Ziff Davis (ZD) Q3 2026 earnings review
Ziff Davis sales fall across every division, but buybacks steady per-share profit
Ziff Davis, the owner of digital media sites and software brands, saw sales fall across all four of its divisions while share buybacks kept per-share profit nearly unchanged. Chief executive Vivek Shah said third-quarter revenue rose from the second quarter as planned, but the 6% drop from a year ago was steeper than the low-to-mid single-digit decline the company had indicated. Profit before interest, taxes, and one-offs fell 16% as sales and marketing costs took a bigger share of revenue, and another $44 million of goodwill and asset write-downs pushed the company into an operating loss.
| Continuing revenue | $289.3M -5.6% from a year ago |
|---|---|
| EBITDA, excluding one-offs | $82.2M -16.0% from a year ago |
| Profit per share, excluding one-offs | $1.39 -0.7% from a year ago |
| Full-year outlook | None deferred for a fourth quarter |
⚖️ Verdict: 🔴 Bearish
The story got worse because the downturn in Health & Wellness deepened and Cybersecurity slipped back into decline, leaving the company with no growing division. Technology & Shopping also took a $30 million goodwill write-down even though its sales decline narrowed against an easy comparison. On the other side, management used its $1.5 billion cash pile to buy back $92 million of stock in the quarter and pay off $149 million of debt after quarter end.
The question now is whether shrinking ad and subscription sales are a temporary rough patch or permanent losses to artificial intelligence search and competing ad platforms. If off-platform video and holiday shopping lift demand, fourth-quarter revenue decline will narrow; if advertisers keep leaving, write-downs and margin pressure will continue. Fourth-quarter Health & Wellness ad retention and Tech & Shopping holiday sales will tell.
🐂 Bull Case
Buybacks Kept Profit Per Share Steady
Ziff Davis runs digital media sites and software brands across tech, gaming, health, and cybersecurity. Chief executive Vivek Shah said the company bought back about $265 million of stock in the first nine months of 2026 and will "keep pursuing opportunities to unlock additional shareholder value". That includes $92 million spent in the third quarter alone.
Those buybacks cut the average diluted share count by 16.8% from a year ago, to 33.8 million shares. Because each remaining share claims a larger piece of the company, profit per share excluding one-offs slipped just 0.7% to $1.39, even though net income excluding one-offs fell 15.0% to $48.3 million. Three other positives—off-platform video and social revenue, AI code writing, and weight-loss drug ads—received no numbers in the release.
What to watch: fourth-quarter share repurchases and the remaining buyback authorization in the quarterly filing. Buying back stock only lifts per-share profit if earnings stop falling faster than the share count.
Asset Sale Cash Paid Off Debt
In the second quarter, the digital publisher sold its Connectivity division, which ran network speed tests, for $1.13 billion in net cash. That sale left Ziff Davis with $1.41 billion in cash and $100 million in long-term investments at the end of September, against $872 million of total debt.
Having more cash than debt gives the company room to pay off maturing loans without borrowing at higher interest rates. After the quarter closed, management paid off $149.1 million of 1.75% convertible notes in cash as planned, and high cash balances earned $1.8 million of net interest income during the quarter compared with $6.5 million of net interest expense a year ago.
What to watch: whether management uses its remaining $1.36 billion of cash and investments, by our math after the note payoff, for buybacks or new acquisitions. Buying more media brands would reintroduce the write-down risk that has hurt GAAP earnings.
🐻 Bear Case
Health and Wellness Decline Accelerated
Health & Wellness, Ziff Davis's largest division with sites like Everyday Health and MedPage Today for doctors, was once the company's main growth engine. Last quarter management noted that pharmaceutical advertisers were shifting spending toward lower-cost artificial intelligence platforms, and this quarter the division's revenue drop worsened from 4.8% in the second quarter to 9.5%, landing at $92.5 million.
- Advertising and performance marketing revenue: $77.3 million, down 9.7% from a year ago
- Ad revenue retention (share of prior-year customer spending kept over 12 months): 95.9%, down from 99.8% last quarter and 102.1% a year ago
- Advertising customers: 723, down 12.4% from 825 a year ago
- Segment EBITDA excluding one-offs: $32.6 million, down 14.3% from a year ago
Because retention fell nearly four percentage points in a single quarter and 102 advertisers left over the past year, the pullback in medical ad spending is widening rather than stabilizing.
What to watch: fourth-quarter Health & Wellness ad retention during the holiday quarter. A third straight drop below 100% would confirm that drug makers have permanently moved ad budgets away from the company's medical sites.
Every Segment Shrank and Write-Downs Returned
"We delivered third quarter results in line with the expectations we set last quarter, including sequential revenue growth despite a challenging operating environment," chief executive Vivek Shah said. Revenue did edge up 0.9% from the second quarter to $289.3 million, but it fell 5.6% from a year ago, missing the 2% to 5% decline management had indicated.
- Technology & Shopping revenue: $82.0 million, down 3.8%, with ad revenue per customer down 17.9% to $109,111
- Cybersecurity & Martech revenue: $68.2 million, down 4.6%, reversing last quarter's 0.5% gain
- Gaming & Entertainment revenue: $46.6 million, down 2.1%, with ad revenue per customer down 22.7% to $57,224
- Third-quarter impairment charges: $29.6 million for goodwill in Technology & Shopping, plus $14.5 million for long-lived assets across Tech and Cybersecurity
All four divisions shrank from a year ago, leaving the company without a single growing business. Worse, writing down the value of past acquisitions has become routine, totaling $102.5 million in goodwill and asset charges across the first nine months of 2026.
What to watch: Technology & Shopping revenue in the fourth quarter, when it compares against an 18% drop a year ago. Failing to grow against that easy comparison would show search traffic losses are still worsening.
Sales Costs Rose While Revenue Shrank
After selling its high-margin Connectivity business, Ziff Davis is earning less on every dollar of remaining sales. Profit before interest, taxes, depreciation, and one-offs (adjusted EBITDA) fell 16.0% from a year ago to $82.2 million, and the margin dropped 3.5 percentage points to 28.4%.
Last quarter, a one-time $4.3 million tax reserve release in Cybersecurity helped prop up company margins. With that benefit gone, operating costs outpaced revenue: sales and marketing expenses excluding one-offs rose to $122.7 million, climbing 3.7 percentage points of revenue to 42.4% by our math. On a standard accounting basis, general and administrative costs jumped 6.7 percentage points of revenue to 22.2%, driven by $14.5 million of asset write-downs and $10.3 million of deal and restructuring charges.
What to watch: sales and marketing expense as a share of revenue in the fourth quarter. If customer acquisition costs keep rising while ad sales shrink, full-year margins will reset permanently lower.
Risks This Quarter Didn't Answer
Four standing concerns received no update in the third-quarter press release or presentation.
- Annual financial outlook: withheld for a fourth straight quarter while management reviews asset sales; any formal fourth-quarter or 2027 target on the call would test whether revenue can stop falling.
- Sales from businesses owned a year ago: not stated in the release; the quarterly Form 10-Q filing will show how much acquired revenue cushioned the 5.6% headline drop.
- Search traffic exposure: no figures on how much revenue depends on Google search as AI Overviews expand; commentary on the call will show if referral traffic stabilized.
- OpenAI lawsuit: no update on the copyright case in the release; legal disclosures in the Form 10-Q will show if licensing talks or court rulings progressed.
👓 Other Themes
Connectivity Tax Bill Pushed Cash Flow Negative
Free cash flow across continuing and discontinued operations swung to an outflow of $100.1 million in the third quarter, compared with an inflow of $108.2 million a year ago. The company paid $55.0 million in cash taxes and $35.1 million in advisory and deal costs tied to selling Connectivity, but even excluding those $90.1 million of sale bills, cash flow was negative $10.0 million as payables dropped.
💲 Other KPIs
Total deferred revenue—cash customers have paid upfront for subscriptions not yet delivered—fell 3.9% from last quarter ($132.9 million) and is down 6.2% since the start of the year ($136.2 million) by our math. A shrinking upfront balance points to sluggish subscription sales over the next two quarters.
Subscription and licensing sales slipped 2.7% from $101 million a year ago, worsening from a 1.0% dip in the second quarter. Health & Wellness subscription customers dropped 22.2% from a year ago to 1.48 million, and Gaming subscribers fell 6.0% to 483,000, though higher prices per user softened the revenue decline.
❓ Key Questions
When will Ziff Davis restore a formal financial outlook?
The company has withheld annual revenue and profit targets for four quarters while reviewing asset sales. Now that the Connectivity sale has closed, investors need a fourth-quarter or 2027 target to judge when revenue will stop shrinking.
How much did acquisitions cushion this quarter's revenue drop?
In the second quarter, $7.1 million of acquired sales made a 5.2% underlying revenue drop look like 2.7%. The release does not state how much acquired revenue sat inside the third quarter's 5.6% decline.
Which Tech & Shopping brands triggered the $37 million write-downs?
Technology & Shopping recorded a $29.6 million goodwill write-down and $7.4 million of asset impairments this quarter, while Cybersecurity took $8.2 million in asset charges. Naming the impaired brands would show where search or software demand broke down.
Why did non-deal free cash flow turn negative in Q3?
Even after adding back $90.1 million of taxes and fees from the Connectivity sale, transaction-adjusted free cash flow was negative $10.0 million versus positive $108.2 million a year ago. Management has not explained how much of the working-capital drain came from continuing businesses.