Criteo S.A. (CRTO) Q2 2025 Earnings Report, Transcript and Summary

Good morning, and welcome to Criteo's Second Quarter 2025 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Melanie Dambre, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and welcome to Criteo's Second Quarter 2025 Earnings Call. Joining us on the call today is Chief Executive Officer, Michael Komasinski; and Chief Financial Officer, Sarah Glickman, are going to share some prepared remarks. Todd Parsons, our Chief Product Officer and President, Performance Media, will join us for the Q&A session. As usual, you will find our investor presentation on our Investor Relations website now as well as our prepared remarks and transcript 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. Our actual results may differ materially from current expectations based on a number of factors affecting Criteo's business. 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 Forms 10-K and 10-Q filed with the SEC. We will 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, Melanie, and good morning, everyone. Thanks for joining us today. After immersing myself in the business over the past few months, I'm encouraged by what I see, an incredibly resilient company with unique assets and enormous potential. That time has reinforced my conviction in our strategy and in the talent and innovation that will drive our next chapter. Now I'd like to share how we're thinking about the future and positioning our business to address the opportunities ahead. Our vision is ambitious and focused on delivering full-funnel, cross-channel, self-service advertising that performs. It's anchored by a solid foundation and grounded in a clear path to execution. We're building a unified outcome-based advertising platform designed for the next decade of commerce, one that connects demand and supply, optimized for performance at every stage of the buyer journey. All of this is underpinned by a deep competitive moat coming from the combination of our unique commerce dataset, cutting-edge AI and global reach. Starting with the demand side of our business. We're advancing intuitive, self-service solutions to attract a broad range of budgets from performance and trade marketing to national media and serve all types of buyers, including agencies, brands and SMB advertisers. Our strategy is built on 3 key levers to reaccelerate growth: cross channel, full funnel and self-service. First, we're meeting consumers where they are, whether that's on-site, off-site, increasingly on connected TV or soon through AI assistance and agents. Second, we're extending our full-funnel capabilities, building on the success of Commerce Audiences, which is our set of precision targeting tactics that leverage commerce data and advanced AI for customer acquisition and retention. We expect our full-funnel approach to unlock a larger share of advertiser spend as we deliver measurable outcomes from discovery to purchase. Third, we're moving towards self- service to drive scale and efficiencies. These initiatives are already expanding our serviceable market and they're key for long-term sustainable growth. Moving to the supply side of our business. We offer retailers and traditional publishers best-in-class tools to deliver superior advertising performance and maximize yield across Retail Media and the Open Web. We have the industry's most expansive Retail Media footprint, giving us exclusive access to premium, global on-site inventory. Our strategy is focused on bringing programmatic flexibility into retail environments, advancing holistic page optimization and scaling curated supply with retailer data deals easily accessible through any DSP. Together, our demand and supply capabilities create synergies that deliver better outcomes, simplify workflows and reduce the tech tax. This convergence is already taking shape. The more we scale advertiser demand, the more value we create for media owners. The more exclusive or commerce-enriched supply we bring to market, the more differentiated our performance becomes for advertisers. That flywheel is working, and we see tremendous opportunities to accelerate it. We see momentum in our platform strategy, reflected in deeper, more strategic partnerships with leading agencies. Last month, we announced an expanded global partnership with dentsu, marking the first time a holding company is leveraging our complete Commerce Media Platform stack. Today, we're thrilled to announce the recent renewal and expansion of our multiyear global partnership with another major holding company, now also using all of our platform's powerful commerce solutions. These milestones signal growing confidence in our unified offering. Lastly, we're executing with discipline as we lay the foundation for sustainable, long-term growth with accelerated innovation. We're embracing the Agentic AI opportunity, which we see as an exciting new frontier for commerce where our scaled and differentiated commerce data positions us to deliver real value. Wherever shopping happens, advertising inevitably follows. As AI assistance and agents change how consumers discover and decide, the ability to surface the right product at the right time becomes even more critical. And that's exactly where we come in. Driving scalable performance in AI-powered environment starts with data, data that's high quality, structured and constantly refreshed. In commerce, that requires far more than static product listings. It means access to real-time, actionable data such as inventory levels, pricing, availability and sourcing standardized across thousands of retailers. We believe this is where Criteo has a unique and durable advantage. We bring product data and shopper journey signals at a scale and precision that differentiates us, powered by a reinforcement loop that continually improves performance. To enable this, we're developing model context protocol, or MCP, support for delivering product and shopper information to AI agents in a way that is real-time, structured and controlled. Prompt-based recommendations are a natural extension of our strategy, and we're actively engaging with LLM vendors to explore how to best shape the next wave of consumer interaction. We're also advancing how audiences are built and activated as we're moving toward real-time, intelligent audience creation that eliminates the friction of traditional workflows. Our goal is to enable brands and agencies to generate the right audience instantly without delays for manual queries or data handoffs. At the same time, we're expanding where and how media can be activated as we're embedding marketing capabilities into new environments, including agent interfaces. Ultimately, we're building tools for marketplaces and merchant networks to run full-funnel, cross-channel campaigns with simplicity and scale. Turn vision into impact, we're realigning the organization to sharpen our focus and align execution with opportunity. Our business has strong fundamentals, and we're ambitious in our long-term outlook. We're renewing our focus on Performance Media with an expanded market approach and accelerated AI innovation to drive our next phase of growth. We're also focused on unlocking the next generation of demand to realize Retail Media's full potential. Our new structure consolidates product, R&D and commercial strategy under 2 seasoned leaders who will take on expanded executive roles. Todd Parsons, as Chief Product Officer and President, Performance Media; and Sherry Smith, as President, Retail Media. This streamlined organization will help us operate with greater agility, clearer accountability and set the stage for long-term sustainable growth. While we believe it will take a few quarters to reaccelerate growth, we have a world-class team to execute against our strategy, and we're confident the foundations we're putting in place will bring multiyear benefits. Now turning to our second quarter performance. We delivered solid results, reflecting our team's strong execution, starting with Performance Media. We're encouraged by the sequential improvement in our growth compared to Q1. We're building for durable growth and laying the groundwork for several multiyear growth opportunities that we believe will accelerate as we scale. Commerce GO! continues to gain momentum as we simplify how advertisers plan, buy and optimize across formats and channels. Powered by AI, Commerce GO! automates decisions around audiences, channels and creative, driving better results and lowering our cost to serve. Campaign volume grew 200% quarter-over-quarter, largely driven by increasing adoption from SMB advertisers and lower churn. We see Commerce GO! as a multiyear revenue growth driver, and we're focused on scaling this momentum by implementing an end-to- end self-service streamlined workflow in the coming quarters. As part of our cross-channel strategy, we expanded our social capabilities last quarter, enabling advertisers to activate Facebook and Instagram inventory at the SKU level for global commerce audience campaigns. We have good traction with spend on social campaigns, growing nearly 30% sequentially this quarter. As we expand our full-funnel capabilities, we're leaning into brand performance and early results in CTV show strong potential as a powerful performance marketing channel. A great example is our recent partnership with Jewelry Television. We delivered CTV campaigns that drove 93% new users, a 20% increase in average order value and more than doubled qualified site visits, clearly demonstrating CTV's ability to deliver measurable outcomes at scale. In addition, we recently announced a new partnership with WPP Media to reach high-intent shoppers at scale across premium connected TV inventory, starting with Roku, Samsung and Scripps. We're making it easier for advertisers to run audience-led CTV campaigns using curated deal IDs with Commerce Grid, our supply side platform. By combining rich commerce and identity data, we're helping them reach the right audiences and drive measurable results from initial exposure to purchase. Overall, our business remains resilient, supported by diversification across markets, verticals and products. We experienced notable strength in APAC again this quarter, largely led by full-funnel activation and the success of our marketplace offering, which allows marketplaces to offer their merchants Criteo's targeting and retargeting tools. We continue to gain market share in travel, up 28% in the second quarter, driven by continued momentum in EMEA and in the Americas. A great example of the measurable impact of our platform is ITAKA, Poland's leading travel brand. By activating full- funnel reach with cross-channel precision across web, app and meta, ITAKA achieved a 5x return on ad spend and nearly 5x higher click-through rate. A key differentiator for us is our Commerce Grid's supply side platform. It uniquely enables access to Commerce Audiences with full DSP interoperability and provides the only programmatic path to retail media at scale. It's a growing contributor to our business as agencies and brands ramp up investments to activate Commerce Audience deals and several leading retailers now use it to power off- site monetization. Today, over 30% of commerce growth inventory buys run through our SSP with meaningful upside as adoption continues to grow in the years ahead. All these synergies across our platform are driving more scale, more flexibility and more value for our partners. Moving on to Retail Media, which is a long-term growth engine and differentiator for Criteo. As this category evolves, retailers are looking for strategic partners who bring global scale, flexible technology and deep connections to brand and agency demand. Criteo delivers on all fronts, which enables us to keep adding new retailers and new brands while outpacing market spend growth quarter after quarter. We continue to win RFPs, including returning clients, and we're pleased with the traction of our new product launches. After launching shoppable video ads in April, we launched our auction-based display technology in June. Retailer adoption is ramping up rapidly with 16 retailers already live across all regions in just a month, and this number is expected to double in the coming weeks. Auction-based display is a great example of how we're making Retail Media supply easier to buy at scale. It's purpose-built to bring programmatic flexibility to retail environments, giving retailers more robust media capabilities like biddable trading optionality, flexible pricing, efficient workflows and advanced controls for ad relevancy. It complements reservation-based deals to give retailers more flexibility and access to national media budgets. Today, on-site display makes up less than 10% of our Retail Media business and represents approximately 30% to 40% of our clients' media mix, which shows significant growth potential. We drove close to $400 million in media spend this quarter, up 20% year-over-year with over 4,000 brands globally. We continue to see substantial growth from our multiyear partnerships with leading agencies, well above market growth rates, and we're incorporating new demand sources. Our new partnership with Miracle is expected to unlock demand from mid- to long-tail advertisers. Together with Miracle, we enable third-party sellers to easily launch campaigns, boosting product variety without adding operational complexity to retailers. We're deepening agency and API partnerships and expect to incorporate more demand sources moving forward, including through Microsoft, which is progressing well and other partnerships. We're expanding globally with new wins across all regions, including Thermo Fisher, BJ's Wholesale Club, and Grocers Weis Markets, Winn-Dixie and Harveys supermarkets via our digital commerce partner, Mirakl Ads in the U.S. In closing, we're confident in the strength of our business and the momentum we're driving. We're operating at the intersection of powerful market trends with the assets, capabilities and strategy to lead and create lasting value for our shareholders. With that, I'll hand it over to Sarah, who will provide more details on our financial results and our outlook.

Thank you, Michael, and good morning, everyone. We delivered strong Q2 results with significant operating leverage enabled by top line growth and disciplined cost management. Revenue was $483 million, and contribution ex-TAC increased to $292 million. This includes the year-over-year tailwind from foreign currencies of $6 million. At constant currency, Q2 contribution ex-TAC grew by 7% year-over-year, representing growth of 21% on a 2-year stack basis. As previously communicated, we experienced a slow start to the quarter. We observed better macro trends in May, and the environment has remained relatively stable since. Client retention remains high at close to 90%. In Performance Media, revenue was $422 million and contribution ex-TAC was $232 million, up 6% at constant currency or 17% on a 2-year stack basis. We leverage our large-scale commerce data and AI-powered audience modeling technology to find in-market shoppers. We saw continued strong growth for Commerce Audiences and retargeting grew at a mid-single-digit rate. We benefited from further AI- driven performance enhancements despite lapping a tough comparison with the significant AI improvements implemented last year. The growth of our Commerce Grid SSP is primarily driven by the traction of Commerce Audiences packaged with publisher inventory to deliver highly targeted campaigns. Lastly, ad tech services continue to be negatively impacted by lower spend by a large client in our media trading marketplace. Overall, we benefit from a global diversified client base. By region, we delivered high single-digit growth in media spend in Asia Pac and low single-digit growth in EMEA, while we saw lower budgets in the U.S. By vertical, travel remains our fastest-growing vertical, up 28%, followed by classifieds and marketplaces performing well. Broadly, there was lower spending in retail, including fashion, which was down 6%. In Retail Media, revenue was $61 million, and contribution ex-TAC grew 11% at constant currency to $60 million, in line with our expectation. That's a 35% increase on a 2-year stack. As a reminder, quarter-over-quarter trends reflect lapping a tough comparison on tiered fees in January. Our growth was driven by continued strength in Retail Media on-site and traction for off-site campaigns. We benefit from the contribution of newly signed retailers and growth from existing clients remain strong, with same retailer contribution ex-TAC retention at 112%. We saw continued expansion with CPG and smaller brands and we onboarded 200 new brands this quarter. Our media spend in Q2 grew 20% year-over-year above market, demonstrating share gains. Momentum with our agency partners remain strong, and our 4,000 global brands are prioritizing Retail Media as a key channel, given its close connection to the point of sale. We continue to win new retailers globally, including former Microsoft advertising retailers. We delivered adjusted EBITDA of $89 million in Q2 2025, reflecting strong operational leverage from top line growth and cost discipline, planned growth investments, including investments in our people and marketing events and lower-than-expected social charges for RSUs. Non-GAAP operating expenses increased to $175 million in Q2, including product investments, marketing events like Cannes Lions and our long-planned in-person company-wide event, partially offset by our rigor on resource allocation. We are building on our strong operational fitness to enable greater scale and efficiency. This means disciplined investments in growth areas, further optimization of our operating model, including the expansion of our lower-cost hub in India and unlocking productivity gains through Commerce GO! and AI-driven tools. Moving down the P&L. Depreciation and amortization increased to $36 million in Q2 2025, which includes approximately $9 million, largely related to accelerated amortization of privacy sandbox assets. Equity-related compensation expense was $22 million. Our income from operations was $30 million, and our net income was $23 million in Q2 2025. Our weighted average diluted share count was 55.1 million, which resulted in diluted earnings per share of $0.39. Our adjusted diluted EPS was $0.92 in Q2 2025. As expected, free cash flow was negative by $36 million in Q2, reflecting seasonality and payment of 2024 income taxes. Our trailing 12-month free cash flow was $194 million. We anticipate positive free cash flow generation in the second half of the year and a free cash flow conversion rate of above 45% of adjusted EBITDA, before any nonrecurring items this year. We benefit from a strong financial position and pristine balance sheet with solid cash generation and no long-term debt. We had 100 -- sorry, $746 million in total liquidity as at the end of June, which gives us significant financial flexibility to execute on our strategy and enable disciplined and balanced capital allocation. Our priorities are to invest in high ROI organic investments and value- enhancing acquisitions and to return capital to shareholders via our share buyback program. We are confident in our business strategy, and we are committed to driving shareholder value. We deployed $48 million for share repurchases for this quarter, which included the repurchase of 1.7 million shares. Year-to-date, we have allocated $104 million to share repurchases, and we have $115 million remaining in our Board share buyback authorization as at the end of June. Turning to our financial outlook, which reflects our expectations as of today, July 30, 2025. We have raised our guidance for the year while keeping a prudent approach, given the remaining uncertainties in the macro environment and potentially lower ad budgets in discretionary categories. For 2025, we now expect contribution ex-TAC to grow 3% to 4% year-over-year at constant currency with growth in each of our segments. We now estimate ForEx changes to drive a positive year-over-year impact of about $1 million to $3 million on contribution ex-TAC for the full year. In Performance Media, we now expect contribution ex-TAC to be up mid-single digits in 2025, raised from our prior expectation of low single-digit growth. This reflects our solid performance in the first half of the year, continued traction with advertisers to drive performance throughout the buyer journey and the continued ramp-up of Commerce GO! In Retail Media, our growth projection for 2025 remains unchanged and is projected to be in the low to mid-single digits range at constant currency. As previously communicated, this includes the unchanged negative impact related to specific client dynamics, mostly affecting Q4 2025. Excluding these 2 clients, our underlying growth for 2025 is expected to be in the ballpark of 20%. Overall, we continue to anticipate an adjusted EBITDA margin of approximately 33% to 34% for 2025. We expect strong margins and cash flow generation while continuing to invest in the growth of our Commerce Media Platform, including investments in Agentic AI innovation. We believe these investments will position us for continued top line growth and strong cash flow generation for the coming years. We expect a normalized tax rate of 22% to 27% under the current rules. Our overall CapEx is expected to be approximately $100 million to $110 million. For Q3 2025, we expect contribution ex-TAC of $277 million to $283 million, up 5% to 7% at constant currency. Our range takes into account uncertainty in the macro environment. We estimate ForEx changes to have a minimal year-over-year impact from contribution to ex-TAC in Q3. We expect adjusted EBITDA between $81 million and $87 million. This reflects continued high ROI growth investments in our platform and foreign exchange rate headwind for our European cost base. We anticipate a slower pace of hiring and less discretionary spend for the remainder of the year. In closing, our strong Q2 results demonstrate the strength of our platform and resilience of our business model. We expect to continue to deliver growth, healthy profitability and solid cash generation to drive shareholder value. We're confident in our strategy and uniquely positioned with the commerce data that powers our AI-driven performance and relevance at scale across the buyer journey. And with that, I'll turn it over to the operator to begin the Q&A session.

[Operator Instructions] And our first question comes from Mark Kelley with Stifel.

I just had a couple on the Agentic AI product that you highlighted on the call and announced a handful weeks ago. I guess the first one would be, what's the right way to think about monetization or I guess, the payment mechanism for a product like that? That's the first one. And then I guess as consumers start to use agents more frequently in the coming years, I guess, in your mind, is that a negative for Retail Media as we know it today and some of those budgets maybe flow towards this Agentic AI product? Any thoughts there would be really helpful.

Great. Thanks for the question. I'll start with a couple of quick thoughts, and then I'll hand it over to Todd to take those. Look, the -- we definitely look at Agentic as a big opportunity for Criteo. And again, that perspective is grounded in the unique data assets that we have. The way that the money would flow into products like that, I mean, is still being determined, right? The LLM vendors have yet to declare monetization strategies. Those could range from affiliate programs to sponsored citations or even commerce transactions, product recommendation inside their platform. So there's quite a range of options of what -- how that could evolve. So our sort of commercial models for those would vary from calls to our API, could be on a CPM or CPC basis. So I think there's quite a few varieties that we're looking at. But we're confident that we really bring a pretty unique capability to those discussions. I'll let Todd comment a little more on that and the retail question as well.

Yes. Let me start with the retail question, Mark. So right now, obviously, we observe traffic globally. And what we're seeing more of is AI assistance being used for discovery and less for conversion, which is good for the time being. What Michael said is true, we're setting up our back end, meaning our product recommendation capabilities, our audience capabilities and our full-funnel capabilities to be called by agents through MCP in order for us to be able to monetize in whatever the selected or winning hand ends up being. As Michael said, and we know this from partnering with and speaking with all of the major players in the space, the prevailing pricing model has not been defined. So our job from a product perspective is to make sure that our MCP setup is flexible enough to accommodate that winning hand. And so far, we haven't seen it. But what we have seen is tremendous interest in our partners getting to product recommendation, getting to Commerce Audiences and getting the full-funnel, cross-channel campaign setup through MCP. And we think being very concrete about those use cases will help us get to a pricing model very quickly that can be tailored to each individual partner. But the setup is most important. And just to emphasize Michael's point about our data and what we've been doing to structure it for years being useful in this new environment as being job one.

And your next question comes from Ygal Arounian with Citi.

Just a follow-up on that Agentic AI and Agentic Commerce. Just so I understand, are your clients, retailers, brands, I think you mentioned the LLMs, are they actively spending on this or working with you guys on this? Like where are we at and the opportunity to monetize this, I guess?

Thanks for the question. Again, I'll just tee this up and then let Todd expand. It is early days in these discussions. I think what you see with retailers, as an example, is them really thinking about what their Agentic front end looks like and wanting to make sure that they can control sort of the data flows and their IP and that they retain a position in the shopper journey that keeps them relevant. As said very directly, we definitely do not want to be disintermediated and turned into online fulfillment centers. So I definitely see a lot of discussion there about protecting data, setting up Agentic front ends and wanting to control and add value to the shopping experience. When it comes to brands, I think they're all sort of looking at sort of the changes in search behavior and wanting to make sure that they understand how to be discovered. And I'll let Todd sort of expand on the rest of that.

Yes. So whether it's a branded agent that sits on a retailer or a marketplace that we partner with or whether it's an LLM that is trying to do product recommendation, we're setting up to serve either or and go beyond. So everything Michael said is true. Brands need discoverability in this new workflow for consumers. We see a lot of organic traffic coming through agents, and it varies. It varies where they come from. But the setup for us is that we can serve all agents regardless of where they're domiciled. And that's exciting because whether a consumer chooses a retailer's agent, a brand's agent or an LLM, we're there with a product recommendation and a way to monetize that discovery. And later on, the conversion that we expect to result.

Okay. That's fascinating topic. I'm sure there'll be a lot more on that. And then I wanted to dig a little bit deeper into the broader agency relationships as well. You called out the one with dentsu and it also seems like an opportunity, that's still pretty early. As you go to these agencies and holdcos and kind of move to the broader set of products that you're pitching, right, like you did with dentsu, can you talk about that motion, like the sales motion, the go-to-market motion and the competitive differentiation of what you're offering now is the full end-to-end suite? And is there any way to help frame how this is flowing through the financials and what the impact is on that front?

Sure. Thanks for the question. Happy to start this and have Sarah give a little extra color on the flow-through. We -- in terms of the go-to-market, which I think is a great way to ask that, we start those conversations at the highest level and really take a look at what is the sort of partnership setup with the agency. And I always say, it's really 3 things, right? Do we have a commercial agreement that creates shared economics for both parties? Do we have a data integration strategy where our data can flow to theirs or be matched to create value? And do we have a co-development strategy where we are building tools that help our agency partners differentiate themselves around our services? So it's always, for me, the 3-legged stool of how we approach an agency relationship. Specifically on products, we're seeing really good traction with the bundling of the commerce growth platform, our performance offering, Commerce Max, our Retail Media DSP -- and sorry, and our Commerce Grid, our SSP, right, where agencies oftentimes want to go direct to curated audience buys. And it's really bundling those 3 things together. And then we really get deep into the agency as well in terms of training, how we provide customer service. We even sometimes will co-locate people on site because really, what we're trying to do is drive adoption at the user level and make sure that our tools are the preferred choice for the people that are hands on keyboard using them. That's what gives us greater share of wallet inside of those agencies once we've created the partnership or commercial framework that frames it. Sarah?

Yes. I mean in terms of how the money flows through our financials effectively, it goes to the product that it relates to, so Retail Media would obviously be reported in Retail Media, Performance Media and Commerce Media. But just in terms of the growth, I mean, this is the fastest-growing part of our business. The deals that we just announced are going -- are spending across the entire platform, as Michael said. For example, in Retail Media, we had about 38% of our business in 2025 coming from agencies versus 30% the year before. So really strong traction across the board and -- now we've got to get the dollars through, which we see very much so with C Grid at the front end as well. That's been well adopted.

Your next question comes from Justin Patterson with KeyBanc.

Great. I wanted to hit on CTV a little bit. The partnership looked pretty interesting that was announced yesterday. I'm just curious how you think that the time line to ramping up this channel and providing value to advertisers will take there.

Yes. Thanks, Justin. Definitely excited to talk about this. We had a couple of, I think, great pieces of content in this earnings cycle around CTV, case study with Jewelry Television, which really demonstrates the efficacy of performance in CTV. And then as you referenced in the question, the partnership with WPP Media. I would say, look, we're at the early stages still of assessing how CTV fits for us and really how we build connections, I would say, between the living room and other channels. But the partnership with WPP Media flows through our Commerce Grid SSP, and we're able to create those curated deal IDs that enable advertisers to connect essentially commerce-first CTV strategies, and it's quite flexible. So it's with the DSP of their choice, which I think that the agencies like because it gives them flexibility to drive those solutions across clients that have embedded DSPs on the front end. So I would say it's early days. We continue to make traction with partnerships like the one announced and some others that we're working on. And it continues to be a more meaningful mix of our supply base overall. And I think it will continue to ramp and accelerate as we go into '26.

Your next question comes from Alec Brondolo with Wells Fargo.

We know that a significant percent of Amazon's Retail Media business is with longer-tail marketplace sellers. Could you maybe just walk us through how the Miracle deal helps you penetrate that market? And then maybe a second question, if I could. After the 2 customer challenges in Retail Media last quarter, I think there's a lot of angst in the investor community that it might beget future issues. How confident are you that you're going to be able to retain the rest of the retailer base? And can you provide an update on the retailer count? I think it was 225 at the end of last year.

Sure, Alec. I'm happy to take those. Look, yes, the Miracle partnership is super exciting. It's -- as we've described in the release, it's -- Miracle is one of the really fastest-growing providers of marketplace support, which is also one of the big secular trends inside of Retail Media as retailers look to add third-party products and demand to their sites. So it's a really good match, fast-growing category with one of the fastest-growing providers in the space. And really, we're there to unlock demand from third-party sellers in the mid- to long tail. For Miracle, it gives them a value proposition to allow them to drive demand generation with targeting and retargeting tools from Criteo in like a really easy setup. It really enhances their value proposition quite a bit. And so -- and obviously, it's great for Criteo because it drives demand and usage of our platform. So it's quite a mutually beneficial partnership. And Miracle, I think, is well competitively positioned against Amazon because, again, we have the thesis that many retailers are not going to work with Amazon, whether it's in marketplace support, Retail Media or anything else, including AWS support. And so it really -- I think it's a great fit with our client base, especially in that mid- to long tail of retailer sets. The second question, I think, you had was on Retail Media, and Sarah can comment a little bit on how we're thinking about that.

Yes. Well, I think the question was on the number of retailers unless I missed part of the question. So yes, I mean, we don't keep updating the numbers, but just to update the number, we now have -- we now partner with over 230 retailers. And we did roll off some less profitable players over the last year that represented less than 2% of our CXT. So just to size that. I would say what's important here is that for those retailers, we have a sizable base in the U.S. We have -- we partner with 70% of the top 30 retailers in the U.S. and 50% of the top 30 retailers in Europe. So we feel very good about being complementary to Amazon and continuing to drive our footprint across -- globally and across Europe as well as Asia Pac. And then we did add some of the new Microsoft partnerships this quarter as we disclosed as well.

Next question comes from Thomas White with D.A. Davidson.

Just a follow-up on CTV. It seems like you guys are talking about the potential for CTV to be more of a performance-based kind of accountable medium. Can you maybe just talk a little bit about what is it about your offering in that channel that positions you to maybe tracking to a space where there are already some decently entrenched competitors, specifically around that angle of sort of performance-based or making it more accountable?

Thanks, Thomas. I'll have Todd take this one.

Thomas, I think it's pretty simple. CTV has shown a huge amount of promise for awareness advertising and for discovery -- product discovery. But it's been very difficult for advertisers to tie their advertising to sales lift or to a better cost per order. And that's something that we do quite well. So when you think about our unique value proposition relative to CTV and what Michael said before, which is there's a brand performance sort of veil on that. That's what makes us special. For us to be able to show incremental return on ad spend, for us to show sales lift organically is coming from those CTV sessions is a pretty special thing. And so that's the way we enter the market. And when you think about the buyer journey and we talk about discovery advertising at the top of the funnel being so important, CTV gives us a huge swath of surfaces to reach consumers and then to tie that reach back to incremental sales lift, CPO, et cetera.

Your next question comes from Richard Kramer with Arete Research.

Michael, we've seen total activated media spend around $1 billion a quarter for the past 4 quarters with very limited growth. Can you parse out what the lower ad tech trading portion of that might explain that? And more importantly, can you speak to the drivers that might bring a step-up in total activated media? Do the 2 announced holdco deals with dentsu and WPP include any firm spending commitments? Or would you open up Retail Media SSP inventory solutions to third-party DSPs?

Thanks, Richard. Yes, definitely activated media -- growing activated media spend really is a top priority. So it's something that we're very focused on. We believe that the strategy for Performance Media, right, this full-funnel, cross-channel, self-service is really the key to reverse that trend of that being flattish for the last couple of years. And we're really focused on that. Obviously, we have great top line media growth with Retail Media. And then there has been a little bit of a drag from our ad tech services units, which Sarah could expand on as needed. The agreements with agencies typically are an endeavor or a commit. And they definitely do have sort of volume expectations. I think it varies a little bit agency to agency, but certainly, there are numbers that are talked about in terms of what we're mutually trying to drive towards. And look, I really think it comes back to the performance products. So driving Commerce GO!, continuing to build into additional channels, developing the mid and upper funnel offerings. And that's what's going to start bringing in an increase in activated media spend to complement the strong growth that we've had in CXT over the last couple of years. But it's definitely a top priority for the management team.

And then a quick -- yes, please go ahead.

Sorry, just to unpack. I mean ad tech services was down by, I would say, double-digit millions kind of quite significantly year-on- year, and that was due to sub preference seen from the largest ad tech player. Retail Media spend is up 20%. It's significantly up in the U.S. We did have a marketplace in Europe that had, I would say, high spend, but very low CXT and that's -- so there's some change in the numbers there in Retail Media. But overall, fee growth is stable, but growing where want it to grow and with good CPMs on the other side. So we feel good about the focus on the acceleration of growth for Performance Media segment. Ad tech services has been impacted by lower traffic.

And maybe a quick follow-up for Sarah. There's obviously intense competition for AI and engineering talent. Can you talk about your strategy for attracting and retaining that talent? And do you expect it could impact future margins to ensure that you're able to staff up to address your AI opportunities?

I think Michael is dying to talk, but since you asked me, I'll say, first of all, we attracted -- first of all, fantastic for the new promotions that we just announced. So that gives focus, including on the product side. Second, we announced Will, who is going to be the Head of our Product Activation team. And that's, I would say, a fantastic hire. So I'm really excited about that. We have a really strong base in Paris Hub, I would say, the best engineering talent areas in AI in our Paris Hub, and we continue to have massive amounts of resumes coming in for people that want to work in Criteo. We actually have 60 new engineers in seats. I will add that teams love working at Criteo. So just more broadly, we have really strong retention of our engineering talent, including in those very high sought-after areas, and we do interesting work and we have fun as well.

Your next question comes from Doug Anmuth with JPMorgan.

This is [ Maggie Hoffman ] on for Doug. I just had 2 quick ones. So one on macro. Is there any more color you can provide on what you're seeing across budgets? I know you mentioned lower retail and some lower U.S. ad budgets as well. So just any additional color there would be great. And then more so on the Microsoft partnership. I know you mentioned some progress there. So curious if there's anything else you can share across retailer wins or what's left to do with the demand integration.

Yes, I mean, just to share more color on the verticals. So we talked about 28% increase in travel and that, obviously, I'd say, quarter- after-quarter significant increases. Classifieds for us was a really good vertical. That's actually up on activated media spend about just under 30% year-on-year. And where we see challenges in our bigger sectors, we certainly see CPG being down just broadly kind of depending on the category. Food and grocery is slightly down to tech being down by 8%. And then nonfood, actually more discretionary items down double digit, 20-plus percent in some categories. Home and Garden is down about 12%. And then in terms of areas that we're seeing really good traction, yes, travel and classifieds would be the key ones. So the benefit of our business is we're diversified globally. And so there's obviously very different stories to that, depending on the region and depending on the size of customers. Department stores in the U.S. and fashion are the 2 categories where slightly more challenged.

I can jump in on the Microsoft partnership. Obviously, Microsoft has been a great multiyear partner for us. And this is just really expanding the envelope of that. As far as Retail Media is concerned, we're continuing to progress well on both fronts. On the supply side, we're preparing the launch of several important retailers across regions in the coming months, and we talked about a couple of those wins. On the demand side, we are tracking, as we talked about before, to get the first real-time setup broadly in Retail Media, we hope by the end of the year. And so we're working together on that. It is a complicated technical challenge to meet retailers' requirements for brand safety, for latency and the variety of controls that they operate with today. But again, we're making great progress with that demand solution, which should be a real unlock for our Retail Media network partners.

Your next question comes from Mark Zgutowicz with Benchmark Company.

Two quick questions. Just on Retail Media broadly, a lot of conjecture out there in terms of the pace of growth. And I'm just hoping maybe you could update us on key drivers over the next 12 months in terms of your core CPG and retail versus Commerce Media -- newer Commerce Media verticals, that is. And then on the standardization front, perhaps an update when that visually could become perhaps a tailwind versus a headwind for Retail Media growth. And then separately, just hoping you could maybe quantify initial demand that you're seeing for auction-based display and on-site video and whether either will have a noticeable contribution to second half revenue?

Yes, Mark, happy to get this started. Look, so the outlook for Retail Media growth over the next 12 months, right, will continue to be driven, I'd say, multifold. One, we continue to win new suppliers like the ones we announced here in this call like BJ's, Thermo Fisher, et cetera, and we have other announcements pending for next quarter. It will come through the scaling of some of the new products that we've launched, like the on-site video product that we launched in April and the programmatic display product that we launched in June. Specifically to your question on programmatic display, that's a great uptake, right? We have 16 retailers live, and we think that that's going to double in the coming weeks. So it's really taking off. And I think we mentioned in the prepared remarks, the gap between the current spend level on our product versus what it is as a total mix for retailers, which really shows the kind of the opportunity that we're chasing with scaling that product. And so that will continue to ramp up over the next 12 months, both of those. I'd say the biggest and longer-term one that will probably be more of a 2026 growth driver will be what Todd was talking about when he answered the Microsoft question, which is as we start to develop the technology to unlock real open RTB for retail supply. I think it's really like the next leg of growth, not just for Criteo, but for the entire industry. And we're really looking forward to leading the charge on that. Criteo will absolutely be at the front of developing that capability for the industry. And again, it will scale because it will improve fill rates and really normalizes what is still a lot of demand that doesn't make its way into Retail Media networks even today at the stage of maturity that we've achieved.

And just in terms of activated media spend, we do see that there is some impact with certain retailers that are more mature in our base, there's less growth. All the factors that Michael spoke about are all key drivers for our growth in media spend. So we're seeing traction, I would say, across the board. Lower -- some slower start-ups of new retailers that have been signed. So that will be more a '26 driver versus '25. And then continued traction on -- especially on large brand spend in Retail Media in North America.

Your next question comes from Brian Pitz with BMO Capital Markets.

Any additional color based on commentary from your advertisers on how they're really thinking about tariffs in the second half and on holiday demand? So -- let's say, we settle at 15% across the board, will that be a positive or negative? Where do they kind of think about getting more bullish? And then separately, I believe same retailer contribution ex-TAC for Retail Media was 112%. That was actually down a bit from 120% last quarter. If you consider the expected second half churn, how are you thinking about the durability of same retailer contribution ex-TAC for the rest of the year?

Yes. So in terms of our outlook, I would say we've been prudent in our outlook. We do see the color related to Americas versus Europe. We do not have a significant -- as you know, China base, it's very, very small for us, and we tend to focus more on in-country larger brands. We do see some impact for the tariffs in the U.S. more for consumer sentiment versus the impact of tariffs, although there is some impact clearly on certain categories and certain retailers, largely on the Performance Media side. In terms of same retailer CXT, yes, it's still strong. And we obviously have some tougher comps on that as well, and we expect that to continue to grow with our existing base and then adding the new retailers over time.

Thank you, Michael, Sarah and Todd. That concludes our call for today. Thanks again, everyone, for joining. If you have any follow- up questions, the Investor Relations team is available to assist. Have a great day.

The conference has now concluded. Thank you so much for attending today's presentation. You may now disconnect.