What Happened?
Shares of programmatic advertising platform Pubmatic (NASDAQ: PUBM) fell 20.9% in the afternoon session after its weak third-quarter forecast overshadowed strong second-quarter earnings. The programmatic advertising company reported second-quarter revenue of $71.1 million and adjusted earnings per share of $0.05, beating analyst expectations. However, investors focused on the bleak outlook for the upcoming quarter. PubMatic guided for third-quarter revenue of $63.5 million at the midpoint, well below the consensus estimate of $71.18 million. Similarly, its third-quarter EBITDA guidance of $8.5 million fell significantly short of the $14.6 million analysts had projected. The weak guidance immediately soured investor sentiment, sending the stock down 22.7% in the aftermath of the announcement.
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What Is The Market Telling Us
PubMatic’s shares are very volatile and have had 23 moves greater than 5% over the last year. But moves this big are rare even for PubMatic and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 8 days ago when the stock gained 4.5% on the news that the Software as a Service (SaaS) sector rebounded following the sell-off in the previous trading session as a weaker-than-expected U.S. jobs report increased the probability of a Federal Reserve interest rate cut. The July Nonfarm Payrolls (NFP) report showed the U.S. economy added only 73,000 jobs, significantly below the 110,000 forecast. This, combined with downward revisions for May and June, signaled a cooling labor market to investors. In response, market expectations for a September interest rate cut by the Federal Reserve surged from roughly 40% to over 80%. A potential rate cut is generally favorable for growth sectors like technology and SaaS, as lower rates can increase the present value of their future earnings, boosting stock valuations.
PubMatic is down 44.1% since the beginning of the year, and at $8.26 per share, it is trading 51.8% below its 52-week high of $17.14 from February 2025. Investors who bought $1,000 worth of PubMatic’s shares at the IPO in December 2020 would now be looking at an investment worth $281.44.
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