Criteo S.A. (CRTO) Earnings

Management highlights

- Leadership Transition * Outgoing CFO Sarah Glickman will step down August 10, 2026, and remain as an advisor through the end of September 2026 * Current Chief Strategy Officer Connor Magogne will be appointed CFO effective August 10, 2026 * The company completed redomiciliation to Luxembourg with a direct listing of ordinary shares, and plans to pursue a subsequent redomiciliation to the U.S. as early as January 2027, subject to regulatory approvals - Strategic AI Initiatives * The OpenAI advertising partnership, Credio's first major AI partnership, now has over 2,000 active brands (doubling the count from April 2026), making it Credio's fastest-growing partnership and channel * The partnership is live in 7 countries, with upcoming launches in Mexico and Brazil following recent launches in Japan and South Korea. It has been integrated into Criteo Go self-service platform * ChatGPT traffic converts at 1.5x to 2x the rate of traditional referral traffic, with 80% of traffic being new to client brands, creating a complementary incremental discovery channel * Credio has launched AI-powered conversational ad formats for the open web and sponsored recommendations for retailer AI shopping assistants (Albertsons is the first launch partner), with additional retailers expected to follow * Major agency holding companies have integrated Credio's MCP capabilities into their workflows, enabling natural language campaign planning and execution - Performance Media Initiatives * Criteo Go, the self-service platform for small and medium businesses, has achieved adoption by more than half of global existing small clients, with June 2026 new account creation 3x higher than initial post-launch months * Close to 80% of U.S. Criteo Go revenue is cross-channel, with clients combining display, social, video, and AI campaigns in a single interface * New discovery audience capabilities enable full-funnel campaign management: client example Agape Diamonds achieved 20% higher ROAS and conversion rate, plus 13% higher average cart value after adoption * Commercial organizational upgrades have driven 30% year-over-year growth in qualified pipeline, 24% year-over-year new business revenue growth in the U.S., and agencies now represent 55% of total pipeline (up from 35% a year ago) - Retail Media Initiatives * New retailer partners added across all regions, including Loblaw Advance (Canada), Monoprix/Druni (EMEA), and Olive Young/Golf Digest Online (APAC), with strong momentum with existing partners like DoorDash * Auction-based display, the fastest-growing retail media format, is now live with over 85 global retailers (up from 60 last quarter) * Page Intelligence, the AI-driven orchestration layer that optimizes merchandising, monetization, and shopper experience simultaneously, secured its first launch with a top large retail partner - Financial Operations * Disciplined cost management delivered non-GAAP operating expenses down 10% year-over-year, as productivity gains offset planned growth investments * The company has no long-term debt, maintains significant liquidity, and deployed $30 million to repurchase 1.7 million shares in Q2 2026, with $160 million remaining in the authorized repurchase program as of quarter-end

Guidance

- Full-year 2026 guidance has been revised downward from prior levels, with a conservative base case that assumes no recovery in spending from the large underperforming enterprise performance media clients through the end of the year, and no meaningful revenue contribution from OpenAI or agentic AI initiatives (those are expected to drive growth starting in 2027) - Full-year 2026 total contribution extract is expected to decline 10% to 12% year-over-year at constant currency, with a modest foreign exchange benefit expected for the full year - Retail media full-year 2026 guidance is unchanged: contribution extract is expected to decline mid-to-high teens year-over-year at constant currency due to the $75 million client scope reduction impact; excluding this impact, underlying retail media contribution extract is expected to grow 18% to 20% year-over-year, with media spend growth expected to outpace the overall market - Performance media full-year 2026 contribution extract is expected to decline high single-digits year-over-year at constant currency, with continued soft travel growth in Europe and softness in discretionary retail - Full-year 2026 adjusted EBITDA margin is expected to be approximately 30% (down from prior expectations), partially offset by continued disciplined cost management; 30% is not considered the long-term normalized profitability level, as the business has meaningful operating leverage with improved top-line growth - Full-year 2026 capital expenditure is expected to be approximately $190 million (driven by data center renewal), operating cash flow conversion from adjusted EBITDA is expected to improve to 85% (up from 76% in 2025), and free cash flow conversion is expected to be approximately 35% of adjusted EBITDA excluding non-recurring items - Q3 2026 contribution extract is expected to be $237 million to $241 million, representing a 14% to 15% year-over-year decline at constant currency, with a $6 million to $8 million negative foreign exchange impact (a $4 million larger headwind than prior guidance assumed). Adjusted EBITDA for Q3 is expected to be $54 million to $58 million - Positive full-year 2026 second half free cash flow generation is expected

Segment performance

Total company Q2 2026 revenue was $428 million, with total contribution extract of $255 million, which represented a 12% constant currency year-over-year decline including a $21 million impact from previously announced retail media client scope reductions. Adjusted EBITDA for the quarter was $73 million. 1. Performance Media: Revenue was $380 million, contribution extract was $208 million, representing a 10% constant currency year-over-year decline. This segment accounts for 88.8% of total company revenue. The decline was driven by client-specific spending cuts from several large enterprise clients, with softness concentrated in discretionary retail categories (fashion down 21% year-over-year). 2. Retail Media: Revenue was $48 million, contribution extract was $47 million including the $21 million headwind from client scope reductions, representing a mid-teens year-over-year decline. This segment accounts for 11.2% of total company revenue. Excluding the scope reduction impact, underlying retail media contribution extract grew 20% year-over-year, with total Q2 media spend growing 31% year-over-year. Same retailer contribution extract retention was 84% overall, and 113% excluding the largest affected retailer.

Risks & headwinds

- Persistent client-specific spending cuts from several large enterprise performance media clients have become more pronounced than expected, creating a material near-term top-line headwind that is expected to continue through the end of 2026 * Root causes include vertical-specific headwinds (travel impacted by Middle East conflict, fashion/discretionary retail impacted by inflation and weaker consumer sentiment), tariff/regulatory changes, client shifts to alternative funnel tactics, and softer demand in Asia-Pacific e-payments verticals * The 19% of total company revenue concentrated in the company's largest clients creates top-line volatility from client-specific decisions - AI initiatives (OpenAI partnership, conversational ad formats, retail AI shopping features) are still in early ramp-up stages, with insufficient scale in 2026 to offset current large client headwinds; geographic expansion and key product feature rollout are still ongoing - New Jersey and emerging U.S. state-level privacy regulations create ongoing compliance complexity, requiring continued incremental investment to maintain regulatory alignment - Open web publishing has seen pressure on lower-intent long-tail publisher traffic, creating some underlying supply dynamic headwinds for performance media - Corporate redomiciliation creates one-time tax impacts and requires regulatory approval for the planned second step of U.S. redomiciliation

Analyst Q&A

• Q: What are the root causes of larger enterprise clients' deeper-than-expected spending cuts, and when will core business growth overcome these periodic client-specific headwinds? /

  A: There is no single common cause: some clients face vertical headwinds (Middle East conflict hurting travel, tariff changes impacting import-focused clients), while some shifted budgets to other funnel tactics. Execution improvements to the commercial organization are focused on retaining budgets when clients shift tactics, leveraging Credio's expanded full-funnel product portfolio. Current new products such as the OpenAI partnership and Criteo Go are still ramping and are not large enough to offset headwinds in 2026, but are expected to become meaningful growth drivers that diversify the revenue base in 2027, with 24% year-over-year U.S. new business growth already recorded in Q2.

• Q: When will the OpenAI partnership scale to become a material revenue contributor, given it is still in testing today? /

  A: Most current OpenAI advertising budgets are client test budgets allocated from general new product testing pools in annual media plans. Clients are still evaluating how to fit this new high-conversion discovery channel into their broader media mix, while geographic expansion is still ongoing (only 7 countries are live today, with most of Western Europe still to launch) and key performance-driving features such as custom audiences only launched in recent weeks. Meaningful revenue contribution is not expected until 2027 as the partnership scales geographically and clients reallocate permanent budget.

• Q: Have competitive dynamics in retail media changed materially, and is there more competition for retail media budgets? /

  A: There has been no material shift in competitive dynamics. Credio continues to gain share, with 31% year-over-year Q2 retail media spend growth that outpaces the overall market growth rate of ~26%. Win rates for new retailer partnerships and multi-year renewals remain high, with a portfolio of innovative products (conquesting, auction-based display, Page Intelligence) that maintain Credio's market leading position. Only small, niche smaller competitors have increased limited activity, which does not impact Credio's leadership position.

• Q: Where do incremental OpenAI advertising budgets come from, and is Credio investing too far ahead of client readiness for new AI products amid the current enterprise slowdown? /

  A: Most current budgets come from client general new product testing allocations. As the channel scales, budget will likely come from a mix of traditional search, online video, and other discovery channels, with potential for overall incremental budget growth as advertising effectiveness continues to outpace GDP growth. For the current enterprise slowdown, the issue is execution to capture existing demand rather than being too far ahead of the market: Credio now has a full portfolio of ready-to-sell full-funnel products, and is upgrading commercial training and talent to better position these products with enterprise clients, with changes expected to pay off over time.

• Q: How do you address open web traffic pressure, and what are spend per advertiser trends for Criteo Go? /

  A: While lower-intent long-tail open web traffic sees some pressure, high-intent open web engagement remains strong and Credio maintains access to diversified high-quality supply. Credio has already diversified 85% of total media spend away from desktop display, and cross-channel clients spend 3x more on average than single-channel clients, reducing reliance on any single environment. Criteo Go is still in early days, with adoption across the full small-to-medium business spectrum, but the company does not disclose current spend per advertiser metrics at this stage of the product ramp.