Executive Summary / Key Takeaways

• Strategic Pivot to AI Data Licensing: CuriosityStream is rapidly transforming from a niche factual streamer into a diversified media and data powerhouse, leveraging its vast, rights-cleared content library to become a leading licensor for AI model training, a market projected to require billions of hours of video.
• Robust Financial Performance & Shareholder Returns: The company achieved its first-ever positive net income and Adjusted EBITDA in Q1 2025, followed by strong Q2 2025 results with 53% year-over-year revenue growth to $19 million and Adjusted EBITDA of $3.1 million. This financial strength supports a $0.32 annualized dividend, offering a compelling yield.
• Unique Technological Moat: CURI possesses a significant competitive advantage through its "superior volume of premium rights-cleared content" (over 1 million hours) and its advanced technical capability to "clip, index, label and annotate at scale," making its data highly valuable for AI partners.
• Diversified Revenue Pillars & Global Expansion: Beyond AI licensing, CURI is building a steadily growing subscription business and a nascent but high-potential advertising segment, supported by new international distribution deals and currency rollouts, creating powerful operating leverage.
• Disciplined Operations & Strong Liquidity: With $30.7 million in cash and securities and no debt as of Q2 2025, coupled with ongoing cost rationalization efforts, CURI maintains significant operating flexibility and is well-positioned for sustained double-digit growth in both revenue and free cash flow.

The Genesis of Curiosity: From Factual Streaming to AI Frontier

CuriosityStream Inc. (NASDAQ:CURI) began its journey in 2015, founded by Discovery Channel pioneer John Hendricks, with a clear mission: to deliver premium factual entertainment across science, history, nature, and technology directly to consumers. This foundational commitment to high-quality, curated content has been the bedrock of its evolution. The company's transition into a public entity in October 2020, through a reverse merger, marked a pivotal moment, providing the capital and platform for broader strategic ambitions.

Today, CURI operates within a media landscape undergoing profound disruption, driven by the rapid acceleration of artificial intelligence. This technological revolution is not merely an iteration but a redefinition, creating new avenues for value creation. CURI has strategically positioned itself at this intersection, transforming its extensive content library from a traditional media asset into a critical data resource for the burgeoning AI industry. This strategic pivot, alongside its core streaming and emerging advertising businesses, forms the bedrock of its investment thesis.

A Technological Fortress: CURI's Data Moat

CURI's most compelling differentiator lies in its vast content library and its sophisticated approach to data structuring. The company controls and has access to over 1 million hours of premium, rights-cleared video and audio content. This volume is exponentially greater than the libraries of many large studios, which typically range from 100,000 to 225,000 hours. This sheer scale of ethically sourced, high-quality content is a formidable tangible moat in the rapidly expanding market for AI model training data.

Beyond volume, CURI's technological capability to "clip, index, label and annotate at scale" hundreds of thousands of hours into any segment length provides a significant competitive advantage. This process generates "traditional metadata on steroids," making the content substantially more valuable to AI licensees. The company has demonstrated this capability by licensing "about 9 million tokens of code for the first time ever" in Q2 2025, illustrating the versatility and value of its controlled intellectual property. This structured data is crucial for large-scale AI models, which require enormous, fresh, and diverse video data to improve accuracy and generative capabilities, with industry estimates for video needs ranging from billions to tens of billions of hours. CURI's ability to provide this structured, authentic data directly addresses a critical need, as synthetic data is often incomplete and cannot fully replicate real-world physics and context.

Strategic Pillars: Diversified Growth in a Dynamic Market

CURI's strategy is built upon three "solid revenue pillars": a subscription business, a licensing business, and an advertising business, all working "hand in glove." This integrated approach allows the company to leverage its core content assets across multiple monetization channels.

The subscription business, encompassing Direct-to-Consumer (DTC) and Partner Direct, remains a core component. While DTC revenue saw a 25% year-over-year decrease in Q2 2025 due to subscriber count fluctuations, Partner Direct revenue grew 34% year-over-year, driven by continued subscriber growth. Overall, subscription revenue is expected to be "up and to the right for the foreseeable future," bolstered by new multiyear wholesale distribution agreements in Asia, Latin America, and the U.S. The company is also expanding its global reach by launching CuriosityStream and Curiosity University on platforms like Prime Video Channels (AMZN) in new international markets, including Australia, New Zealand, Finland, The Netherlands, Sweden, and the UK, and through a multi-tier deal with DIRECTV in the U.S.

The licensing business, particularly AI data licensing, is CURI's primary growth engine. This segment saw a remarkable 609% year-over-year increase in Q2 2025, reaching $9.3 million, driven by new AI model training agreements. Management views this as "de facto recurring revenue," as every partner to date has requested additional data beyond initial agreements. This sustained demand, coupled with the anticipation of licensing new monetizable rights (e.g., display, derivative, transformative) in the future, underscores the long-term potential. CURI's early entry and ability to work at scale with a "very finite number" of hyperscalers, who prefer not to engage with hundreds of licensors, solidify its competitive position.

The advertising business, while nascent, is identified as a "significant steady and high-growth opportunity." Revenue in this segment grew 139% year-over-year in Q2 2025, driven by new FAST and AVOD revenue-share arrangements and proprietary code licensing. CURI is actively expanding its presence in the free ad-supported streaming television (FAST) and advertising-supported video on-demand (AVOD) markets, launching channels with major partners like Samsung TV Plus (SSNLF), Pluto (PARA), Tubi (FOXA), and Roku (ROKU). These initiatives not only generate revenue but also serve as promotional platforms for its subscription services.

Financial Momentum and Shareholder Returns

CURI's strategic pivot has translated into significant financial improvements. In Q2 2025, the company reported total revenue of $19.01 million, a substantial 53% increase from $12.4 million in Q2 2024. This growth was primarily fueled by Content Licensing, which surged by over $8 million. Net income reached $0.78 million, a nearly $3 million improvement year-over-year, and Adjusted EBITDA hit a company-record $3.1 million, up over $4 million from a negative $1 million in the prior year. This marks the sixth consecutive quarter of positive adjusted free cash flow, which stood at $2.9 million in Q2 2025.

The company's gross margin improved slightly to 53% in Q2 2025, reflecting continued reductions in content amortization despite increased distribution costs from revenue-share licensing. Operating expenses, including advertising, marketing, and general and administrative costs, saw an 8% decline year-over-year, demonstrating ongoing cost rationalization. Management prides itself on a lean team of 42 full-time employees, projecting $1.5 million to $2 million in revenue per employee for 2025.

CURI maintains a robust balance sheet, with $30.7 million in total cash and securities and no outstanding debt as of June 30, 2025. This strong liquidity position provides significant operating flexibility and underpins the company's commitment to shareholder returns. The Board of Directors recently doubled its quarterly cash dividend to $0.08 per share, or $0.32 annualized, which, based on recent share prices, implies a compelling dividend yield of approximately 6.5%. This dividend, along with a share repurchase program initiated in June 2024 (251,000 shares repurchased by Q2 2025), reflects management's confidence in sustained operational cash flow.

Outlook and Risks

For Q3 2025, CURI expects revenue in the range of $15 million to $18 million. The full-year 2025 Adjusted Free Cash Flow is guided to be between $11 million and $13 million. Management is confident in achieving double-digit growth in both top-line revenue and cash flow for 2025. Looking ahead to 2026, the company anticipates licensing more video and data than in 2025 and aims to be among the dominant licensors of video for AI model training. This outlook is predicated on the continued high demand for AI training data, CURI's expanding content library, and its unique data structuring capabilities.

Despite the optimistic outlook, risks are present, particularly in the nascent AI licensing market. The market is evolving rapidly, and there is no guarantee of sustained revenues. AI developers could find alternative content sources, and the legal framework for IP ownership and licensing in generative AI is still developing, potentially impacting future terms. Demand for AI models could also be limited by regulation or other factors. However, CURI mitigates these risks through its early mover advantage, deep relationships with AI partners, and a focus on delivering high-quality, ethically sourced, and technically superior data. The company's diversified revenue streams also provide a buffer against volatility in any single segment.

Conclusion

CuriosityStream is undergoing a profound transformation, repositioning itself from a specialized streaming service to a critical enabler in the AI revolution. Its deep, rights-cleared content library, coupled with advanced data structuring technology, provides a unique and powerful competitive advantage in the burgeoning AI data licensing market. This technological leadership, combined with disciplined cost management and a strategic expansion of its traditional media businesses, is driving robust financial performance and significant shareholder returns through a growing dividend.

CURI's ability to capitalize on the "extraordinary and transformational time in media and technology" positions it as a high-performance outlier. The company's focus on three solid revenue pillars, its strong balance sheet, and management's clear vision for sustained growth in AI data licensing and beyond, present a compelling investment narrative for discerning investors seeking exposure to the intersection of content and artificial intelligence.