PubMatic’s second quarter was marked by mixed results, as the company delivered year-on-year revenue growth and outperformed Wall Street expectations on both revenue and adjusted profit. However, the market reacted sharply negatively, reflecting concerns about platform changes by a major demand-side partner (DSP) that created revenue headwinds. CEO Rajeev Goel highlighted that strong gains in connected TV (CTV) and emerging revenue streams, such as data targeting and commerce media, were offset by disruptions from one top DSP. Management acknowledged the surprise impact of the DSP’s new inventory valuation model and emphasized ongoing efforts to diversify demand sources and stabilize the business.
Is now the time to buy PUBM? Find out in our full research report (it’s free).
PubMatic (PUBM) Q2 CY2025 Highlights:
- Revenue: $71.1 million vs analyst estimates of $68.08 million (5.7% year-on-year growth, 4.4% beat)
- Adjusted EPS: $0.05 vs analyst estimates of $0.01 (significant beat)
- Adjusted Operating Income: $4.34 million vs analyst estimates of -$10.01 million (6.1% margin, significant beat)
- Revenue Guidance for Q3 CY2025 is $63.5 million at the midpoint, below analyst estimates of $71.18 million
- EBITDA guidance for Q3 CY2025 is $8.5 million at the midpoint, below analyst estimates of $14.6 million
- Operating Margin: -7.7%, down from -5.9% in the same quarter last year
- Market Capitalization: $382.7 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From PubMatic’s Q2 Earnings Call
- Matt Swanson (RBC): Asked for more detail on the DSP platform change and mitigation process. CEO Rajeev Goel explained that a major DSP shifted clients to a new system for inventory evaluation, requiring PubMatic to adjust how it prioritizes and sends impressions, a process expected to take several months.
- Jacob Armstrong (KeyBanc): Inquired about the evolution of supply path optimization (SPO) and its impact on go-to-market strategy. Goel described deeper conversations with advertisers around identity and performance, and noted that not all new mid-market deals are SPO-driven, which may introduce future metric volatility.
- Shweta Khajuria (Wolfe): Sought clarity on the blurring lines between SSPs and DSPs and the impact on take rates. Goel emphasized the industry’s move toward end-to-end platforms and reiterated that PubMatic remains a platform of choice due to its scale and omnichannel capabilities.
- Jason Helfstein (Oppenheimer): Queried whether the DSP change was a reaction to PubMatic’s Activate platform and about display concentration risk. Goel and CFO Pantelick said there’s no sign of retaliation, and that display now represents a declining share of revenue as the business pivots to growth sectors.
- James Heaney (Jefferies): Asked about the risk of generative AI to the display business. Goel reported exposure is limited due to a focus on CTV and mobile app inventory, and sees potential for future ad-supported AI platform partnerships.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace and effectiveness of mitigation efforts to recover DSP-related revenue, (2) continued growth and adoption of CTV and emerging revenue streams—including Activate and Connect—and (3) PubMatic’s progress diversifying its DSP mix and reducing concentration risk. Execution on AI-driven product innovation and international expansion will also be important indicators of strategic progress.
PubMatic currently trades at $8.40, down from $10.56 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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