Executive Summary / Key Takeaways

• Perion Network Ltd. is undergoing a profound strategic transformation, consolidating its diverse advertising technologies into the AI-driven Perion One platform to become the centralized solution for Chief Marketing Officers (CMOs) seeking measurable business outcomes.
• The company's Advertising Solutions segment returned to year-over-year growth in Q2 2025, driven by robust performance in Digital Out-of-Home (DOOH), Retail Media, and a stabilizing Web segment, signaling a successful pivot from legacy businesses.
• Key technological differentiators, including the recently launched SODA for supply-side optimization, Performance CTV for ROI-focused video, and the Greenbids AI algorithms for walled gardens, are expanding Perion's addressable market and enhancing campaign efficiency.
• Perion reiterates its full-year 2025 guidance, projecting revenue between $430 million and $450 million and adjusted EBITDA of $44 million to $46 million, underpinned by cost efficiencies and accelerated growth in high-margin verticals.
• While facing challenges from the non-renewal of its Microsoft Bing contract and shifts in the open web, Perion's strong cash position, active share buyback program, and disciplined M&A strategy support its long-term vision and shareholder value creation.

The Dawn of Perion One: Unifying Digital Advertising for the CMO

Perion Network Ltd. (NASDAQ:PERI), established in 1999, has evolved from its roots as IncrediMail into a digital advertising technology leader, consistently delivering positive annual adjusted EBITDA and operating cash flow since 2014. The company is currently undergoing a significant strategic transformation, pivoting to address a critical gap in the digital advertising landscape: the absence of a centralized, outcome-driven platform for Chief Marketing Officers (CMOs). CMOs globally manage nearly $1 trillion in annual digital advertising budgets, yet often grapple with a fragmented ecosystem of platforms and channels. Perion One is the company's ambitious answer, designed to unify, simplify, and amplify the advertiser's journey by connecting media with measurable business outcomes through creative, data, and AI.

This strategic shift, planned since late 2023 and formally announced in early 2025, involves reorganizing Perion's structure, unifying its technologies, and aligning its go-to-market strategy. The company is building Perion One to orchestrate planning, activation, and measurement across all major digital channels, aiming to expand recurring high-margin revenue streams powered by AI-driven insights, self-service capabilities, and creative automation. This foundational work is critical as the digital advertising industry increasingly demands greater accountability and performance-based results, moving away from traditional awareness-focused campaigns.

Technological Edge: AI-Powered Solutions Driving Performance

Perion's competitive advantage is deeply rooted in its advanced AI capabilities and proprietary technology, which are central to the Perion One platform. These innovations offer tangible, quantifiable benefits that differentiate Perion in a crowded market.

At its core, Perion One integrates several key AI-powered solutions:

• SODA (Supply Optimization & Demand Amplification): Launched on September 11, 2025, SODA is an AI-powered suite for publishers, featuring a next-generation AI algorithm for Supply Path Optimization (SPO). This technology is designed to maximize efficiency and monetization across every ad impression, directly increasing revenue for publishers and reducing waste for advertisers.
• Performance CTV: Introduced in Q2 2025, this native Perion One feature transforms Connected TV (CTV) ads into full-funnel, ROI-focused channel activation. It integrates high-impact technology with a new performance algorithm and measurement capabilities, focusing on actual outcomes beyond mere viewability. This solution is strategically positioned to capture a greater share of the U.S. CTV ad spend market, projected to exceed $36 billion by 2026, by targeting outcome-driven budgets from previously underserved mid-market brands and retailers.
• Greenbids (Perion Algo): Acquired in Q1 2025, Greenbids embeds custom AI-based algorithms into Perion One, extending optimization capabilities across "walled gardens" like YouTube, Facebook, and Instagram, as well as leading DSPs such as The Trade Desk and Google DV360. This technology is focused on reducing waste in advertising budgets and increasing business outcomes, significantly expanding Perion's total addressable market into lower-funnel performance opportunities. In Q2 2025, Perion already booked over $1 million in Perion Algo deals from existing customers, demonstrating immediate synergy and market traction.
• Dynamic Content Optimization (DCO): Integrated into the Hivestack platform (acquired December 2023), Perion's DCO technology enables Hivestack advertisers to access 40% more inventory than previously possible. This is achieved by dynamically adapting creative content to various screen sizes and resolutions in the Digital Out-of-Home (DOOH) space, solving a common advertiser challenge.
• SORT and WAVE: SORT is Perion's advanced AI audience segmentation technology for CTV and Web, designed for cookieless environments. WAVE is an advanced Generative AI audio ad solution, anticipating the industry's growing investment in digital audio.
• AI-Powered Chatbot: Perion has unveiled a groundbreaking ad experience powered by generative AI, driving a double-digit audience engagement lift by integrating bespoke AI chatbots directly into ad formats for real-time, personalized interactions.

Perion is also deploying Generative AI across its internal operations, led by its new Chief Operating Officer, Anat Paran. This initiative aims to streamline processes from HR to campaign deployment, enabling the company to scale growth without a proportional increase in headcount. The company is actively experimenting with various large language models, including Google 's capabilities and DeepSeek algorithms, to ensure cost-effective and efficient solutions without high switching costs. This focus on operational efficiency is expected to drive margin expansion in the second half of 2025 and beyond.

Competitive Landscape and Strategic Positioning

Perion operates in a highly competitive digital advertising market, vying with industry giants and specialized players alike. The company's strategic shift to Perion One and its emphasis on AI-driven, outcome-focused solutions are direct responses to this dynamic environment.

Compared to large, diversified players like Alphabet Inc. (GOOGL) and Meta Platforms (META), Perion holds a niche but agile position. While Google Ads and Meta's ad ecosystems benefit from immense scale, vast data resources, and exceptional profitability, Perion differentiates itself through specialized tools and a privacy-focused approach. Perion's SORT technology, for instance, offers signal-based targeting in cookieless environments, providing a qualitative advantage in evolving regulatory landscapes where GOOGL's data-heavy approach faces scrutiny. The Greenbids acquisition is particularly significant, as it allows Perion to directly enter the "walled garden" space, where the majority of advertising money is spent, a market traditionally dominated by GOOGL and META.

Against independent Demand-Side Platforms (DSPs) like The Trade Desk (TTD) and Supply-Side Platforms (SSPs) like PubMatic (PUBM), Perion's comprehensive, channel-neutral Perion One platform offers a more integrated ecosystem. While TTD excels in programmatic buying efficiency and PUBM in publisher yield optimization, Perion's approach combines both supply and demand management with creative and AI capabilities. Perion's Digital Out-of-Home (DOOH) offering, significantly bolstered by the Hivestack acquisition, provides a unique competitive advantage. This segment, which grew 35% year-over-year in Q2 2025, serves as a "foot in the door" for market entry in new geographies like Korea, Germany, and Italy, where competition is less intense, enabling cross-selling of Perion's broader suite of solutions.

Perion's competitive advantages lie in its proprietary AI platform for campaign optimization and cookieless targeting, fostering stronger customer loyalty through personalized experiences. This technological moat enhances pricing power and market share in AI-driven segments. However, Perion faces vulnerabilities, including potential dependence on major platforms for traffic and the inherent scale advantages of larger competitors. The company's M&A strategy is disciplined, focusing solely on acquisitions that are "extremely synergistic" and fit within the Perion One platform as additional features, rather than standalone entities, to avoid fragmentation.

Financial Performance and Outlook

Perion's financial performance in the first half of 2025 reflects the early impacts of its strategic transformation. The company reported Q2 2025 revenue of $103 million. Notably, the Advertising Solutions business returned to year-over-year growth for the first time since Q3 2023, increasing by 8.3% year-over-year and accounting for 78% of total revenue. This growth was primarily driven by strong performance in Digital Out-of-Home (up 35% year-over-year to 17% of total revenue) and Retail Media (up 27% year-over-year to $22.3 million).

While CTV revenue saw a 5% year-over-year decline in Q2 2025, representing 9% of total revenue, management attributes this to a shift in advertiser budgets to the second half of the year and remains optimistic about annual growth, expecting to outpace the overall CTV market growth of 13% in 2025, potentially reaching above 20%. Web revenue, which declined 28% year-over-year in Q1 2025, surprisingly increased by 5% year-over-year in Q2 2025, representing 52% of total revenue. This stabilization is a positive sign, though management acknowledges the open web as a non-growing industry segment in the long term. Search revenue remained stable at $22.4 million in Q2 2025, representing 22% of total revenue, a trend expected to continue at similar levels per quarter.

Profitability metrics show a disciplined approach. The contribution ex-TAC margin remained stable at 46% in Q2 2025. Adjusted EBITDA for Q2 2025 was $7.1 million, resulting in a 7% adjusted EBITDA margin and a 15% ex-TAC margin. The cost of revenue is increasing due to growth in the retail vertical and hosting services, but Perion is actively implementing automation and efficiency initiatives, particularly with Generative AI, to optimize its cost structure. These efforts are expected to lead to continued margin expansion in the second half of 2025.

Perion's balance sheet remains robust, with $318.5 million in cash, cash equivalents, short-term bank deposits, and marketable securities as of June 30, 2025. The company generated $21.3 million in operating cash flow in Q2 2025, reinforcing its cash-generative business model. Capital allocation includes a share repurchase program, with $86.7 million spent year-to-date through Q2 2025 and $38 million remaining, expected to be utilized by year-end. The Greenbids acquisition in Q1 2025 involved $27.5 million in cash at closing, with an additional $22.5 million cash earn-out over two years and a $15 million retention package over three years. Greenbids is expected to be accretive to adjusted EBITDA starting in 2025, with significant acceleration from 2026 onwards.

For the full year 2025, Perion reiterates its guidance, expecting revenue in the range of $430 million to $450 million and adjusted EBITDA in the range of $44 million to $46 million. The company anticipates a strong cash flow conversion rate, with adjusted free cash flow closely aligning with adjusted EBITDA for 2025.

Risks and Challenges

Despite the promising transformation, Perion faces several key risks. The non-renewal of its contract with Microsoft Bing, which concluded at the end of 2024, represents a significant shift, though a tail period is expected to generate some de minimis revenue in 2025. While management asserts this was an industry-wide decision by Microsoft (MSFT) and unrelated to Perion's display advertising business, it underscores the risk of reliance on major platform partners. The ongoing decline in the broader open web advertising market also presents a challenge, although Perion is strategically de-emphasizing lower-margin, older technology-dependent open web business to focus on higher-growth areas.

The potential impact of AI search on publisher traffic is another long-term consideration. Perion acknowledges that human behavior might shift away from traditional web search, but its channel-agnostic Perion One platform is designed to adapt, deploying advertiser budgets across emerging channels like TikTok, Meta, or YouTube as consumer preferences evolve. While no immediate signals suggest a similar non-renewal with its Yahoo search partner, the non-strategic nature of the search business means its long-term contribution remains uncertain.

Conclusion

Perion Network Ltd. is executing a bold and necessary transformation, repositioning itself as an indispensable platform for CMOs in the AI era. The Perion One strategy, underpinned by advanced AI-powered solutions like SODA, Performance CTV, and Greenbids, addresses the digital advertising industry's fragmentation and growing demand for measurable outcomes. This strategic pivot is already yielding tangible results, with the Advertising Solutions segment returning to growth and high-growth verticals like DOOH and Retail Media demonstrating robust expansion.

The company's commitment to technological leadership, operational efficiency, and disciplined capital allocation, including a strong balance sheet and active share buyback program, provides a solid foundation for future growth. While challenges from legacy business declines and competitive pressures persist, Perion's focus on high-margin, synergistic acquisitions and its ability to adapt to evolving market dynamics position it to capture a greater share of the expanding digital advertising landscape. Investors should closely monitor the continued rollout and adoption of the Perion One platform and the acceleration of synergies from its strategic acquisitions as key indicators of its long-term value creation potential.