Good morning, and welcome to Criteo's third quarter 2026 earnings call. All participants will be in a listen-only mode. Should you need assistance, please press the star key followed by zero. After the prepared remarks, there will be an opportunity to ask questions. To ask a question, please press star then the number one. To withdraw a question, press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Melanie Dambre, Senior Vice President, Investor Relations and Corporate Communications. Please go ahead.
Good morning, everyone, and welcome to Criteo's third quarter 2026 earnings call. Joining us on the call today are Chief Executive Officer, Michael Komasinski, and Chief Financial Officer, Connor McGogney, who are going to share some prepared remarks. As usual, you will find our investor presentation on our 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, and the registration statement on form S-4 related to our proposed redomiciliation 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 gross 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. Before we begin, I'd like to welcome Connor to his first earnings call as CFO. Connor has been with Criteo for eight years, most recently as our Chief Strategy Officer. He knows the business well, making this a seamless transition, and I'm pleased to have him in this role as we strengthen execution and focus on shareholder value. This has been a challenging year for Criteo. Our performance is not yet where I want it to be, but the strength of our capabilities and the progress we're making give me confidence in our direction. Much of the pressure this year has been concentrated in reduced spending from several large enterprise clients in performance media and the previously communicated client scope reductions in retail media.
Encouragingly, spending trends among those large performance media clients remained broadly stable throughout the quarter while we continued to build new business momentum. Our strategy has been to extend our commerce capabilities across channels and the full shopping journey, helping clients reach consumers wherever they discover, consider, and buy. Our investments in CTV, app, social, and AI platforms are all part of that plan. This quarter, we are seeing more evidence of those investments translating into commercial traction, with CTV a growing example that I will discuss in more detail. Commerce intelligence underpins this strategy. Our combination of large-scale commerce data and AI infrastructure helps advertisers turn shopping intent into sales. We are extending those capabilities across more channels, including AI platforms like ChatGPT Ads, to capture additional advertiser budgets, and through AI assistants and Page Intelligence to help clients monetize new shopping experiences.
Together, these efforts make our commerce intelligence more valuable to advertisers and retailers, building a foundation for Criteo to power more of the shopping journey as AI creates new ways for consumers to discover and buy products. We now need to translate this progress into stronger financial performance. That means strengthening commercial execution, ramping new clients, deepening existing relationships, and helping retailers grow their media businesses. We are also expanding self-service and agency workflows to make our capabilities easier to access, improve productivity, and lower our cost to serve. Challenges remain, but we are addressing them directly with a clear focus on execution and cost discipline. Let me start with CTV. We started a little over a year ago, and we believe our commerce capabilities give us a compelling opportunity as advertisers increasingly look to CTV to drive measurable sales. That is where Criteo has a right to win.
Our differentiated commerce audiences allow advertisers to reach their ideal consumers on CTV based on real shopping behaviors and purchase intent. Combined with our ability to connect campaigns across channels and optimize towards a purchase or other outcome, this makes CTV a more powerful performance channel for advertisers. This morning, we announced the global expansion of our CTV offering, building on our early success in the U.S. We will launch in Brazil and Mexico by year-end, followed by major markets across Europe, Canada, and Australia in 2027. We are beginning to see the returns on our investments in performance CTV, with that differentiation translating into growing commercial traction. More advertisers are now running campaigns through our offering across several verticals, including apparel, travel, consumer electronics, and automotive.
For example, a global travel platform generated a 61x return on ad spend while delivering 9% lower cost per acquisition compared to their display campaign serving to the same audience. Our pipeline is expanding rapidly, and we are winning budgets in competitive evaluations. We have also secured several renewals, with advertisers increasing their investment and committing larger budgets as they see meaningful results. Based on this momentum, we are on track to double our Q3 CTV run rate in Q4. We are putting more commercial resources behind this opportunity as demand and repeat spending grow. We are also expanding our reach across AI platforms. Our OpenAI integration has grown from seven countries last quarter to 89 countries. Europe is particularly important given our deep advertiser relationships and established presence across the region.
We're building our presence in an emerging advertising channel with meaningful long-term growth potential, positioning us to capture additional advertiser budgets as adoption scales. We bring differentiated capabilities that help advertisers drive results in this new channel. Our rich commerce audiences help them reach relevant consumers. Our Prompt Smart Ads tailor messaging to the intent people express in their conversations, and our measurement helps advertisers understand the results and optimize their spending. For example, a Turkish Airlines campaign activated through Criteo used Prompt Smart Ads and generated a 183% increase in site landings from ChatGPT Ads. Users exposed to the ads also spent 15% more time per visit. We continue to see interest in testing ChatGPT Ads, and average spend per client is increasing modestly. This is still an early market, and spending has yet to scale. Our focus is on turning tests into repeat campaigns and larger budgets.
We expect the contribution from ChatGPT Ads to build in 2027. As we develop these newer channels, we're applying the same experience we've gained in social. In Q3, we saw approximately 20% growth in both media spend and the number of campaigns on social compared to a year ago. We've built a business that demonstrates how our commerce intelligence can drive performance beyond the open web. Together, CTV, AI platforms, and social now represent 13% of Commerce Growth campaigns, up from 6% a year ago. By expanding across these newer channels, we can address more of our clients' budgets and give them a more connected view of the consumer across the shopping journey. Beyond these channels, we also see meaningful opportunity to grow within our existing client base through apps.
Many advertisers run web campaigns with us and have their own apps, but have yet to activate app campaigns with Criteo. Advertisers combining app and web generate approximately twice the sales at a similar return on ad spend compared with web alone. This gives us a clear opportunity to deepen client relationships and capture additional performance budgets. This diversification puts us in a fundamentally stronger position today. We're not currently seeing an impact from the Safari changes in iOS 27, supported by our longstanding investments in privacy-safe technology and durable addressability. We're also making our capabilities easier for advertisers to access and use through self-service. GO gives clients direct access to campaign tools powered by our AI and commerce data. It simplifies how they launch, manage, and optimize campaigns. More than half of our small clients globally use GO campaigns.
GO now serves approximately 1/3 of Commerce Growth customers and represents about 10% of Commerce Growth revenue. We've learned a lot about how clients adopt GO this year. Our marketing has generated strong interest in GO, including hundreds of thousands of visits to GO pages, and activation is higher when our teams help clients get started. We're phasing out standalone self-registration while using agentic tools to automate key onboarding steps and help clients get started more easily. Once clients are up and running, they can manage and optimize campaigns themselves. As more campaigns move into these self-service workflows, we're improving productivity and lowering our cost to serve. Over time, we also expect more clients to access our capabilities through AI assistants.
All major agency holding companies are currently testing our Model Context Protocol, or MCP, which connects their AI tools with Criteo solutions and enables planners to build and activate campaigns using natural language. These connections allow agencies to bring Criteo solutions into their own AI tools. In performance media, early testing includes reporting, audience creation, and selected campaign operations. In retail media, we currently provide retailer insights and reporting, with activation coming soon. Our work on MCP is part of broader progress with agencies. Spend through agencies has increased 5% year- to- date, ahead of direct client trends. We are deepening these relationships by combining our commerce data with agency assets, developing agentic capabilities together, and extending our partnerships across more of our products. Turning to our third quarter performance media results. Media spend trends improved sequentially despite reduced spending by several large enterprise clients discussed last quarter.
The reductions primarily reflected client-specific decisions and softer demand in certain verticals. Encouragingly, trends among large clients remained broadly stable throughout the quarter. We have also strengthened our commercial execution with tangible progress in new business momentum. Our pipeline continues to strengthen with open opportunities up 72% year-over-year, with agencies representing more than 0.5 of our pipeline. Spend from new business grew 13% year-over-year in Q3, with the share of new enterprise client spend doubling year-over-year. We expect these new clients to begin ramping in Q4 and reach full run rate in the first half of 2027. While the challenges affecting several large enterprise clients remain a near-term headwind, we are building the foundation for improved performance in 2027 through stronger commercial execution, broader client relationships, and a growing contribution from new channels.
The opportunities I described in CTV, social, app, and AI platforms give us more ways to deliver results and earn additional budgets. Our focus is clear: ramp the clients we have signed, grow our share of existing accounts, and continue to improve execution in the Americas. As we head into Cyber Week and the holiday season, our teams are ready and excited to help our clients drive strong results. Turning to retail media. We are building a more diversified business across clients, markets, and products. That gives us more ways to grow and greater flexibility to meet retailers' demands. Retail media Contribution ex-TAC grew 10% in Q3 across our underlying client base, supported by advertiser demand and adoption of new formats. We are expanding demand on several fronts. During the quarter, the number of brands on our platform reached 4,700, and media spend grew 22%.
We are making it easier for brands and agencies to invest across our network. Commerce Max unifies planning, activation, and measurement, including campaigns sold directly by retailers, so advertisers can manage and scale campaigns across retailers in one place. We are also expanding capabilities on retailer sites. More retailers are adopting conquesting, helping brands reach shoppers, considering competing products, and attracting incremental budgets. Our Mirakl partnership further broadens demand by enabling third-party sellers and mid-to-long tail advertisers to run campaigns across a growing retailer network. Together, these advertisers represent a meaningful source of incremental demand. Within our existing retailer network, new formats continue to drive growth. Auction-based display remains our fastest-growing retail media format. It is now live with more than 95 retailers, twice the number at the start of the year.
Auctions account for more than half of on-site display, and we are on track to grow display spend by close to 50% this year. Auction-Based Display gives brands a more flexible, performance-driven way to reach relevant shoppers while helping retailers attract more demand and generate more revenue from on-site inventory. We believe retailer AI assistants create a new opportunity to connect shoppers with relevant products and generate revenue for retailers. Following our initial launch with Albertsons, we are working to bring sponsored recommendations to additional retailer AI assistants, including THG Ingenuity in the U.K. These recommendations connect what a shopper is asking for with relevant products and advertiser demand. They create a new source of revenue for retailers within a personalized experience designed to help consumers make a purchase.
As agentic AI creates new ways for consumers to shop, we expect online commerce to grow and retail media to grow with it. E-commerce traffic across our retail partners continues to grow, even as consumers increasingly use AI assistants. Those assistants are creating new paths to discovery and bringing qualified shoppers to retailers. They may also help consumers complete purchases they might otherwise abandon, expanding the opportunity for online commerce. Retailers remain central to that journey. They provide the assortment, fulfillment, loyalty programs, and payment capabilities that turn interest into a purchase. Consumers also continue to use search, brand websites, and retailer sites alongside AI assistants. As shoppers move across more touchpoints, retailers have an opportunity to make their own sites more relevant and valuable. Page Intelligence brings merchandising, advertising, and shopper engagement into one optimization system. Retailers retain control over product selection, ranking, and monetization.
We bring the technology and advertiser demand to help them improve product discovery, show relevant sponsored recommendations, and grow revenue. We are now testing it with one of our largest retail partners. That innovation builds on strong retailer relationships. Four of our largest retail partners have recently renewed their agreements for multiple years. Existing partners, including Douglas, Flaconi, and Metro, are preparing to expand with us into additional markets. We are also adding partners across regions, including Notino in EMEA, El Puerto de Liverpool in Mexico, ONIGO in Japan, Adore Beauty in Australia, and PayU in India. Looking to 2027, we expect a more supportive backdrop for the business, with the previously communicated client scope reductions behind us and a diversified client base.
We are renewing and expanding relationships with existing retailers, adding new clients, and seeing growing demand from advertisers, which reinforces our confidence in the durability of the business and the opportunity ahead. Our product organization remains focused on delivering our roadmap and meeting client needs through the recent leadership transition. In performance media, new client signings and momentum across CTV, app, social, and AI platforms give us concrete levers for improved performance in 2027. In retail media, multi-year retailer commitments, a more diversified client base, and new sources of advertiser demand provide a solid foundation. Across both businesses, we believe agentic AI is creating new ways for us to serve clients and expand our opportunity.
Alongside these priorities, we are maintaining cost discipline and focusing product and commercial resources on the clearest revenue opportunities. Connor will help us improve efficiency, sustain strong cash generation, and allocate capital to drive shareholder value. We remain on track to complete our redomiciliation to the U.S. on January 1st, 2027, subject to shareholder approval and other customary conditions. We expect this to complete the simplification of our corporate structure and create the potential for inclusion in certain U.S. indices, which could broaden our access to investors. I am confident in our direction, and we need to translate this progress into stronger financial performance.
Our focus is on converting long-term client commitments, new business wins, and expanding our role across channels into sustainable growth through consistent execution and operating discipline. With that, I will turn it over to Connor, who will provide more details on our third quarter financial performance and our outlook for the rest of the year.
Thank you, Michael, and good morning, everyone. I am pleased to join you for my first earnings call as CFO. Having spent the past eight years at Criteo, I have a deep understanding of our business and where we need to improve. We have strong technology, a real AI foundation, long-term client relationships, and a cash-generative business. My focus as CFO is to bring financial discipline to our execution, improve efficiency, and ensure our investments and capital allocation support sustainable growth and shareholder value. With that, I am focused on three key priorities. First, I want to make our performance more predictable. We are strengthening how we manage the pipeline, build our operating plans, and better forecast our business despite a rapidly evolving ecosystem. That means clear commercial ownership and a tighter connection between what we see in the pipeline and what we commit to financially.
Second, I want to improve our efficiency and operating leverage as we return the business to growth. We are applying AI across our own operations, expanding self-service capabilities, and simplifying how work gets done. We are also taking a proactive look at our cost structure and operating model to sharpen resource allocation and position the business for stronger profitability. As we execute through this transformation, we will continue to invest in growth, but be more vigilant about improving our operating leverage. Third, I want every capital allocation decision to support shareholder value creation. Our priority is to improve our organic performance, and we will invest where we see compelling opportunities. Share repurchases remain an important part of our capital allocation strategy. We will also continue to evaluate acquisitions, but as always, the bar will be very high.
Turning to the quarter, our top line was in line with our expectations, and Adjusted EBITDA was ahead of plan. Media spend was $1.2 billion, up 9% from a year ago. Revenue was $416 million, and Contribution ex-TAC was $240 million, down 15% at constant currency. This includes a $4 million year-over-year foreign exchange headwind and a $20 million impact related to previously communicated scope changes with two retail media clients. In performance media, revenue was $365 million, and Contribution ex-TAC was $189 million, down 13% at constant currency. As expected, budgets from several large enterprise clients were lower year-over-year, while our broader performance media client base remained more resilient. During Q3, spending from these large clients stabilized compared with Q2, and the year-over-year decline in overall Commerce Growth media spend moderated.
We also made progress in developing newer channels, including CTV and AI platforms, building on the momentum we've established in social. We believe these channels represent additional opportunities for growth over time. Capturing these opportunities and driving broader improvements in client spending will require stronger commercial execution. We've made changes in sales leadership and are strengthening our pipeline management and conversion of opportunities into client spend. While these are encouraging steps, we need to see sustained improvement in client spend to demonstrate that our actions are delivering results. Across regions, the U.S. remains our most challenged market, while trends in EMEA and APAC were comparatively stronger. By category, travel decelerated following several years of strong growth. Retail trends improved, but remained soft overall, particularly in discretionary categories such as fashion, where spending declined 14%.
Retail media revenue was $52 million, and Contribution ex-TAC was $51 million, down 23% at constant currency. The quarter included a $20 million impact from the previously communicated scope reductions pertaining to two clients. Excluding that impact, Contribution ex-TAC across the underlying client base grew a healthy 10%, as expected given tougher comparisons with last year. In retail media, we saw media spend grow 22% from a year ago, driven by continued strong demand across our expanded set of formats. Adjusted EBITDA was $65 million, and our Adjusted EBITDA margin was 27% this quarter. Results came in ahead of our outlook, primarily due to lower hiring and a partial reversal of a previously accrued employee bonus expense based on year-to-date performance and our full-year outlook. We also managed costs tightly while continuing to invest in our growth initiatives.
Non-GAAP operating expenses were $153 million, down 3% from a year ago, primarily driven by lower headcount and lower employee bonus accruals. We're also focused on improving productivity through AI and simplifying how we operate, which we expect to drive greater efficiency over time. At the same time, we remain highly disciplined in our approach to hiring, discretionary spending, and the returns on our investments. Moving down the P&L, depreciation and amortization was $29 million, and share-based compensation was $9 million, down 39% year-over-year. Income from operations was $21 million, and net income was $6 million. Diluted earnings per share was $0.11, and adjusted diluted earnings per share was $0.43. Our provision for income taxes was $16 million this quarter, including a $6 million one-time tax impact associated with our redomiciliation.
Operating cash flow was $57 million in the quarter, and free cash flow was $21 million. We anticipate strong free cash flow generation in the fourth quarter as usual. For reference, our trailing 12-month free cash flow was $134 million. We ended September with $275 million in cash and no long-term debt. Our liquidity gives us the flexibility to invest in the business, pursue acquisitions that meet our return requirements, and return excess capital to shareholders. During the quarter, we repurchased $4 million of shares, bringing year-to-date repurchases to $65 million. We had $156 million remaining under our authorization at the end of September, and we'll continue to assess repurchases as part of our broader focus on maximizing shareholder value. Now, turning to the outlook, our full-year guidance is unchanged.
While we are confident in the actions underway to improve the performance of the business, we are maintaining a prudent approach to our outlook. We continue to expect 2026 Contribution ex-TAC to decline 10%-12% at constant currency. This outlook reflects the spending levels we are seeing in performance media and the previously communicated client scope reductions in retail media. In performance media, we continue to expect Contribution ex-TAC to decline in the high single digits at constant currency for the year. Our outlook reflects year-to-date trends, typical holiday seasonality, and continued pressure in discretionary retail categories. Our teams are taking decisive action on sales execution. The leadership changes, stronger pipeline management, clearer commercial accountability, and better alignment of incentives are intended to improve performance, but we have not assumed an immediate benefit in our remaining 2026 outlook.
We want to see sustained improvement in client activity and spend before building it into our expectations. In retail media, for the year, we expect Contribution ex-TAC to decline in the high teens to 20% at constant currency, including approximately $75 million of impact from the two client scope reductions. Excluding those reductions, we expect underlying retail media Contribution ex-TAC growth in the low teens this year, reflecting the timing of new format launches with selected retailers. We continue to expect an Adjusted EBITDA margin of approximately 30% for 2026. As discussed earlier, we are taking steps to improve our cost structure and operating efficiency, positioning us to deliver operating leverage as growth improves. We continue to expect operating cash flow conversion from Adjusted EBITDA to improve to approximately 85% in 2026, up from 76% in 2025, driven by continued improvements in working capital.
We also continue to expect free cash flow conversion of about 35% of Adjusted EBITDA before any non-recurring items. As previously discussed, this reflects higher capital spending this year for data center renewals versus prior years. Our full-year capital expenditure outlook is now approximately $180 million, including these planned renewals. We also expect an effective tax rate in the high 30% range, reflecting lower anticipated pre-tax income and certain one-time non-deductible tax costs related to our planned redomiciliation. For the fourth quarter, we expect Contribution ex-TAC of $292 million-$298 million, down 9%-11% at constant currency. We now expect foreign exchange to reduce Q4 Contribution ex-TAC by up to $4 million year-over-year. That is approximately $2 million more of a headwind than we assumed in our prior guidance, primarily due to the euro weakening against the US dollar over the past three months.
In performance media, our fourth quarter outlook reflects stable trends among large clients and the initial ramp-up of new business, including a growing number of CTV campaigns. In retail media, the fourth quarter outlook includes approximately $7 million of impact from the previously communicated client scope reductions. As a reminder, the underlying business also faces a tougher comparison with last year. We expect Adjusted EBITDA of $105 million-$111 million in the fourth quarter. Costs are expected to decline year-over-year, primarily reflecting lower employee costs. The modest sequential increase reflects normal seasonality and the non-recurrence of the one-time reduction in the employee performance bonus accruals that benefited Q3. Looking to 2027, our priorities are to strengthen performance media, scale new channels, reinforce our leadership in retail media, and translate our product investments into results for clients.
We'll pursue these priorities with continued operating discipline, and I'll be clear about the progress we make. With that, I will open up the call for questions.
Thank you. To ask a question, please press star then the number one. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause to assemble our roster. Your first question comes from Ygal Arounian from Wedbush. Please go ahead.
Hey, good morning, guys. I have two questions. Michael, you talked about the improved execution and the, I think you called open opportunities up 72% year-over-year, agencies being half the pipeline. Can you just explain what that means, open opportunities, and how you get from this improved execution on some of the sort of, I guess, the top of the funnel opening to delivering on these and seeing this turn into sustained improvements as we get into next year? You also talked about agentic and that being an opportunity for retail media formats.
In just sort of bigger picture, I guess, as agents have started to take shape and gain some traction, there's been a lot of investor fear that the retail media ad format is going to be one of the ones that are the most at risk with agents taking over some purchase decisionings. Can you just maybe talk a little more about how you see that evolving and why it's a better ad format and not one that's going away? Thanks so much.
Yeah, sure. Hey, Ygal, good to hear from you. So, on kind of commercial execution broadly, there are sort of two dynamics there. There is stabilizing the leaky bucket with the large clients, and I think we made good progress on that in the quarter. So we could see spend levels stabilizing, and then we do not have any improvement in that in our outlook, so we have given ourselves some room for upside on that. Then encouragingly, we have just really doubled down and invested in some new talent, some better process, some better go-to-market materials to drive new business to offset that.
Because I think I have discussed it in some previous calls, some ups and downs with enterprise clients is normal, and what we need is to control the ones that are controllable by us, but have enough pipeline and new business activity to offset the ones that are not. That is the evidence that we are starting to see, right? We see pipeline opportunities up 72%. That is just a function of having more hunters in the field, better go-to-market materials, more focus on that, and then conversion on that pipeline is increasing. Now, we do have a little bit of ramp time with new clients. There are data integrations that have to be set up. We have to get our bidder tuned to their campaign objectives.
So it can take a couple of months to start to really scale budgets, but we are confident that that new business activity will start to ramp in the first half of 2027. I think that gets us to a more normal sort of balance of ups and downs with existing business, but always new business coming in to grow the net number. To your second question on kind of agentic shopping, and is that a disintermediation type of thing for retail media, I think you hopefully have seen some of my public speaking on this topic. It is something I actually like talking about. That is just not how we see it. We see sort of the world similarly to what other executives, I think, have talked about with horizontal agents and vertical agents.
Right now, the horizontal agents, whether that is platforms like ChatGPT or new platforms like Muse, are really serving discovery use cases. They are helping people answer questions, helping them sort of zero in on a handful of products or solutions that are relevant to them. But ultimately, they are then transitioning to vertical agents, which are retailer-owned, to complete that basket building, complete that evaluation, and ultimately to transact. We believe that that paradigm will continue. Just believe that consumers have a lot of reasons to stay with retailer-owned agents and sites. There is fulfillment, there is customer service, there is faith in payments and trust. Not to mention, people actually enjoy basket building and some of that assortment merchandising and shopping experience that retailers provide.
So, it is certainly an interesting space, but we believe that retailers continue to have a vital role in the shopping experience. Then, as they build out their own vertical solutions, we can bring retail media ad formats into those new surfaces. That is what we already started doing with Albertsons in the last quarter, and we have started to expand that to additional retailers this quarter. So, a new surface for retail media, where it can actually grow, not shrink.
Great. That is really helpful. Yeah, we will see how the agentic world evolves, but yeah, I think that makes a lot of sense. Thanks.
Your next question comes from Ron Josey from Citi. Please go ahead.
Good morning. This is James Sherman-Lewis on for Ron. Thank you for taking my questions. Two here, please. On the stabilizing performance media spending trends this quarter, what have you seen specifically through October, particularly in discretionary retail categories or other potential areas of pressure, including travel? Then I have a follow-up.
Okay, great. Yeah, I know. Happy to jump in and take it. Yeah, I would say that you are aware of really the year-over-year challenges from the first couple of quarters as we reported. We are not necessarily seeing a bounce back in growth, for example, in the quarter. What we are really seeing is no further deterioration in really the large client and core performance media business. As we have discussed publicly and on the call, fashion has been a challenging category for us this quarter. I think we have noted that that category in particular is down about 14%, making it very tough for the quarter. That said, in terms of the turnaround of the business, we are seeing bright spots in the stabilization, as Michael talked about, in the new business pipeline growing, which gives us confidence in the future and confidence in our outlook.
But right now, we're still seeing a pretty muted business in Q3, and we're taking a cautious outlook for the rest of the year.
Great. That's helpful. And then dovetailing with Doug's question, spend per client on ChatGPT Ads increasing largely, and this holiday season seems like it's going to be an important test for agentic commerce. So, my broader question is, what are your expectations for the ramp in ChatGPT Ads as we think about 2027? Are AI ad formats still largely funded through experimental budgets, or are they really becoming a more meaningful part of more durable 2027 budget conversations? Thank you.
Yeah, I'm happy to take that. Yeah, no, it's an exciting space, and it's moving fast. I think, you know, like ChatGPT has been our fastest-growing partnership and channel for some time. I mean, one of the proof points of that is we were only in seven countries on the last quarterly earning call, and we're now live in 89 countries today. For Criteo, we've had 3,600 clients on and off the platform. That sentence is telling, right? Because the on and off nature of that, clients will come on, they'll do a test and learn of some kind. They might go off while they evaluate those results, then they'll come back on, run a different test. They'll start to experiment this holiday season with how it performs. So, we do see that sort of on-off nature.
We're really focused on getting clients to be always on and getting the budgets to scale. But of course, we are dependent on our partner to introduce functionality that supports that, and they're doing that at pace. I mean, they have built a great platform in less than 200, 250 days. I think sometimes we forget that some of the features they release then need a few weeks to start to have an impact in the market. One or two in particular that I'm thinking about would be the custom audiences product, right? That allows Criteo to use our commerce graph to help clients really fine-tune a high-fidelity audience, which will drive better performance then out of ChatGPT's platform. That's the kind of symbiotic relationship that starts to give clients confidence to keep those budgets always on and to start to scale them.
Again, we've got a great position with a fast-growing channel, fast-growing partner who is introducing functionality at a rapid pace, and we're going to continue to grow with them. I think it will be a meaningful contributor to growth in 2027.
Thank you so much.
Your next question comes from Tim Nollen from SSR. Please go ahead.
Hi. I'd like to ask a question also about your partnership with OpenAI, which you were very early in announcing. I think it was earlier this year. I wonder, you were very early in that announcement, but there have been a lot of partners announced with OpenAI since then. I wonder if you could speak a bit to how that helps you in terms of partnerships that you've got with some of those other companies working with OpenAI now. Is that a positive to your ability to grow out a business with them, or by contrast, are there any conflicts or challenges with those partnerships that they've announced?
Yeah, sure. Hey, Tim. Good question. Look, it's generally complementary. Those partnerships are generally bringing advertisers and demand that does not overlap with Criteo. Generally, complementary. What I'd say more broadly is that the more partners that bring demand to that platform, the better it gets. As you all know, there's a flywheel effect on these large-scale advertising platforms where demand density creates a better auction, that creates better performance, and then that brings more budgets. I'm happy for them to continue to add demand partners. We have a robust client portfolio that I believe is unique to us in many cases, and we add value to the platform.
Without going into a ton of detail, I've always talked about improving the inputs, like with the audience fidelity, the smart prompts features, the creative variations, and then helping clients to analyze and optimize the outputs, with our cross-channel measurement and understanding how that traffic performs. I think generally partners are complementary because they bring volume to the platform and get that flywheel going, and that in turn is good for us.
Great. Thanks, Michael.
Your next question comes from Justin Patterson from KeyBanc. Please go ahead.
Great. Thank you. Good morning. I was hoping you would talk more about just the efforts to scale CTV. What do you see is really the next investments to make over the coming year to make this a more material part of the business? How should we think about just the incrementality of the budgets and advertiser base that are coming from that? Secondly, I appreciate the call-out on the changes with Safari. I believe the iOS 27 upgrade cycle is still pretty early in there, so we probably shouldn't see too much impact until maybe late November, early December. When you look at the changes here, how does this compare to what you've seen previously? Just more broadly, what do you think that means in terms of just how bigger players like Apple approach privacy in the future? Thank you.
Sure. Yeah, those are great questions, Justin. Let's take the CTV one first. Going back, when I joined the company a little over a year and a half ago, I had always said that Criteo needed to be in this channel. It was the second fastest-growing advertising channel after retail media. With the way the channel supply base was evolving, it had a great opportunity to be a performative channel, which is a great fit for what we do. That's now coming to fruition. It took us a little time to fine-tune our bidder, build the right campaign structure, the right workflow, but we're there now. Our differentiation versus other providers in the space is our commerce graph and the fidelity of audiences that we can create to run these campaigns. We win in head-to-head contests.
The investment here will be to continue to build out just campaign features, generally speaking, scale it geographically, and then get our flywheel going. Whereas we have more demand, we'll add additional supply partners, and that will build, I think, very naturally. Again, the right to win and differentiate comes from the commerce graph, where you've heard me talk about this many times. We have one of the best shopper graphs in the world. In this channel in particular, that is the difference in performance. Really excited about where this is going to go. On the iOS 27 question, just to be clear, we are not currently seeing any direct impact to our ad serving capabilities from Apple's latest changes in 27.
Look, that more broadly just reflects our longstanding investment in privacy-safe technology and durable addressability, some of which was built during the Privacy Sandbox days a few years ago. Further, our channel diversification with social, OpenAI, CTV, just puts us in a fundamentally different position today than where Criteo was, say, a couple of years ago. Not seeing any impact today, and if something were to happen, I believe we are much more diversified and ready for those types of changes. We'll see how all that goes.
Your next question comes from Alec Brondolo from Wells Fargo. Please go ahead.
Yeah. Hey, thanks so much. Maybe two from me. This quarter, it seems like Google significantly accelerated the rollout of AI Overviews and AI Mode. I think several web publishers have called it out as a headwind during the quarter. Could you speak to what you are seeing from an open web supply perspective, and did that impact results in the quarter at all? Then maybe a follow-up question on CTV. So, I appreciate the idea is, hey, we have performance data, we could bring this into the CTV modality, which has historically been brand marketing. I think Walmart bought the Vibe.co asset. Amazon has obviously done a nice job of wrapping performance capabilities around Prime Video. So, there is a couple of, I guess, competitors in performance CTV at this point. Within that performance CTV category, how do you think about differentiating Criteo's solution? Thank you.
Yeah, I am happy to take those. Hey, Alec. Thanks for those, as usual. Yeah, look, on open web, as we have talked about before, you do see some pressure on lower-intent traffic and on long-tail publishers. But engagement from high-intent users on high-quality pubs is still really strong. We have got access to broad, diversified, high-quality supply. Just to be clear, we see no shortage of opportunities to engage with users on the open web. On the second question about CTV, again, it is the ability to create high-fidelity audiences. So I will take the Walmart Vibe.co one just as an example, since you brought it up. I think that is a really smart synergy between those two partners, as Walmart acquired them. However, the Walmart first-party graph, it is not as broad as the Criteo shopper graph.
Certainly going to be high fidelity in the categories and from a first-party perspective, but the Criteo shopper graph just sees more transactions, right? We see it across more categories. We have got broader integrations across a broader retailer base, so we just see more activity. I would argue it is a higher fidelity and more useful graph for building those types of audiences.
Thank you.
Again, if you would like to ask a question, please press star then one. Your next question comes from Richard Kramer from Arete Research. Please go ahead.
Thanks, Michael. It seems like underlying retail media slowed from 20% growth in Q2 to now 10%, and also their growth rate of activated media fell by 10 points or so. Can you talk over some of the reasons for that deceleration and whether retail media is now sort of maturing and your retailer client base understands it? Around this time last year, we heard about the client scope reductions. Are large client discussions why maybe we are not getting a preliminary outlook for 2027, given your optimism around AI, social, and CTV into next year? Thanks.
Thanks, Richard. Look, I will let Connor talk about the specific Q4 dynamics, but I will just reiterate a few things. I mean, certainly the market is maturing and changing, but we are adapting with that. I am still really bullish about our ability to grow this segment going into next year. So, you have got the long-term drivers around AI innovation, like the whole Page Intelligence product, where we optimize organic and paid results on page. We can bring sponsored recommendations into these new vertical assistants that we talked about earlier. With on-site display, which is our fastest-growing format, although we are live with 95 retailers, we still have work to do on share of volume within each of those retailers. So, we still have a lot of upside on the display product. There are opportunities with off-site, including taking retail off-site into OpenAI.
On our demand strategy, we have launched things like conquesting and then built a lot of new functionality for digital shelf insights into the Commerce Max platform. We continue to think that we can grow our share on the demand side with that tool. We have several different drivers moving against a channel that is still growing in the high teens, depending on which study you are looking at. That just gives us confidence about where the business is going in 2027. In terms of Q4, little ups and downs with things that we see, and Connor can speak to the specifics.
Yeah, sure. Good morning, Richard. Just to add to what Michael said, I think generally, as we have talked about previously and on this earnings call as well, we have had tougher year-over-year comps due to some very large retailer launches in Q3 of last year versus this year, and without the same benefit going into Q4 this year versus last year. That definitely has an impact on the quarter. Two is, regarding display, as Michael said, it is a very exciting product. It will be a material growth driver for the business.
As we are rolling it out across a large number of retailers, which we have been very successful at, looking at Q4, we have had a couple of delays related to some larger retailers where we see this getting pushed out into 2027, as opposed to landing in Q4, which is creating some softness in the Q4 numbers. I would say lastly, looking at Q4 and the outlook, we have had a modestly slower start in October related to some retail media clients, which we expect to still pick up in the back part of the quarter. That is what you are seeing in the numbers, and we still remain very bullish about retail media.
Okay. Thanks, guys.
There are no further questions at this time. I will turn the call back over to the presenters for closing remarks.
Thank you. That concludes our call for today. Thanks, everyone, for joining. If you have any follow-up questions, the Investor Relations team is here to assist. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.