Executive Summary / Key Takeaways

• Portfolio Transformation Complete: IAC has fundamentally reshaped itself through the March 2025 spin-off of Angi and July 2025 rebranding of Dotdash Meredith to People Inc., creating a simplified structure focused on digital publishing and strategic investments, with management targeting over $1 billion in additional divestiture proceeds within 3-6 months to fuel aggressive capital returns.

• People Inc.'s Defensive-Offensive Pivot: The renamed publishing arm is successfully diversifying away from Google dependency, with search traffic falling from 54% to 24% of core brand sessions while maintaining overall audience scale through 66% off-platform growth and AI content partnerships, though this resilience is tested by a 9% digital revenue growth rate that barely offsets print's 15% decline.

• MGM as a "Violently Strong" Hedge: IAC's 24% stake in MGM Resorts represents a $2.24 billion asset that management views as "wildly undervalued," trading at less than 3x EBITDA when excluding MGM China and BetMGM, providing both downside protection and potential upside as the Osaka resort development progresses and digital operations scale.

• Capital Allocation on Offense: With $1 billion in cash and access to People Inc.'s cash flow following leverage ratio improvements, IAC has repurchased 8% of its shares year-to-date ($300 million) while pursuing "opportunistic" M&A, signaling management's conviction that the market undervalues the transformed entity.

• The Google AI Overhang: The single biggest risk to the investment thesis is Google's AI Overviews, which appear on one-third of searches and are "expected to continue to negatively impact Core Sessions," potentially undermining People Inc.'s digital growth engine and compressing margins across the publishing segment.

Setting the Scene: From Conglomerate to Focused Platform

IAC Inc., founded nearly three decades ago and headquartered in New York City, has spent the last two years executing one of the most dramatic portfolio transformations in its history. The company that once housed dozens of internet businesses has methodically slimmed down to a core focused on digital publishing and strategic investments. This matters because it fundamentally changes IAC's risk profile—from a complex conglomerate requiring sum-of-the-parts valuation to a more transparent entity where investors can clearly assess the value drivers.

The transformation reached its crescendo in 2025. In March, IAC completed the spin-off of Angi Inc. (ANGI), its tenth independent company creation, effectively removing a chronically underperforming home services marketplace that had required constant management attention and capital injections. In July, the company rebranded Dotdash Meredith as People Inc., a name reflecting its strategy to create content "made by people for people." These moves weren't cosmetic; they represented a deliberate shift from defense to offense after a 2022 crisis when Angi's EBITDA had plummeted and Dotdash Meredith's projections were slashed.

Today, IAC makes money through three primary channels: People Inc.'s digital and print publishing operations (generating $1.25 billion in revenue through nine months of 2025), a portfolio of smaller businesses including Care.com and search properties (contributing another $589 million), and strategic investments in MGM Resorts (MGM) and Turo (33% preferred ownership). The business model is evolving from traffic-dependent advertising to diversified revenue streams including performance marketing, licensing, and direct-to-consumer offerings.

This positioning places IAC at the intersection of two powerful industry trends: the disruption of traditional search by AI, and the consolidation of digital publishing around scaled, brand-safe content. The company sits in a value chain increasingly dominated by Google on one side and AI platforms on the other, with its strategic differentiation hinging on its ability to build direct audience relationships that bypass traditional search dependency.

Technology, Products, and Strategic Differentiation

People Inc.'s core technology advantage lies in its "inverted publishing model" and D/Cipher+ ad targeting platform. Rather than relying solely on search traffic, the company has built a scaled audience across 40+ iconic brands including PEOPLE, Better Homes & Gardens, and Investopedia, then diversified revenue through licensing deals with OpenAI (commenced May 2024) and Meta (META) (strategic partnership announced December 2025). This matters because it directly addresses the existential threat posed by Google AI Overviews, which answer user queries directly rather than driving clicks to publisher sites.

The D/Cipher+ platform exemplifies this differentiation. By expanding the addressable market beyond owned-and-operated sites, People Inc. can monetize audiences across the open web while maintaining premium pricing power. The acquisition of Feedfeed, a food influencer network, further enhances this capability, allowing the company to capture value from off-platform audiences that grew 66% year-over-year in Q3 2025. This is why over one-third of Q3 revenue is now "not session-based" and growing at 16%—a structural shift away from volatile search traffic.

The technology moat extends to AI integration. People Inc. is a launch partner for publisher content marketplaces where AI players compensate publishers, creating a new revenue stream that didn't exist two years ago. This positions the company to benefit from rather than be destroyed by generative AI, a critical distinction from publishers who lack the scale and technical capability to negotiate such deals.

Financial Performance & Segment Dynamics: Evidence of Strategy Working

The numbers reveal a company in transition, with clear winners and losers that validate the simplification thesis. People Inc.'s digital revenue grew 9% in Q3 2025 to $269 million, marking the eighth consecutive quarter of growth and hitting the high end of guidance. This 9% growth is particularly significant because it occurred while Google search traffic for core brands collapsed from 54% to 24% of sessions over two years. The implication: People Inc. is successfully rebuilding its audience engine, with off-platform growth and direct navigation offsetting search declines.

However, the total picture is more nuanced. People Inc.'s overall revenue declined 2% in Q3 to $429.8 million because print revenue fell 15% to $169 million. The print business, while still profitable with $7.3 million in adjusted EBITDA, is in structural decline. This mix shift matters for margins: digital adjusted EBITDA margins of 27% and incremental margins of 26% suggest that as digital grows as a percentage of the mix, overall profitability should improve. Yet total People Inc. adjusted EBITDA declined 5% to $65 million in Q3, reflecting $4.3 million in severance costs and increased marketing investment.

Care.com presents a turnaround story with execution risk. Revenue declined 5% in Q3 to $90.8 million, but core consumer metrics achieved stability and growth in June and July 2025 for the first time since 2022. The company relaunched its product in June with improved search and messaging, targeting a $375 billion addressable market where it has less than 1% penetration. The path to growth involves driving consumers from offline methods, new pricing tiers, and expanding into senior and pet care. Management expects consumer revenue to return to growth in Q2 2026, but Q4 2025 guidance calls for 7-9% revenue declines, showing the turnaround remains fragile.

The Search segment is in freefall, with revenue down 41% in Q3 to $51.9 million. Ask Media Group suffered from Google algorithm changes and policy updates, while Desktop declined due to fewer legacy search queries. This segment is now managed for margin rather than growth, generating only $1.9 million in adjusted EBITDA. The collapse validates IAC's decision to spin off Angi and focus on People Inc.—the search-dependent businesses are no longer core to the investment thesis.

Emerging & Other swung to a $20 million EBITDA loss in Q3, but this was entirely due to $21 million in legal expenses for legacy litigation that concluded in the quarter. Excluding this one-time hit, the segment is profitable, with Vivian Health implementing AI into healthcare staffing products that could "fundamentally change" the industry.

Outlook, Management Guidance, and Execution Risk

Management's guidance reveals both confidence and caution. For People Inc., Q4 2025 digital revenue growth is expected in the 7-10% range with strong EBITDA margins, but full-year adjusted EBITDA guidance was lowered slightly to $325-340 million due to "continued Google Search disruptions" and $4 million in legal expenses for ad tech litigation. This $4 million spend is framed as a worthwhile investment given potential for significant damages, but it highlights the ongoing regulatory friction with big tech.

The long-term target for People Inc. is 10% digital revenue growth, which would require maintaining momentum despite Google headwinds. Management expects the $60 million in run-rate savings from recent headcount reductions to be split evenly between profit flow-through and reinvestment in high-ROI digital activities, suggesting a balanced approach to efficiency and growth.

Care.com's outlook remains challenging, with Q4 revenue expected to decline 7-9% and full-year adjusted EBITDA guidance of $45-50 million. The consumer business is projected to return to growth in Q2 2026, with overall business growth in the second half of 2026, but this timeline leaves the segment as a drag on consolidated results for at least the next year.

The most significant forward-looking statement comes from Barry Diller: "anything, frankly, other than... MGM and People, those are the core." Management expects to generate "another, I don't know, $1 billion or so of capital" from divestitures within "3 months, 6 months at the most." This capital will fund share repurchases and opportunistic M&A, with IAC already buying back 8% of shares year-to-date.

Risks and Asymmetries: What Could Break the Thesis

The Google AI Overviews threat is existential and immediate. With AI-generated answers appearing on one-third of searches, People Inc.'s core sessions declined 6% in Q3, and management expects this "to continue to negatively impact Core Sessions." If Google expands AI Overviews further or changes algorithms again, the 9% digital growth could evaporate, turning People Inc. from a growth engine into a declining asset. The risk is amplified because 24% of traffic still comes from Google—any acceleration in AI adoption could quickly undermine the diversification efforts.

MGM's valuation, while described as "wildly undervalued," remains a paper gain until realized. The $2.24 billion carrying value represents a $979.5 million cumulative unrealized gain, but MGM's stock has declined 29% since early 2022. While management touts the Osaka resort development and BetMGM's growth, the gaming industry faces macro headwinds and regulatory risks that could limit upside.

Execution risk on the divestiture program is material. While management targets $1 billion in proceeds, the actual timing and valuation of non-core asset sales remain uncertain. The Mosaic Group sale in February 2024 provides a template, but market conditions for digital assets have deteriorated, potentially limiting proceeds.

The macro environment poses a broader threat. Management's guidance assumes "no significant recession," but advertising is cyclical. With 70%+ of revenue tied to advertising and marketing, any economic slowdown would disproportionately impact People Inc. and the remaining search business, compressing margins and reducing cash available for buybacks.

Valuation Context: Parsing the Market's Skepticism

At $36.76 per share, IAC trades at an enterprise value of $3.37 billion, representing 1.23 times trailing revenue and 0.59 times book value. The negative operating margin (-3.46%) and profit margin (-6.19%) reflect the drag from declining segments and restructuring costs, but the 74.85% gross margin indicates underlying pricing power in the core publishing business.

The valuation metrics require context. The EV/EBITDA multiple of 10.49 appears reasonable until you realize it includes losses from shrinking segments. People Inc. alone generated $214.9 million in adjusted EBITDA through nine months, putting it on pace for roughly $285 million annually. If the publishing business were valued in line with digital media peers like BuzzFeed (BZFD) (EV/Revenue 0.52) or News Corp (NWSA) (1.88), it would imply a wide range of outcomes, suggesting the market is struggling to price the transformation.

The balance sheet provides downside protection. With $1 billion in cash, a debt-to-equity ratio of just 0.30, and access to People Inc.'s cash flow following the leverage ratio improvement, IAC has the firepower to execute its buyback program and weather downturns. The $300 million in year-to-date repurchases (8% of shares) at an average price likely above current levels signals management's conviction but also raises questions about capital allocation efficiency.

Conclusion: A Transformation Story at an Inflection Point

IAC has completed its radical slim-down, emerging as a focused digital publishing platform anchored by People Inc. and supplemented by a potentially undervalued MGM stake. The investment thesis hinges on three variables: whether People Inc. can sustain digital growth amid Google's AI onslaught, whether management can extract full value from divestitures and the MGM investment, and whether the aggressive buyback program proves accretive.

The company has demonstrated remarkable resilience in diversifying away from search traffic, with People Inc. maintaining growth despite a 30-percentage-point drop in Google dependency. However, this achievement remains fragile—AI Overviews could accelerate and overwhelm the diversification efforts. The MGM investment provides a unique hedge and value unlock opportunity, but timing remains uncertain.

For investors, IAC represents a levered bet on management's ability to navigate the most disruptive period in digital publishing history while allocating capital with discipline. The 8% share count reduction shows they're putting money behind their conviction, but the next 6-12 months will prove whether People Inc.'s defensive-offensive strategy can deliver sustainable growth or if Google will render the publishing model obsolete. The margin of safety lies in the balance sheet and MGM stake; the upside requires flawless execution on multiple fronts.