Next Monday, Qihoo 360 (UNKNOWN:QIHU.DL) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

Qihoo 360 has come from being a virtually unknown player in the crowded Chinese Internet space to becoming a serious threat to dominant search provider Baidu (NASDAQ:BIDU) and its competitors. Yet does Qihoo have what it takes to take the fight to the next level? Let's take an early look at what's been happening with Qihoo 360 over the past quarter and what we're likely to see in its quarterly report.

Stats on Qihoo 360

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$106.3 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Where will Qihoo's growth come from this quarter?
Analysts have gotten a bit more pessimistic about Qihoo's earnings prospects in recent months, reducing their first-quarter estimates by $0.01 per share and cutting $0.07 per share from their full-year 2013 consensus. Yet the stock has soared, rising nearly 30% since mid-February.

The reason for Qihoo's success has been its surprising ability to make inroads in the browser and search areas. Originally specializing in antivirus and other Internet-security solutions, Qihoo is now reaching a broader audience, saying in its fourth-quarter announcement that its 360 Browser reached 310 million users, up more than 20% from the year-ago quarter. Although Qihoo earned a warning from the Chinese government for alleged unfair competition, the company was awarded a government contract in February to provide security solutions for its Ministry of Commerce, giving at least a signal that Qihoo may be back in the government's good graces.

But what's really capturing investors' attention is the ambitious move Qihoo made to launch a search engine last year. Already, Qihoo has seen a big uptick in its search share, rising from 10.4% to 13.5% between the beginning of 2013 and March 20. That leaves it well behind Baidu's figures above 70%, but the incremental gains show Qihoo's staying power in the space.

The big question for Qihoo is what it will do next. One possible next step is for the company to start monetizing its search engine success by developing its own advertising network. Paid search has the potential to greatly increase revenue and to do so in a high-margin way that should bolster profits substantially as well. Another possible growth path could come from acquisitions, as (NASDAQ:SOHU) has soared lately on the idea that its Sogou search business could be a buyout target from Baidu, Qihoo, or Tencent. Picking up Sogou's assets could boost Qihoo's search share to nearly 20%, representing an even bigger threat to Baidu's dominance.

In Qihoo's quarterly report, watch for comments on which direction the company plans to take to push itself forward. With such a strong opportunity in a quickly growing market, Qihoo needs not to squander its change to turn what has been strong success into truly explosive growth in the near future.

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