Criteo S.A. 2026 Q2 Earnings Call

Please go ahead. Good morning, everyone, and welcome to Criteo's second quarter 2026 earnings call.

Joining us on the call today, Chief Executive Officer Michael Komasinski and Chief Financial Officer Sarah Glickman are going to share some prepared remarks. Joining us for the Q&A session is Todd Parsons in his role as Chief Product Officer. As usual, you will find our investor presentation on our investor relations website now, as well as our prepared remarks and transcripts after the call. Before we get started, I would like to remind you that our remarks will include forward-looking statements which reflect Criteo's judgments, assumptions, and analysis only as of today. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today.

For more information, please refer to the risk factors discussed in our earnings release as well as our most recent Form 10-K and 10-Q filed with the SEC. We'll also discuss non-GAAP measures of our performance. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings release published today. Finally, unless otherwise stated, all growth comparisons made during this call are against the same period in the prior year. With that, let me now hand it over to Michael.

Thanks, Mélanie. Good morning, everyone. Before we begin, I'd like to share an important leadership update. After six years as Chief Financial Officer, Sarah Glickman will be stepping down from her role on August 10th and will remain with Criteo as an advisor through the end of September. On behalf of our board and everyone at Criteo, I want to thank Sarah for her exceptional leadership and many contributions to Criteo. She's been instrumental in strengthening our financial foundation and driving greater operational discipline during a period of significant transformation for the company, and we are grateful that she will continue to support the business and ensure a seamless transition. I am also pleased to announce that Connor McGogney has been appointed Chief Financial Officer effective August 10th.

Currently serving as chief strategy officer, Connor brings a unique combination of finance, strategy, and capital markets experience together with deep knowledge of our business and our financial operations. Having served in senior finance and strategy leadership roles across the company, he has been a key partner in shaping our long-term strategy, capital allocation priorities, and transformation. His broad perspective across the business and strong relationships throughout the organization make him exceptionally well-positioned to lead our finance organization as we execute against our strategy. Connor looks forward to meeting many of you in the weeks and months ahead. With that, let me turn to our quarterly results. The second quarter was a challenging one for Criteo. We did not meet the expectations we set for ourselves, and we will be transparent about the factors behind our revised outlook and the actions we are taking.

Primary drivers were the client-specific Performance Media dynamics that we discussed last quarter, which became more pronounced during the quarter. Several large enterprise clients further reduced spending, primarily driven by client-specific decisions and softer demand in specific verticals. While the vast majority of our client base remained resilient, these spending decisions more than offset the progress we made across the broader business. While we are confident in the actions underway to improve the performance of the business, we have taken a more conservative approach to our outlook. Our guidance reflects what we see in the business today and assumes no improvement in spending from those large enterprise clients through the balance of the year. We believe this provides a prudent and achievable baseline for the remainder of 2026. Our focus is on consistently delivering against the commitments we make.

While we are not providing any outlook beyond this year, in Performance Media, we are focused on commercial execution while continuing to advance our full-funnel, cross-channel, and self-service strategy. We believe these initiatives will improve the trajectory of our business over time, although our current outlook does not assume any meaningful benefit from them this year. In Retail Media, the previously communicated client scope reductions are largely behind us after Q3, providing a more supportive backdrop for the business as we move beyond those headwinds. Even as we face these top-line headwinds in the second quarter, we delivered strong adjusted EBITDA through disciplined cost management and productivity gains without reducing investment in our strategic priorities. Importantly, while our near-term assumptions have changed, our long-term strategy has not.

The progress we are seeing across our strategic priorities reinforces our conviction that we are investing in the right opportunities We remain committed to disciplined execution while continuing to evaluate every opportunity to maximize shareholder value. At the core of that strategy is Commerce Intelligence, combining large-scale commerce data with AI decisioning to predict shopper intent and optimize outcomes across increasingly fragmented shopper journeys. We believe AI is creating a new commerce paradigm, and Criteo is uniquely positioned to help brands and retailers navigate that transition. The rapid evolution of AI is creating entirely new opportunities for Criteo, and our partnership with OpenAI is a great example. Only a few months ago, we became OpenAI's first advertising technology partner. Today, that partnership continues to exceed our expectations, attracting new advertisers and expanding our addressable market.

The number of brands running campaigns through OpenAI has now surpassed 2,000, more than double the 1,000 brands we announced at the end of April. We continue to attract incremental budgets from both existing advertisers and new clients, making OpenAI both our fastest-growing partnership and our fastest-growing channel. Advertisers benefit from dedicated support for campaign setup, prompt strategy, and ongoing optimization. We are quickly expanding internationally, and our demand integration is now available across seven countries, with additional country launches planned, including Mexico and Brazil. This follows our recent launches in Japan and South Korea. We've also integrated OpenAI directly into Criteo GO, enabling advertisers to activate ChatGPT alongside display, social, and other channels through our self-service platform. The early performance validates the opportunity.

Traffic from ChatGPT converts at approximately one and a half to two times the rate of traditional referral traffic, while roughly 80% of paid traffic is new to the brand. This demonstrates that AI is creating an entirely new discovery channel that complements existing media rather than replacing it, expanding advertisers' reach and unlocking incremental budgets. We are also pioneering a new category of retail media. With Metro Inc., we became the first to bring AI-enriched retailer product catalogs into ChatGPT. We believe this opens an entirely new source of demand for brands and a new monetization opportunity for retailers. We are particularly excited about OpenAI's new Custom Audiences capability because it reinforces one of Criteo's core differentiators.

We bring rich commerce audiences built on years of investment in commerce data and identity, enabling advertisers to activate AI campaigns with a level of relevance and scale that is difficult to replicate. We believe this combination represents a durable competitive advantage as AI advertising continues to scale. Beyond our OpenAI partnership, we are embedding agentic capabilities across our platform. Our AI-powered conversational ad format transforms advertising across the open web into guided shopping experiences, helping brands engage consumers earlier in the discovery journey while generating richer intent signals that improve relevance over time. We're also unlocking a new retail media monetization opportunity through sponsored recommendations in retailer AI assistants. Albertsons became the first retailer to launch this capability with us, and we expect additional retailers to follow as conversational shopping is gaining traction.

Together, these innovations show how agentic AI is reshaping commerce and helping brands engage consumers earlier in their shopping journey while enabling retailers to participate in the next generation of AI-powered shopping experiences. We are also seeing encouraging adoption of our MCP capabilities across agencies. Major agency holding companies have now integrated our MCP server into their workflows, enabling planners to build and activate campaigns using natural language. This is making campaign execution faster and more efficient while embedding Criteo more deeply into our clients' day-to-day workflows. Turning to performance media, our near-term challenges do not change the actions we are taking to restore growth. We remain focused on expanding self-service, increasing cross-channel activation, and extending performance further up the funnel. We are also taking targeted actions to enhance our measurement capabilities, further strengthening our platform and the value we deliver to clients.

Starting with our self-service offering, GO is making encouraging progress in strengthening our ability to serve the large and under-penetrated SMB market. Adoption among our existing clients is progressing faster than we anticipated. Today, more than half of our small clients globally have adopted GO, driving accelerated productivity gains while lowering our cost to serve. While it remains early for new client acquisition, we are beginning to see encouraging leading indicators. Account creation in June was approximately 3 times higher than during the initial months following launch, giving us confidence that awareness and adoption continue to build. Client feedback has also been positive. Advertisers consistently tell us they value the platform's ease of use, enterprise-grade targeting capabilities, and AI-powered creative automation, which enable them to launch and optimize campaigns with minimal manual effort.