Qihoo 360 Q3 profit up 18 percent on revenue jump

Chinese Internet company beats market expectations with net profit of US$12.9 million, thanks to surge 77 percent surge in revenue and larger user base.
Written by Ryan Huang, Contributor

Qihoo 360 Technology Company has booked a 18 percent rise in third quarter net profit at US$12.9 million, beating market estimates, boosted by an expanding user base and a jump in revenue.

The Chinese Internet firm said revenue for the three months ended September were up 77 percent to US$84 million, according to a press release Monday.

This mainly lifted by growth in both online advertising and Internet value-added services, said the company. It also hit a record 442 million active users in September this year, compared with 370 million last year.

Hongyi Zhou, chairman and CEO of Qihoo 360, noted this was the company's "seventh straight quarter of robust revenue growth" since its public listing in 2011.

"We continue to outperform the growth rate of the industry, despite the macro economic challenges that persist in the market," said Zhou.

Qihoo 360, known for its antivirus software, launched a browser in August to take on Baidu. (source: 360.cn)

Earnings jump but lower margins
For the third quarter, online advertising revenues were US$58.4 million, up 66.5 percent from the same period last year. Internet value-added service revenues, which are mainly derived from web game operations, were up 110.8 percent at US$25.5 million.

However, operating expenses were more than double from last year to US$63.9 million. Net margins were also down to 15.4 percent, from 23 percent in the same period a year ago. These were mainly dragged down by higher costs due to staff, bandwidth, equipment depreciation, and marketing, said Qihoo.

Qihoo, which had established itself as an Internet security software provider, launched a search service in August. This saw it gain an estimated 5 to 10 percent market share, eroding search giant Baidu's leadership position of around 70 percent.

Baidu last month reported a 50 percent rise in its third quarter net profit to US$994.6 million--missing market forecasts and recording its slowest revenue growth in two years.

Both companies are currently embroiled in a legal dispute, with Baidu suing Qihoo for "unfair competition" for reportedly releasing a software which blocked its advertisements and value-added services.

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