What happened

Shares of online content-feed specialist Outbrain (OB -0.73%) tumbled on Thursday following a mixed earnings report. After falling steadily throughout the day, the stock closed 23.6% lower.

So what

Outbrain's second-quarter sales increased by 2% year over year, landing at $250.9 million. The adjusted bottom line swung from earnings of $0.28 per share to a net loss of $0.19 per share. Your average analyst expected a smaller net loss of roughly $0.04 per share on revenue in the neighborhood of $247 million.

Management also slashed Outbrain's full-year profit outlook. The guidance provided three months ago pointed to 2022 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately $55 million. The new EBITDA projection was set to "at least $18 million" instead.

The third quarter was described as "a low point" followed by a "moderate" rebound in the fourth quarter. These estimates were based on normal seasonal patterns on top of weak advertiser interest in the current market.

Now what

The fading advertising market is not exactly news. The guidance given in the first-quarter report was also a substantial cut compared to the full-year EBITDA target of approximately $98 million that was given in the Q4 2021 report six months ago.

In the earnings call, CFO Jason Kiviat said:

We've seen demand deteriorate over the course of this year. Between elections and the [soccer] World Cup, and the holiday season, we do expect some seasonal uplift [in Q4] as well as a ramp-up on the optimization of some of this new supply integrating onto our platforms.

The "new supply" Kiviat mentioned is a fresh content-feed deal with Fox, adding a selection of third-party stories at the bottom of each article on the Fox News website and news apps. That's a substantial deal that could help Outbrain reverse its negative business trends over time. But it isn't an instant game changer. Outbrain already had similar deals with Fox News rivals such as CNN and Washington Post, so one more big-name news partner shouldn't move the needle very far.

All told, Outbrain's stock is now down 74% from last year's market-debut price of $20 per share. Some investors may see a buying opportunity at these dramatically lower prices, but I'm not so sure. To me, Outbrain looks like a falling knife that could hurt your portfolio if you try to catch it today.