Ziff Davis (ZD): A Misunderstood Media Play with Strong Q2 Execution and AI-Driven Growth Potential

Ziff Davis (NASDAQ: ZD) has long been a polarizing name in the media and digital services space. While its stock price has lagged behind broader market benchmarks and peers in recent years, a closer look at its Q2 2025 results and strategic investments reveals a company poised for long-term value creation. With strong execution in high-margin verticals like health, connectivity, and cybersecurity, and a disciplined approach to capital allocation, ZD is quietly building a foundation for sustainable growth.

Q2 2025: A Quarter of Resilience and Strategic Clarity

Ziff Davis delivered a standout Q2 2025, reporting 9.8% year-over-year revenue growth to $352.2 million. This outperformance was driven by its Health & Wellness and Connectivity segments, which grew by 15.7% and 14.2%, respectively. The Cybersecurity & Martech segment, despite a marginal 0.9% decline, remains a critical growth engine, bolstered by VIPRE Security Group's AI-powered email threat solutions and recent acquisitions.

Operating income and adjusted EBITDA both rose sharply—17.2% and 11.8%, respectively—while margins improved to 9.5% and 30.6%. These metrics underscore ZD's ability to maintain profitability even as it invests in high-growth areas. Free cash flow of $26.9 million (up 7.5% YoY) and $33.9 million in share repurchases further highlight management's focus on shareholder returns.

AI-Driven Verticals: The Engine of Future Growth

ZD's strategic pivot toward AI and digital transformation is reshaping its business model. In healthcare, the acquisition of TheSkimm and a partnership with Xyla are enabling personalized wellness content for millennial and Gen X women—a demographic with significant spending power. Meanwhile, VIPRE's Integrated Email Security (IES) and Penetration Testing Services are addressing the rising threat of hyper-personalized phishing attacks, a $40 billion market expected to grow at 12% annually through 2030.

The Connectivity segment, bolstered by IPVanish's eSIM initiatives and T-Mobile's 5G leadership, is capitalizing on the surge in remote work and global travel. These verticals are not just complementary; they are interlinked. For example, VIPRE's cybersecurity tools protect health and connectivity platforms, creating a flywheel effect.

Reassessing the Stock: Undervalued or Overlooked?

Despite these strengths, ZD's stock has underperformed, with a 12-month return of -24% versus the S&P 500's +19%. Analysts cite challenges like subscription revenue volatility and integration costs from recent acquisitions. However, this underperformance may present an opportunity.

ZD's trailing P/E of 12x and forward P/E of 10x suggest it is trading at a discount to peers in the digital media and cybersecurity sectors. Its full-year 2025 guidance—$1.442–$1.502 billion in revenue and $505–$542 million in adjusted EBITDA—implies a path to margin expansion and earnings growth. Moreover, the company's $457 million in cash and $3.2 billion M&A war chest position it to continue acquiring niche brands in fragmented markets.

Risks and Realities

ZD is not without risks. Subscription fatigue and macroeconomic headwinds could pressure recurring revenue streams. Additionally, integrating 92+ acquired brands requires operational discipline. However, the company's focus on high-margin verticals and recurring revenue models (e.g., VIPRE's SaaS offerings) mitigates these risks.

Investment Thesis: A Long-Term Play on Digital Transformation

For investors with a 3–5 year horizon, ZD offers an attractive risk-reward profile. Its AI-driven verticals are aligned with multi-decade trends in digital health, cybersecurity, and connectivity. The stock's current valuation, combined with a robust balance sheet and active M&A strategy, suggests upside potential as these segments scale.

While the “Hold” consensus rating reflects near-term uncertainties, the fundamentals point to a company that is executing well and positioning itself for structural growth. For those willing to look beyond short-term volatility, Ziff Davis represents a compelling case of a misunderstood media play with strong execution and AI-powered momentum.