Direct Digital Holdings reported its third‑quarter 2025 results on November 6, 2025, showing consolidated revenue of $8.0 million—a 12% decline from $9.1 million in the same quarter last year. Buy‑side advertising revenue rose 7% to $7.3 million, driven by new customer wins in emerging verticals, while sell‑side revenue fell sharply to $0.6 million, a 73% drop attributed to lower impression inventory and engagement levels on the company’s supply‑side platform.
Gross margin contracted from 39% in Q3 2024 to 28% in Q3 2025, reflecting the shift from higher‑margin sell‑side activity to the lower‑margin buy‑side segment. Operating expenses fell 15% year‑over‑year to $6.1 million, a result of disciplined cost‑control initiatives that have been in place since 2024. Despite the expense reduction, the company posted a net loss of $5.0 million, an improvement over the $6.4 million loss reported in Q3 2024.
The company’s earnings per share were $‑0.24, missing the consensus estimate of $‑0.16 by $0.08—a 50% earnings surprise. The revenue miss of $7.98 million versus the consensus estimate of $22.25 million represents a 65% shortfall, underscoring the severity of the sell‑side decline and the limited upside from buy‑side growth.
To shore up liquidity, Direct Digital Holdings issued $25 million of Series A Convertible Preferred Stock on November 6, adding to a prior $10 million issuance on October 14. The company also expanded its Equity Reserve Facility to $100 million from $20 million, providing additional capital flexibility as it pursues growth and addresses liquidity challenges.
Management emphasized a strategic pivot to an AI‑first model, citing cost‑efficiency gains and new customer solutions. CEO Mark D. Walker noted that the company is “aggressively deploying AI across internal analytics, decision‑making, and optimization” and that it aims for positive cash flow in 2026. The company’s guidance for the remainder of 2025 remains cautious, reflecting the need to rebuild inventory volumes and strengthen partner relationships in the sell‑side segment.
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