Executive Summary / Key Takeaways

• Ziff Davis is actively pursuing a strategic review, engaging outside advisors to explore opportunities to unlock shareholder value, driven by a perceived significant discount between its current market capitalization and the intrinsic value of its diverse portfolio.
• The company's Q3 2025 results demonstrated continued revenue growth of nearly 3% year-over-year, marking its fifth consecutive quarter of expansion, with adjusted diluted EPS growing over 7%, partially offset by a slight decline in adjusted EBITDA.
• Ziff Davis is leveraging advanced AI across its segments, from enhancing advertising targeting and customer service to improving consumer health apps and email security, providing tangible operational efficiencies and product innovation.
• A disciplined capital allocation strategy, including active share repurchases and strategic tuck-in acquisitions, underpins the company's commitment to long-term value creation, with management viewing current stock levels as significantly undervalued.
• Despite macroeconomic uncertainties and evolving digital landscape challenges like AI's impact on search, Ziff Davis's diversified business model and leadership positions in endemic categories position it for sustained growth, with all five segments anticipated to grow in 2025.

A Vertically Focused Powerhouse Poised for Revaluation

Ziff Davis, Inc. (NASDAQ:ZD) operates as a vertically focused digital media and internet company, commanding a diverse portfolio of leading brands across technology, shopping, gaming and entertainment, health and wellness, connectivity, cybersecurity, and martech. Incorporated in 2014, the company's journey has been marked by strategic acquisitions and divestitures, notably the 2021 spin-off of its cloud fax business into Consensus Cloud Solutions, Inc. (CCSI), a move that significantly unlocked shareholder value. This history of proactive portfolio management underscores Ziff Davis's current strategic review, aimed at addressing what management identifies as a "meaningful disconnect" between the company's market value and the intrinsic worth of its underlying businesses.

The company's overarching strategy centers on acquiring and scaling leadership brands within high-value verticals, leveraging its platforms, technology, and expertise to drive growth and profitability. This approach is evident in its recent restructuring into five distinct reportable segments—Technology & Shopping, Gaming & Entertainment, Health & Wellness, Connectivity, and Cybersecurity & Martech—a move designed to enhance transparency and allow investors a clearer "sum of the parts" valuation. Ziff Davis believes each of its divisions should individually command a higher multiple than the company's current blended valuation.

Technological Edge: AI-Powered Innovation Across the Portfolio

Ziff Davis's competitive moat is significantly strengthened by its strategic adoption and integration of artificial intelligence across its diverse operations. The company has developed a proprietary AI platform that refines how it serves advertisers, creating precise audience segments powered by billions of real-time signals from its extensive portfolio. This translates into "moment-of-influence solutions" that can be activated across Ziff Davis properties, its network, and the broader digital ecosystem.

In the Health & Wellness segment, Ziff Davis launched HALO, an AI-driven tool that activates deep first-party data to identify and target high-intent audiences, thereby maximizing campaign return on investment for pharmaceutical clients. Similarly, the Gaming & Entertainment segment introduced IMAGINE, a cognitive AI platform that combines cultural intelligence with predictive audience modeling to understand, forecast, and reach entertainment consumers in real-time. This platform is currently in private beta with strategic partners, with a full commercial rollout anticipated in early 2026, coinciding with IGN's 30th anniversary.

Operational efficiency is also a key beneficiary of AI integration. In the Shopping business, approximately 80% of all user-submitted coupon codes are now processed automatically with AI, streamlining workflows. The Lose It! app, a core offering in Health & Wellness, leverages AI for voice and photo meal logging, making meal tracking 3.5 times faster and leading to users tracking twice as many foods. This increased engagement directly contributes to user success, with members achieving 6% more weight loss on average. Furthermore, RetailMeNot has deployed an AI customer service chatbot that boasts a roughly 50% case deflection rate for inbound chats, significantly enhancing customer support efficiency. In cybersecurity, the VIPRE Integrated Email Security solution, designed for small and medium businesses, is powered by an AI engine that uses natural language processing, semantic analysis, and machine learning to identify and block advanced email threats. Health eCareers' AI Job Fit Analyzer has also demonstrated tangible benefits, increasing engagement with job search functionality by 18% and uplifting job applications by 30% among users interacting with the AI tools.

Beyond AI, the Connectivity segment is driving innovation with new product launches. Speedtest Certified, launched in September 2025, offers a highly localized Wi-Fi certification program targeting enterprise verticals, already seeing strong global demand. Another Ekahau-leveraged product, planned for a Q4 2025 launch, aims to provide rapid network validation, diagnostics, troubleshooting, and continuous network connectivity testing for ISP technicians and IT organizations. These technological advancements not only enhance Ziff Davis's product offerings but also reinforce its competitive position by delivering quantifiable benefits and driving operational excellence.

Competitive Landscape and Strategic Positioning

Ziff Davis operates in a dynamic digital landscape, competing with a mix of diversified digital media conglomerates, specialized content providers, and focused cybersecurity firms. Its competitive strategy is rooted in its portfolio of leadership brands, which enables it to define business models by demand rather than solely by supply, a key differentiator from many programmatic-driven competitors.

Compared to diversified digital media players like InterActiveCorp (IAC), Ziff Davis's strength lies in its focused portfolio within niche, high-value verticals. While IAC's broad diversification offers scale, Ziff Davis's established brands in tech, gaming, health, and shopping allow for deeper content engagement and stronger user loyalty. Ziff Davis's operational efficiency in its core segments, bolstered by AI integration, provides a competitive edge, potentially leading to superior gross margins through efficient content delivery.

Against content powerhouses such as The New York Times Company (NYT), Ziff Davis differentiates through a broader mix of entertainment and tech-focused content, appealing to a wider demographic. While NYT excels in premium journalism and subscription loyalty, Ziff Davis's diversified web properties and lifestyle-oriented content ecosystem, including brands like Mashable and MedPageToday, allow for extensive audience reach and adaptability to evolving consumer interests.

In the cybersecurity arena, Ziff Davis's offerings, such as VIPRE and IPVanish, overlap with specialized firms like CrowdStrike (CRWD). While CrowdStrike focuses purely on enterprise-grade security with advanced AI-driven threat detection, Ziff Davis integrates cybersecurity solutions within its broader digital media ecosystem, offering consumer-facing products and bundled services. This hybrid approach could lead to lower customer acquisition costs in consumer segments and greater market adaptability due to its diversified business, though it may not match CrowdStrike's specialized technological depth in pure enterprise security.

Ziff Davis's strategic positioning in endemic categories like tech, shopping, gaming, and health allows it to attract marketers seeking targeted audiences, balancing their spend across social networks, search, and specialized platforms. The company's programmatic advertising business is intentionally small, representing less than $50 million of annual revenue, as it prioritizes direct, endemic programs and performance marketing (CPA, CPL, CPC) over CPM-based programmatic models. This strategic choice insulates Ziff Davis from the broader volatility often associated with the open web's programmatic ad market.

Financial Performance and Liquidity: A Foundation for Growth

Ziff Davis's recent financial performance reflects a company returning to growth and generating substantial cash flow, even amidst strategic retooling and market shifts. For the third quarter ended September 30, 2025, the company reported revenues of $363.71 million, representing a nearly 3% increase year-over-year. This marked the fifth consecutive quarter of revenue growth. Adjusted diluted EPS for Q3 2025 rose by over 7% to $1.76, up from $1.64 in Q3 2024, partly attributable to the company's active share repurchase program. Adjusted EBITDA, however, saw a slight decline of less than 1% to $124.1 million, resulting in an adjusted EBITDA margin of 34.1%.

Year-to-date for the nine months ended September 30, 2025, Ziff Davis delivered growth across revenues, adjusted EBITDA, and adjusted diluted EPS. Advertising and performance marketing revenues increased by $11.5 million in Q3 2025, driven primarily by strong performance in the Health & Wellness and Technology & Shopping segments. Health & Wellness, in particular, accelerated its growth in Q3 with a 12.7% year-over-year revenue increase to $102.31 million and an 18% adjusted EBITDA growth, reaching high watermarks for the division. This growth was balanced across subscription and performance marketing, supported by pharma commercialization programs and digital health solutions like the Lose It! app.

The Technology & Shopping segment experienced a 2.2% revenue decline in Q3 2025 to $85.19 million, primarily due to a $6.9 million negative swing from the wind-down of game publishing activities. Excluding this, the segment demonstrated positive revenue and adjusted EBITDA growth, led by CNET's strong licensing, video, and sponsorship performance. The B2B business within this segment is undergoing a "shrink-to-grow" strategy, simplifying offerings and reducing expenses to enhance profitability, even with a planned revenue reduction. Gaming & Entertainment revenues decreased by 4.3% to $47.58 million in Q3 2025 due to the lumpy nature of title releases, though year-to-date revenues are up, and Q4 is expected to show growth. Humble Bundle's subscription revenues were up 5% year-over-year.

Connectivity revenues grew 2.2% to $57.18 million in Q3 2025, with deals shifting into Q4. Year-to-date, Connectivity revenues are up 6.9%, and management anticipates acceleration in Q4 due to pipeline strength and new product introductions. The segment's Q3 adjusted EBITDA margin was impacted by contract timing and investments in new product development. Cybersecurity & Martech returned to growth in Q3 2025 with a 2.0% revenue increase to $71.46 million, driven by strong cybersecurity performance, particularly in consumer VPN and cloud backup. However, adjusted EBITDA for this segment declined by approximately $0.5 million due to expense timing.

Ziff Davis maintains a robust liquidity position. As of September 30, 2025, the company held $503.37 million in cash and cash equivalents and $119.56 million in long-term investments. Its gross leverage stood at 1.7x trailing 12 months adjusted EBITDA, with net leverage at 0.7x (or 0.5x including financial investments), indicating significant capacity for further strategic investments.

The company's free cash flow generation remains strong, with Q3 2025 free cash flow at $108.2 million, a 35% increase over the prior year. Trailing 12 months free cash flow reached $261.2 million. This strong cash generation, combined with $348.8 million in available revolving credit, provides ample resources to meet operational needs, capital expenditures, debt obligations, and continued share repurchases.

Outlook and Guidance: A Path to Accelerated Value

Ziff Davis has reaffirmed its fiscal year 2025 guidance, anticipating total revenues and adjusted diluted EPS to fall within the lower half of the previously provided range, with adjusted EBITDA expected to be closer to the lower end. This outlook reflects a prudent assessment of the macroeconomic environment and segment-specific dynamics, with Q4 typically being the seasonally strongest revenue quarter. Management expects an acceleration of revenue growth from 2.8% in 2024 to a midpoint of 5% in 2025, and adjusted EBITDA growth improving from 2.3% to 6%.

The company's long-term vision remains to achieve double-digit total revenue growth, split roughly equally between organic and inorganic contributions, while maintaining mid-30s adjusted EBITDA margins. Key assumptions underpinning the 2025 outlook include continued strong performance in Health & Wellness, driven by promising pharma ad upfronts and a robust drug pipeline. Connectivity is projected for accelerated growth in Q4 2025, fueled by new product introductions and underlying pipeline strength, with anticipated increased demand from Wi-Fi 7 adoption. The Technology & Shopping segment is expected to be the strongest grower in 2025, particularly on the bottom line, benefiting from CNET's margin expansion and a focus on B2B profitability. Gaming & Entertainment is also on track for revenue growth in the seasonally important fourth quarter.

Ziff Davis's guidance does not factor in incremental M&A or additional share repurchases, but the company remains committed to an active and opportunistic capital allocation strategy. Management views current stock levels as significantly undervalued, citing a substantial disconnect between the company's adjusted EBITDA in 2021 ($485 million when the stock hit $130) and its projected 2025 adjusted EBITDA midpoint of $523 million, with 12% fewer shares outstanding. This conviction fuels ongoing share buybacks, with 3.6 million shares repurchased since the start of 2025.

Risks and Challenges

Despite a positive outlook, Ziff Davis faces several pertinent risks. The evolving landscape of generative AI presents a significant challenge, as these technologies can access, duplicate, and distribute Ziff Davis's content without authorization or fair compensation. This could potentially reduce online traffic, infringe intellectual property rights, and harm the company's reputation if inaccurate information is attributed to its brands. The legal and regulatory framework for generative AI remains uncertain, and enforcing IP rights against misuse could be costly. Ziff Davis has taken a proactive stance, filing a lawsuit against OpenAI, Inc. for copyright infringement and other violations, and blocking known AI bots at the CDN level to prevent unauthorized access.

Search engine volatility, driven by frequent algorithm changes and Google's ongoing experimentation, also poses a risk to traffic-dependent revenues. While Ziff Davis's business model is diversified, with only about 17.5% of total revenue exposed to search, these fluctuations can still impact performance. Macroeconomic conditions, including the possibility of an economic downturn, global conflicts, inflation, and elevated interest rates, could affect customer acquisition and retention rates, usage levels, and advertising spend. Furthermore, the company's goodwill, which stands at $1.61 billion as of September 30, 2025, is subject to impairment risk if market conditions or key valuation assumptions deteriorate. Litigation, including putative class actions related to job postings, third-party trackers, and video viewing data, also represents a potential financial and operational burden.

Conclusion

Ziff Davis stands at a pivotal juncture, strategically re-positioning itself to unlock substantial shareholder value. Through a disciplined approach to acquisitions, a robust capital allocation strategy emphasizing share repurchases, and a clear focus on leveraging its diversified portfolio of leadership brands, the company is building a compelling investment narrative. The recent segment reporting enhancements and the ongoing strategic review underscore management's commitment to addressing the perceived valuation disconnect.

The company's deep integration of AI across its operations, from enhancing advertising effectiveness to streamlining customer service and powering new product innovations, provides a tangible competitive advantage. This technological differentiation, combined with strong free cash flow generation and a healthy balance sheet, positions Ziff Davis to capitalize on growth opportunities in its core verticals. While challenges from the evolving AI landscape and macroeconomic uncertainties persist, Ziff Davis's proactive measures, diversified revenue streams, and commitment to operational excellence suggest a resilient business with significant potential for long-term value appreciation. The coming quarters will be critical in demonstrating the full impact of these strategic initiatives and the company's ability to translate its intrinsic value into shareholder returns.