By Karsten Weide, Chief Analyst
Executive Summary
Criteo reported its second-quarter 2025 earnings on Wednesday, July 31, marking a quarter of steady topline results, significant gross margin expansion, and strategic progress in retail media and AI-powered advertising. While growth remains modest, and profitability has come under pressure due to higher investment, the company is navigating its pivot from a legacy retargeting business toward a more diversified, forward-facing commerce media platform.
A Quarter of Stable Revenue, Strong Gross Margins, and Mixed Bottom Line
For the second quarter of 2025, Criteo reported $483 million in gross revenue, a 2% increase year-over-year on a reported basis. While not eye-catching, this performance aligns with Criteo’s modest near-term growth expectations as it continues its strategic repositioning. More impressive was the company’s gross profit, which rose 11% to $259 million. This reflects a material improvement in gross margin – up to 54% from 49% in the same quarter last year – signaling better monetization and stronger pricing discipline.
Criteo’s key internal metric, Contribution ex-TAC (revenue net of traffic acquisition costs), grew 9% year-over-year to $292 million. This measure is particularly important for performance-oriented AdTech businesses and suggests that Criteo’s mix shift toward higher-margin retail media and commerce solutions is bearing fruit. Importantly, TAC as a share of gross revenue has declined, meaning Criteo has become better at generating revenue based on a given amount of inventory.
However, adjusted EBITDA fell 4% year-over-year to $89 million, and EBITDA margin dropped to 31%, compared to 35% a year ago. The decline reflects heavier investment in technology, AI capabilities, and go-to-market operations. Net income came in at $23 million, down from $28 million in Q2 2024, and diluted earnings per share fell to $0.39 from $0.46.
Retail Media Is Growing,
But IT Is Growing Too Slowly
Criteo organizes its business into two product segments: Retail Media and Performance Media. In Q2, Retail Media generated approximately 20% of Contribution ex-TAC, growing 11% year-over-year. Performance Media, which includes retargeting and audience campaigns, delivered the remaining 80% and grew 9%.
This continued expansion of Retail Media’s share reflects Criteo’s ongoing transformation. While the company’s roots are in retargeting – a segment under pressure from signal loss and browser privacy changes – it has made inroads into onsite retail media networks, offsite audience extension, and now commerce-driven AI ad formats.
Strategically, Criteo’s pivot toward Retail Media is the right move. It reflects the company’s efforts to reposition itself as a commerce media partner for brands and retailers, and it aligns with the direction taken by competitors like The Trade Desk, which also sees retail media and commerce-based advertising as key engines of future growth.
But there’s a problem: Criteo’s Retail Media segment isn’t growing fast enough. Since 2023, Retail Media has consistently outpaced the Performance segment in growth – but not enough to break past the 20% threshold of Criteo’s net revenue (measured as Contribution ex-TAC). Even more troubling is that its growth rate has been decelerating since 2024 (see charts below).
Geographic Distribution Remains Stable, But Europe Weighs on Growth
Criteo breaks down its revenue into three geographic regions: the Americas, EMEA (Europe, Middle East, Africa), and APAC (Asia-Pacific). In Q2 2025, the Americas accounted for 41% of gross revenue, EMEA for 39%, and APAC for 20%. These ratios have held relatively steady over the past few years, but growth patterns within them have diverged.
The Americas continue to be Criteo’s most dynamic region, with its share slowly gaining over time. It benefits from stronger U.S. retail media partnerships, a more advanced programmatic infrastructure, and greater adoption of commerce media tools. In contrast, EMEA’s contribution share has trended down, weighed down by economic headwinds in Western Europe and a more fragmented retail media ecosystem. APAC contributes less to overall revenue but remains a region of future promise.
Compared to The Trade Desk, which derives most of its revenue from North America but is pushing hard into APAC, Criteo maintains a more globally diversified revenue base. However, its dependence on slower-growth European markets may limit upside unless offset by gains in the Americas and Asia.
Losing Clients,
But Getting More Out of Better Ones
Criteo has consistently lost clients since early 2022. Ordinarily, this would be a problem. However, net revenue per client has consistently gone up (from about $11K per quarter in Q1 2022 to about $18k in Q2 2025), as has profitability per client. Criteo has become much better at monetizing its clients, and has gotten rid of less-performant clients that were a drag on Criteo’s operations.
Criteo has been steadily losing clients since early 2022 – a trend that would typically raise red flags. But in this case, it tells a more nuanced story. Over the same period, net revenue per client consistently increased, rising from around $11,000 per quarter in Q1 2022 to approximately $18,000 in Q2 2025. Profitability per client has also improved. In effect, Criteo has become significantly more efficient at monetizing its customer base, shedding underperforming accounts that were a drag on operational efficiency.
Operating Income and Margins
Under Pressure from Strategic Investment
Criteo reported net income of $23 million for the quarter, representing an operating margin of 5%, down from $28 million and 6% in the same quarter a year earlier. This reflects the company’s deliberate decision to invest more heavily in product development, AI infrastructure, and go-to-market capabilities – especially in support of its retail media and commerce audiences initiatives.
Margins are narrow, pointing to a business in active reinvestment mode. This trade-off is not unusual for companies pivoting toward higher-value, long-term platforms. But Criteo must continue to prove that its investments will translate into sustainable growth and defensible differentiation – particularly as the broader AdTech sector becomes more competitive and capital-conscious.
Beating Guidance, But With Caution
Criteo’s contribution ex-TAC of $292 million was above the guided $278 – $284 million range, and EBITDA of $89 million came in just above the high end of the $81 – $87 million range. This mild beat reinforced investor confidence and contributed to a nice post-earnings stock price increase of 8%.
Still, the tone of the guidance for Q3 and full-year 2025 remains measured. The company raised its full-year Contribution ex-TAC growth outlook to 3% – 4% and maintained its EBITDA margin guidance at 33% – 34%. These are modest but realistic targets in a challenging digital ad market.
Over the past year, Criteo’s stock performance has lagged The Trade Desk and other high-growth peers, in part due to investor skepticism about its ability to modernize and diversify. However, strong gross margin trends, retail media traction, and a clearer AI narrative may help reestablish momentum if sustained.
Cash Position and Financial Flexibility
Criteo ended the quarter with $427 million in cash and cash equivalents. While that figure is down from previous quarters due to share repurchases ($104 million spent on buybacks in H1 2025), the company remains in a healthy financial position with no long-term debt.
This war chest provides Criteo with room to continue investing in product development, AI capabilities, and potential M&A – all critical to remaining competitive in a rapidly consolidating AdTech landscape.
Looking Ahead: A Company in Strategic Motion
Criteo used this quarter’s earnings call to highlight its AI initiatives, expanded agency partnerships, and new product innovations – all signaling a company actively reshaping its identity.
The company announced the launch of auction-based retail media display ads, tighter integration with marketplace platform Mirakl, and new partnerships with global agencies like WPP and Dentsu. These moves aim to solidify Criteo’s position as a full-funnel commerce media platform.
Criteo’s strengths lie in its retail relationships, commerce audience data, and expanding identity solutions. Its weaknesses remain its legacy perception as a retargeting vendor, client concentration risk, and overexposure to Europe. Opportunities include the continued rise of retail media and the emergence of AI-based automation of the value chain. Challenges include increased competition from Amazon (especially), Google, and The Trade Desk, the shift of shopper journeys to agentic interfaces (because it removes humans from part of the value chain, removing them as targets for performance advertising), as well as the need to rebuild investor confidence.
The broader digital advertising industry is showing signs of cautious growth, with resilient marketer demand but intensifying pressure on signal quality, identity resolution, and ROI measurement. Within this context, Criteo is working to modernize, differentiate, and prove that it can compete not only on scale but on strategic relevance.
Conclusion: Retail Media and AI Give Criteo a Path Forward, But Execution Is Key
Criteo’s second quarter of 2025 reveals a company that is gradually evolving – not yet a high-growth juggernaut, but not a stagnant relic of retargeting either. With retail media continuing to gain share, strong gross margins, and a deepening AI focus, Criteo is making credible progress toward a more modern, defensible position in the commerce media landscape.
But the path ahead remains narrow: Criteo will need to accelerate growth, expand margins, and overcome structural drag in legacy geographies and products. If it can do so, Criteo may yet complete one of AdTech’s more impressive reinventions.
About Criteo
Criteo (NASDAQ: CRTO) is a global AdTech company that provides commerce media solutions to brands, retailers, and publishers. Learn more at www.criteo.com.
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