Ex-TAC gross profit is what an advertising technology company keeps after paying the publishers and partners whose audiences it monetises. TAC stands for traffic acquisition costs, the revenue share, minimum guarantee or media payment owed to the owner of the inventory. Subtract that from revenue and the remainder is what the platform has left to run itself. The measure exists because the headline revenue line can be almost meaningless. A company that books the advertiser's entire budget as revenue and pays 75% of it straight out to media owners looks four times larger than a competitor doing identical work but booking only its fee.

None of this is defined by accounting standards. Ex-TAC gross profit is a non-GAAP measure, constructed by each company, reconciled to a statutory figure, and disclosed at management's discretion.

How the calculation works

Two arithmetic routes reach the same place. The first starts at the top: revenue minus traffic acquisition costs. The second starts at gross profit and adds back the cost of revenue that is not TAC, such as hosting, depreciation, content costs and digital services taxes.

Teads, formerly Outbrain, publishes the full ladder. Its 2024 annual report on Form 10-K shows revenue of $889.9 million, traffic acquisition costs of $653.7 million, other cost of revenue of $44.0 million, gross profit of $192.1 million and Ex-TAC Gross Profit of $236.1 million. TAC absorbed 73.5% of revenue. The $44.0 million gap between the two profit figures is the added-back cost of revenue, which is why the non-GAAP number is always the larger of the pair.

Naming and small adjustments vary. Criteo calls its version Contribution ex-TAC and describes it as a profitability measure close to gross profit; its 2025 Form 10-K deducts $763.1 million of traffic acquisition costs to reach $1.175 billion, as set out in PPC Land's explanation of spread. Taboola adds back other cost of revenues plus non-cash amortisation of a commercial agreement asset, which in the first quarter of 2026 produced $168.1 million from $129.6 million of gross profit, with TAC of $302.4 million the largest single line on the income statement.

The ratios diverge wildly. Viant's second quarter of 2026 carried traffic acquisition costs of $44.1 million, roughly 42% of revenue, lifting gross profit of $45.5 million to Contribution ex-TAC of $60.2 million. Magnite, in the same quarter, reported Contribution ex-TAC of $189.6 million on revenue of $192.8 million, implying TAC of about $3.2 million, under 2% of revenue.

Why revenue alone does not compare

That contrast is not about generosity towards publishers but about revenue recognition. Under ASC 606, a company acting as principal, controlling the inventory before transferring it, books the gross amount and records the media as a cost. A company acting as agent books only its fee. Outbrain told the Securities and Exchange Commission in 2021 that approximately 99% of its 2020 revenue was recognised on a gross basis. Magnite states in its annual report that it acts as agent for publishers on most transactions and recognises revenue net, and PPC Land's account of take rates records gross-basis revenue falling from 18% of its total in 2023 to 10% in 2025.

The accounting choice moves the reported numbers without changing a single trade. Magnite's second-quarter cost of revenue fell 4% largely because $8.1 million less TAC flowed through, a function of less revenue being reported gross. Ex-TAC gross profit strips that distortion out, so a principal and an agent can be laid side by side.

Origin and evolution

The term entered financial vocabulary through search. Yahoo, which paid affiliate sites a share of click revenue after acquiring Overture in 2003, reported revenue excluding traffic acquisition costs for more than a decade, and analysts judged it on that basis. Google took the opposite path, keeping TAC as a cost line and never adjusting revenue for it. Alphabet still does: its fourth quarter of 2025 carried $16.6 billion of traffic acquisition costs, up 12%, inside cost of revenues.

Regulation G, adopted on January 22, 2003 under Section 401(b) of the Sarbanes-Oxley Act and effective from March 28, 2003, set the terms for everything that followed. It requires the most directly comparable statutory measure alongside any non-GAAP figure, plus a reconciliation, and Item 10(e) of Regulation S-K requires the statutory measure to appear with equal or greater prominence. Criteo, which listed in 2013, agreed with SEC staff in 2015 to reduce the prominence of its Revenue ex-TAC discussion and add a statement of utility.

The naming changed in 2021, when regulators objected to a profitability measure carrying the word revenue in its title. Viant chose Contribution ex-TAC, Taboola chose ex-TAC Gross Profit. Outbrain, then preparing its own listing, received a comment letter dated May 18, 2021 instructing it to retitle Revenue Ex-TAC to reflect a nature closer to gross profit. Its response of May 28, 2021, filed through counsel at Mayer Brown, resisted: the industry term was the most widely used, peers calculated it uniformly, and the alternative label was itself confusing, since gross profit by definition already excludes traffic acquisition costs. The company likened the measure to funds from operations in the property sector and asked to discuss it with staff. It lost. Outbrain's 2021 annual report uses Ex-TAC Gross Profit throughout.

Criteo followed on February 9, 2022, renaming Revenue ex-TAC to Contribution ex-TAC in its 2021 results and stating that no change had been made to the calculation, only to the label and to the reconciliation target, which moved from revenue to gross profit. The SEC hardened the doctrine on December 13, 2022, rewriting Compliance and Disclosure Interpretation 100.04 on individually tailored accounting. Among the adjustments the staff guidance flags as potentially misleading is deducting transaction costs as though the company were an agent where the standards require gross presentation as principal.

Why it matters to marketers

Guidance is issued on this number, and so are valuations. When Outbrain agreed to acquire Teads in a transaction valued at about $1 billion, the combined company was framed to investors as generating $660 million to $680 million of Ex-TAC Gross Profit for 2024, alongside adjusted EBITDA of $180 million to $190 million. Revenue was not the headline. The deal closed in February 2025 at about $900 million.

For media owners the measure is a mirror. TAC is publisher income, so a platform expanding ex-TAC gross profit faster than revenue is keeping a larger slice of the same spend. Single policy changes now register in it directly: Taboola disclosed that Google's treatment of back-button products removed more than $20 million of expected ex-TAC gross profit from the second half of 2026.

Limitations and disputes

The first limitation is comparability, and the companies say so. Definitions differ, add-backs differ, and Teads warns in its filings that the measure will always exceed gross profit. Two firms reporting ex-TAC growth of 12% may be describing different things.

The second is that the excluded costs are real. Hosting, depreciation, content licensing and digital services taxes are cash obligations that ex-TAC gross profit steps over, and they grow. Taboola's other cost of revenues rose 21.3% in the first quarter of 2026, far faster than revenue.

The third is that the measure can detach from cash outcomes. Teads landed inside its guided ex-TAC range in the second quarter of 2026 while missing adjusted EBITDA by half, reporting $7.0 million against a $14 million to $22 million band, and suspended full-year guidance. Chief Financial Officer Jason Kiviat attributed roughly half the variance to expense timing, with currency movements and elevated bad debts on top.

It can also move sharply while revenue barely twitches. Perion's search advertising revenue slipped 2% to $22.1 million in a recent quarter while search contribution ex-TAC fell 30% to $6.7 million, as traffic acquisition costs and media buy consumed 57% of revenue against 54%. A three-point shift in the cost ratio erased nearly a third of the profit measure.

Disambiguation

Gross profit is the statutory figure, revenue less all cost of revenue. Ex-TAC gross profit is always higher, because the non-TAC portion is added back.

Revenue ex-TAC is the same arithmetic presented as a revenue measure rather than a profitability one. Microsoft still reports search and news advertising revenue excluding traffic acquisition costs, a line that grew 21% in its third fiscal quarter of 2025 and 10% for the quarter ended June 30, 2026.

Take rate is a percentage retained at one link in the chain. Ex-TAC gross profit is a currency amount across an entire business. The Trade Desk, which recognises revenue as an agent, has no meaningful TAC line: its $13.4 billion of 2025 gross platform spend against $2.896 billion of revenue supports a take rate calculation, not an ex-TAC one.

Adjusted EBITDA sits several lines below, after operating expenses. Ad tech companies commonly report adjusted EBITDA as a percentage of ex-TAC gross profit rather than of revenue, which is why the two are guided together.

Recent developments

The second quarter of 2026 demonstrated cleanly what the measure does and does not capture. Taboola grew ex-TAC gross profit 11.8% to $192.372 million while revenue rose 2.4% and fell $15.2 million short of its own guidance. Magnite lifted Contribution ex-TAC 17% to $189.6 million. Criteo went the other way, with Contribution ex-TAC down 13% to $255 million and a third downgrade to the same annual figure in six months, even as media spend through its systems grew 9% at constant currency to $1.1 billion. Teads split ex-TAC gross profit by segment for the first time, showing $89 million from enterprise against $34 million from direct response and small business, the latter down 30%.

Timeline

  • 2003: Yahoo acquires Overture and begins reporting revenue excluding traffic acquisition costs paid to affiliate sites
  • January 22, 2003: The SEC adopts Regulation G and amendments to Item 10(e) of Regulation S-K under Section 401(b) of the Sarbanes-Oxley Act
  • March 28, 2003: Regulation G takes effect for all public disclosures
  • October 2013: Criteo lists in New York reporting Revenue ex-TAC as its primary performance measure
  • February 2015: Criteo agrees with SEC staff to reduce the prominence of its Revenue ex-TAC disclosure and add a statement of utility
  • May 2016: The SEC staff issues its most significant update to the non-GAAP interpretations in a decade
  • February 2021: Viant lists using Contribution ex-TAC
  • May 18, 2021: SEC staff ask Outbrain to retitle Revenue Ex-TAC to reflect a nature closer to gross profit
  • May 28, 2021: Outbrain formally objects, then adopts Ex-TAC Gross Profit in its listing documents and 2021 annual report
  • February 9, 2022: Criteo renames Revenue ex-TAC to Contribution ex-TAC with no change to the calculation
  • December 13, 2022: The SEC rewrites C&DI 100.04 on individually tailored accounting principles
  • February 3, 2025: Outbrain completes its acquisition of Teads, a deal framed around combined Ex-TAC Gross Profit
  • August 5, 2026: Taboola, Criteo and Magnite report second-quarter results diverging sharply on the same measure
  • August 6, 2026: Teads suspends full-year guidance and discloses ex-TAC gross profit by segment for the first time

Summary

Who. Advertising technology companies that pay for the inventory they resell, including Teads, Taboola, Criteo, Magnite and Viant, together with the investors and analysts who evaluate them. The Securities and Exchange Commission sets the disclosure conditions.

What. A non-GAAP measure equal to revenue less traffic acquisition costs, reconciled to gross profit by adding back the cost of revenue that is not TAC. Published under the names ex-TAC Gross Profit, Contribution ex-TAC and, historically, Revenue ex-TAC.

When. The concept dates to search affiliate economics in the early 2000s, was framed by Regulation G in 2003, and was renamed across the sector during 2021 and 2022 under regulatory pressure to stop calling it revenue.

Where. Quarterly earnings releases, Forms 8-K, 10-Q and 10-K, investor decks and guidance ranges, mainly among United States-listed platforms that recognise media revenue on a gross basis.

Why. Gross revenue overstates the size of businesses that pass most of their income to publishers, and statutory gross profit mixes publisher payments with infrastructure costs. The measure isolates what a platform actually retains, at the price of excluding real costs and of being defined differently by every company that reports it.