Ziff Davis Q3 2025: Contradictions Emerge on Valuation, AI Impact, and M&A Strategy

Date of Call: November 7, 2025

Financials Results

• Revenue: $363.7M, up nearly 3% YOY (vs $353.6M prior year)
• EPS: $1.76 adjusted diluted EPS, up >7% YOY (vs $1.64 prior year)

Guidance:

• Reaffirming fiscal year 2025 guidance range; expect total revenues and adjusted diluted EPS in the lower half of the range and adjusted EBITDA nearer the lower end.
• Q4 is seasonally largest revenue quarter; expect Connectivity revenue growth to accelerate and product timing to benefit Q4.
• Continue stock repurchases (10b5-1 plan) and disciplined M&A program while evaluating strategic transactions to unlock shareholder value.

Business Commentary:

* Revenue Growth and Share Repurchase: - Ziff Davis reported revenues of $363.7 million for Q3 2025, reflecting a nearly 3% increase over the prior year period. - The company also reported an increase in adjusted diluted EPS by 7%, driven by increased share buybacks, which reduced weighted average shares by nearly 3.3 million or 7.5% compared to the prior period. - The share repurchases were a strategic move to capitalize on the current valuation disconnect in the price of Ziff Davis stock.

• Segment Performance and Strategic Evaluation:
• Three of Ziff Davis' five segments grew revenues in Q3, with Gaming & Entertainment and Health & Wellness showing strong performance, particularly in subscriptions and licensing.
• The company engaged outside advisers to evaluate potential opportunities to unlock value for shareholders, acknowledging a significant disconnect between the current market cap and the intrinsic value of the company.

• This evaluation is driven by interest from both strategic and private equity investors, indicating strong performance in certain divisions and encouraging strategic moves to maximize shareholder value.

• Impact of Game Publishing Wind-Down:

• The Tech & Shopping segment saw a 2% decrease in Q3 revenues, primarily due to the continued wind-down of game publishing activities, which resulted in a negative year-over-year revenue swing of $6.9 million.
• Excluding game publishing, the segment grew in both revenues and adjusted EBITDA, with CNET leading the growth through strong licensing and sponsorships.

• The decline in game publishing was due to strategic decisions to focus on other more profitable segments, such as CNET and RetailMeNot.

• Cybersecurity & Martech Growth:

• The Cybersecurity & Martech segment reported a 2% revenue increase in Q3, driven by strong performance in consumer VPN and cloud backup services.
• The segment's growth was supported by the acquisition of Semantic Labs, which complements existing customer acquisition platforms.
• The focus on enhancing customer acquisition capabilities and strong performance in core services contributed to the segment's revenue growth.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted revenue growth of nearly 3%, adjusted diluted EPS up >7%, and Q3 free cash flow of $108.2M (up 35% YOY). They engaged advisers to evaluate transactions to 'unlock value', repurchased ~3M shares deploying $109M, and reaffirmed FY2025 guidance while noting pockets of strength (Health & Wellness +13% revenue).

Q&A:

• Question from Robert Coolbrith (Evercore ISI): Thoughts on where the valuation disconnect versus intrinsic value is most acute and whether inbound interest now is unique or more competitive?
  Response: Segment-level disclosure drove inbound interest; engaged advisers in response; believe valuation disconnect is broad across divisions and open to transactions to maximize shareholder value.

• Question from Cory Carpenter (JPMorgan): What is on the table (anything off-limits), would you consider selling the whole company, and what impact have AI overviews had on traffic?
  Response: Nothing is off the table; inquiries target specific businesses and selective divestitures likely more value-accretive though full-company offers will be evaluated; AI overviews are not a major headwind—search algorithm volatility is the bigger concern.

• Question from Shyam Patil (Susquehanna): Do you have a preference between selling pieces vs whole company and how would proceeds be used (buybacks, M&A) over next 3–5 years?
  Response: Preference is whatever most increases per‑share value; process may include sales, spinoffs or investments; will remain flexible and continue disciplined M&A and buybacks depending on what unlocks the most value.

• Question from Ross Sandler (Barclays): If Google referral traffic impact may be peaking industry-wide, why is now the right time to explore sales? Also, color on implied Q4 ad growth.
  Response: Many segments (notably Health & Wellness, Connectivity, Cybersecurity) are insulated from AI overview/search impacts and are performing strongly; market undervalues differentiated businesses; expect subscription growth to outpace advertising in Q4, with CNET comps and search volatility weighing on ad growth.

• Question from Rishi Jaluria (RBC): Given other publishers' struggles, will you be aggressive acquiring smaller dislocated properties to consolidate and deploy capital?
  Response: Actively acquiring (~$67–70M YTD) and will continue; will opportunistically buy dislocated assets but balance acquisitions against significant buybacks given attractive stock valuation.

• Question from Ygal Arounian (Citi): Will M&A expand into new high‑growth verticals; update on AI licensing approach and Cloudflare/CDN blocking?
  Response: Prefer acquiring leadership brands that drive demand; actively pursuing AI licensing (joined RSL), blocking AI bots at CDN layer, and will only license content under fair-value terms to set sustainable precedents.

• Question from Christopher Kuntarich (UBS): If a spinoff occurs, would acquisition targeting shift toward emerging leaders/higher‑growth businesses versus current leadership brands?
  Response: Acquisition philosophy remains focused on cash‑on‑cash returns and free cash flow yield; may pursue higher-growth assets only if they meet return and cash‑flow criteria—no fundamental change to the formula.

Contradiction Point 1

Valuation and Strategic Review

It involves the company's valuation and strategic review, which are crucial factors for investors and potential acquirers.

Where are valuation gaps most pronounced? Do current factors justify increased interest? Are competitive bidding or exit opportunities for certain businesses likely? - Robert Coolbrith (Evercore ISI Institutional Equities, Research Division)

2025Q3: The decision to engage advisers is in response to the level of inbound interest since breaking out into 5 reportable segments, which attracted strategic and sponsor interest. The disconnect between current and intrinsic value is the widest it's ever been. Every division should command a multiple higher than the current Ziff Davis multiple. - Vivek Shah(CEO)

With increased segment-level disclosures, what does Ziff Davis aim to communicate to the market, particularly about intrinsic value versus current market valuation? - Shyam Patil (Susquehanna Financial Group, LLP, Research Division)

2025Q2: We are also providing additional disclosure in the supplemental materials for the first time ever. We're doing -- there are tables that show the revenues, profitability, growth, and EBITDA margin trends for each of the 5 reportable segments. We hope that investors will appreciate the intrinsic value of these 5 reportable segments. - Vivek Shah(CEO)

Contradiction Point 2

AI's Impact on Traffic and Growth

It involves the impact of AI on traffic and growth, which is crucial for understanding the company's future performance and strategies.

What impact has AI had on traffic and growth? - Cory Carpenter (JPMorgan Chase & Co, Research Division)

2025Q3: AI overviews are stable, but there's volatility due to frequent Google algorithm changes. - Vivek Shah(CEO, President & Director)

How is generative AI affecting your business? Is there a shift from direct to programmatic sales? - Cory Carpenter (JPMorgan)

2025Q1: Only 3% of revenues depend on traffic, and GenAI impacts just a small percentage. - Vivek Shah(CEO)

Contradiction Point 3

M&A Market and Share Buybacks

It highlights differing perspectives on the M&A market and share buybacks, which are important for understanding the company's capital allocation strategy.

Where are the most significant valuation gaps? Are there unique factors in the current environment that make pursuing opportunities more strategic now? Could competitive bidding dynamics emerge, or would exiting now be strategic for certain businesses? - Robert Coolbrith (Evercore ISI Institutional Equities, Research Division)

2025Q3: The decision to engage advisers is in response to the level of inbound interest since breaking out into 5 reportable segments, which attracted strategic and sponsor interest. - Vivek Shah(CEO, President & Director)

How is the current M&A market, and what are your thoughts on share buybacks given the current stock price? - Ygal Arounian (Citi)

2025Q1: M&A market is favorable. We have seen participation from all divisions, and teams are actively looking for deals. - Bret Richter(CFO)