IAC (IAC)

Digital media conglomerate IAC (NASDAQGS:IAC) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 8.1% year on year to $589.8 million. Its GAAP loss of $0.27 per share was 19.1% below analysts’ consensus estimates.

Company Overview

Originally known as InterActiveCorp and built through Barry Diller's strategic acquisitions since the 1990s, IAC (NASDAQ:IAC) operates a portfolio of category-leading digital businesses including Dotdash Meredith, Angi, and Care.com, focusing on digital publishing, home services, and caregiving platforms.

AI-driven content creation, personalized media experiences, and digital advertising are evolving, which could benefit companies investing in these themes. For example, companies with a portfolio of licensed visual content or platforms facilitating direct monetization models could see increased demand for years. On the other hand, headwinds include growing regulatory scrutiny on AI-generated content, with many publishers balking at anything that gets no human oversight. Additional areas to navigate include the phasing out of third-party cookies, which could make traditional ways of tracking the online behavior of consumers (a secret sauce in digital marketing) much less effective.

IAC's businesses face competition across multiple sectors: Dotdash Meredith competes with major digital publishers like Hearst, Condé Nast, and BuzzFeed; Angi faces competition from HomeAdvisor (which it now owns), Thumbtack, and Yelp in the home services market; while Care.com competes with UrbanSitter, Sittercity, and traditional caregiving agencies.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $2.47 billion in revenue over the past 12 months, IAC is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, IAC struggled to increase demand as its $2.47 billion of sales for the trailing 12 months was close to its revenue five years ago. This shows demand was soft, a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. IAC’s recent performance shows its demand remained suppressed as its revenue has declined by 15% annually over the last two years.

This quarter, IAC missed Wall Street’s estimates and reported a rather uninspiring 8.1% year-on-year revenue decline, generating $589.8 million of revenue.

Looking ahead, sell-side analysts expect revenue to decline by 2.2% over the next 12 months. Although this projection is better than its two-year trend, it’s hard to get excited about a company that is struggling with demand.

IAC’s high expenses have contributed to an average operating margin of negative 5.7% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, IAC’s operating margin rose by 6.4 percentage points over the last five years. Still, it will take much more for the company to reach long-term profitability.

In Q3, IAC generated a negative 3.5% operating margin. The company's consistent lack of profits raise a flag.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

IAC’s full-year EPS was flat over the last five years. This performance was underwhelming across the board.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For IAC, its two-year annual EPS declines of 60.7% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.

In Q3, IAC reported EPS of negative $0.27, up from negative $2.93 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast IAC’s full-year EPS of negative $2.73 will flip to positive $0.18.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

IAC broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.

IAC’s free cash flow clocked in at $25.27 million in Q3, equivalent to a 4.3% margin. The company’s cash profitability regressed as it was 18 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends trump temporary fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

IAC’s five-year average ROIC was negative 2.6%, meaning management lost money while trying to expand the business. Its returns were among the worst in the business services sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, IAC’s ROIC averaged 4.7 percentage point increases over the last few years. This is a good sign, and we hope the company can continue improving.

IAC reported $1.01 billion of cash and $1.43 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $266.8 million of EBITDA over the last 12 months, we view IAC’s 1.6× net-debt-to-EBITDA ratio as safe. We also see its $40 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 8.3% to $29.90 immediately after reporting.

Updated: December 4, 2025 at 11:29 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in IAC.

We cheer for all companies making their customers lives easier, but in the case of IAC, we’ll be cheering from the sidelines. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its expanding adjusted operating margin shows the business has become more efficient, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

IAC’s P/E ratio based on the next 12 months is 25.5x. At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $45.62 on the company (compared to the current share price of $36.05).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.