Programmatic advertising platform Pubmatic (NASDAQ: PUBM) announced better-than-expected revenue in Q1 CY2025, but sales fell by 4.3% year on year to $63.83 million. Guidance for next quarter’s revenue was better than expected at $68 million at the midpoint, 0.6% above analysts’ estimates. Its non-GAAP loss of $0.04 per share was $0.03 above analysts’ consensus estimates.

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StockStory’s Take

PubMatic’s first quarter performance was shaped by a mix of secular industry shifts and the company’s evolving product focus. CEO Rajeev Goel highlighted strong momentum in connected TV (CTV), with revenues in that segment growing over 50% year-over-year, and noted that supply path optimization (SPO) accounted for a record 55% of total activity. Management also attributed underlying business growth to new products such as Activate for SPO and Convert for commerce media. The quarter was affected by continued softness in the display advertising segment, particularly linked to a large demand-side platform (DSP) partner, but Goel emphasized that excluding this factor and last year’s political advertising, core business growth accelerated to 21%.

Looking ahead, PubMatic’s guidance is driven by expectations of continued secular shifts in digital advertising—most notably, increased spending on streaming over linear TV, and a transition from brand to performance-based advertising. Management believes these trends will benefit key product lines, especially CTV and commerce media. CFO Steve Pantelick emphasized the company's growing relationships with both major agency holding companies and mid-market DSPs, while Goel noted that the recent Google AdTech antitrust ruling could open additional opportunities for independent platforms. The ongoing adoption of AI-driven advertising tools is expected to further enhance efficiency and drive customer value.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to rapid expansion in CTV, increased adoption of SPO, and growth in new product lines targeting commerce media and curation.

• CTV and video expansion: CTV remained a major growth engine, with over 50% year-over-year revenue gains, supported by deeper partnerships with leading streamers and international broadcasters. Goel noted 80% penetration among the top 30 streaming platforms.
• Supply path optimization (SPO) momentum: SPO represented a record 55% of PubMatic’s total activity, as advertisers and agencies sought greater efficiency and transparency. Management sees SPO’s share potentially reaching as high as 75% in coming years.
• Emerging products and curation: New revenue streams, especially from the Connect curation and data platform, more than doubled year-over-year. These solutions help advertisers better target audiences using first-party data and have become increasingly relevant as privacy concerns and data ownership shift industry dynamics.
• AI-driven platform launch: PubMatic introduced an AI-powered end-to-end platform, enabling buyers to use natural language to create and activate optimized campaigns. Early beta partners, such as GroupM, are testing this tool to improve campaign efficiency and targeting.
• Diversification of demand sources: The company reported accelerating activity from mid-market DSPs and direct advertisers, reflecting broader industry trends of budget consolidation and performance marketing. This diversification helps lessen reliance on large agency holding companies and single DSPs.

Drivers of Future Performance

PubMatic expects future growth to be driven by increasing adoption of programmatic CTV, AI-enabled advertising tools, and the ongoing shift to performance-focused digital campaigns.

• Secular shift to streaming and performance: Management expects advertisers to allocate more budgets toward streaming and lower-funnel, performance-based campaigns, as flexibility and measurable outcomes gain importance. This transition favors PubMatic’s CTV and commerce media products, with anticipated benefits from higher demand and premium inventory.
• AI and operational efficiency: The expanded use of generative AI across the business, from campaign planning to internal engineering, is expected to enable faster innovation and productivity without increased headcount. AI-powered tools are projected to improve customer outcomes and streamline costs.
• Industry changes and regulatory impact: The Google AdTech antitrust verdict and changes in third-party cookie policies are seen as catalysts for independent platforms like PubMatic. Management anticipates potential market share gains as publishers and buyers seek alternatives to incumbent solutions, supported by ongoing investments in data-driven, privacy-compliant products.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will track (1) the pace of CTV and AI product adoption across new and existing clients, (2) the impact of regulatory changes and the Google antitrust ruling on market share, and (3) further progress in diversifying demand away from large DSPs and agency holding companies. The effectiveness of cost control measures and the rollout of new AI-driven tools will also be key to monitoring operational leverage.

PubMatic currently trades at a forward price-to-sales ratio of 1.9×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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