GETY Q2 Deep Dive: Subscription Gains Offset Agency Weakness, Margin Pressures Continue

Visual content marketplace Getty Images (NYSE:GETY) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 2.5% year on year to $234.9 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $949.5 million at the midpoint. Its non-GAAP profit of $0.05 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Getty Images’ second quarter results were met with a negative market reaction, reflecting concerns around operating margin compression and persistent challenges in its agency business. Management pointed to ongoing macroeconomic headwinds in the advertising sector, which weighed on creative segment performance. However, strong growth in annual subscriptions and editorial demand—particularly in news and sports—helped offset these pressures. CFO Jennifer Leyden acknowledged that while creative agency activity remained soft, “we continue to see good momentum outside of agency and creative, and that is, again, on the corporate side of the business and subscriptions.”

Looking forward, Getty Images’ guidance is shaped by stabilization in annual subscription metrics and expectations for continued corporate and media segment resilience. Management highlighted that subscription revenue retention rebounded, with premium access subscriptions returning to over 100% retention, signaling a recovery from earlier disruptions such as the Hollywood strikes. CEO Craig Peters noted the importance of ongoing investments in AI integration and the company’s efforts to resolve litigation uncertainties, stating, “We’re hopeful to get a positive outcome in the U.K. on other aspects [of the Stability AI litigation], but really pursuing the training itself within the U.S.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to ongoing macroeconomic pressures in the agency business, balanced by strong momentum in subscriptions and editorial content, as well as operational discipline amid legal and merger-related costs.

• Agency business under pressure: The creative segment continued to face softness, with agency revenues declining due to ongoing challenges in the advertising industry and broader macroeconomic uncertainty. Management noted that agency activity, which is predominantly a la carte, has not shown signs of recovery, impacting overall creative results.

• Subscription momentum and retention: Subscription revenue grew steadily, with active annual subscribers reaching 321,000—a 14% increase year-over-year. Notably, revenue retention for premium access subscriptions returned above 100%, a level not seen since 2023, largely driven by recovery in enterprise and production clients post-Hollywood strikes.

• Editorial and event-driven strength: The editorial segment, particularly news and sports coverage, saw robust demand. Exclusive partnerships and high-profile assignments, such as coverage of global sports events and major entertainment festivals, helped drive steady growth in editorial revenues.

• AI integration and licensing deals: Getty Images upgraded its AI suite and struck multiple multi-year content licensing agreements that include AI rights, reflecting growing demand for AI-powered content solutions. Over 70% of recent AI model usage was for pre-shot modifications, leading to the introduction of bundled AI offerings on subscription platforms like iStock.

• Legal and merger-related costs: Operating expenses were elevated due to SOX compliance efforts and ongoing litigation, particularly with Stability AI. Management emphasized that these costs are largely one-off in nature, but they weighed on margins and free cash flow for the quarter.

Drivers of Future Performance

Getty Images’ outlook for the coming quarters is shaped by stabilization in subscription growth, ongoing legal and merger-related costs, and external pressures in creative agency demand.

• Subscription-driven revenue stability: Management expects annual subscription growth and high revenue retention rates—especially in premium access offerings—to anchor performance, supported by continued expansion in e-commerce platforms like iStock and Unsplash+.

• Event-driven editorial variability: The timing and scale of global news and sports events will heavily influence editorial revenues, particularly as the company faces tougher comparisons in the second half of the year due to last year’s event-heavy calendar and lingering production disruptions from events like the Hollywood strikes and Los Angeles fires.

• Margin headwinds from legal and compliance costs: Elevated SG&A expenses, associated with SOX compliance and litigation (notably with Stability AI), are expected to persist through the remainder of the year. Management flagged these as mostly non-recurring, but they will continue to pressure operating margins and free cash flow in the near term.

Catalysts in Upcoming Quarters

Over the coming quarters, our analysts will monitor (1) the pace of subscription growth and retention, particularly in premium access and e-commerce platforms, (2) developments in the Stability AI litigation and other legal or regulatory matters—especially those impacting AI content rights, and (3) the company’s ability to manage costs amid ongoing SOX compliance and merger-related expenses. The progression of the Shutterstock merger review and any major event-driven editorial wins will also serve as important markers for execution.

Getty Images currently trades at $1.64, down from $1.72 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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