10-Q: Taboola Swings to Q3 Profit, Boosts Share Buyback Program

Taboola.com Ltd. reported a return to net income in the third quarter of 2025, driven by revenue growth and improved operational efficiency, while expanding its share repurchase authorization.

Summary

• Revenues increased by 14.7% to $496.764 million for the three months ended September 30, 2025, compared to $433.012 million in the prior year.
• The company achieved a net income of $5.244 million ($0.02 diluted EPS) for Q3 2025, a significant improvement from a net loss of $6.454 million ($0.02 diluted EPS) in Q3 2024.
• For the nine months ended September 30, 2025, revenues grew 9.0% to $1.389 billion, and the net loss substantially narrowed to $7.851 million from $36.903 million in the same period of 2024.
• Non-GAAP Net Income surged by 54.3% to $34.263 million in Q3 2025 and by 82.5% to $89.471 million for the nine-month period.
• Adjusted EBITDA increased slightly by 0.6% to $48.223 million in Q3 2025 and by 19.0% to $129.336 million for the nine-month period.
• The board of directors authorized an additional $200 million for the share buyback program in February 2025 and another $200 million in July 2025, bringing the total remaining authorization to $261.892 million as of September 30, 2025.
• Taboola repurchased 58.3 million shares (44.5 million Ordinary, 13.8 million Non-voting) for approximately $184.6 million during the nine months ended September 30, 2025.
• The company refinanced its long-term debt by entering into a new $270 million revolving credit facility on March 18, 2025, which matures on March 18, 2030.
• The Share Repurchase Agreement with Yahoo terminated on October 15, 2025, after it was determined that Israeli Competition Authority approval was not required for Yahoo's equity ownership to exceed 25%.

Sentiment

Score: 7

Explanation: The company demonstrated strong financial improvement, swinging to a net profit in Q3 and significantly reducing its nine-month net loss, supported by robust revenue growth and non-GAAP metric increases. Strategic actions like the expanded share buyback program and debt refinancing are positive. However, the notable decrease in cash and cash equivalents, along with a slight decline in total digital property partners, introduces some caution, preventing a higher score.

Positives

• Revenues increased by 14.7% in Q3 2025 and 9.0% for the nine months ended September 30, 2025, demonstrating strong top-line growth.
• The company returned to net income in Q3 2025, reporting $5.244 million, a significant turnaround from a net loss in the prior year.
• Non-GAAP Net Income saw substantial growth, increasing by 54.3% in Q3 2025 and 82.5% for the nine-month period, indicating improved underlying profitability.
• Adjusted EBITDA grew by 19.0% for the nine months ended September 30, 2025, reflecting enhanced operational performance.
• Free Cash Flow increased by $3.4 million in Q3 2025 and $19.2 million for the nine-month period, providing greater financial flexibility.
• The cost of guarantees as a percentage of traffic acquisition costs improved to 12% in Q3 2025 from 21% in Q3 2024, indicating better contract terms or performance.
• The number of Scaled Advertisers increased to 2,100 in Q3 2025 from 2,000 in Q3 2024, and Average Revenue per Scaled Advertiser grew by 10.9% to $208,000.
• The successful refinancing of long-term debt with a new $270 million revolving credit facility provides improved liquidity and financial structure.
• The termination of the Yahoo Share Repurchase Agreement on October 15, 2025, removes a previous constraint related to Yahoo's equity ownership and regulatory approval.

Negatives

• Cash and cash equivalents decreased significantly from $226.583 million as of December 31, 2024, to $115.475 million as of September 30, 2025, primarily due to share repurchases and debt repayment.
• The accumulated deficit increased from $154.220 million as of December 31, 2024, to $162.071 million as of September 30, 2025.
• The total number of digital property partners decreased from 15,000 in Q4 2022 to 11,000 in Q4 2024, although revenue from new and existing partners is growing.
• Traffic acquisition cost increased at a higher rate (20.9%) than revenue (14.7%) in Q3 2025, partially due to ad format testing with Yahoo.
• The launch date of the Vertical Ads format (to replace the Moments ad format) has not yet occurred as of the Amendment Effective Date (February 1, 2025).

Risks

• The company is subject to U.S. and international laws and regulations regarding privacy, data protection, digital advertising, and the collection of user data, which could impact operations.
• Decisions by large Internet and technology companies like Google and Apple regarding consumer privacy can affect the entire digital ecosystem and Taboola's business.
• Global economic and geopolitical conditions, including inflation, rising interest rates, supply chain disruptions, and international conflicts, create volatility and may materially impact the business.
• Commercial agreements with digital properties that include guaranteed payments could lead to gross losses if the guarantee is higher than the actual revenue generated.
• Credit risk exists with cash balances maintained in banks that significantly exceed FDIC and FSCS insurance limits, and the company may not be able to fully mitigate the risk of possible bank failures.
• Derivative instruments expose the company to credit risk if counterparties are unable to meet the terms of the agreement.

Future Outlook

The company expects seasonality trends to continue, with revenue and margins being strongest in the fourth quarter and weakest in the first quarter. Management anticipates general and administrative expenses to remain relatively flat in 2025. The launch of the Realize performance platform in February 2025 is expected to lead to a growing portion of the business being tied to inventory where Taboola bids for ad placements. The launch date of the Vertical Ads format is pending mutual agreement on availability across all applicable inventory.

Management Comments

• We operate outside of the major search and social media walled gardens such as Meta, Google, and Amazon.
• Our scale is meaningful we reach approximately 600 million people a day, gaining real-time insight into what people read and buy. This gives us unique pulse of the internet data which alongside our artificial intelligence (AI) is our competitive advantage and helps our advertiser clients achieve exceptional returns on their advertising spend.
• Unlike walled gardens, we are a business-to-business, or B2B, company with no competing consumer interests. We only interact with consumers through our partners digital properties, hence we do not compete with our partners for user attention. Our motivations are aligned. When our partners win, we win, and we grow together.
• We are the only independent performance platform that goes beyond search and social, and delivers outcomes at scale for advertisers, leveraging our unique supply, 1st-party data and AI technology.
• We view research and development expenditures as investments that help grow our business over time.
• We expect our general and administrative expenses to remain relatively flat in 2025.
• At this time we are unable to predict if these factors (macroeconomic conditions) will have a material impact on our business during 2025.

Industry Context

Taboola operates in the competitive digital advertising ecosystem, positioning itself as an independent performance platform outside of major 'walled gardens' like Meta, Google, and Amazon. Its focus on AI-powered recommendations and first-party data leverages a key industry trend towards more targeted and privacy-compliant advertising solutions. The launch of the Realize platform indicates a strategic shift towards programmatic bidding, aligning with broader industry movements in ad tech. The company's B2B model, emphasizing partnership with digital properties rather than competition for user attention, differentiates it from consumer-facing platforms.

Comparison to Industry Standards

• Taboola's claim of being the 'only independent performance platform that goes beyond search and social, and delivers outcomes at scale for advertisers, leveraging our unique supply, 1st-party data and AI technology' positions it against major ad tech players and 'walled gardens' like Google, Meta, and Amazon, which typically have access to more explicit intent data or rich personal profiles.
• The increase in Average Revenue per Scaled Advertiser to $208,000 in Q3 2025, up from $187,000 in Q3 2024, suggests effective monetization strategies with its larger clients, a key performance indicator in the ad tech sector.
• The improvement in the cost of guarantees as a percentage of traffic acquisition costs (from 21% to 12%) indicates better negotiation or performance efficiency compared to previous periods, which is a positive trend in managing publisher relationships.
• The company's strategy of investing heavily in AI (Deep Learning) for optimization, accuracy, and reliability of its platform is consistent with industry-wide efforts to enhance ad targeting and delivery efficiency, mirroring investments by competitors in advanced analytics and machine learning.

Corporate Governance

Legal Proceedings

• The company is currently not aware of any legal matters that, it believes, would individually or in the aggregate, have a material adverse effect on its business, financial position, results of operations, or cash flows.

Related Party Transactions

• Taboola has a 30-year exclusive commercial agreement with Yahoo Inc. and its affiliates, under which Taboola powers native advertising across Yahoo's digital properties.
• Yahoo is a principal shareholder, holding 39,525,691 Ordinary shares and 45,198,702 Non-voting Ordinary shares issued on January 17, 2023.
• Revenues from Yahoo were $52.106 million (10.5% of total revenue) for Q3 2025 and $146.886 million (10.6% of total revenue) for 9M 2025.
• Traffic acquisition costs paid to Yahoo were $93.088 million for Q3 2025 and $252.644 million for 9M 2025.
• Trade receivables from Yahoo were $37.941 million (12.3% of total trade receivables) as of September 30, 2025, down from $76.677 million (20.7%) as of December 31, 2024.
• Trade payables to Yahoo were $67.690 million as of September 30, 2025, compared to $68.556 million as of December 31, 2024.
• The company repurchased 14,170,762 Non-voting Ordinary shares from Yahoo for approximately $44.288 million through October 14, 2025, under a Share Repurchase Agreement.
• The Share Repurchase Agreement with Yahoo terminated on October 15, 2025, following notice that Israeli Competition Authority approval was not required.

Stakeholder Impact

• Shareholders: The swing to net income and increased non-GAAP profitability, coupled with an expanded share buyback program, could positively impact shareholder value and confidence. The reduction in cash due to buybacks and debt repayment reflects capital allocation decisions.
• Employees: Share-based compensation remains a significant part of the compensation strategy, and R&D investments support job growth in technology and AI.
• Customers (Advertisers): Growth in Scaled Advertisers and Average Revenue per Scaled Advertiser indicates continued value delivery and strong relationships with advertisers.
• Suppliers (Digital Property Partners): Revenue sharing and guarantee models continue to provide monetization opportunities for digital properties, though the overall number of partners has decreased.
• Creditors: The refinancing of long-term debt with a new revolving credit facility and compliance with covenants demonstrate sound financial management, benefiting creditors.

Next Steps

• Finalize measurements for Vertical Ads in a further amendment once the format is available across all applicable inventory of the Properties.
• Continue to execute the share buyback program, with remaining authorization of $261.892 million as of September 30, 2025.
• Monitor macroeconomic conditions closely to assess potential impacts on the business during 2025.
• Evaluate the impact of adopting new accounting standards: ASU 2023-09 (Income Taxes), ASU 2024-03 (Expense Disaggregation), ASU 2025-05 (Credit Losses), and ASU 2025-06 (Internal-Use Software).

Key Dates

Recommendation

Taboola's Q3 2025 results show a positive shift to net income and strong growth in non-GAAP metrics, indicating improved operational efficiency and monetization. The expanded share buyback program and successful debt refinancing are strategic moves that could support long-term value. However, the significant decrease in cash and cash equivalents, largely due to these capital allocation activities, warrants a cautious 'hold' stance. While the company is executing well on its strategy, the broader macroeconomic uncertainties and the slight decline in total digital property partners suggest a need for continued monitoring before a more aggressive recommendation.

Keywords

Taboola, SEC Filing, 10-Q, Quarterly Report, Financial Results, Digital Advertising, Ad Tech, Native Advertising, Yahoo Agreement, Share Buyback, Revolving Credit Facility, Net Income, Adjusted EBITDA, Free Cash Flow, Traffic Acquisition Cost, Scaled Advertisers, AI-powered platform, Open Web