IAC Reports Q3 Revenue Decline Amid AI-Driven Search Disruption

IAC reported a third-quarter revenue decline of 8% year-over-year to $589.8 million, missing Wall Street expectations amid headwinds primarily from its ad-supported search and caregiving platforms. The search unit's revenue fell 41% due to reduced traffic as users received answers directly from Google AI Overviews, bypassing IAC's sites, while Care.com subscriptions declined 5%. However, IAC's People division, the largest digital and print publisher in the U.S., saw a 9% increase in digital revenue, boosted by performance marketing and a new AI content licensing agreement with Microsoft, signaling a potential path for tech-driven recovery. Despite this, adjusted EBITDA fell 59% to $29.1 million due to severance and other one-off costs, leading IAC to lower its 2025 profit guidance. The company's financials highlight profitability challenges, with a negative net margin and an Altman Z-Score placing it in the distress zone, although valuation ratios suggest potential undervaluation. Overall, IAC's results underscore the disruptive impact of AI on traditional digital media and ad-based business models, prompting strategic shifts toward partnerships and content licensing to adapt to the changing landscape.