Taboola (TBLA) Q2 Revenue Jumps 9%

Taboola (TBLA 5.14%), a digital advertising technology company known for its AI-powered performance advertising platform, released its results for the fiscal 2025 second quarter on August 6, 2025 (period ended June 30, 2025). The company reported revenue of $465.5 million, exceeding the consensus estimate by $16.8 million, or 3.7%. Diluted earnings per share equaled $(0.01), matching analyst expectations. The quarter featured broad-based growth, strong operational leverage, and significant capital return to shareholders through aggressive share repurchases. The results reflect steady execution, ongoing adoption of new initiatives, and material improvement in gross profit and adjusted EBITDA margins compared to the prior year.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in the fiscal 2025 first quarter earnings report.

What Taboola does and where it is focusing

Taboola is a performance advertising technology company that provides content recommendations and display advertising across the open web. Its platform uses proprietary artificial intelligence to match user interests with relevant content and ads. This technology is deployed across a wide network of publishers, allowing advertisers to reach hundreds of millions of daily users outside the boundaries of large social media and search platforms.

The company’s current focus is on expanding its AI-driven advertising platform, building long-term strategic partnerships with premium digital properties, and broadening its reach into e-commerce through its Connexity business. Key success factors include continued growth of its scaled advertiser base (clients spending over $100,000 per year), with the number of scaled advertisers increasing by 9% to 1,996, successful scaling of new products such as Realize, strong compliance with data privacy regulations, and operational execution that yields improving margins and cash flow, as reflected by increases in gross profit, adjusted EBITDA, and free cash flow.

Fiscal 2025 second quarter: Key developments and financial performance

Revenue climbed 8.7% compared to the prior-year period as demand expanded among both existing and new advertisers. Scaled advertisers grew 8.5%, supporting broad-based top-line momentum. The average revenue per scaled advertiser also increased by 1.8%, reflecting higher spend per client.

Gross profit rose 18.2%, outpacing revenue growth and highlighting the company’s improved margin profile. The ex-TAC gross profit metric, which excludes traffic acquisition cost (the amount paid to publishers for ad inventory), increased 15.1%. Management attributed this to a shift toward higher-margin digital property partners, growth in digital advertising spend, and the ongoing benefit of onboarding Yahoo as a major partner last year.

The net loss remained steady at $(4.3) million. However, adjusted EBITDA, a measure of operational earnings before interest, taxes, depreciation, and amortization, improved by 21.3% to $45.2 million. The ratio of adjusted EBITDA to ex-TAC gross profit climbed to 26.2%, up from 24.9% in the prior-year period, showing increased operational leverage even as reported earnings stayed flat.

Cash flow from operating activities reached $47.4 million, a year-over-year increase of $8.6 million. Free cash flow, which deducts capital expenditures, rose to $34.2 million, up from $26.2 million in the prior-year period, a gain of over 30%. These improvements stemmed from effective collections, lower prepayments to publishers, and cost controls. However, cash and equivalents fell to $115.2 million at period end, compared to $182.2 million at the end of the prior-year period and $226.6 million at December 31, 2024. The decrease was largely due to aggressive share repurchases, as Taboola bought back nearly 12% of its shares in the first half of 2025. The board approved an incremental $200 million to the share repurchase program in the fiscal 2025 first quarter.

On the product side, Taboola launched and deployed its new Realize performance advertising platform across its full advertiser base. Realize is a platform that applies Taboola’s AI to performance-based advertising, offering new targeting and creative options, and the ability to purchase display and social advertising on a cost-per-click basis. Management described early feedback as positive, with new clients secured and sales momentum building. Realize is built to function without third-party cookies, underscoring its relevance as the advertising industry adapts to tighter data privacy rules.

Strategic partnerships continued to be a highlight. The exclusive long-term agreement with Yahoo, originally announced as a 30-year deal, provided incremental growth and reach in the period, offering access to large new audiences. Additional publisher deals, such as with messaging platform LINE, further diversified supply and enhanced the advertising ecosystem for clients. The company reinforced its reach of approximately 600 million daily active users, which supports both advertiser demand and data collection for further AI optimization.

Integration of Connexity, Taboola’s e-commerce solution, continued. Connexity enables product listings and cost-per-click ad placements within digital content, offering value for publishers and advertisers while supporting additional data-gathering for Taboola’s AI models. Although specific e-commerce financial contributions were not broken out in the quarter, management sees the segment as a key strategic lever for future revenue growth.

The quarter included professional and legal expenses related to a litigation matter not related to ongoing business operations, and a non-cash amortization expense of a commercial agreement asset. There is no dividend, so all capital return in the period has come through share buybacks. TBLA does not currently pay a dividend.

Looking ahead: Management guidance and investor focus

Taboola’s management raised full-year fiscal 2025 guidance following strong second quarter results. It now forecasts fiscal 2025 revenue of $1,858 million to $1,888 million, up from its prior range. Projected ex-TAC gross profit (non-GAAP) for fiscal 2025 is $689 million to $703 million, and adjusted EBITDA is now targeted at $208 million to $214 million. Non-GAAP net income guidance increased to $138 million to $144 million. For the third quarter, the company expects revenue between $461 million and $469 million, with ex-TAC gross profit (non-GAAP) of $166 million to $172 million and adjusted EBITDA of $43 million to $48 million.

Management noted that Realize is expected to begin making a more visible financial contribution late this year or in 2026. Current guidance for fiscal 2025 does not fully reflect possible incremental upside from Realize, as uptake is still in an early stage. Executives express confidence in the long-term market opportunity and their ability to capture larger budgets that have so far remained within search and social platforms. Investors should keep watch on Realize’s ability to scale, overall advertiser traction, impacts from evolving privacy regulations, and the company’s pace of free cash flow generation and capital returns in the coming quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.