Curiosity Stream (NASDAQ: CURI)
Q3 2025 Key Financials
CuriosityStream reported 3Q25 revenue of $18.4 million, marking a 46% year-over-year increase from $12.6 million in 3Q25. This growth was primarily fueled by a remarkable 400% increase in content licensing revenue, which surged from $1.6 million in 3Q24 to $8.7 million driven by newly executed AI model training agreements with leading developers.
The direct subscription business (45% of 3Q25 revenue) contracted 26% YoY due to declining subscriber counts.
Content additions were minimal and primarily sourced through trade and barter arrangements rather than commissioned original content. Notably, net produced content on the balance sheet continues to decline significantly, suggesting the company has deliberately de-emphasized original content production—a strategic shift that has direct, negative implications for the licensing business model
Despite a $4m increase in gross profit year-over-year, operating losses actually widened from $3.3m to $4.5m. This deterioration was driven by a $5.4m increase in G&A expenses, predominantly attributable to increased stock-based compensation (SBC).
Operating cash flow reported at $4.3m (annualized $17.5m, representing a 7% yield on the $271m market cap (@$4.6) is substantially overstated when SBC is treated as a true cash expense. Adjusting for SBC as a cash expense, adjusted operating cash flow would have been negative $2.6m. However, the management did point out that majority of the significant increase in SBC was a one-off thing.
The management believe that the company will continue double digit growth in both revenue and cash flow in 2026.
400% growth in content licensing revenue masks two material accounting and cash flow considerations:
Upfront revenue recognition of multi-year contracts: The company recognizes multi-year licensing agreements on a cash basis upon signature, rather than recognizing revenue ratably over the contract term. This creates an accounting-to-cash mismatch—the $8.7m licensing figure represents the full contractual value of multi-year deals, not annualized recurring revenue. Normalizing for this, the true annualized run-rate of ongoing licensing relationships is materially lower than headline figures suggest and may not be sustainable at the current pace if contract signatures decelerate.
Significant non-cash revenue component: Approximately one-third of the recorded $8.7m in content licensing revenue stems from trade and barter transactions—exchanges of content or services with no cash exchanged. While this expands the reported top line, it generates neither cash inflow nor cash margin contribution. When adjusted for the non-cash portion, true cash-generating licensing revenue was approximately $5.8m in the quarter, and the recurring cash licensing run-rate is likely closer to $8m-$12m annualized at conservative assumptions.
My View - Current valuation likely presumes licensing becomes a durable, renewable revenue stream with a growth component, but the unit economics and contractual structure suggest otherwise.
Licensees build proprietary competitive advantages (trained models) that CuriosityStream cannot replicate or access, and for which there is diminishing incremental value from new CuriosityStream content once model training is complete. Once an AI model is trained on CuriosityStream's licensed content, the licensee retains permanent ownership and continued use of the trained model, even if the licensing agreement terminates. The already-trained model weights and parameters are the licensee's intellectual property to deploy and improve indefinitely. The company is essentially monetizing the training phase of model development, not the deployment phase. Once that training phase concludes—typically over 1-3 years—there is no economic mechanism compelling contract renewal unless CuriosityStream provides materially new content that adds incremental capability to the next generation model.
This structural limitation is compounded by CuriosityStream's strategic choice to de-emphasize original content production. Net produced content on the balance sheet is declining significantly, and new content additions have shifted primarily to low-cost trade and barter arrangements. This decision directly undermines the licensing business's renewal economics: if CuriosityStream is not continuously producing new, differentiated documentary content, there is minimal value proposition for renewal negotiations. Licensees will simply deploy the already-trained models and will have no incentive to pay for incremental training data.
The licensing business is best understood as a one-time monetization event per customer, not as the foundation of a recurring, compounding business model. Current valuation likely presumes licensing becomes a durable, renewable revenue stream with a significant growth component, but the unit economics and contractual structure suggest otherwise.
Maintaining Sell rating with target price equal to liquidation value of $2.5. Reflecting the lack of competitive moats and the view that the 7% dividend yield is unlikely to be sustainable long-term.