Ziff Davis (ZD)

Digital media company Ziff Davis (NASDAQ:ZD) missed Wall Street’s revenue expectations in Q3 CY2025 as sales rose 2.9% year on year to $363.7 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $1.47 billion at the midpoint. Its non-GAAP profit of $1.76 per share was 1.4% below analysts’ consensus estimates.

Company Overview

Originally a pioneering technology publisher founded in 1927 that became famous for PC Magazine, Ziff Davis (NASDAQ:ZD) operates a portfolio of digital media brands and subscription services across technology, shopping, gaming, healthcare, and cybersecurity markets.

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.

Ziff Davis competes with diversified internet and digital media companies like IAC, Future PLC, Red Ventures, and Penske Media. In specific verticals, it faces competition from companies like RVO Health, TechTarget, and Doximity. Its cybersecurity and marketing technology businesses compete with providers such as Palo Alto Networks, CrowdStrike, SEMRush, and MailChimp.

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.

With $1.46 billion in revenue over the past 12 months, Ziff Davis 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.

As you can see below, Ziff Davis struggled to increase demand as its $1.46 billion of sales for the trailing 12 months was close to its revenue five years ago. This shows demand was soft, a poor baseline 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. Ziff Davis’s annualized revenue growth of 3.1% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, Ziff Davis’s revenue grew by 2.9% year on year to $363.7 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its newer products and services will not catalyze better top-line performance yet.

Ziff Davis’s operating margin has risen over the last 12 months and averaged 11.3% over the last five years. Its profitability was higher than the broader business services sector, showing it did a decent job managing its expenses.

Looking at the trend in its profitability, Ziff Davis’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. Shareholders will want to see Ziff Davis grow its margin in the future.

In Q3, Ziff Davis generated an operating margin profit margin of 7.8%, up 16.1 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.

Sadly for Ziff Davis, its EPS declined by 2.2% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

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

For Ziff Davis, its two-year annual EPS growth of 4.7% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q3, Ziff Davis reported adjusted EPS of $1.76, up from $1.64 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates. Over the next 12 months, Wall Street expects Ziff Davis’s full-year EPS of $6.72 to grow 9.1%.

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.

Ziff Davis has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 19.5% over the last five years.

Taking a step back, we can see that Ziff Davis’s margin dropped by 14.9 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. If the longer-term trend returns, it could signal increasing investment needs and capital intensity.

Ziff Davis’s free cash flow clocked in at $108.2 million in Q3, equivalent to a 29.7% margin. This result was good as its margin was 7.1 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends trump 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).

Ziff Davis historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.2%, lower than the typical cost of capital (how much it costs to raise money) for business services companies.

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. Unfortunately, Ziff Davis’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

Ziff Davis reported $503.4 million of cash and $865.9 million 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 $503.7 million of EBITDA over the last 12 months, we view Ziff Davis’s 0.7× net-debt-to-EBITDA ratio as safe. We also see its $25.54 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.

It was encouraging to see Ziff Davis beat analysts’ full-year EPS guidance expectations this quarter. On the other hand, its EPS slightly missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock traded up 1.9% to $33.30 immediately following the results.

Updated: December 3, 2025 at 11:26 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 Ziff Davis.

We cheer for all companies making their customers lives easier, but in the case of Ziff Davis, we’ll be cheering from the sidelines. To begin with, its revenue growth was weak over the last five years. And while its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its declining adjusted operating margin shows the business has become less efficient.

Ziff Davis’s P/E ratio based on the next 12 months is 4.5x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $43.43 on the company (compared to the current share price of $35.83).

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.