VerticalScope Holdings Q3 preview

On Nov. 2, Beacon Securities analyst Gabriel Leung maintained his “Speculative Buy” rating and $6.00 target on VerticalScope Holdings (VerticalScope Holdings Stock Quote, Chart, News, Analysts, Financials TSX:FORA), as he believes the company’s investments in artificial intelligence could help reduce its dependence on Google Search traffic and support a recovery in advertising revenue.

Leung said he will be looking for evidence that VerticalScope’s AI initiatives are delivering measurable improvements when the Toronto-based company reports third-quarter results after markets close Nov. 10.

VerticalScope operates online communities focused on specialized interests, generating revenue primarily through digital advertising and e-commerce.

Leung expects Q3 revenue of US$14.5-million and Adjusted EBITDA of US$4.9-million, compared with consensus estimates of US$14.7-million and US$5.6-million, respectively. His forecasts represent sequential increases of 4.9% in revenue and 10.5% in Adjusted EBITDA, reflecting seasonal improvements and the company’s efforts to attract and retain users.

However, revenue would remain 1.3% below the same period last year, while Adjusted EBITDA would decline 20.8%.

Leung said recent results from Reddit demonstrate the challenges facing online community platforms as Google’s AI-powered search features increasingly provide answers directly to users, reducing traffic to third-party websites. Reddit reported stronger-than-expected third-quarter results but issued fourth-quarter guidance below consensus, partly because of declining referrals from Google Search following the expansion of AI Overviews and AI Mode.

Leung thinks VerticalScope recognized this risk earlier and has invested in technology designed to attract users through other channels. The initiatives include AudienceEngine, an AI-enabled user acquisition platform, internal AI workflow tools and efforts to increase the number of registered users who visit its communities directly.

Increasing direct engagement could reduce VerticalScope’s exposure to changes in Google’s search algorithms while improving advertising opportunities.

Leung said those investments contributed to the company’s first sequential increase in monthly active users in several quarters during Q2 2026. He said he will be watching whether that improvement continued into the third quarter, providing evidence that the company’s strategy is gaining traction.

Leung also expects an update on VerticalScope’s efforts to generate revenue from licensing its content to AI developers. Management previously disclosed advanced discussions with a major technology company about an agreement that would compensate VerticalScope when its content contributes to AI-generated responses. Such agreements could create an additional revenue stream while offsetting some of the traffic losses associated with AI-powered search.

VerticalScope has also filed a statement of claim against OpenAI in Ontario Superior Court.

Leung’s unchanged $6.00 target is based on seven times estimated EV/Adjusted EBITDA.

He expects VerticalScope to generate Adjusted EBITDA of US$16.9-million on revenue of US$54.7-million in fiscal 2026, compared with Adjusted EBITDA of US$21.1-million on revenue of US$58.1-million in 2025.

-30-