Taboola.com Ltd. (TBLA) Earnings

Management highlights

### Strategic Publisher Wins & Partnership Expansion - Secured two high-profile strategic publisher wins: a planned expansion of a partnership with a large existing premier media/entertainment publisher, and a new deal to add Fox News to the existing Taboola-Fox ecosystem, which includes Fox Local, Fox Sports, and Fox Weather. - The expanded partnership with the premier publisher will move Taboola from only monetizing bottom-of-article native placements to monetizing all ad inventory, including display, vertical format, and native. The display opportunity alone for this partner is estimated to be 2-3x the size of Taboola's existing native revenue with the publisher, serving as a model for future similar deals with other publishers. - The Fox News win is a material growth opportunity and validates Taboola's competitive positioning and value proposition for premium open web publishers. ### AI and Technology Product Development - Launched the beta version of Realize Plus, an AI-powered optimization framework that brings automation comparable to Google Performance Max and Meta Advantage Plus to open web advertising. Over 300 advertisers have already adopted the beta, with early results showing improved campaign efficiency and performance. - Built MCP cloud integration that allows advertisers and agencies to plan, launch, and optimize campaigns via natural language conversations with AI; several millions of dollars in advertiser spend already flows through this early integration. - Deeper Dive, Taboola's AI engagement product for publisher sites, is growing rapidly, approaching 10 million daily active users after launching in September 2025. Over 10% of users engage with Deeper Dive on participating publisher sites, and CPMs for Deeper Dive inventory are 5-10x higher than traditional Taboola ad inventory, creating a large new monetization opportunity. ### Capital Allocation and Operational Discipline - Proactively cleaned up the publisher network by removing low-quality, non-performing publishers that failed to deliver value for advertisers, a step expected to drive long-term revenue growth despite near-term headwinds. - Returned capital to shareholders via share repurchases: bought back ~9 million shares for $41 million in Q2 2026, and has repurchased ~20% of outstanding shares since the start of 2025. The company continues to allocate the majority of free cash flow to buybacks while maintaining a strong balance sheet with $198 million in available liquidity as of quarter-end.

Guidance

Management updated full-year 2026 guidance, raising core profitability guidance even after incorporating the negative impact of the Explore More deprecation and publisher network cleanup: - Full-year 2026 revenue is now guided to $1.93 billion to $1.96 billion - Full-year GAAP gross profit is guided to $605 million to $615 billion - XTAC gross profit guidance was raised by $7 million at the midpoint, to a new range of $772 million to $783 million - Adjusted EBITDA guidance was raised by $3 million at the midpoint, to a new range of $228 million to $240 million - Non-GAAP net income is guided to $168 million to $176 million - Q3 2026 guidance: revenue $460 million to $473 million, gross profit $148 million to $152 million, XTAC gross profit $184 million to $190 million, adjusted EBITDA $51.5 million to $56.5 million, non-GAAP net income $38 million to $42 million - Management confirmed that guidance incorporates all expected impacts from publisher network cleanup, Explore More deprecation, broader open web display impression changes, and ongoing foreign exchange headwinds

Segment performance

Taboola reports aggregated results for the quarter, with no formal breakdown of separate product segments provided. Overall Q2 2026 revenue grew 2% year-over-year to $476.8 million. XTAC (ex-TAC) gross profit increased 12% year-over-year to $192.4 million, representing 40.3% of total Q2 revenue. GAAP gross profit was $139.5 million, up 3% year-over-year, after a one-time $12 million non-cash write-down of publisher prepayments. GAAP net income was $4.3 million, non-GAAP net income was $41.3 million, and adjusted EBITDA was $55.5 million (representing 11.6% of total revenue) with an adjusted EBITDA margin of 29%. Operating cash flow was $31.3 million and free cash flow was $17.3 million. The number of scaled advertisers grew 2% year-over-year, while average revenue per scaled advertiser remained flat due to Q2 headwinds.

Risks & headwinds

- Google policy change risk: The unexpected fast implementation of a Google policy change deprecated Taboola's Explore More product, resulting in an expected $20 million loss of XTAC gross profit in the second half of 2026, with continued impact to year-over-year comparisons in H1 2027. Management noted no other large product exposures to Google policy changes at this time, and less than 5% of U.S. page views come from Google search referrals, limiting broader dependency. - Macroeconomic risk: The broader advertising market remains relatively stable but advertisers are skittish amid geopolitical uncertainty and inflation concerns, which could impact future ad spend. - AI-driven search impact: Declines in publisher search referral traffic from AI-driven search trends present a small headwind for Taboola, but the impact is limited because less than 5% of Taboola's U.S. page views come from search. - Near-term revenue risk: The intentional removal of low-quality publishers created near-term revenue headwinds, though management expects this to improve long-term network performance. The majority of removed low-quality publishers were international, primarily in the Greater China region.

Analyst Q&A

• Q: What is the current growth and monetization opportunity for Deeper Dive, and what early adoption metrics and performance data do you have for Realize Plus? /

  A: Deeper Dive is approaching 10 million daily active users, up from 7 million a quarter prior, with 10%+ of users engaging with the product when it is available on publisher sites. CPMs for Deeper Dive are currently 5 to 10x higher than traditional ad inventory, even before new ad units are fully developed, creating a very large growth opportunity. Over 300 advertisers have already adopted the Realize Plus beta, with early results showing improved campaign efficiency that management expects will drive broader adoption over time. Deeper Dive also gives Taboola a competitive advantage in winning new publisher partnerships.

• Q: What is the $20 million impact from the Explore More deprecation, do you have other Google policy exposures, and what is the broader macro advertising environment? /

  A: The $20 million impact is to XTAC gross profit in the second half of 2026, and will impact year-over-year comparisons in the first half of 2027. Taboola has launched a new compliant product, NextEngage, to recover much of the lost Explore More revenue, though it is unclear if it will recover 100% of the lost revenue. Management noted no other major exposures to Google policy changes, and less than 5% of U.S. page views come from Google search. The broader advertising environment remains stable, though advertisers are skittish amid ongoing uncertainty around geopolitics and inflation.

• Q: Why did you accelerate publisher network cleanup in Q2, and is there more cleanup to come? Do you have additional Google exposure after the Explore More change? /

  A: Publisher network quality checks are an ongoing process, but Q2 saw an unusual volume of low-quality publishers that grew very quickly and needed to be removed. The company always removes non-performing supply as soon as it is identified to avoid hurting overall advertiser performance, making this a short-term headwind that creates long-term value. Google announced the Explore More policy change in April 2026 and implemented it much faster than expected, catching Taboola off guard. Management confirmed there are no other major product dependencies on Google policy, and search traffic dependency is very low at less than 5% of U.S. page views.

• Q: What is the strategic significance of expanding from native to full inventory monetization for publishers, and can this model be replicated with other partners? /

  A: The shift to full-suite monetization is a major validation of Taboola's strategy, driven by publisher demand for fewer ad partners, lower operational complexity, and higher overall revenue. This opportunity came from the publisher, not Taboola, and the total revenue potential for this partner is 2-3x the size of Taboola's existing native revenue with them. Management notes that other publishers are already engaging in similar conversations, and this model could become an industry shift that positions Taboola as the primary monetization layer for the open web.