Digital media company Ziff Davis (NASDAQ: ZD) missed Wall Street’s revenue expectations in Q3 CY2025 as sales rose 2.9% year on year to $363.7 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $1.47 billion at the midpoint. Its non-GAAP profit of $1.76 per share was 1.4% below analysts’ consensus estimates.

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StockStory’s Take

Ziff Davis’ third quarter performance showed modest revenue growth, but both sales and non-GAAP profit came in slightly below Wall Street expectations. Management attributed the results to continued strength in its Health & Wellness division and growth in several key product areas, offset by softness in Tech & Shopping due to the wind-down of game publishing activities. CEO Vivek Shah highlighted the company’s enhanced segment-level reporting and operational focus, noting that three out of five business units grew revenue in the quarter. Shah also pointed to a strong performance from CNET and the Health & Wellness segment, which saw 13% year-over-year revenue growth, as contributors to the quarter.

Looking ahead, Ziff Davis’ reaffirmed guidance reflects management’s belief that ongoing product innovation, targeted acquisitions, and disciplined capital deployment will support growth. The company is actively evaluating strategic alternatives, including potential divestitures or spin-offs, to unlock shareholder value following significant inbound interest in its various business segments. Shah stated, “We are going in with an open mind,” indicating that all options—including the sale of individual units or the entire company—are being considered. Management further emphasized the company's ongoing investment in AI-driven platforms, digital health solutions, and M&A as critical to its forward strategy.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to strong performance in Health & Wellness and CNET, offset by continued decline in game publishing and the impact of new product investments.

• Health & Wellness momentum: The Health & Wellness segment accelerated with 13% revenue growth and 18% adjusted EBITDA growth, marking its best third quarter ever. Management credited balanced expansion across pharma commercialization, digital health, and provider solutions, as well as strong subscription growth for the Lucid app. This segment’s success is seen as strategic given industry shifts toward consumer-driven healthcare.

• Tech & Shopping mix shift: Revenue in Tech & Shopping declined 2% due to the planned wind-down of game publishing, which created a $6.9 million year-over-year headwind. Excluding game publishing, the segment grew, led by CNET’s licensing, expanded video, and a Best Buy partnership rollout, showing resilience in core digital media operations.

• AI platform deployment: Ziff Davis continued to integrate artificial intelligence to refine advertiser targeting and operational efficiency. The company launched HALO for Health & Wellness and IMAGINE for Gaming & Entertainment, applications designed to leverage proprietary data for better audience segmentation and predictive modeling. Early client feedback and private beta results were described as promising.

• Product development and launches: Connectivity segment growth was supported by new offerings, including Speedtest Certified (a Wi-Fi certification product for enterprises) and an upcoming network diagnostics tool. These investments led to higher current costs but are expected to drive future growth.

• Active capital allocation: The company maintained a strong balance sheet and continued to prioritize share repurchases, deploying a significant portion of free cash flow to buybacks. Management also referenced ongoing M&A activity, completing seven acquisitions year-to-date to expand capabilities in Connectivity and Cybersecurity & Martech.

Drivers of Future Performance

Ziff Davis expects its strategic review, ongoing AI initiatives, and selective acquisitions to shape its outlook for the rest of the year and into 2026.

• Strategic alternatives under review: Management is actively evaluating divestitures, spin-offs, or the sale of business units following increased external interest, with the goal of unlocking shareholder value. CEO Shah emphasized that every division is on the table, and decisions will be guided by what maximizes per-share value for investors.

• AI-driven product innovation: The company is investing in proprietary AI platforms—such as HALO and IMAGINE—to enhance advertising effectiveness and operational efficiency. Management expects these applications to improve monetization and create new revenue streams, particularly as more clients test and adopt the new tools.

• M&A and capital deployment: Ziff Davis remains committed to disciplined acquisitions and ongoing share repurchases, balancing buybacks with strategic investments. Management believes the combination of buybacks and expansion into leadership brands or new verticals can drive long-term earnings growth, but cautions that the timing and impact of these moves depend on market dynamics and the outcome of the strategic review.

Catalysts in Upcoming Quarters

In coming quarters, StockStory analysts will closely track (1) updates from the ongoing strategic review, including any announcements of asset sales, spin-offs, or other transactions; (2) the pace of adoption and monetization for newly launched AI platforms in Health & Wellness and Gaming & Entertainment; and (3) the performance of new product launches in Connectivity, especially the uptake of Speedtest Certified and the forthcoming diagnostics tool. The sustainability of strong free cash flow and continued M&A activity will also be key watchpoints.

Ziff Davis currently trades at $32.59, in line with $32.69 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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