Taboola (TBLA) Q3 2026 earnings review
Taboola's third-quarter profit rises, but it cuts its full-year plan
Taboola, which places ads across news websites, earned more per ad in the third quarter even as total sales shrank. Revenue fell 7% from a year ago, while gross profit after publisher traffic costs rose 7% because payments to websites dropped faster than sales. However, chief executive Adam Singolda cut every full-year target, and by our math the fourth-quarter plan has gross profit after traffic costs falling 2%.
| Revenue | $462.3M -6.9% from a year ago |
|---|---|
| Gross profit after traffic costs (ex-TAC) | $188.8M +6.8% from a year ago |
| Adjusted EBITDA | $56.0M +16.1% from a year ago |
| Full-year ex-TAC gross profit outlook | Cut $19M middle of the range: 6.3% growth |
⚖️ Verdict: 🔴 Bearish
The story got worse because the margin gains that carried the first nine months are no longer enough to offset falling sales. After raising its full-year profit targets twice while sales slowed, management cut its fourth-quarter plan to $21 million below what last quarter's outlook pointed to by our math, and sales outside partner Yahoo fell 11%. One bright spot: full-page ad rollouts at NBCUniversal and Fox News are now completely live.
The question now is whether NBCUniversal, Fox News and the Realize ad platform can bring total sales back to growth in 2027, or if shrinking advertiser demand outside Yahoo will keep pulling the business down. The initial 2027 outlook next quarter will tell.
🐂 Bull Case
NBCUniversal and Fox News Rollouts Are Now Live
Taboola places ads on news websites and shares the money with the publisher. Chief executive Adam Singolda wants to move beyond bottom-of-article links by "growing the revenue we generate with our existing publisher partners" through Realize, its broader performance ad platform.
This quarter the ad group named its biggest expansion partner and finished two rollouts, announcing in its headline: "Full Page Monetization Live Across All NBCUniversal; Fox News Live 100%; Dianomi Acquisition Expected to Close Before End of Year". Naming NBCUniversal fulfills last quarter's promise to reveal the major publisher testing its display ads.
However, going live did not lift the fourth-quarter outlook, which points to lower gross profit after traffic costs than a year ago. What to watch: when NBCUniversal and Fox News add enough ad spending to return gross profit after traffic costs to growth in early 2027.
Traffic Costs Fell Faster Than Revenue
Taboola measures its core performance using ex-TAC gross profit, which is the money left over after paying traffic acquisition costs (TAC) to publishers for ad space. Even though total revenue fell 6.9% from a year ago to $462.3 million, ex-TAC gross profit rose 6.8% to $188.8 million.
The company kept a larger share of every ad dollar because payments to publishers dropped 14.3%, falling by 5.2 percentage points of revenue to 60.1%. By our math, that pushed ex-TAC gross profit to 40.8% of revenue, up from 35.6% a year ago, while sales and marketing costs edged down 0.1 percentage points of revenue. That lifted Adjusted EBITDA, its cash operating profit, by 16.1% to $56.0 million.
What to watch: whether ex-TAC gross profit stays above 40% of revenue in 2027. A drop back toward 36% would mean new full-page display deals carry lower margins than the old ad formats.
🐻 Bear Case
Fourth-Quarter Plan Cuts Full-Year Profit Targets
"We believe our technology, data, scale and deep partner relationships position us well to help publishers and advertisers navigate change and capture the opportunities ahead," chief executive Adam Singolda said. For two straight quarters, Taboola had raised its full-year target for ex-TAC gross profit even as sales slowed.
This quarter the company cut every full-year target. Management lowered the middle of its full-year ex-TAC gross profit plan by $19 million and its Adjusted EBITDA plan by $17.5 million. The cut comes from the fourth-quarter outlook, which calls for ex-TAC gross profit to shrink 1.8% from a year ago at the middle of the range.
- Fourth-quarter ex-TAC gross profit plan: $204.5–213.5 million, vs $221.6–238.6 million implied by last quarter's outlook by our math
- Full-year revenue plan: cut by $52.5 million at the middle of the range to $1,882.5–1,898.5 million
- Fourth-quarter Adjusted EBITDA plan: $73.5–82.5 million, down 9.5% from a year ago at the middle of the range by our math
This matters because the fourth quarter is when holiday ad spending peaks and when NBCUniversal and Fox News were supposed to start adding to growth. Instead, losing high-margin ad supply from earlier network cleanups is outweighing the new publisher launches. What to watch: the initial 2027 ex-TAC gross profit outlook next quarter, which will show if the fourth-quarter drop continues into the new year.
Revenue Outside Yahoo Dropped 11%
Taboola reports transactions with Yahoo as related-party revenue because Yahoo is its largest shareholder and partner. While total revenue fell 6.9% from a year ago, the split between Yahoo and the rest of the network widened further.
Revenue from Yahoo rose 30.9% from a year ago to $68.2 million, making up 14.8% of the company's total sales. By our math, revenue from all other customers dropped 11.4% to $394.1 million, a steeper fall than the 5.1% drop in the second quarter. At the same time, the traffic acquisition costs Taboola paid to Yahoo rose 1.8% to $94.7 million, exceeding the revenue recorded from Yahoo by $26.5 million.
The widening drop outside Yahoo shows that advertiser demand across Taboola's independent publisher network is shrinking faster than headline revenue suggests. What to watch: third-party revenue growth in the fourth quarter, where another double-digit drop would confirm that non-Yahoo advertisers are pulling back.
Higher Server Bills and Payables Cut Cash Flow
Even though Adjusted EBITDA rose 16.1% from a year ago, free cash flow fell 55.9% to $20.4 million. By our math, only 36.4% of Adjusted EBITDA turned into free cash flow this quarter, down from 96.0% a year ago.
Two cash outflows drove the drop: capital spending on computers, equipment and software more than doubled to $15.2 million, and a paydown of publisher bills took $13.8 million out of operating cash flow. Because free cash flow did not cover the $30.4 million spent buying back shares, Taboola drew a net $6.5 million on its credit line, lifting debt to $78.5 million.
What to watch: fourth-quarter free cash flow against the cash needed to close the Dianomi acquisition before year-end, as further borrowing would show cash generation cannot fund both deals and buybacks.
Risks this quarter didn't answer
Four standing concerns could not be read from the earnings release because the company gives advertiser counts and operational details on its conference call or in its full quarterly filing.
- Large advertiser count and spending: the release omitted the number of scaled advertisers (those spending over $100,000 a year) and their average spend, which will appear in the quarterly filing.
- Realize platform revenue share: management gave no dollar figure for how much revenue came from new Realize display and social formats versus legacy article links.
- Google and AI search traffic loss: the release did not quantify how much traffic publishers lost to AI search answers or Google policy changes this quarter.
- Israeli shekel currency cost: the release showed a $1.5 million currency remeasurement loss, while the operating cost impact of the shekel awaits the conference call.
💲 Other KPIs
Net profit more than tripled from $5.2 million a year ago, lifting diluted profit per share to $0.06 from $0.02. Most of the $13.1 million improvement came from a $9.8 million drop in sales and marketing amortization as older acquisition assets finished writing off, rather than from new operating savings.
Weighted-average diluted shares fell 6.5% from a year ago and 1.9% from last quarter. The ad group spent $30.4 million buying back shares in the third quarter, down from $41.5 million in the second quarter, bringing nine-month buybacks to $94.6 million against $184.6 million in the same period last year.
Money owed by customers fell 1.8% from a year ago and 4.3% from last quarter. Receivables shrank more slowly than the 6.9% drop in total revenue because balances owed by related party Yahoo rose to $46.3 million from $39.2 million at the end of 2025.
🔮 Guidance
Cut. The middle of the full-year sales plan dropped by $52.5 million, pointing to a 1.1% decline from 2025 by our math. It is the second straight cut after a slight raise in the first quarter: +$10.5M, -$91.0M, -$52.5M.
New. The fourth-quarter plan calls for sales to fall 7.1% from a year ago at the middle of the range by our math, slightly worse than the 6.9% drop in the third quarter.
Cut. Taboola lowered the middle of the range by $10.5 million, leaving full-year gross profit up 5.3% from last year by our math. After a first-quarter raise, the target has fallen twice: +$9.0M, -$10.0M, -$10.5M.
New. At the middle of the range, fourth-quarter gross profit rises 1.7% from a year ago by our math, slowing from 9.6% growth in the third quarter.
Cut. Management lowered the middle of its main gross profit target by $19.0 million, to 6.3% growth for the year by our math. That reverses two straight raises earlier in the year: +$7.0M, +$7.0M, -$19.0M.
New. The plan puts fourth-quarter ex-TAC gross profit down 1.8% from a year ago at the middle of the range by our math, below the $221.6–238.6 million implied by last quarter's full-year outlook.
Cut. The company reduced the middle of its cash profit plan by $17.5 million, leaving full-year Adjusted EBITDA up 0.5% from 2025 by our math. The cut wipes out two earlier raises: +$2.0M, +$3.0M, -$17.5M.
New. By our math, the middle of the range points to a 9.5% drop from a year ago, reversing the 16.1% growth delivered in the third quarter.
Cut. The middle of the range fell by $16.5 million, pointing to a 7.8% decline for the full year by our math. Across the last three quarters, the middle of the plan moved +$1.0M, -$7.0M, -$16.5M.
New. At the middle of the range, fourth-quarter net profit excluding one-offs falls 27.3% from a year ago by our math, after rising 16.4% in the third quarter.
❓ Key Questions
Did the count of large advertisers shrink in Q3?
The earnings release did not include the number of scaled advertisers or their average spend. Because revenue outside Yahoo fell 11.4% by our math, investors need to know if large customers left the network or spent less.
Why does the Q4 plan drop despite NBCUniversal going live?
Full-page ads at NBCUniversal and Fox News are now 100% live, and management previously said they would start adding to fourth-quarter profit. Yet the fourth-quarter ex-TAC gross profit plan sits $21 million below what last quarter's outlook implied.
Why do traffic payments to Yahoo exceed Yahoo revenue?
Taboola recorded $68.2 million of revenue from related party Yahoo in the third quarter but paid Yahoo $94.7 million in traffic acquisition costs. Management has not explained the accounting mechanics or margin structure of this gap.
How much will Taboola pay to close the Dianomi deal?
The headline notes the Dianomi acquisition should close before year-end, and cash flow showed $0.5 million of acquisition costs. With free cash flow down to $20.4 million and credit line debt rising, the purchase price and funding source matter.