10-Q: Shutterstock Reports Q1 2026 Results, Revenue Declines

Shutterstock, Inc. reported a significant revenue decrease for the first quarter of 2026, primarily driven by a decline in new customer acquisition and a drop in its data offering.

Summary

• Shutterstock reported a net loss of $47.6 million for the first quarter of 2026, a substantial decrease from a net income of $18.7 million in the same period of 2025.
• Total revenue for the quarter was $199.2 million, down 18% from $242.6 million in Q1 2025. On a constant currency basis, revenue decreased by 19%.
• Content revenue decreased by 12% to $178.1 million, attributed to weakness in new customer acquisition.
• Data, Distribution, and Services revenue saw a significant drop of 47% to $21.0 million, largely due to a 63% decline in the data offering.
• Operating expenses decreased slightly by 1% to $230.1 million, but as a percentage of revenue, they increased to 116% from 96% in the prior year.
• General and administrative expenses increased by 16% to $67.6 million, primarily due to a $28.0 million legal contingency related to an FTC investigation.
• The company had $162.5 million in cash and cash equivalents as of March 31, 2026.
• The proposed merger with Getty Images is progressing, with the UK Competition and Markets Authority (CMA) suggesting a sale of Shutterstock's editorial businesses (Rex Features, Backgrid, and Splash News) as a potential remedy for competition concerns.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to the significant revenue decline, net loss, and concerning operational metrics, despite the ongoing merger progress.

Positives

• The company maintained a strong cash position with $162.5 million in cash and cash equivalents as of March 31, 2026.
• Cost of revenue decreased by 6% year-over-year, primarily due to lower royalty expenses resulting from the decline in revenue.
• Sales and marketing expenses decreased by 9% year-over-year, driven by a reduction in brand and performance-based marketing.
• Product development expenses decreased by 2% year-over-year.
• Interest expense decreased by 13% due to lower interest rates.
• The company remains committed to its dividend, declaring a quarterly cash dividend of $0.36 per share.
• The DOJ has concluded its review of the Getty Images merger, and the HSR Act waiting period has expired without conditions.

Negatives

• Net loss of $47.6 million for the quarter, compared to a net income of $18.7 million in the prior year.
• Revenue decreased by 18% to $199.2 million.
• Content revenue decreased by 12% due to weak new customer acquisition.
• Data, Distribution, and Services revenue decreased by 47%, with the data offering declining by 63%.
• Operating expenses as a percentage of revenue increased significantly to 116% from 96%.
• General and administrative expenses increased by 16% due to a $28.0 million legal contingency.
• Adjusted EBITDA decreased by 32% to $42.7 million from $63.4 million.
• Adjusted net income decreased by 43% to $20.7 million from $36.3 million.
• Paid downloads decreased by 13% to 104.1 million.
• Subscribers decreased by 8% to 993,000.

Risks

• The UK CMA has provisionally found that the merger with Getty Images may result in a substantial lessening of competition in the UK editorial market and has suggested a sale of Shutterstock's Rex Features, Backgrid, and Splash News businesses.
• The FTC is investigating Shutterstock's disclosure and subscription enrollment and cancellation practices, which could result in significant monetary costs or penalties and have a significant impact on financial results.
• The company faces ongoing competition in its industry.
• The effectiveness and efficiency of marketing efforts are critical.
• The ability to innovate technologically and develop new products and services is a risk.
• Costs related to litigation or infringement claims, indemnification claims, and misuse of content pose risks.
• Pricing pressure could impact profitability.
• The impact of worldwide economic, political, and social conditions is a risk.
• Issues relating to the use of new and evolving technologies, such as AI, present potential challenges.
• The company's ability to grow revenues at historical rates is uncertain.
• Risks related to personnel, including the ability to effectively expand, train, manage changes to, and retain its sales force, are present.
• The potential impairment of goodwill or intangible assets is a risk.
• Risks related to debt and the need to raise additional capital are factors.
• Reliance on information technologies and systems, and security vulnerabilities, are ongoing concerns.
• International operations and expansion carry inherent risks.
• Foreign exchange risk and regulatory and tax challenges are present.

Future Outlook

The company expects its cost of revenue to continue to fluctuate in line with changes in revenue. Sales and marketing expenses are expected to fluctuate as the company optimizes sales channels and invests in new customer acquisition, products, and geographies. Product development expenses are expected to continue in the foreseeable future as the company invests in new products and enhances existing ones. The company believes its current cash and cash equivalents, along with cash from operations and its credit facility, will be sufficient to meet its anticipated cash needs for at least the next 12 months. Future declarations of dividends are subject to the Board of Directors' determination and will depend on various factors including financial condition, results of operations, and capital requirements.

Management Comments

• The company remains committed to the proposed Merger with Getty Images and will continue to engage with the CMA.
• Shutterstock believes it has substantial defenses in connection with the demand letters and denies all allegations that additional disclosure was or is required.
• The company believes, based on its current operating plan, that its cash and cash equivalents, and cash from operations, will be sufficient to meet its anticipated cash needs for at least the next 12 months.
• The company currently expects to continue to pay comparable cash dividends on a quarterly basis in the future.

Industry Context

StockSavvy.ai notes that Shutterstock's revenue decline in Q1 2026, particularly in its core Content segment, reflects broader challenges in the digital content licensing market, potentially exacerbated by evolving AI technologies and increased competition. The significant drop in the Data, Distribution, and Services segment, especially the data offering, may indicate a shift in demand or challenges in monetizing these newer services.

Comparison to Industry Standards

• While specific industry benchmarks for Q1 2026 are not provided in the filing, Shutterstock's reported revenue decline of 18% (19% on a constant currency basis) is a significant underperformance compared to the general growth trends observed in the digital media and content creation sectors in recent years.
• The increase in cost of revenue as a percentage of revenue (48% vs. 42%) suggests potential margin pressure, which could be a concern if competitors are managing these costs more effectively.
• The substantial increase in General and Administrative expenses due to legal contingencies is a specific company issue and not directly comparable to industry standards, but it highlights a significant drag on profitability.
• The decline in subscribers (down 8%) and paid downloads (down 13%) indicates a potential loss of market share or reduced customer engagement compared to competitors who may be experiencing different trends.

Legal Proceedings

• Two complaints filed against Shutterstock and its directors alleging false and misleading information in the Proxy Statement regarding the Merger, seeking injunctions, rescission, and damages.
• Demand letters sent by purported stockholders of Shutterstock and Getty Images alleging similar disclosure deficiencies regarding the Merger.
• A Civil Investigative Demand (CID) from the FTC regarding its investigation into Shutterstock's disclosure and subscription enrollment and cancellation practices. A legal contingency expense of $28.0 million was recorded, and a loss contingency accrual of $30.0 million exists as of March 31, 2026.

Stakeholder Impact

• Shareholders: The significant revenue decline and net loss, coupled with the ongoing merger uncertainties and FTC investigation, could negatively impact shareholder value. The continued dividend payment may offer some support.
• Contributors: Lower revenue and paid downloads may lead to reduced royalty payments for contributors.
• Customers: While not explicitly detailed, a decline in new customer acquisition and potential operational challenges could impact customer experience or service availability.
• Employees: The FTC investigation and potential legal costs could create uncertainty. Workforce optimization severance costs were noted in accrued expenses.

Next Steps

• Continue to engage with the UK CMA regarding the proposed merger with Getty Images.
• Work with Getty Images to expeditiously secure necessary clearances for the Editorial business.
• Continue to cooperate with the FTC investigation into disclosure and subscription practices.
• The company expects to continue paying comparable cash dividends on a quarterly basis.
• The company plans to finance operations, capital expenditures, and corporate actions through cash generated by operations and its credit facility.

Key Dates

Recommendation

The company is facing significant headwinds with declining revenues and a net loss, compounded by regulatory scrutiny and merger-related uncertainties. While the core business is struggling, the potential merger with Getty Images and ongoing dividend payments provide some stability. A 'hold' recommendation reflects the need to observe the resolution of the FTC investigation, the outcome of the CMA review for the merger, and any signs of stabilization or recovery in the core business before considering a more definitive action.

Keywords

Shutterstock, SEC Filing, 10-Q, Quarterly Report, Getty Images Merger, Revenue Decline, Content Licensing, Creative Platform, Financial Results, FTC Investigation, UK CMA Review