Taboola faces securities probe after Q2 miss sends shares down 25%

Law firms opened securities fraud investigations into Taboola.com Ltd. after the company's Q2 earnings missed estimates and its shares fell 25 percent.

"We are investigating whether Taboola complied with federal securities laws," Corey Holzer, founding partner at Holzer & Holzer, said. The Law Offices of Frank R. Cruz separately announced a probe into possible violations of federal securities laws on behalf of investors who lost money.

Taboola reported Q2 revenue of $476.8 million, up 2.4 percent from a year earlier, while diluted GAAP EPS of $0.01 missed consensus estimates. Ex-TAC gross profit rose 11.8 percent to $192.4 million and adjusted EBITDA climbed 22.8 percent to $55.5 million, with the margin expanding to 28.8 percent from 26.2 percent. The company raised its full-year ex-TAC gross profit and adjusted EBITDA guidance.

Shares of the Nasdaq-listed company fell 25.33 percent to $3.95, cutting its market value to about $1.06 billion. The probe adds legal and reputational risk on top of a quarter in which operating cash flow fell 34 percent to $31.3 million and free cash flow dropped 49 percent to $17.3 million.

Taboola swung to net income of $4.3 million from a $4.3 million loss a year earlier, helped by a $7.2 million improvement in operating profit as sales and marketing expenses fell $4.1 million. The company ended June with $133.1 million of cash and cash equivalents, up from $120.9 million at the end of 2025, while borrowings on its revolving credit facility declined to $72.0 million from $102.3 million.

For the third quarter, Taboola guided to revenue of $460 million to $473 million, ex-TAC gross profit of $184 million to $190 million, and adjusted EBITDA of $51.5 million to $56.5 million. Full-year revenue guidance is $1.93 billion to $1.956 billion.

CEO Adam Singolda pointed to momentum in the Realize advertising platform and the addition of Fox News as evidence of progress in the company's Open Web strategy. The company spent $41.5 million repurchasing shares in the second quarter.

The investigation raises the prospect of shareholder lawsuits and the risk of financial restatement, which could pressure the stock further. Investors will watch for any regulatory action and Taboola's third-quarter results, due in early November, for signs of whether the revenue miss was a one-off or a trend.

This article is for informational purposes only and does not constitute investment advice.