NRDS Q3 Deep Dive: Margin Expansion and AI-Driven Traffic Offset Organic Search Headwinds

Financial guidance platform NerdWallet (NASDAQ:NRDS) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 12.4% year on year to $215.1 million. Its non-GAAP profit of $0.35 per share was 10.6% above analysts’ consensus estimates.

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StockStory’s Take

NerdWallet’s third quarter was marked by a positive market reaction, fueled by strong revenue growth and substantial non-GAAP profit outperformance versus Wall Street expectations. Management attributed these results to successful efforts in expanding product offerings to below prime consumers and optimizing performance marketing, which helped mitigate persistent headwinds in organic search. CEO Tim Chen noted, “These results are a testament to longer-term initiatives—extending our reach with consumers and improving operational efficiency.” The company also benefited from underspending on brand marketing as its strategy was reevaluated during the quarter, contributing to improved margins.

Looking ahead, management’s guidance centers on continued momentum in banking and personal loans, while acknowledging ongoing pressure in credit cards and small business products. Investments in channels like large language models (LLMs), which are generating higher conversion rates than traditional organic traffic, are expected to play a larger role. CFO Jun Lee emphasized, “We expect less margin expansion year-over-year due to organic search headwinds and planned business investments,” while highlighting that operational improvements and targeted marketing spend remain strategic pillars for the coming quarters.

Key Insights from Management’s Remarks

Management highlighted that third quarter performance was driven by category strength in banking and personal loans, expanded reach to below prime consumers, and ongoing operational efficiency initiatives.

• Banking and personal loans strength: The company saw robust growth in banking and personal loan products, with both segments benefiting from high consumer and partner demand. Product funnel improvements also contributed to better user-to-partner matching, enhancing monetization opportunities.
• Operational efficiency focus: Margin expansion was attributed to improved performance marketing and conservative expense management. Underspending on brand marketing, as management reevaluated its creative strategy, provided an additional one-time margin benefit for the quarter.
• Below prime consumer expansion: Efforts to broaden product offerings to below prime consumers allowed NerdWallet to scale performance marketing, helping offset declines in organic search traffic. CEO Tim Chen stated that serving unmet needs in this segment made the company more competitive in paid channels.
• Growing LLM-driven traffic: The company is seeing initial, albeit small, gains from referrals via large language models such as AI-powered search tools. These users have higher conversion rates, prompting ongoing investment in content and brand trust to capture this emerging channel.
• Marketplace diversification: Insurance showed modest growth, but small business and credit card verticals declined due to organic search headwinds. Management is pursuing vertical integration and selective bolt-on acquisitions to diversify traffic sources and reduce reliance on any single channel.

Drivers of Future Performance

NerdWallet’s outlook emphasizes ongoing investment in new customer channels, product diversity, and operational efficiency, amid continued organic search pressure.

• Channel diversification and AI investment: Management is prioritizing performance marketing and expanding into AI-driven channels like large language models, which show higher conversion and engagement, to offset organic search vulnerabilities and drive future growth.
• Banking and personal loan momentum: Continued strength in these categories is expected to support growth, but management anticipates that credit card and small business products will face ongoing challenges from market conditions and search engine trends.
• Planned spending and margin outlook: The return to normalized brand marketing investment and increased operational spending will limit further margin expansion, with management stating that expense growth is necessary to support new product development and long-term strategic goals.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the scale and impact of LLM-driven user traffic and its effect on conversion rates; (2) whether banking and personal loan product momentum can offset ongoing declines in credit card and small business segments; and (3) the return to normalized brand marketing spend and its influence on both user acquisition and profitability. We will also monitor how continued vertical integration and selective acquisitions support diversification away from organic search.

NerdWallet currently trades at $13.75, up from $12.01 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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