QuinStreet (QNST)

Performance marketing company QuinStreet (NASDAQ:QNST) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 2.4% year on year to $285.9 million. The company expects next quarter’s revenue to be around $275 million, close to analysts’ estimates. Its non-GAAP profit of $0.22 per share was in line with analysts’ consensus estimates.

Company Overview

Founded during the dot-com era in 1999 and specializing in high-intent consumer traffic, QuinStreet (NASDAQ:QNST) operates digital performance marketplaces that connect clients in financial and home services with consumers actively searching for their products.

The sector is on the precipice of both disruption and growth as AI, programmatic advertising, and data-driven marketing reshape how things are done. For example, the advent of the Internet broadly and programmatic advertising specifically means that brand building is not a relationship business anymore but instead one based on data and technology, which could hurt traditional ad agencies. On the other hand, the companies in the sector that beef up their tech chops by automating the buying of ad inventory or facilitating omnichannel marketing, for example, stand to benefit. With or without advances in digitization and AI, the sector is still highly levered to the macro, and economic uncertainty may lead to fluctuating ad spend, particularly in cyclical industries.

QuinStreet competes with digital marketing agencies, lead generation companies like EverQuote (NASDAQ:EVER) and MediaAlpha (NYSE:MAX), as well as larger tech platforms where clients can advertise directly, including Google (NASDAQ:GOOGL), Meta (NASDAQ:META), and Microsoft (NASDAQ:MSFT).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.1 billion in revenue over the past 12 months, QuinStreet is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, QuinStreet’s sales grew at an incredible 16.9% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows QuinStreet’s demand was higher than many business services companies.

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. QuinStreet’s annualized revenue growth of 40.1% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, QuinStreet reported modest year-on-year revenue growth of 2.4% but beat Wall Street’s estimates by 2.1%. Company management is currently guiding for a 2.7% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 12.9% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is noteworthy and implies the market is baking in success for its products and services.

QuinStreet was roughly breakeven when averaging the last five years of quarterly operating profits, one of the worst outcomes in the business services sector.

Looking at the trend in its profitability, QuinStreet’s operating margin decreased by 1.4 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. QuinStreet’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, QuinStreet generated an operating margin profit margin of 1.7%, up 2.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

QuinStreet’s EPS grew at a solid 9.9% compounded annual growth rate over the last five years. However, this performance was lower than its 16.9% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of QuinStreet’s earnings can give us a better understanding of its performance. As we mentioned earlier, QuinStreet’s operating margin expanded this quarter but declined by 1.4 percentage points over the last five years. Its share count also grew by 8.3%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For QuinStreet, its two-year annual EPS growth of 320% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, QuinStreet reported adjusted EPS of $0.22, in line with the same quarter last year. This print beat analysts’ estimates by 3.8%. Over the next 12 months, Wall Street expects QuinStreet’s full-year EPS of $0.88 to grow 28.3%.

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.

QuinStreet has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.7%, subpar for a business services business.

Taking a step back, an encouraging sign is that QuinStreet’s margin expanded by 4 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

QuinStreet’s free cash flow clocked in at $15.51 million in Q3, equivalent to a 5.4% margin. Its cash flow turned positive after being negative in the same quarter last year, building on its favorable historical trend.

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).

Although QuinStreet has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 8.5%, meaning management lost money while trying to expand the business.

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. Over the last few years, QuinStreet’s ROIC averaged 2.3 percentage point decreases each year. If its returns keep falling, it could suggest its profitable growth opportunities are drying up. We’ll keep a close eye.

Companies with more cash than debt have lower bankruptcy risk.

QuinStreet is a profitable, well-capitalized company with $101.3 million of cash and $7.00 million of debt on its balance sheet. This $94.3 million net cash position is 11% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was encouraging to see QuinStreet beat analysts’ revenue expectations this quarter. We were also glad its EPS was in line with Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 11.2% to $15.40 immediately after reporting.

Updated: December 4, 2025 at 11:24 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 QuinStreet.

There are several reasons why we think QuinStreet is a great business. First of all, the company’s revenue growth was exceptional over the last five years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its projected EPS for the next year implies the company’s fundamentals will improve. Additionally, QuinStreet’s rising cash profitability gives it more optionality.

QuinStreet’s P/E ratio based on the next 12 months is 13.1x. Analyzing the business services landscape today, QuinStreet’s positive attributes shine bright. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $21.75 on the company (compared to the current share price of $14.81), implying they see 46.9% upside in buying QuinStreet in the short term.