Direct Digital 2025 Q2 Earnings Wider Losses Amid Revenue Decline

Direct Digital Holdings (DRCT) reported its second-quarter 2025 earnings on August 7, 2025, highlighting a significant decline in revenue and a widened net loss, amid ongoing operational and market challenges. The company’s performance missed expectations in terms of both revenue and profitability, with management expressing cautious optimism about future recovery efforts.

Direct Digital’s Q2 revenue of $10.14 million fell sharply by 53.6% compared to $21.86 million in the same period the prior year, driven by a steep drop in its sell-side advertising segment. The sell-side reported $2.48 million, a 83% decline from $14.3 million in Q2 2024, due to reduced impression inventory. In contrast, buy-side advertising revenue increased slightly to $7.66 million from $7.6 million in Q2 2024, contributing to a modest sequential recovery in overall performance.

The earnings report showed a significant deterioration in profitability, with a net loss of $4.20 million, or $0.23 per share, representing a 33.6% increase in losses compared to the $3.14 million, or $0.16 per share loss in Q2 2024. These figures highlight the company’s sustained financial struggles over the past five years, with consecutive quarterly losses and limited near-term profitability visibility.

Post-earnings, the stock of Direct Digital has underperformed significantly. The stock price declined 10.28% in the latest trading day, 8.96% over the past week, and 24.30% month-to-date. A strategic trade based on revenue beating expectations resulted in a -97.63% return, significantly underperforming the benchmark by 138.02%, with a Sharpe ratio of -0.38. These figures underscore the stock’s high volatility and the risk associated with investing in the company during this period.

Following the disappointing results, the stock price of Direct Digital has been highly volatile, with a 10.28% decline in a single trading day and a 24.30% drop month-to-date. A post-earnings trading strategy based on revenue beating expectations led to a -97.63% return, significantly underperforming the market benchmark by 138.02%, further emphasizing the challenges for investors.

CEO Mark D. Walker acknowledged the company’s ongoing challenges but emphasized progress in rebuilding the business. He highlighted a 24% sequential revenue increase in Q2 2025 driven by both sell-side and buy-side operations, as well as a 25% reduction in operating expenses compared to Q2 2024. Walker expressed optimism about the potential for growth in the second half of 2025, particularly through the integration of direct connections in the sell-side business and continued cost efficiencies.

Direct Digital Holdings did not provide specific revenue guidance for the remainder of 2025 due to uncertainties surrounding its sell-side operations and broader market conditions. However, management remains confident in the potential for stronger performance in the second half of the year, driven by the recovery of the sell-side business and growth in the buy-side segment. Once the company achieves greater visibility into its sell-side operations, it intends to reinstate revenue guidance.

In its additional news, Direct Digital reported a 24% sequential increase in revenue and a 35% gross margin in Q2 2025, compared to 29% in Q1. The company reduced operating expenses by 25% year-over-year and improved net loss and adjusted EBITDA sequentially by $1.7 million and $1.6 million, respectively, driven by growth in the buy-side segment. The sell-side advertising segment processed 182 billion average monthly impressions, and the number of advertisers increased by over 30% compared to Q2 2024. The buy-side segment served over 220 customers, with $1.0 million in revenue from new verticals. The company also highlighted its strategic focus on long-term value creation and potential M&A activity to support key growth initiatives.