, both on search and potentially on AI initiatives. The renewal process typically progresses toward the second half of the year, and we'll provide updates when available. Regarding AI adoption metrics, we have not disclosed a single exact percentage of AI usage across the entire base because there are many touch points and entry points for AI in the browser, making a single definition hard to pin down. AI interactions can originate from the omnibar suggestions, the sidebar assistant, Browser Connector with a user's own AI subscription, or third-party chatbots embedded in webpages. As a result, it becomes harder to define one discrete 'AI usage' metric, and we expect a majority of interactions in the browser will encounter AI in one form or another over time. Our goal is to make Opera the best place to use whatever AI the user prefers, and we are focused on providing choice and context so users prefer Opera for those interactions.

We'll move next to Ron Josey with Citi.

I wanted to ask a little bit more on search, specifically with query growth accelerating in the quarter. Frode, I think you talked about search evolving and your broader query approach overall. Talk to us about the evolution as search is evolving and we see accelerating query growth — specifically the tie between the new browser AI tools and engagement as search revenues grow and query growth accelerates. Any insights on the evolution here would be super helpful. And then bigger picture, understood with guidance here, but any insights on the broader advertising environment would be very helpful. Are there any verticals to call out one way or the other?

Ron, I'll start. In the first quarter, pure search revenue grew about 14% year-over-year, which was very strong and up from the growth we saw in all quarters of 2025. On top of that, the broadening of the category to include non-search query revenues drove total query revenue growth to 23%. We view that category enthusiastically because as new tools evolve and people engage with the browser in new ways, we have more opportunities to direct users to the things they are looking for in native ways within the browser. On the advertising environment, we saw strong commercial momentum overall. E-commerce performance remains a tailwind, and we continue to see opportunities to scale into other verticals like travel as seasonality and demand patterns shift. But we remain measured in guidance and leave upside for things to scale better than what we built into our plan.

Further to that, as engagement ramps, you talked about more opportunity direct. Earlier, Song mentioned broader engagement for those who have adopted AI tools. Any additional insights on adoption of AI tools across the user base overall?

Yes, I'll complement Frode. The experience is becoming very integrated: using Browser Connector, users can go to ChatGPT or other models directly from the browser and benefit from browser context. If you type a regular URL, we can use AI to suggest products or relevant services, such as showing Amazon product suggestions or booking options that surface directly in the UI. I would argue that a majority of user searches will involve AI in one form or another going forward. The key is designing experiences that facilitate browsing behavior and are consumer-first. Browser Connector is important because it lets users bring whatever AI they prefer, including cloud-based subscriptions or open-source models, and still have Opera be the best place to use them. That approach has contributed to our recent user growth, particularly on desktop.

We'll take our next question from Jim Callahan with Piper Sandler.

Interested on the comments on travel, rolling out the sort of performance-based product there. Would just be curious if how much of the pieces are in place to kind of roll that out? Or is that something that's already in the model today?

I'll go in terms of the model. Our guidance is built bottom-up from what we have today, and we leave upside for things to scale better than what we built into guidance in the later parts of the year. Travel is a big opportunity and we can use our lessons from e-commerce to scale into that vertical. Seasonality is different — travel has midyear peaks while e-commerce is typically strongest around year-end and the holiday season.

Got it. That is helpful. And then anything in terms of guidance for either Q2 or full year, just relative growth between query and advertising?

We are cautious to break down the guidance further because the mix evolves as the opportunity evolves, especially with the relatively new non-search parts of query. Q1 was very strong on query overall. We don't need to continue year-over-year growth of over 20% on a query basis to meet our guidance, but it's too soon to provide specific segment-level guidance for the back half of the year.

We'll move next to Jacob Stephan with Lake Street Capital Markets.

Congrats on a nice quarter. Maybe just to start off for me, I'll ask on the MCP. This kind of positions you as the central call point for several AI tools. But do you think that this kind of risks cannibalizing any of the Opera Neon subscriptions or economics? Or is this kind of a complementary funnel? Curious your thoughts here.

That's a great question. We do evaluate which features should be exclusive to our subscription product Opera Neon and which should be broadly available across our mainstream browsers. In this case, Browser Connector is a bring-your-own-AI approach that imposes minimal cost on us because it leverages users' existing AI subscriptions or models rather than consuming Opera-paid tokens. Given our profitable advertising model and the leverage that broader distribution provides for ad monetization, it made sense to make Browser Connector widely available rather than restricting it to Neon. There will continue to be features tailored to particular audiences that may remain subscription-based, but for Browser Connector, the clear choice was to make it broadly available because it increases retention and intent capture in the browser overall and thereby supports our ad-based economics.

Okay. Very helpful. Maybe just last one for me on MiniPay. Obviously, nice momentum there. At what point does this kind of become more of a P&L contributor versus just a strategic investment? Looking longer term, what are your plans for MiniPay and OPay?

I can comment on MiniPay. MiniPay is already meaningfully contributing; we generate about $20 million of revenue from the broader ecosystem around it. It is a very successful product and it allows people, particularly in emerging markets, to access stablecoins and other blockchain-based assets in an easy way. We continue to see huge potential ahead, though it is still relatively early in terms of how big it can get and the trajectory. On OPay, that is a separate company Opera founded in 2017 where we hold a 9.5% stake carried on our balance sheet at about $300 million book value. OPay now operates independently and is advancing on its own path, and we expect it may ultimately pursue an IPO, which would be positive for Opera as it would make the market value of that company and our stake more visible.

We'll take our next question from Jonnathan Navarrete with TD Cowen.

How are buybacks going in Q2 so far? And how should we think about the phasing through the year?

We won't provide forward commentary beyond the historical period, but we are pleased to have the program in place. This is our largest buyback program to date and we began trading in late February with March reported activity. The program is opportunistic and we will adjust pace to maximize shareholder value. The business generates healthy cash flows and our CapEx needs are limited relative to many AI companies, so returning cash via dividends and buybacks is a priority.

Great. And just one more question. There were some reports this morning that OpenAI missed some internal sales targets. Just wondering what could be the read-through, if any, for you guys?

Hard to comment specifically on another company's internal targets, but I can speak to how Opera is positioned relative to the broader AI ecosystem.

OpenAI?

I think it's useful to distinguish the different roles. There are major platforms like OpenAI, and then there are companies like Opera that provide a service layer in the browser. We don't try to compete with large LLM providers. Instead, we provide an interface for those models to exist very close to the user, to control the browser, to take into account the user's context and to enable productivity. For example, Browser Connector and our in-browser AI let users operate these models with context included — they don't have to copy and paste links and text. Our cost and capital structure is also quite different from many AI-first companies. We operate a profitable ad business and deliver services at a software layer rather than bearing massive compute burn as part of our core operating model. So while news about other companies is interesting, our business is distinct and positioned to integrate and benefit from multiple AI providers rather than directly depend on any single provider's sales trajectory.

Maybe I'll just add: Opera's user base is already quite AI-savvy and our 300 million MAU represents a very attractive partner opportunity for many AI providers. We believe there are compelling partnership opportunities ahead as the year progresses.

It does appear that there are no further questions at this time. I would now like to hand the call back to Song Lin for any additional or closing remarks.

Sure. Thank you to everyone for joining us today. 2026 is off, again, to a great start. Our continued momentum and truly exciting landscape has already resulted in a solid foundation for continued strength through the remainder of the year and well beyond. Have a good day, everyone.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.