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ZD

ZIFF DAVIS, INC. (ZD)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered fifth consecutive revenue growth; however both revenue and adjusted EPS were modestly below S&P Global consensus, with revenue at $363.7M vs $366.4M consensus and adjusted EPS at $1.76 vs $1.785 consensus, while adjusted EBITDA was roughly flat year-over-year . Revenue miss and EPS shortfall were small in magnitude; GAAP EPS was negative due to a $17.6M goodwill impairment and an unusually high GAAP tax rate .
  • Guidance was reaffirmed for FY2025 ($1.44B–$1.50B revenue, $505M–$542M adjusted EBITDA, $6.64–$7.28 adjusted diluted EPS), though management expects results to land in the lower half for revenue and adjusted EPS, and adjusted EBITDA closer to the low end .
  • Segment mix: Health & Wellness led with 12.7% revenue growth and 17.9% adjusted EBITDA growth; Connectivity grew revenue 2.2% but margins compressed on product investment; Cybersecurity & Martech returned to revenue growth (+2%) but EBITDA dipped due to timing effects; Tech & Shopping declined on the wind-down of game publishing; Gaming & Entertainment fell 4.3% YOY but was on track for seasonal Q4 strength .
  • Potential stock reaction catalyst: the strategic review and advisor engagement to explore value-creating opportunities, including potential sale of entire divisions; continued buybacks (3.6M shares YTD, 10b5-1 plan) reinforce capital return and sum-of-the-parts narrative .

What Went Well and What Went Wrong

  • What Went Well

    • Health & Wellness accelerated: revenue +12.7% YOY to $102.3M; adjusted EBITDA +17.9% to $38.0M; management highlighted strong pharma commercialization, Lose It subscription growth, and new AI audience platform Halo .
    • Free cash flow surged: Q3 FCF $108.2M (+35% YOY) and operating cash flow $138.3M; trailing-12-month FCF $261.2M; supports ongoing buybacks and M&A .
    • Connectivity pipeline and product launches: Speedtest Certified launched in September; Speedtest Pulse unveiled in November; Q4 expected acceleration from timing, pipeline strength, and new products .

  • What Went Wrong

    • GAAP loss and unusual tax: Q3 GAAP net loss of $(3.6)M with GAAP EPS $(0.09), driven by a $17.6M goodwill impairment and ~139.8% GAAP tax rate for the quarter .
    • Tech & Shopping softness: segment revenue down 2.2% YOY and adjusted EBITDA down 12.1% due to negative net revenue from the wind-down of game publishing; excluding game publishing, segment grew revenue and EBITDA .
    • Slight miss vs estimates and margin mixed: revenue and adjusted EPS slightly below consensus; Connectivity margins compressed on upfront product investments; Cybersecurity & Martech EBITDA down ~$0.5M on expense timing .

Financial Results

MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 Consensus
Revenue ($USD Millions)$353.6 $352.2 $363.7 $366.4*
Adjusted EBITDA ($USD Millions)$124.7 $107.7 $124.1 —
Adjusted diluted EPS ($USD)$1.64 $1.24 $1.76 $1.785*
GAAP diluted EPS ($USD)$(1.11) $0.62 $(0.09) —
Operating income margin (%)(8.3)% 9.5% 7.8% —
Adjusted EBITDA margin (%)35.3% 30.6% 34.1% —

Values with * retrieved from S&P Global.

Segment revenues and adjusted EBITDA:

SegmentRevenue Q3 2024 ($M)Revenue Q3 2025 ($M)Adj. EBITDA Q3 2024 ($M)Adj. EBITDA Q3 2025 ($M)
Technology & Shopping$87.1 $85.2 $31.17 $27.39
Gaming & Entertainment$49.7 $47.6 $18.19 $18.67
Health & Wellness$90.8 $102.3 $32.24 $38.01
Connectivity$56.0 $57.2 $29.46 $25.46
Cybersecurity & Martech$70.0 $71.4 $24.62 $24.06
Corporate——$(10.99) $(9.54)
Total$353.6 $363.7 $124.69 $124.06

KPIs (mix by revenue source):

Revenue SourceQ3 2024 ($M)Q3 2025 ($M)YoY Change
Advertising & Performance Marketing$194 $205 +5.9%
Subscription & Licensing$147 $150 +2.0%

Additional cash flow and capital allocation:

  • Net cash from ops: $138.3M ; Free cash flow: $108.2M ; Q3 FCF reconciliation shown .
  • Share repurchases: $44.4M in Q3; >3.6M shares repurchased YTD; ~2.75M shares remaining under authorization; 10b5-1 plan to continue .
  • Balance sheet: Cash & equivalents $503.4M; gross debt ~$872M; gross leverage ~1.7x TTM adjusted EBITDA; net leverage ~0.7x (0.5x incl. investments) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenues ($USD Billions)FY 2025$1.442–$1.502 $1.442–$1.502 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$505–$542 $505–$542 Maintained
Adjusted diluted EPS ($USD)FY 2025$6.64–$7.28 $6.64–$7.28 Maintained

Management indicated they expect FY2025 revenue and adjusted diluted EPS to be in the lower half of the range, and adjusted EBITDA closer to the low end, with Q4 typically the seasonally largest quarter .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Strategic review / unlocking valueNew five-segment reporting helped investors apply sum-of-the-parts; continued buybacks; active M&A Advisors engaged; open to divestitures, investments, spinoffs; focus on per-share value; no divisions off the table; willing to evaluate whole-company interest; inbound interest increased post disclosure Intensifying strategic optionality
AI initiatives (products & ops)AI customer chatbot at RetailMeNot; Viper IES email security; Lose It AI logging boosted engagement and outcomes Halo audience platform launched in Health & Wellness; Imagine AI platform in Gaming & Entertainment (private beta); 80% coupon code processing automated by AI Expansion in AI commercialization
Search/AIO reviews exposureCompany less leveraged to SEO; programmatic < $50M annually; direct and diversified monetization; blocking AI bots at CDN AIO prevalence ticked down; search rank volatility noted; overall exposure limited (≈17.5% of revenue via search) Manageable headwind; vigilant monitoring
Connectivity product roadmapDouble-digit growth in Q2; Speedtest Intelligence/RootMetrics demand Launched Speedtest Certified; unveiled Speedtest Pulse; Q4 product launch planned; Q4 connectivity acceleration expected Strengthening with new products
Health & Wellness momentumRecord growth in Q2; pharma commercialization strong; Lose It web subscriptions Growth accelerated in Q3; Halo launch; continued strength across subscription and marketing Sustained strength
Cybersecurity & MartechNear flat revenue in Q2; VPN momentum; tuck-in acquisitions Returned to revenue growth, EBITDA affected by timing; Semantic Labs acquisition Improving top line; margin timing effects

Management Commentary

  • “During the third quarter, we delivered our fifth consecutive quarter of revenue growth and generated strong free cash flow.” — Vivek Shah, CEO .
  • On strategic review: enhanced segment disclosure revealed valuation discount; advisors engaged to assess transactions including potential division sales; focus on maximizing shareholder value; open to all options .
  • On segment drivers: Health & Wellness hit high-water marks; Connectivity to accelerate with new products; Cybersecurity (VPN, backup) showing momentum; Tech & Shopping ex-game publishing grew .
  • Capital allocation: substantial cash and leverage capacity; >3.6M shares repurchased YTD; intent to continue buybacks via 10b5-1 .

Q&A Highlights

  • Strategic options: No assets off-limits; selective unit sales likely more value-accretive than whole-company sale, but will evaluate all credible interest; priority is per-share value accretion .
  • Search/AIO impacts: exposure relatively limited; AIO reviews appear in ~29% of key queries; more concerned with recent rank volatility; diversified revenue model reduces risk .
  • Guidance positioning: Expect lower-half outcomes for revenue and adjusted EPS; adjusted EBITDA near low end; subscription growth expected to outpace advertising in Q4; lapping CNET acquisition affects advertising growth optics .
  • AI licensing stance: active negotiations; joined Real Simple Licensing; blocking bots at CDN; insist on fair value exchange to set sustainable precedent .
  • M&A approach: continue disciplined acquisitions of leadership brands and platforms; balance buybacks with accretive deals; focus on cash-on-cash returns .

Estimates Context

MetricQ3 2025 ActualQ3 2025 ConsensusSurpriseQ4 2025 Consensus
Revenue ($USD Millions)$363.7 $366.4*Miss (~$2.7M; ~0.7%)$417.0*
Adjusted diluted EPS ($USD)$1.76 $1.785*Miss (~$0.025; ~1.4%)$2.664*

Values with * retrieved from S&P Global.

Implications: Slight misses are unlikely to materially alter the FY guide (reaffirmed), but management’s lower-half framing suggests consensus may drift down modestly for FY revenue/EPS and near-term margins (connectivity investments), while Q4 seasonality and product launches offer a support.

Key Takeaways for Investors

  • Small revenue and adjusted EPS misses vs consensus, with solid cash generation and flat adjusted EBITDA vs prior year; GAAP loss driven by non-cash goodwill impairment and unusual tax rate .
  • Health & Wellness remains the growth engine; Connectivity poised for Q4 acceleration as Speedtest Certified and Speedtest Pulse begin to contribute .
  • Tech & Shopping headwinds are transitory (game publishing wind-down); ex-publishing performance was positive; expect seasonal tailwinds in Gaming & Entertainment .
  • Strategic review is a tangible catalyst; sum-of-the-parts rerating potential increases with advisor engagement and continued buybacks .
  • Near-term trading: watch for updates on asset reviews and Q4 execution in Connectivity/Health & Wellness; modest estimate recalibration possible given management’s lower-half commentary .
  • Medium-term thesis: diversified, less SEO-dependent revenue mix, strong FCF and disciplined capital allocation (buybacks + tuck-ins) support value creation; new AI/data products provide incremental growth vectors .
  • Risks: search volatility, macro advertising variability, timing of connectivity contracts, and expense timing in Cybersecurity & Martech; monitor GAAP tax and impairment items .

Citations: Press release and 8‑K (Q3) ; Earnings call transcript (Q3) ; Prior quarters Q2 and Q1 8‑Ks and call (for trends) ; Product/acquisition press releases .

Values with * retrieved from S&P Global.