Zedge (NYSEAMERICAN:ZDGE) reported record quarterly revenue and average revenue per monthly active user (ARPM) for its fiscal second quarter of 2026, as management emphasized ongoing improvements in monetization quality despite continued contraction in monthly active users (MAUs). Executives said results benefited from continued advertising optimization, record subscription activity, and record gross transaction value (GTV) from Zedge Premium, while certain non-core assets faced headwinds.
Record revenue, higher ARPM, and subscription growth
Chief Executive Officer Jonathan Reich said the company’s monetization “continues to improve,” helping drive “record levels of revenue and average revenue per monthly active user in our seasonally strongest quarter.” Reich attributed the performance to investments in optimizing ad inventory and subscription offerings, while noting the company remains focused on acquiring “higher value users” and monetizing its audience more effectively.
On subscriptions, Zedge Plus revenue increased 33% year-over-year, and net active subscribers rose 49% to nearly 1.2 million. Tsai said the company continues to optimize its subscription plans and is seeing benefits from those changes. Deferred revenue—primarily subscription-related—rose to $6.0 million, up 5% sequentially and 39% year-over-year, which Tsai described as an important indicator of future revenue that “essentially carries a 100% gross margin.”
Other marketplace metrics also improved. Zedge Premium GTV increased 15.7% from the year-ago quarter, and ARPM rose 47.6%, reflecting what Tsai described as a continued shift toward higher-value users and improved monetization efficiency.
Emojipedia headwinds and impairment; GuruShots stabilizing
Both executives highlighted pressure from Emojipedia. Reich said the business continues to face “structural headwinds tied to the evolving field of search,” and the company recorded a non-cash impairment charge during the quarter “to reflect the likely impact of these changes.” He added that Emojipedia remains profitable and said its cost structure is aligned accordingly.
Tsai said Emojipedia was “a significant drag on top-line growth,” and that year-over-year declines at GuruShots also weighed on overall revenue growth. Still, he said GuruShots is stabilizing sequentially and is being operated conservatively after last year’s restructuring as management evaluates longer-term options.
Advertising revenue rose 18.3% year-over-year, with strong growth in the Zedge Marketplace offset by lower ad revenue at Emojipedia, according to Tsai.
DataSeeds.AI: early-stage, building infrastructure and pipeline
Reich described DataSeeds.AI as an early-stage initiative aimed at the AI training data market, calling demand for training data “virtually insatiable.” He said Zedge is productizing offerings it believes can meet model builders’ needs “intelligently and cost-effectively,” and said the company is focused on making disciplined bets while growing its content library and executing in a fast-moving market.
Operationally, Reich said the company is seeing continued inbound interest and has begun building an outbound pipeline. He added that some customers have returned with “new, larger orders” after the company met demanding specifications with “high-quality outcomes.” He also said Zedge is working on an “off-the-shelf” catalog to reduce costs and accelerate delivery, while expanding its production cloud with vetted teams to create datasets as needed. Revenue is “lumpy at this stage,” he said, and the priority is building infrastructure and supply depth without sacrificing profitability.
Tsai noted that digital goods and services revenue in the quarter included contributions from both GuruShots and DataSeeds.AI, but said “a vast majority” was generated by GuruShots, as Zedge recognized minimal DataSeeds.AI revenue in the quarter. He said the company expects DataSeeds.AI to increase its contribution in the second half of fiscal 2026.
In the Q&A session, management said DataSeeds.AI’s deal progression depends heavily on proof-of-concept outcomes and whether engagements are custom or off-the-shelf. Executives said margins have been attractive so far, though they vary based on the deal type and whether a marketplace middleman is involved. Management also said it is focused on multimodal data—images, audio, and video—citing a completed video proof of concept and ongoing discussions related to audio work.
Innovation pipeline updates, including Tapedeck and alpha launches
Reich said the company recently launched two additional alpha products, bringing it “halfway toward” its goal of introducing up to six in fiscal 2026. He also said Syncat, the first release under its Product Innovation Team framework, failed to meet targeted KPIs and development is being discontinued. Reich described the framework as pre-qualifying ideas, developing rapidly, testing quickly, measuring objectively, and investing in winners.
Asked about the newest alpha products, Reich said they are newly launched but are being built on an evolving modular foundation intended to speed time-to-market. He also said the company is expanding monetization beyond subscriptions to include advertising for certain initiatives.
On Tapedeck, Reich referenced a recent Billboard article featuring the product and said key performance indicators are trending in the right direction. He said the company is slowing product development to focus on expanding the music catalog, describing a large and varied catalog as “table stakes” for success. He also discussed discovery features within the app and said Zedge has begun working directly with artists to promote Tapedeck to their fan bases.
Profitability measures, cash position, and capital allocation
Tsai reported cost of revenue was 6.8% of revenue, up from 6.4% a year ago due to reduced partner discounts from Google Cloud Platform and the introduction of Tapedeck licensing fees and DataSeeds.AI production costs. SG&A declined about 6% to $6.7 million, reflecting restructuring savings partially offset by investment in scaling DataSeeds.AI and Tapedeck.
GAAP loss from operations was $2.9 million, compared with a $2.2 million loss a year earlier. Tsai said results included a $3.7 million asset impairment charge related to Emojipedia; the prior-year period included $1.3 million in restructuring charges. GAAP net loss was $2.3 million, or $0.18 per share, versus a $1.7 million loss, or $0.12 per share, last year.
On a non-GAAP basis, the company reported net income of $0.8 million and EPS of $0.06, compared to a non-GAAP loss of $0.2 million and a loss per share of $0.01 in the prior-year quarter. Adjusted EBITDA was $1.1 million, compared with negative $0.1 million last year. Operating cash flow was $0.9 million, and free cash flow was $0.8 million.
Reich said the company generated solid free cash flow even while investing in DataSeeds, Tapedeck, and other innovation priorities. Tsai said Zedge ended the quarter with $19.1 million in cash and cash equivalents and no debt. Management also highlighted its shareholder returns, noting a quarterly dividend and ongoing share repurchases when conditions are favorable; Tsai said about $500,000 remained under the current buyback authorization.
Looking ahead, Tsai flagged a comparability item for fiscal Q3: the prior-year quarter included a one-time $450,000 revenue benefit from an integration bonus from an ad partner that will not repeat.
About Zedge (NYSEAMERICAN:ZDGE)
Zedge, Inc (NYSE American: ZDGE) is a digital media and technology company that operates a mobile personalization platform. Through its flagship Zedge app and website, the company provides consumers with a wide range of downloadable digital content, including wallpapers, ringtones, notification sounds, app icons and lock screens. The platform accommodates both free and premium content, enabling users to customize their smartphones and tablets according to personal taste.
The company’s platform features content created by independent designers and established media brands, and it supports multiple languages and regional preferences.
