Ziff Davis, Inc. (ZD) Q4 2025 Earnings Call Transcript
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Overview
The earnings report shows mixed results: positive revenue growth in key segments and a significant share repurchase program, yet challenges in Tech & Shopping and a declining ad market. The Q&A highlights efforts to offset traffic declines and maintain margins. Despite optimistic guidance and strategic initiatives, the reaffirmed lower-end guidance and uncertainties in certain segments balance the overall sentiment. Considering the company's market cap, the stock is likely to remain stable, with a neutral impact on the stock price over the next two weeks.
Key Financial Performance
Full Year 2025 Revenue Growth Ziff Davis grew revenues by 3.5% year-over-year. The growth was achieved despite headwinds in some business segments.
Full Year 2025 Adjusted EBITDA Adjusted EBITDA grew slightly year-over-year to $495.1 million, with a margin of 34.1%. The growth was modest due to challenges in certain segments.
Free Cash Flow for 2025 The company generated $287.9 million in free cash flow, up $4.2 million from 2024. This reflects 58.1% of the adjusted EBITDA.
Q4 2025 Revenue Revenue was $406.7 million, a 1.5% decline year-over-year. The decline was primarily due to an 18% drop in the Tech & Shopping segment, offset by growth in other segments.
Q4 2025 Adjusted EBITDA Adjusted EBITDA was $163.2 million, a 5% decline year-over-year. This was driven by the revenue drop in the Tech & Shopping segment.
Tech & Shopping Segment Revenue (Q4 2025) Revenue declined by 18% year-over-year due to a drop in web search traffic, impacting affiliate commerce revenues.
Gaming & Entertainment Segment Revenue (Q4 2025) Revenue grew by 1.5% year-over-year, consistent with its full-year growth rate. Growth was driven by strong performance in the Humble Bundle Storefront and IGN Store.
Health & Wellness Segment Revenue (Q4 2025) Revenue grew by 8.6% year-over-year. Growth was driven by increased ad spend from pharma clients and subscriptions for the Lose It! weight loss app.
Connectivity Segment Revenue (Q4 2025) Revenue grew by 11% year-over-year. Growth was driven by new customers and increased service adoption for products like Speedtest and Downdetector.
Cybersecurity & Martech Segment Revenue (Q4 2025) Revenue grew by 2.7% year-over-year. Growth was driven by strong performance in consumer VPN and cloud backup services.
Advertising and Performance Marketing Revenue (Q4 2025) Revenue declined by 4.4% year-over-year. The decline was attributed to challenges in the Tech & Shopping segment.
Subscription and Licensing Revenue (Q4 2025) Revenue increased by 4% year-over-year, driven by growth in other business segments.
Games Publishing Business Impact (2025) The business contributed negative net revenue of $2.5 million in Q4 and $4.9 million for the full year. The exit from this business reduced revenue drag and volatility.
Share Repurchase Program (2025) The company repurchased 4.8 million shares for $174 million, reducing shares outstanding by more than 10%.
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Operating Highlights
Speedtest Pulse: Launched as a handheld diagnostic device to validate network installations and troubleshoot WiFi issues, enhancing operational efficiency and reducing costs.
Speedtest Certified: Introduced as an independent network verification program awarding a badge of excellence to commercial venues for superior connectivity performance.
IPVanish VPN: Enhanced with threat protection and secure browsing features.
VIPRE integrated email security: Launched with an AI engine to detect threats like email compromise.
Connectivity: Achieved record Q4 revenues with 11% growth, driven by new customers and increased service adoption.
Gaming & Entertainment: Humble Bundle Storefront had its best revenue quarter in 5 years, and IGN Store sales tripled, contributing to $90 million in direct-to-consumer revenues in 2025.
Health & Wellness: Achieved record revenue and adjusted EBITDA, with an 8.6% Q4 revenue growth. Growth driven by AI-powered Halo tool and increased ad spend from pharma clients.
Affiliate commerce: Experienced a decline due to reduced web search traffic, impacting Tech & Shopping segment revenues.
Video and social engagement: CNET Group saw video and social views grow 100% in Q4 and 80% for the full year, reaching 1 billion views.
Share repurchases: Deployed $174 million in 2025 to repurchase shares, reducing outstanding shares by over 10%.
Games Publishing exit: Exited the business to eliminate distractions and volatility, recognizing tax savings and retaining rights to future payments.
AI content licensing: Engaged in discussions to establish proper licensing frameworks for AI applications, focusing on fair compensation for content use.
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Risk or Challenges
Tech & Shopping Segment Revenue Decline: The Tech & Shopping segment experienced an 18% revenue decline in Q4 2025, primarily due to a drop in web search traffic, which significantly impacted affiliate commerce revenues. This trend is expected to continue with double-digit revenue declines in the first half of 2026.
Affiliate Commerce Revenue Dependency: Affiliate commerce revenues are heavily reliant on high-quality referral traffic from search engines, which has been declining. This dependency poses a risk to revenue stability.
Games Publishing Business Impact: The Games Publishing business contributed negative net revenue of $2.5 million in Q4 2025 and caused significant volatility in the Tech & Shopping segment. Although the business was sold, its prior impact dragged consolidated revenue growth by approximately 1% in 2025.
AI Content Licensing Uncertainty: Uncertainty around the framework for AI content licensing, including compensation for content used in model training versus retrieval augmented generation (RAG), poses a risk to future revenue opportunities. Ongoing litigation further delays clarity and potential agreements.
Health & Wellness Revenue Mix: The Health & Wellness segment's revenue mix is expected to have lower margins in Q1 2026, which could impact overall profitability.
Connectivity Segment Investment: Continued investment in growth at the Connectivity segment is expected to lower Q1 2026 adjusted EBITDA margins by approximately 3 points year-over-year.
Economic and Market Conditions: The company faces a challenging operating environment, which has impacted financial performance and growth opportunities.
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Guidance & Outlook
Tech & Shopping Revenue Outlook: Tech & Shopping revenues are expected to continue the trend of double-digit revenue decline in the first half of 2026, with improvements forecasted in the second half of the year due to favorable year-over-year comparisons, increased off-platform engagement, and growth in licensing activities. For the full year, Tech & Shopping revenue is expected to decline by mid-single digits.
Segment Growth Projections: Gaming & Entertainment, Health & Wellness, and Cybersecurity & Martech segments are expected to achieve low to mid-single-digit revenue growth for the full year 2026. Connectivity is anticipated to continue its double-digit revenue growth trajectory.
Adjusted EBITDA Margins: The company expects adjusted EBITDA margins to remain around 34% in 2026.
AI Content Licensing: Ziff Davis is actively engaged in discussions with key players regarding AI content licensing. The company anticipates greater clarity on licensing frameworks following ongoing litigation, which is expected to unlock future revenue opportunities. The company is committed to ensuring proper licensing for both model training and retrieval augmented generation (RAG) use cases.
Q1 2026 Revenue and Margin Expectations: Consolidated year-over-year revenue growth for Q1 2026 is expected to be flat or slightly negative due to headwinds in affiliate commerce revenues in the Tech & Shopping division. Adjusted EBITDA margins for Q1 2026 are expected to be about 3 points lower year-over-year, reflecting revenue declines in Tech & Shopping, a lower margin mix in Health & Wellness, and continued investment in Connectivity.
Capital Deployment and M&A: The company plans to continue its active and disciplined approach to acquisitions in 2026, focusing on adding capabilities to its businesses in an accretive manner.
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Shareholder Return Plan
Share Repurchase Program: Ziff Davis deployed $174 million, approximately 60% of its free cash flow, in share repurchases throughout 2025. During the fourth quarter, the company repurchased 1.75 million shares for $60.6 million. Over the course of 2025, Ziff Davis reduced the number of shares outstanding by more than 10%. Since January 1, 2026, the company repurchased an additional 740,000 shares. The Board of Directors increased the stock repurchase authorization by 10 million shares, bringing the total amount available for repurchase to 10.7 million shares, valid until February 2036. The company views share repurchases as an attractive use of investable capital at current valuation levels.
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Key Q&A
Q:Can you expand on the AI search tailwinds in Tech & Shopping and other segments like healthcare or gaming?
A:Vivek Shah explained that traffic is fungible, and while search traffic declines in Tech & Shopping are hard to replace, other sources like apps, social traffic, and video are being utilized. He highlighted that Tech & Shopping faces challenges due to high-intent consumer traffic loss, particularly in affiliate commerce. In 2025, affiliate commerce commissions from organic traffic were $90 million, down $25 million year-over-year, with half of the decline in Q4. Efforts to offset include app traffic, browser extensions, and other monetization forms like video and licensing.
Q:What percentage of traffic and revenue impact is expected from SEO traffic decline, and how will margins be managed?
A:Vivek Shah noted that Tech & Shopping remains a challenge, with affiliate commerce being one of three issues. B2B revenues in Tech & Shopping were intentionally reduced in 2025, leading to a $6 million EBITDA increase despite an $11 million revenue drop. The Game Publishing business also contributed a $14 million revenue decline. He expects affiliate commerce challenges to improve in the second half of 2026. Bret Richter added that margins have been maintained through deliberate efforts, and the first quarter reflects revenue softness and mix changes. The company anticipates delivering on fiscal year 2026 targets.
Q:What is the long-term growth outlook for Tech & Shopping, and what are the M&A opportunities?
A:Vivek Shah believes Tech & Shopping should grow at mid-single digits long-term, similar to other Digital Media segments. He emphasized the potential for new monetization forms within market-leading brands like CNET Group and RetailMeNot. Regarding M&A, he sees opportunities due to compelling valuations in digital media and aims to focus on high-quality brands in high-value categories. The company has cash and free cash flow to pursue attractive opportunities while continuing strategic reviews to unlock shareholder value.
Q:What divisions are prospective buyers most interested in, and what are the broader ad market trends?
A:Vivek Shah could not provide specifics on buyer interest but mentioned an active process. He described the ad market as three segments: Gaming & Entertainment (5% growth in 2025, expected to continue in 2026), Health & Wellness (double-digit growth in 2025, expected to moderate to mid-single digits in 2026), and Tech & Shopping. Challenges in Tech & Shopping are mainly in affiliate commerce, while non-affiliate commerce and non-B2B areas are performing better.
Q:What is the traffic and value at risk in Health & Wellness from search and AI-based competition?
A:Vivek Shah stated that Health & Wellness is not heavily reliant on search traffic, with inventory coming from partnerships, custom condition centers, and direct-to-provider businesses. He is not concerned about search dynamics in this segment. Regarding AI-based competition, he acknowledged that physicians use AI tools, which could present marketing opportunities. The company’s physician engagement platform tied to CME credits remains strong.
Q:Does AI-related uncertainty affect M&A activity, and how does AI impact the clinician side?
A:Vivek Shah acknowledged that AI-related uncertainty might make some content asset owners hesitant to transact due to potential future AI licensing revenues. However, he believes opportunities exist as some may choose to sell due to market difficulties. On the clinician side, he noted that physicians use AI tools, which could create marketing opportunities. The company’s CME credit-tied platform ensures continued physician engagement.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on which divisions prospective buyers are most interested in, citing an active process but offering no further information.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI activation
AI application
AI content
CEO Chief
Certified network
Conference Chief
Connectivity interest
Connectivity record
Consumer Health
Cybersecurity digit
Downdetector RootMetrics
End Conference
Entertainment engagement
GLP
Pulse
RAG
Shopping revenue
affiliate commerce
agreement
audience
business cash
clarity licensing
compensation
content licensing
cybersecurity
drop
engine
generation
harbor language
launch
mail
record revenue
threat
traffic affiliate
training
use case
value proposition
year
ZD Transcript
Ziff Davis, Inc. (ZD) Q4 2025 Earnings Call Transcript
Unknown2-24
The earnings report shows mixed results: positive revenue growth in key segments and a significant share repurchase program, yet challenges in Tech & Shopping and a declining ad market. The Q&A highlights efforts to offset traffic declines and maintain margins. Despite optimistic guidance and strategic initiatives, the reaffirmed lower-end guidance and uncertainties in certain segments balance the overall sentiment. Considering the company's market cap, the stock is likely to remain stable, with a neutral impact on the stock price over the next two weeks.
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The earnings call summary indicates steady growth across various segments, with a notable 35% increase in free cash flow. The Q&A section highlights management's openness to strategic opportunities, including potential divestitures and M&A, which suggests proactive capital allocation. Despite some uncertainties around AI impacts and market dynamics, the company's strong cash generation and shareholder return plans, including stock repurchases, support a positive outlook. Given the market cap, the stock price is likely to see a moderate positive movement of 2% to 8% over the next two weeks.
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ZD Slides
ZD Report
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