Shares of Taboola cratered as much as 26% after the content-recommendation company posted Q2 results that put a glaring spotlight on the tension between improving profits and decelerating sales. Revenue came in at $476.8 million versus analyst estimates of $499.4 million — a 4.5% miss on just 2.4% year-over-year growth. The stock, recently trading at $4.70, now prices in deep skepticism about Taboola's top-line trajectory even as the company touts record profitability metrics.
A Google Policy Change Blew a Hole in the Revenue Line
Google deprecated Taboola's "Explore More" product — a feature that served sponsored content when users hit the browser back button — during the quarter, and management expects it to strip more than $20 million in gross profit from the second half of 2026.
A replacement product may recover some, but not all, of that lost revenue over time. The episode underscores a basic vulnerability: a meaningful slice of Taboola's business runs on someone else's platform rules.
Margins Got Better, But Cash Flow Went the Wrong Way
Adjusted EBITDA — a rough proxy for operating cash earnings — jumped 22.8% to $55.5 million, and its margin expanded to 28.8% from 26.2%. Yet operating cash flow fell 34.1% and free cash flow — the actual cash left after running and investing in the business — declined 49.3%. Improving paper profits matter less when less cash is hitting the bank account.
Next Quarter's Outlook Spooked the Street Even More
Q3 revenue guidance of roughly $466.5 million came in about 10% below analyst expectations.
Full-year revenue guidance was cut to a midpoint of $1.94 billion, down from the prior $2.03 billion forecast , while the company raised full-year profitability guidance for both gross profit and EBITDA. Management is explicitly choosing margin over growth — a rational pivot, but one that shrinks the revenue base investors were banking on.
The Fox News Win Is Real, But Scale Takes Time
Taboola signed Fox News, one of the five largest U.S. publishers, expanding across the Fox ecosystem.
A separate deal to manage a publisher's full ad suite — display, vertical, and native placements — could yield two to three times the revenue of traditional native ads. These deals validate Taboola's product, but they will take quarters to materially move the needle on a nearly $2 billion revenue base now growing in the low single digits.