By Brian Lantier, CFA
NASDAQ: MKTW
READ THE FULL MKTW RESEARCH REPORT
MarketWise (NASDAQ: MKTW) reported second-quarter results that again reflected the company's significant investment in customer acquisition via marketing efforts. The company reported a loss per share of ($0.24), which was well below our estimate of earnings of $0.51/share. We believe management elected to pull marketing levers at its disposal when the strong market performance during the quarter (the S&P 500 was up 15% in the quarter and had its best quarterly performance since 2020) drove significant retail investor interest in the MarketWise suite of services. While we anticipated some additional investment in customer acquisition, it appears that the company saw strong customer response to its marketing efforts, which encouraged significantly higher spending to drive additional customer subscriptions. Historically, the company's newsletters have seen periods of strong demand and paid-subscription additions during volatile markets and during periods of very strong market performance, when individual investors are either fearful of a market decline or fear missing out on the next major market move.
Paid subscribers were up 5% sequentially in the second quarter to 400k and are now up 7% for the year after bottoming out at 374k in the fourth quarter of 2025. Additionally, total billings, which we consider a more accurate view of real-time demand for the company's services than quarterly reported revenue, as it reflects actual customer signings in the quarter, grew to more than $91 million in the quarter, up 12% sequentially and 56% year over year to reach the highest level for the company since 2023. As a result of the strong first-half billings ($172.5 million of total billings), the company increased its guidance for 2026 total billings to $330 million, a 10% increase from previous guidance and 21.7% above 2025 billings.
As further evidence of the company's subscriber turnaround, its paid subscriber base was up 1% versus the second quarter of 2025 as the impact of the wind-down of the company's Legacy Research division begins to dissipate.
As we've discussed previously, a key metric for MarketWise is its "Average Revenue Per User" (ARPU), which increased again in Q2 2026 to $822, up 11% from $738 in the first quarter and up 73% or $347 from the second quarter of 2025. The combination of growing billings and a lower average number of paid subscribers has boosted this metric sharply. The company continues to focus on offering higher-value content, software subscriptions, and bundled content to drive additional revenue per user, and the strategy appears to be paying off.
We remain encouraged by the company's commitment to rebuilding long-term subscriber engagement and improving customer lifetime value rather than fixating on near-term profitability. Management is willing to tolerate near-term margin compression as we've seen in the first half of 2026, while investing in marketing efforts to drive future growth and platform development, which will likely benefit long-term investors.
Importantly, the company reaffirmed its previous cash flow guidance of $50 million from operations after reporting cash flow from operations of $22.4 million in the second quarter and raised its guidance for total billings from $300 million to $330 million.
Valuation
In the first half of 2026, the company adjusted its marketing strategy significantly based on market conditions, which has significantly increased billings but also impacted margins as the company invested in new customer acquisition. We expect that the company will moderate this spending in the second half of 2026, which should materially improve profitability in the second half of 2026. As a result of the higher expenses in Q2 and increased margins we are forecasting in Q3 and Q4, we are adjusting our 2026 EPS forecast to $0.70/share, and increasing our 2027 EPS forecast modestly to $3.58/share. Given the long-term nature of the company's revenue streams, we encourage investors to focus less on quarterly GAAP revenues and EPS and more on the consistency of the company's cash flow from operations, billings growth, and dividend payout.
Based on our assumption that the company delivers on its cash flow projections ($50 million in 2026) and dividend payout ($1.80/class A share), we believe the company's P/E ratio based on our 2027 earnings estimate of $3.58 /share could rise 8 times, which produces our new 12-month target valuation of $28/share. The company's shares remain subject to a great deal of volatility, and with an average daily volume of under 20,000 shares, any sizable buying or selling can materially impact the share price. We would encourage investors to review our full updated research report on MarketWise.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives payments totaling a maximum fee of up to $50,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.