Criteo S.A. ((CRTO)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Criteo’s latest earnings call struck a cautious but constructive tone as management balanced solid operational wins with clear financial headwinds. Executives pointed to momentum in AI, self‑service tools and Retail Media products, yet acknowledged softer demand from key clients, EPS pressure and higher CapEx that delay a return to growth into late 2026.
Media Spend Hits $1 Billion Milestone
Criteo highlighted a new scale marker, as activated media spend exceeded $1.0 billion in the first quarter for the first time. Media spend rose 30% year over year across roughly 4,150 global brands, underscoring strong advertiser engagement even as headline revenue and contribution metrics declined.
Agentic AI and OpenAI Partnership Drive Early Upside
The company emphasized momentum in Agentic AI, noting that it became OpenAI’s first ad‑tech partner with more than 1,000 brands already live and deploying incremental budgets. Management said traffic from AI platforms such as ChatGPT converts at around 1.5 times the rate of other referral channels, and they see a strong pipeline and agency traction building.
GO Self‑Service Platform Gains Traction with Smaller Clients
Criteo launched its AI‑powered self‑service product, Criteo GO, at the end of the quarter as a cross‑channel solution targeting smaller advertisers. In the U.S., more than two‑thirds of small‑client campaigns already run through GO, and cross‑channel users spend up to three times more, with one case study showing a 28% ROAS boost and a 10% lift in average order value.
Retail Media Shows Underlying Strength Beneath Client Losses
Despite highly visible client scope cuts, the underlying Retail Media business grew contribution ex‑TAC by 24% in the quarter when those reductions are excluded. Auction‑based display continued to scale, expanding from 49 to more than 60 retailers, while shoppable video formats are ramping quickly, signaling deeper product adoption by retailers and brands.
Profitability and Liquidity Remain Solid
The company reported adjusted EBITDA of $65 million in the seasonally soft first quarter, supported by disciplined cost control and mix. Operating cash flow reached $48 million and free cash flow came in at $16 million, while Criteo ended March with $889 million in total liquidity and no long‑term debt on the balance sheet.
Capital Returns Underscore Shareholder Focus
Criteo continued to return cash to investors, deploying $31 million to repurchase 1.6 million shares during the quarter. The firm still has $190 million remaining under its buyback authorization, and it canceled 1.9 million shares in April, which lifts repurchase capacity and supports per‑share metrics over time.
Product and Supply‑Side Innovation Expand the Platform
On the product front, Criteo rolled out Page Intelligence, an AI layer designed to balance organic and sponsored placements on retailer pages. The firm expanded auction‑based display and conquesting tools, signed multiyear renewals with key retailers and added new partners including DoorDash in Canada and a Hyundai department store in the Asia‑Pacific region.
Contribution ex‑TAC Slides Despite Adjusted Growth
Total contribution ex‑TAC was $250 million in the first quarter and declined 9% year over year at constant currency. Management stressed that this headline drop included a $27 million hit from the two Retail Media client scope reductions, and that excluding these, contribution ex‑TAC inched up by 1%.
Revenue and EPS Under Pressure
Quarterly revenue landed at $425 million, reflecting the broader soft patch in parts of Criteo’s portfolio. GAAP diluted EPS fell to $0.15 from $0.66 a year earlier, and adjusted diluted EPS dropped to $0.73 from $1.10, as lower contribution, higher operating costs and heavier investment combined to compress earnings.
Retail Media Client Scope Cuts Weigh Heavily
Management reiterated that two previously flagged Retail Media scope changes are a major drag on results, reducing first‑quarter contribution by $27 million. These changes are expected to create around a $75 million headwind for full‑year 2026, pushing Retail Media contribution down in the near term despite healthy underlying demand from other partners.
Weak Guidance and Slower Path Back to Growth
The company reduced its 2026 outlook and now expects contribution ex‑TAC to decline by low single digits at constant currency, with growth not returning until the fourth quarter. For the second quarter, Criteo guided contribution ex‑TAC to a $260–264 million range, representing a 9%–11% decline at constant currency, highlighting a still‑choppy near‑term setup.
Performance Media Hit by Large U.S. Client Cuts
Performance Media faced softer spending from several large U.S. customers who trimmed budgets across formats, not just in retargeting. This led to a 2% decline in Performance Media contribution ex‑TAC at constant currency in the quarter, demonstrating how concentrated client behavior can ripple through the segment.
Discretionary Verticals and Travel Lose Steam
Weakness in discretionary retail categories also weighed on performance, with fashion down roughly 18% year over year compared with a smaller decline last year. Travel growth slowed to about 20% from 43% a year earlier, and management indicated they are taking a conservative stance on travel trends for 2026 given macro uncertainty.
Operating Costs and CapEx Move Higher
Non‑GAAP operating expenses climbed 10% year over year due to planned growth investments, return‑to‑office spending and foreign‑exchange headwinds. The company also expects capital expenditures to rise to around $190 million in 2026, mainly for data center renewals, which will limit near‑term free‑cash‑flow conversion even as EBITDA margins stay healthy.
FX and Macro Volatility Add Another Headwind
For the second quarter, foreign exchange is projected to be a modest drag, with up to a $2 million negative year‑over‑year impact on contribution ex‑TAC. Management also flagged persistent macro and geopolitical volatility and more cautious advertiser behavior as potential near‑term risks that could pressure spending patterns.
Guidance Points to Delayed Growth but Solid Core
Criteo now expects full‑year 2026 contribution ex‑TAC to fall by low single digits at constant currency, with the midpoint roughly 300 basis points below prior guidance, and a return to growth deferred to the fourth quarter before reacceleration into 2027. Excluding the $75 million Retail Media client scope hit, underlying contribution ex‑TAC is projected to grow mid‑single digits, with underlying Retail Media potentially accelerating toward high‑teens to roughly 20% growth and Performance Media flat to up low single digits, supported by an adjusted EBITDA margin of about 32%–34% and improved cash‑flow conversion.
Criteo’s earnings call painted a picture of a company in transition, pairing robust innovation and healthy advertiser engagement with meaningful near‑term financial and client‑specific challenges. For investors, the story hinges on whether AI partnerships, self‑service tools and Retail Media growth can offset client losses and macro pressure in time to deliver the promised upturn in 2027.