Criteo S.A. (CRTO)

Executive Summary / Key Takeaways

• Criteo is undergoing a significant transformation from a retargeting specialist to a diversified Commerce Media Platform, leveraging its proprietary AI Engine and Criteo Shopper Graph to drive full-funnel, cross-channel, self-service advertising.
• The company delivered strong Q3 2025 results, with Contribution ex-TAC increasing 8% year-over-year to $288.10 million (6% at constant currency) and Adjusted EBITDA surging 28% to $105.10 million, reflecting robust operational leverage and AI-driven productivity.
• Retail Media continues to be a powerful growth engine, with media spend up 26% in Q3 2025, driven by new formats like auction-based display and strategic partnerships, despite near-term headwinds from specific client scope reductions impacting Q4 2025 and early 2026.
• Performance Media is re-energized by the rollout of Commerce GO!, an AI-powered self-service tool, and expansion into high-growth channels like social and Connected TV (CTV), bolstering its long-term growth trajectory.
• Criteo's planned redomiciliation to Luxembourg and direct Nasdaq listing, followed by a potential U.S. redomiciliation, aims to enhance capital management flexibility and broaden its shareholder base, signaling a commitment to unlocking long-term shareholder value.

Criteo's Commerce Media Evolution: A Strategic Pivot

Criteo S.A., incorporated in France in 2005, has fundamentally reshaped its identity from a singular retargeting solution to a comprehensive Commerce Media Platform. This strategic evolution, particularly pronounced since 2020, has seen retargeting's share of the business shrink from nearly 90% to 40% by the end of 2024. The company's vision is to deliver full-funnel, cross-channel, self-service advertising that performs, connecting marketers and media owners across the open internet. This transformation is anchored by its unique commerce dataset and advanced Artificial Intelligence (AI) capabilities, positioning Criteo at the nexus of e-commerce, digital marketing, and media monetization.

The industry landscape is characterized by increasingly fragmented consumer attention across websites, apps, social feeds, Connected TV (CTV), and emerging AI-driven assistance. This fragmentation, while complex for advertisers, creates significant opportunities for platforms like Criteo that can meet shoppers wherever they are. The company's strategy is built on three key levers: cross-channel reach, full-funnel capabilities, and a shift towards self-service solutions, all designed to reaccelerate growth and capture a larger share of advertiser budgets.

Technological Edge: Fueling Performance with AI and Data

Criteo's core competitive advantage lies in its differentiated technology, particularly its proprietary Criteo Shopper Graph and advanced Criteo AI Engine. The Criteo Shopper Graph aggregates and derives proprietary commerce data, including transaction activity, from thousands of e-commerce players. This uniquely structured, granular, and scalable dataset forms the foundation for Criteo's AI Engine. The AI Engine processes trillions of intent signals in real-time to power sophisticated lookalike finder, recommendation, and predictive bidding models, delivering hyper-personalization and budget efficiency across five billion SKUs. This capability enhances the shopping experience, increases basket sizes, and maximizes sales for clients.

The tangible benefits of this technology are evident in various performance metrics. For instance, cross-channel, full-funnel campaigns for large enterprise clients have driven five times more new users and positive incremental return on ad spend. In CTV, campaigns with Jewelry Television resulted in a 93% new user acquisition rate, a 20% increase in average order value, and more than doubled qualified site visits. Similarly, a luxury fashion brand saw transactions per user lift by 50%, revenue per user by 25%, and new buyers by 7% through Criteo's CTV solutions. The combination of onsite and offsite ads for HP (HPQ) and Costco (COST) yielded an 855% uplift in conversion rates, over a 10x increase in revenue per user, and a 58% lift in click-through rates. Shoppable video ads have also demonstrated strong performance, driving over five times higher conversion and five times more new buyers than sponsored products alone.

Criteo is actively investing in new technological developments to expand its market opportunity. The company is embracing the Agentic AI opportunity, developing Model Context Protocol (MCP) support to deliver real-time, structured product and shopper information to AI agents. This includes piloting sponsored recommendations within retailer agents and a proof of concept with a major AI-powered assistant to integrate Criteo's product recommendation API, aiming to drive incremental performance and relevance for users. These initiatives are designed to remove friction from data workflows, enable instant audience generation, and ensure Criteo's relevance in the evolving landscape of intelligent assistants.

New ad formats are also critical to Criteo's technological roadmap. The launch of auction-based display technology in June 2025 has seen rapid adoption, with 16 retailers live in Q2 2025 and that number expected to double. On-site display spend grew 42% in Q3 2025, now representing 12% of the Retail Media business, with potential to reach 30% to 40% of clients' media mix. This technology brings programmatic flexibility, biddable trading, and efficient workflows to retail environments. The expansion into social channels, enabling SKU-level activation on Facebook and Instagram, led to a 40% sequential increase in social campaigns in Q1 2025, with social now accounting for approximately 35% of Commerce GO campaign revenue. Furthermore, Criteo views CTV as a significant multiyear growth opportunity, with partnerships like WPP Media (WPP) aimed at scaling commerce intelligence to this rapidly growing channel.

For investors, Criteo's continuous AI innovation and proprietary data assets form a deep competitive moat, making its performance-driven solutions difficult to replicate. This technological edge enables measurable outcomes for clients, contributing directly to Criteo's financial performance through higher ad relevance, improved conversion rates, and increased client spend. The strategic focus on full-funnel, cross-channel, and self-service solutions, underpinned by these technological differentiators, is designed to drive sustained growth and long-term value.

Competitive Arena: Differentiating in a Dynamic Market

Criteo operates in a highly competitive digital advertising technology market, where it strategically positions itself as the leading independent commerce media platform. Its diversified reach across various channels, including websites, apps, social feeds, and CTV, is a core strength that delivers consistent, measurable returns, differentiating it from single-channel ad tech players and walled gardens. Criteo's data, AI, and global reach create a distinct competitive edge for delivering measurable outcomes for clients.

Compared to direct competitors like The Trade Desk (TTD), a leading independent Demand-Side Platform (DSP) with a broader programmatic advertising focus, Criteo emphasizes its proprietary commerce data and AI for retail media. While TTD offers a versatile platform with strong scalability across various cross-channel campaigns, Criteo's AI Engine, leveraging first-party data for customized recommendations, provides greater efficiency in retail targeting. TTD has historically demonstrated stronger revenue growth due to its wider market reach, and often exhibits higher operating margins. Criteo, however, aims to carve out its niche by focusing on e-commerce integration and personalized ads, potentially leading to stronger customer loyalty in the retail sector.

Against PubMatic (PUBM), a Supply-Side Platform (SSP) focused on yield optimization, Criteo differentiates through its retail media focus and AI-powered shopper insights. Criteo's strategy of integrating offline and online ad environments offers more comprehensive personalization for commerce clients compared to PUBM's publisher-centric approach. While PUBM may have an edge in bidding technology innovation and often achieves superior operating margins through streamlined operations, Criteo's Criteo Shopper Graph and AI capabilities aim for superior product performance in e-commerce targeting, enhancing pricing power and market share in this segment.

In comparison to Magnite (MGNI), an SSP specializing in CTV and digital video, Criteo's AI-driven solutions compete in ad personalization, but its retail emphasis provides a distinct differentiator through Criteo Retail Media for e-commerce. Criteo's predictive bidding and experimentation platform are designed for superior retail ad performance, while MGNI excels in CTV innovation. Criteo's diversified services support its growth and profitability, though MGNI has experienced variable growth tied to broader ad trends.

Indirect competitors include social media platforms like Meta Platforms (META), which offer integrated audience tools that can be more accessible for brands, potentially impacting Criteo's market share in social-driven ads. However, Criteo's "gray box solution" for Commerce GO! offers agencies the ability to manage parameters and understand placement and measurement components, providing transparency that other solutions in the market may not. This differentiation is crucial as Criteo evolves from a largely managed service model to a more scalable self-service platform.

Criteo's competitive advantages, or moats, are primarily its proprietary Criteo Shopper Graph and its AI Engine. These assets translate into tangible benefits such as enhanced customer loyalty through targeted ads, leading to stronger recurring revenue and superior margins. The company's neutrality and interoperability within the retail media landscape are also key, positioning it favorably against in-house efforts by large retailers or competing platforms like Amazon's (AMZN) advertising services, which often face reluctance from retailers due to competitive concerns.

Segment Performance: Retail Media's Growth Engine and Performance Media's Re-acceleration

Criteo's financial performance in Q3 2025 reflects the ongoing execution of its strategic transformation. Revenue for the quarter increased by 2% year-over-year to $469.70 million, remaining flat at constant currency. Gross profit rose 11% to $256.50 million, driven by lower traffic acquisition costs and increased revenue across both segments. Contribution ex-TAC, a key profitability measure for Criteo, increased 8% to $288.10 million, or 6% at constant currency. This growth was a direct result of strong performance in both Retail Media and Performance Media. Net income saw a significant 552% increase to $40.10 million, primarily due to higher gross profit and reduced operating expenses. Adjusted EBITDA grew 28% to $105.10 million, yielding an Adjusted EBITDA margin of 36%, a 500 basis point improvement year-over-year. This margin expansion was driven by operational leverage, AI-driven productivity gains, cost discipline, and lower-than-expected social charges for RSUs.

For the nine months ended September 30, 2025, Criteo reported a 2% increase in revenue to $1.40 billion (1% at constant currency) and a 7% increase in Contribution ex-TAC to $844.58 million (7% at constant currency). Net income for this period was $103.01 million, up 141% year-over-year, and Adjusted EBITDA reached $286.61 million, up 16% year-over-year.

Retail Media: A Powerful Growth Engine with Near-Term Headwinds

The Retail Media segment continues to be a powerful growth engine for Criteo. In Q3 2025, Retail Media Contribution ex-TAC grew 11% at constant currency to $66.27 million, representing a 34% increase on a two-year stack basis. Media spend in this segment grew 26% year-over-year to over $450 million, outpacing the market and demonstrating share gains. This growth was fueled by the continued strength of Retail Media onsite, the traction of Criteo's auction-based display offering, and the addition of newly signed retailers. The company's global retailer network expanded to 235 retailers in Q3 2025. The new API integration with Google (GOOGL) is live, capturing brand search budgets and offering access to an estimated $172 billion in addressable spend, which is expected to be a multiyear growth driver starting in 2026.

Despite this strong momentum, Criteo faces near-term headwinds in its Retail Media segment. The company anticipates lower revenue in Q4 2025 due to scope changes with two specific clients and the lapping of one-time tiered fees for its largest retailer in December 2024. The largest Retail Media client unexpectedly notified Criteo that they would discontinue managed services and curtail brand demand sales services starting November 1, 2025. This, along with a U.S. food delivery client discontinuing services for the U.S. market, is expected to result in a $25 million negative impact in 2025 (largely in Q4) and approximately $75 million for the first ten months of 2026. Excluding these two clients, the underlying Retail Media Contribution ex-TAC growth for 2025 is expected to be in the mid-to-high teens range, albeit with a slower ramp-up from certain new clients in Q4.

Performance Media: Re-energized for Broader Reach

The Performance Media segment is undergoing an exciting transformation from a managed service model to a self-service, AI-first platform. In Q3 2025, Performance Media Contribution ex-TAC grew 5% at constant currency to $221.87 million, representing a 10% increase on a two-year stack basis. This was primarily driven by the Commerce GO solution, which saw a 6% increase in contribution, leveraging Criteo's large-scale commerce data and AI-powered audience modeling technology. Commerce GO is simplifying performance marketing through automation and optimization, leading to higher spend, lower churn, and stronger return on ad spend for clients. Its campaign volume grew 200% quarter-over-quarter in Q2 2025, largely due to increasing adoption from SMB advertisers.

The segment is also benefiting from expansion into new channels. Social now accounts for approximately 35% of Commerce GO campaign revenue, and its share of Performance Media business has nearly tripled since last year. Connected TV (CTV) is emerging as a new performance channel, representing a significant multiyear growth opportunity for Criteo. The company's marketplace offering is also helping marketplaces unlock incremental ad revenue and strengthen merchant retention. Ad Tech Services, however, reduced Performance Media Contribution ex-TAC growth by approximately 100 basis points in Q3 2025 due to lower spend in the media trading marketplace.

Financial Health and Capital Allocation

Criteo maintains a robust financial position, characterized by strong cash generation and no long-term debt. As of September 30, 2025, the company's total liquidity exceeded $810.50 million, including cash, marketable securities, treasury shares, and immediate access to $407 million from its Revolving Credit Facility. Cash and cash equivalents, and restricted cash stood at $255.30 million.

Cash flows from operating activities in Q3 2025 were $89.60 million, an increase from $57.50 million in the prior year, reflecting higher net income. For the nine months ended September 30, 2025, net cash provided by operating activities was $150.50 million, primarily from net income adjusted for noncash items and improved working capital. The company expects to deliver free cash flow conversion above 45% of adjusted EBITDA in 2025, excluding nonrecurring items.

Criteo is committed to returning capital to shareholders. The board authorized an extension of the share repurchase program to up to $805 million in January 2025. In Q3 2025, Criteo deployed $11 million towards share repurchases, buying back approximately 0.5 million shares, with $104 million remaining in the Board's authorization. For the full year 2024, Criteo deployed a record $225 million for share repurchases, representing 124% of its free cash flow.

Outlook and Strategic Initiatives for Future Value

Criteo's management has reaffirmed its full-year 2025 Contribution ex-TAC guidance to grow 3% to 4% year-over-year at constant currency, with a positive ForEx impact of $12 million to $15 million. The Adjusted EBITDA margin guidance for 2025 has been raised to approximately 34%. This reflects confidence in operational leverage, AI-driven productivity, and continued cost discipline, even as the company invests in agentic AI innovation and scales its Commerce Media Platform. Capital expenditures for 2025 are projected at approximately $110 million, primarily for data center equipment and platform investments. Higher CapEx is anticipated in 2026 for the renewal of certain large data centers.

For Q4 2025, Criteo expects Contribution ex-TAC between $325 million and $331 million, representing a 3% to 5% decline at constant currency, and Adjusted EBITDA between $113 million and $119 million. Management has indicated that these Q4 trends do not represent the run rate for 2026, with overall low growth anticipated for 2026 and a low point expected in Q1 due to the one-time revenue from tiered fees in January 2025.

A significant strategic initiative to unlock shareholder value is Criteo's announced intention to redomicile from France to Luxembourg, with a direct listing of ordinary shares on Nasdaq, expected by Q3 2026. This move aims to simplify the corporate structure, increase capital management flexibility (including eliminating restrictions on share repurchases), and enable potential inclusion in major U.S. stock indices, thereby broadening its shareholder base. The company also plans a subsequent redomiciliation to the United States, potentially as early as Q1 2027. This strategic corporate restructuring, coupled with ongoing investments in AI, self-service platforms like Commerce GO!, and expansion into high-growth channels, underscores Criteo's commitment to sustained growth and long-term value creation.

Risks and Headwinds

While Criteo's strategic transformation and technological advancements present a compelling investment thesis, several risks and challenges warrant attention. The most immediate impact stems from client-specific headwinds in the Retail Media segment. The curtailment of managed services by Criteo's largest Retail Media client and the discontinuation of U.S. services by a food delivery client are expected to result in a $25 million negative impact in 2025 (primarily Q4) and approximately $75 million for the first ten months of 2026.

Macroeconomic volatility, driven by global geopolitical conditions, inflation, and fluctuating interest rates, continues to pose a risk to advertising demand and consumer behavior. Soft retail trends, particularly an 11% decline in fashion in Q3 2025, highlight the sensitivity of ad budgets to discretionary categories. Criteo is also subject to U.S. and international privacy regulations and the evolving privacy decisions of large internet companies like Google and Apple (AAPL), although Google's decision to maintain third-party cookies has provided near-term clarity. Legal proceedings, such as a patent infringement lawsuit filed in October 2025, also represent potential liabilities and a diversion of management resources.

Conclusion

Criteo is strategically transforming into a diversified Commerce Media Platform, leveraging its proprietary AI and extensive commerce data to deliver full-funnel, cross-channel, and self-service advertising solutions. Despite facing near-term client-specific headwinds and a volatile macroeconomic environment, the company's Q3 2025 results demonstrate strong operational execution, robust profitability, and effective cost management. The re-energization of Performance Media through Commerce GO! and the continued expansion of Retail Media into new formats and partnerships, including the significant Google API integration, position Criteo for sustained growth.

The planned redomiciliation to Luxembourg and eventual U.S. listing are critical steps to enhance capital flexibility and broaden investor appeal, reinforcing Criteo's commitment to long-term shareholder value. While the competitive landscape remains dynamic, Criteo's unique technological differentiators, particularly its AI Engine and Shopper Graph, provide a strong moat. These capabilities enable superior performance and relevance at scale, which are crucial for driving future growth and maintaining its leadership in the evolving commerce media ecosystem. Investors should monitor the successful integration of new clients and technologies, as well as the effective management of client transitions, as Criteo executes its ambitious strategy to capitalize on the convergence of commerce and advertising.