If you thought China's economy was slowing down from its double-digit growth rate, don't tell that to Internet security and Internet value-added service company Qihoo 360 Technology (NYSE:QIHU), which delivered a huge surge in revenue and income for shareholders with the release of its third-quarter results.
For the quarter, Qihoo 360 reported revenue growth of 124%, hitting $187.9 million, as adjusted profits catapulted 154% year-over-year to $61.5 million, or $0.47 per share, and adjusted net margin added 390 basis points to 32.7%. According to estimates on Yahoo! Finance, Qihoo crushed expectations, which had called for $181.7 million in revenue and $0.37 in EPS.
Leading the charge was a 107% increase in advertising revenue, which comprised 64% of total sales, while the company's value-added service delivered a revenue spike of 163% to $67 million, aided by more Chinese citizens paying for online games. As China's middle class grows, so does the demand for small luxuries, such as the ability to play online games, as Qihoo is quickly learning.
Qihoo 360's management notes multiple milestones achieved during the quarter. These included its Qihoo 360 browser, the leading mobile security product in China, gaining four percentage points to reach 69% mobile market coverage, and user penetration of its Qihoo 360 PC-based products remaining stable at 94% through Sept. 2013.
Looking ahead, Qihoo's management anticipates fourth-quarter revenue growth of 100%-102% ($206 million-$208 million in total revenue) and full-year revenue growth of approximately 100% ($655 million-$657 million). President Xiangdong Qi also commented that the company plans to boost product and technology investments to focus its efforts on improving its search and mobile monetization capabilities as growth permits, since these tools represent the future growth driver of the company.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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