Ziff Davis revenue and EBITDA fall as Google referrals retreat

By Tom Whitfield

$289.3 million was Ziff Davis’s revenue from continuing operations in the third quarter, down from $306.5 million a year earlier. Adjusted EBITDA fell to $82.2 million from $97.8 million, and the adjusted EBITDA margin narrowed to 28.4% from 31.9%.

Adjusted diluted EPS slipped to $1.39 from $1.40 as buybacks supported the per-share result. CEO Vivek Shah said revenue and adjusted EBITDA rose from the second quarter and the margin improved 160 basis points sequentially. Management expects further sequential revenue and margin growth in the fourth quarter. Shah said results were broadly in line with expectations.

What does falling Google traffic mean for revenue?

Organic Google referrals to Ziff Davis properties fell approximately 37% year over year in the third quarter, after a roughly 23% decline in the same quarter last year. Shah said: “We are operating on the assumption that referrals will continue to fall rather than planning for a search recovery.” The company has not built a search rebound into its operating plan.

The revenue decline was much smaller than the traffic decline because the portfolio also includes subscription, app and newsletter businesses. Social commerce, video, licensing and direct audiences partly offset pressure on search-dependent properties, Shah said.

Ziff Davis content appeared roughly 2.7 billion times in Google AI Overviews and AI Mode responses during the quarter, based on a Google statistic cited by Shah. That exposure was nearly 10 times the clicks received by the digital media sites from Google Search.

Shah said marketers increasingly consider AI visibility when choosing media partners, although a gap remains between usage and monetization. Ziff Davis remains open to licensing deals for content used in AI systems and expects its OpenAI litigation to bring clarity. No licensing revenue, deal timetable or financial impact from the OpenAI case was disclosed, leaving that upside unquantified.

AI may broaden distribution, but the search hole remains the immediate earnings risk.

Which businesses held up, and which did not?

Revenue declined across all four operating segments:

• Tech and shopping: Revenue fell just under 4% year over year, versus a 5% decline in the second quarter. The decline has narrowed for three consecutive quarters, and Shah expects that trend to continue in the fourth quarter.
• Gaming and entertainment: Revenue fell about 2%. Growth at the Humble Bundle storefront offset lower advertising revenue at IGN. Shah described a weak gaming advertising market amid a light release slate and expects more launches to support advertising demand in 2027.
• Health and wellness: Revenue dropped 9.5%, mainly because of lower advertising aimed at healthcare professionals at MedPage Today. Consumer pharmaceutical advertising strengthened, including promotion of GLP-1 treatments. Harvard Health Publishing joined the healthcare media network under a long-term exclusive contract.
• Cybersecurity and marketing technology: Revenue fell 4.6%, mainly on weakness in search engine optimization tools and email marketing. Consumer cybersecurity business IPVanish, email delivery platform SMTP.com and customer-acquisition business Semantic Labs continued to grow.

The portfolio mix softened the search shock, but no operating segment posted an annual increase.

Can AI and spending cuts sustain the margin recovery?

More than 90% of pull requests across product and engineering teams are written by AI, Shah said, helping lower the cost of delivering features. Shah estimated headcount would fall 10% by year-end, though he cautioned that AI is not the sole reason.

CFO Bret Richter said: “Targeted spending cuts and operating efficiencies also contributed to the sequential margin improvement.” The reported figures do not isolate AI-related savings, so the margin bridge does not show that automation alone drove the gain.

Cost discipline improved the quarter, but the evidence does not show AI caused the entire increase.

What do buybacks and cash flow show?

Ziff Davis repurchased 1.7 million shares for $92 million in the third quarter. Year to date, it bought 5.5 million shares and reduced the share count by nearly 14%, according to Richter. About 6 million shares remain available under the board’s authorization.

At Sept. 30, the company held $1.4 billion in cash and cash equivalents and about $100 million in long-term investments. Richter said cash and equivalents exceeded outstanding debt by $535 million. Ziff Davis subsequently paid approximately $150 million, including accrued interest, to satisfy maturing convertible notes.

Free cash flow was negative $100.1 million, compared with positive $108.2 million a year earlier; the prior-year figure included the Connectivity business, which Ziff Davis sold in the second quarter. Taxes, professional fees and other sale-related items reduced third-quarter free cash flow by approximately $90 million.

The balance sheet therefore carries more cushion than the quarter’s cash generation suggests.

What has management guided for the fourth quarter?

Fourth-quarter revenue should rise by a double-digit percentage sequentially but decline by a low- to mid-single-digit percentage year over year, Richter said. The adjusted EBITDA margin should reach the low- to mid-30% range, up sequentially but below the prior-year level. Adjusted diluted EPS should increase slightly year over year.

The forecast requires stronger sequential demand and does not assume a Google search recovery.

The near-term promise is sequential improvement, not a return to last year’s scale.

What does Ziff Davis own?

Ziff Davis describes itself as a digital media and technology company serving consumers, technology professionals, businesses and advertisers. Its portfolio covers technology, gaming and entertainment, shopping, health and wellness, and related digital services. Brands include PCMag, Mashable, IGN, Humble Bundle, RetailMeNot, Spiceworks, Ookla, Speedtest and Downdetector, plus health and wellness publications and platforms operated through Everyday Health Group.

The quarter offers no quick cure for search dependence: AI exposure is large and cash is ample, but revenue, EBITDA and free cash flow all fell.