Zeta Global (ZETA) Q1 2026 Earnings Transcript

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Date

Thursday, April 30, 2026 at 4:30 p.m. ET

Call participants

• Co-Founder, Chairman, and Chief Executive Officer — David A. Steinberg
• Chief Financial Officer — Christopher Greiner

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Takeaways

• Revenue -- $396 million, up 50% year over year, and up 29% year over year excluding Marigold, marking the fourth consecutive quarter of acceleration excluding acquisitions and political candidate revenue.
• Adjusted EBITDA -- $66 million, up 42% year over year, with a margin of 16.7% (100 basis points lower than prior year).
• Net Cash from Operating Activities -- $49.7 million, up 43% year over year.
• Free Cash Flow -- $41.7 million, up 48% year over year, representing a margin of 10.5%, and 63% adjusted EBITDA conversion, 270 basis points above the previous year.
• Super-Scaled Customer Metrics -- Customer count reached 189, up 19% year over year, an addition of 5 sequentially; super-scaled customer ARPU was $1.7 million, up 21% year over year.
• Customer Expansion Trends -- Customers using multiple use cases grew over 50% year over year, and those using more than three channels increased by 40% year over year.
• Net Retention Rate -- Remained above the stated target range of 110%-115%.
• Revenue Mix -- Direct revenue accounted for 75%, up from 73% prior year, and within the 70%-75% target.
• Cost of Revenue -- GAAP cost of revenue was 41%, up 190 basis points year over year, primarily due to increased social channel mix from new agency wins.
• Athena Adoption and Impact -- Within the first week of general availability, Athena drove a 7x increase in agentic interactions, and accounted for 60% of all AI usage platform-wide.
• Sales Pipeline -- Up 40% year over year, with outsized growth in discretionary industries such as retail, advertising, travel, restaurants, furniture, and resorts.
• Share Repurchase -- Repurchased 1.5 million shares for $25.7 million; $138 million remains authorized.
• Marigold Integration -- Tracking ahead of expectations, with synergy actions expected to benefit adjusted EBITDA margins beginning in Q2 and into year-end.
• Full Year 2026 Guidance Raised -- Midpoint revenue guidance increased by $30 million to $1.785 billion (37% growth rate); adjusted EBITDA guidance midpoint increased by $6 million to $397 million (22.3% margin); free cash flow guidance raised to $235 million.
• Q2 2026 Guidance -- Revenue expected at $420 million (36% year-over-year growth); adjusted EBITDA expected at $86.6 million, 20.6% margin.
• GAAP Net Loss -- $13.2 million, an improvement from $21.6 million prior year; loss per share of $0.06, with Marigold integration costs noted as the primary driver.
• Executive Compensation -- Board enacted a new performance-based long-term equity incentive plan for management, restricting additional equity grants for six years, and tying awards to long-term financial targets.
• Athena Deployment -- Made generally available to all enterprise customers, with early markers of adoption and revenue contribution cited.
• SuperGraph Data Moat -- Proprietary data platform cited as a key factor in enterprise wins and customer expansion, with one Fortune 100 telco client forecasted to increase spend by 18x in 2026.

Summary

Zeta Global Holdings (NYSE:ZETA) reported results that demonstrated continued market share gains, marked by both accelerating organic growth and substantial increases in free cash flow conversion. Management emphasized the successful early adoption of Athena, with measurable customer engagement reflected in platform usage and ARPU expansion. Strategic cross-selling and rapid Marigold integration further supported improved financial visibility, enabling another upward revision to full-year guidance.

• Steinberg described a "structural shift in the market," and stated, "AI is no longer a feature. It is driving a replacement cycle where enterprises are demanding fewer systems, measurable results, and applied intelligence that works today."
• Greiner emphasized broad-based sources of growth, noting, "In terms of revenue growth, excluding Marigold's contribution, approximately 14 points of growth came from existing customers, and 15 points from new customers."
• Management underscored Athena’s effect on competitive positioning, with Steinberg stating, "Athena was a driver in one of the largest deals we have ever closed," as a client consolidated from four vendors to Zeta.
• SuperGraph, the company's proprietary identity and intelligence graph, was credited as instrumental to "wins where access to our data is a key driver for customer decisions."
• Leadership projected that Athena's scalability and integration would provide "minimal contribution" to 2026 guidance, suggesting potential upside if adoption accelerates beyond current expectations.
• Greiner stated, "adjusted EBITDA was $66.1 million at a margin of 16.7%, 100 basis points lower year over year, and $5 million better than the midpoint of our guidance."
• Operating cash flow and free cash flow growth outpaced revenue growth, with improved margins attributed to platform leverage, and disciplined cost management.
• Board-approved executive incentive changes tie equity awards explicitly to future revenue and margin performance, limiting further dilution while aligning management with long-term shareholder interests.

Industry glossary

• Super-Scaled Customer: A Zeta-defined segment of customers that have reached significant revenue or usage thresholds, often indicating deeper multi-use case and channel engagement.
• ARPU: Average Revenue per User; for Zeta, refers to average revenue per super-scaled customer.
• Agentic Interactions: User-initiated actions leveraging AI-driven agents within the Athena platform workflow.
• One Zeta: The company’s strategy of cross-selling and consolidating multiple marketing use cases and channels onto a single unified platform.
• Athena: Zeta’s AI-driven marketing workflow user interface that integrates applied intelligence directly into client operations.
• SuperGraph: Zeta's proprietary identity and intelligence graph, unifying and analyzing customer data across channels and sources.
• Marigold: Refers to the recently acquired business line contributing to revenue and cross-sell opportunities within Zeta’s platform.
• Holdcos: Large agency holding companies representing collections of multiple advertising, marketing, or PR agencies under a single corporate group.
• RPO: Remaining Performance Obligations; represents contracted revenue yet to be recognized, serving as a visibility indicator for recurring revenue streams.

Full Conference Call Transcript

David Steinberg, Zeta's Co-Founder, Chairman and Chief Executive Officer; and Chris Greiner, Zeta's Chief Financial Officer. Before we begin, I'd like to remind everyone that statements made on this call as well as in the presentation and earnings release contain forward-looking statements regarding our financial outlook, business plans and objectives and other future events and developments, including statements about the market potential of our products, potential competition, revenues of our products and our goals and strategies. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. These risks and uncertainties include those described in the company's earnings release and other filings with the SEC and speak only as of today's date.

In addition, our discussion today will include references to certain supplemental non-GAAP financial measures, which should be considered in addition to, and not as a substitute for, our GAAP results. We use these non-GAAP measures in managing our business and believe they provide useful information for our investors. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, where appropriate, can be found in the earnings presentation available on our website as well as our earnings release and our other filings with the SEC. With that, I will now turn the call over to David.

David Steinberg: Thank you, Matt. Good afternoon, everyone, and thank you for joining us today. We delivered our 19th consecutive beat and raise quarter. This consistency is not driven by a single product cycle or a short-term tailwind. It is the result of a structural shift in the market. AI is no longer a feature. It is driving a replacement cycle where enterprises are demanding fewer systems, measurable results and applied intelligence that works today. We are winning in this environment because of the system we have built, proprietary data that improves with every interaction, intelligence that compounds with every decision and a platform with AI at its core that allows customers to consolidate vendors into a single unified operating system.

This differentiated approach has been recognized by Forrester, where Zeta was once again named a leader and also reflected in our customer advocacy with an NPS score in line with market leaders, up 23% from our assessment in the prior year. Both come on the heels of Forrester study showing Zeta returns an average of 600% on marketing spend for its customers. Athena by Zeta is an accelerant. It is the user interface that brings AI directly into marketing workflows and removes the barriers to enterprise-wide adoption and impact. Signs of this were evident in Q1 with beta customers plus strong early adoption of Athena contributing to the revenue beat.

Our first quarter performance, once again, shows we are the disruptor in the AI-driven marketing ecosystem. First quarter revenue of $396 million, representing year-over-year growth of 50% and up 29% year-over-year ex Marigold, our fourth straight quarter of revenue growth acceleration, excluding acquisitions and political candidate revenue. And adjusted EBITDA was $66 million, up 42% year-over-year. 19 consecutive beat and raise quarters combined with a 4-year revenue CAGR of 30% reflect more than just consistency. They are evidence of sustained demand in a market consolidating around platforms that can deliver measurable outcomes at scale. And that visibility is reflected in our outlook.

After raising the midpoint of our range for 2026 revenue guidance last quarter by $25 million, we are again raising it by $30 million, representing growth of 37%. These market share gains are evidence of a shift in the competitive landscape as AI moves from feature to a new way of doing business. Athena is designed to accelerate our share gains by bringing intelligence directly into workflows, turning answers into actions and ultimately changing how marketing is planned, executed and optimized. Athena is currently available to all of our enterprise customers, and its impact is already evident in sales pursuits and results. The number of Athena demos to potential new clients increased dramatically throughout the quarter.

The promise of Athena is influencing decision-makers and helping Zeta win deals as customers want to invest in applied AI, not road map AI. One new customer we closed in the quarter commented, "Leapfrogging to the future requires thinking differently today and committing to execution. Interacting with Athena made it clear that Zeta has already made this leap, bringing its vision to life and positioning us to accelerate into a fully agentic marketing future." Athena was a driver in one of the largest deals we have ever closed. The customer is a leading global apparel retailer operating across multiple brands, each with unique customers and over 3,000 locations worldwide.

Zeta's platform was purpose-built to handle the complexity required by the largest enterprise companies, and this customer was able to consolidate down from 4 vendors to 1, Zeta. As the legacy Marketing Cloud replacement cycle begins to accelerate, this particular client was a marquee win. We are also seeing rapid adoption among existing customers. Early feedback and usage shows that customers view Athena not as incremental functionality, but as transformational technology. As adoption increases, Athena learns from more data, outcomes improve and usage deepens, driving ARPU expansion and ultimately reinforcing the same flywheel that has powered our growth. That flywheel is powered by more than just Zeta's AI models. It's driven by the data and infrastructure behind them.

Zeta SuperGraph, our proprietary identity and intelligence graph, unifies data across the enterprise and enables a complete deterministic view of the consumer that we believe is difficult to replicate at scale. This is translating directly into wins where access to our data is a key driver for customer decisions. For example, our SuperGraph was instrumental in a win with a leading online retailer of pet products in the United States that serves millions of active customers with a highly personalized e-commerce experience, a broad assortment of over 100,000 products and a rapidly expanding ecosystem that includes autoship subscriptions, pharmacy services and pet health offerings.

In addition, our proprietary data and the intelligence it generates was a key component in the expansion of a Fortune 100 telco client, expected to drive an 18x increase in spend with Zeta in 2026 versus 2025. As Athena brings that intelligence to our customers in real time, the impact of this data advantage only grows. This foundation of data plus AI continues to power One Zeta. We are consistently seeing that the land, expand, extend model takes hold as customers begin with a single-use case and scale across the platform over time. That expansion is driven by the modern CMO mandate, do more with fewer partners, improve ROI and simplify execution across the organization.

The result is larger commitments, deeper adoption and a growing role for Zeta as the marketing operating system and core infrastructure. That momentum is showing up in the data. Super-scaled customer ARPU was up 21% year-over-year, well ahead of our target range. Net retention rate remained above our target range of 110% to 115%. And the number of super-scaled customers using more than one use case was up over 50% year-over-year at scale. It also creates a reinforcing cycle. Consolidation drives adoption, adoption drives results and results drive further expansion. This is the One Zeta model, and it continues to be a powerful driver of durable growth.

What stands out for me this quarter is the strength we are building across every part of the business. At the center of this is Athena, which is already beginning to change how our customers operate and how we compete. Together, our data, our platform and our leadership in AI are positioning Zeta not just to participate in this shift but to define it. As always, I want to sincerely thank our customers, our partners and our shareholders for your continued support of our vision. And to team Zeta, thank you for everything you do. It was an honor to be recognized as a Great Place to Work for the third year in a row.

This is a reflection of your hard work and collaboration. Now let me turn it over to Chris to discuss our results in greater detail. Chris?

Christopher Greiner: Thank you, David, and good afternoon, everyone. Our results, once again, demonstrated the durability, predictability and profitability of Zeta's growth. Revenue growth, excluding acquisitions and political candidate revenue accelerated for the fourth consecutive quarter to 29% in Q1, further cementing the durability of our growth and market share gains. Broad-based strength across the business is resulting in improved visibility, leading us to, once again, raise our 2026 outlook, underscoring the predictability of our growth. Even in doing so, we're maintaining our typical conservatism. And we also saw free cash flow conversion improved to 63%, generating $42 million in free cash flow, demonstrating the increasing profitability of our growth.

These results surpassed even our internal stretch goals, coming in $26 million or 7 points above the midpoint of our revenue guidance for the quarter. As I analyzed the strength of our quarter, what stood out was how balanced the upside contribution was. It was not 1 or 2 isolated benefits. Instead, in baseball parlance, it was a lot of singles and doubles, which in my opinion, is healthier. Here are some examples. In terms of revenue growth, excluding Marigold's contribution, approximately 14 points of growth came from existing customers and 15 points from new customers.

From an industry lens, 9 out of our top 10 industries grew faster than 20%, with more discretionary industries continuing to be at the upper end, demonstrating why in tougher macro times, data-driven, lower marketing funnel, high ROI attributable marketing is paramount. And finally, as it relates to how customers use our platform, e-mail, connected TV, mobile and social all grew double digits, all while each use case, acquire, grow and retain also grew double digits. Now let me dive deeper into our KPIs, income statement and balance sheet. Total super-scaled customer count grew to 189, up 19% year-over-year and an addition of 5 customers sequentially. This exceeds our Zeta 2028 model of 4% to 8% super-scaled customer count growth.

Super-scaled customer additions were especially strong in advertising, marketing, travel and hospitality. Super-scaled customer ARPU was $1.7 million, up 21% year-over-year. This also exceeded our Zeta 2028 model of 12% to 16% ARPU growth. Strong ARPU growth in the quarter was driven by an increase in the number of customers using multiple use cases, which was up over 50% year-over-year, as well as customers using more than 3 channels, which increased 40% year-over-year. Both are great examples of the One Zeta sales motion working and how Athena can unlock more of the platform's capabilities for our customers to use.

The forward-looking sales pipeline is also robust, going into a season when Athena will be front and center at multiple industry conferences. In fact, Athena demos were a crucial differentiator versus incumbents and RFP competitors in each of our marquee enterprise and agency wins in Q1. And we expect Athena to play an even bigger role in adding to the sales pipeline, which is already up 40% year-over-year with a subset of discretionary industries up even more, those like retail, advertising, travel, restaurants, furniture and resorts to name a few.

This outsized sales pipeline growth in discretionary industries is consistent with what we've seen in previous periods of macro volatility and is another proof point that in times of uncertainty, customers consolidate onto fewer platforms that can drive measurable ROI with AI-driven efficiency. Now moving on to revenue mix. Direct revenue in the first quarter was 75%, above the 73% last year and in line with our target of 70% to 75%. Our GAAP cost of revenue in the quarter was 41%, a 190 basis point increase year-over-year and 50 basis points sequentially. The increase in cost of revenue was driven by new agency wins, driving a higher initial mix of social as a channel.

This is consistent with the pattern of business we've seen and spoken to previously when new agencies platform on to Zeta. This is because we offer a substantially more efficient and effective solution for social and has become the first of many channels adopted by new agencies as they migrate. As new agencies scale over time, not only does their aggregate spend increase, but they do so by adding Zeta-owned channels like e-mail, display, video, mobile, CTV and others. It also bears repeating, while social has a higher cost of revenue, it is still accretive to both adjusted EBITDA and free cash flow margins. Further, social drives high customer stickiness as well.

In the first quarter, adjusted EBITDA was $66.1 million at a margin of 16.7%, 100 basis points lower year-over-year and $5 million better than the midpoint of our guidance. Marigold integration is progressing rapidly and tracking ahead of our expectations. We took aggressive steps in the quarter to execute operating synergies, which should begin to benefit our adjusted EBITDA margin in Q2 and into the back half of the year. At the same time, Marigold's revenue came in better than we anticipated, and we're seeing encouraging traction from the One Zeta approach of cross-selling Marigold's loyalty product along with Zeta's grow-and-acquire use cases to the combined customer base.

Another area we spoke about last quarter was becoming GAAP net income and EPS positive for the full year of 2026, specifically generating between $0.02 and $0.04 of GAAP earnings per share. Our first quarter results have us pacing towards the high end of that range. In Q1, our GAAP net loss was $13.2 million, an improvement from a net loss of $21.6 million in the first quarter of last year. GAAP loss per share was $0.06, coming in ahead of our expectations for the quarter with forecasted costs related to the integration of Marigold being the primary driver and not seen as recurring over the rest of the year.

First quarter net cash provided by operating activities was $49.7 million, up 43% year-over-year, with free cash flow of $41.7 million, up 48% year-over-year and representing a margin of 10.5%. This represents a free cash flow conversion of 63%, a 270 basis point improvement from the first quarter of 2025. This also includes a roughly 13-point working capital headwind driven by longer agency payment cycles standard for their industry. During the first quarter, we repurchased 1.5 million shares for $25.7 million and have approximately $138 million remaining on our share repurchase authorization. We expect to remain active buyers of our stock, especially at these price levels, subject to market conditions and other priorities.

And we continue to make significant progress in reducing dilution and stock-based compensation expense. Excluding Marigold, our dilution in the first quarter was 0.1%, and we remain on track to achieve our normal course net dilution target of 3% to 4% in 2026. Relatedly, with most of management's previously issued equity now fully vested post-IPO, Zeta's Board of Directors and Compensation Committee, in consultation with an independent compensation consultant, approved a new long-term equity incentive plan for management.

This performance-based plan secures continuity of Zeta's named executive officers and management for 6 years and incentivizes management to achieve its long-term revenue and adjusted EBITDA margin objectives while adhering to its principles of lowering dilution, reducing stock-based compensation as a percentage of revenue and achieving GAAP positive earnings. Furthermore, named executive officers who received these incentives will not be rewarded any further equity for the next 6 years. Now on to our increased guidance. For the full year 2026, we're increasing the midpoint of our revenue guidance by $30 million to $1.785 billion, representing a 37% growth rate or 22% year-over-year growth when excluding Marigold and political candidate revenue.

None of our guidance increase is related to political candidate revenue, which we continue to assume will be $15 million in 2026 with $7 million in the third quarter and $8 million in the fourth quarter. Additionally, we continue to take a conservative view of Marigold, contributing $47.5 million per quarter to 2026 revenue for the remainder of the year. Our revenue guidance also includes minimal contribution from Athena. And as shared earlier, we have taken into account our typical conservatism of 2% to 5% in setting our outlook.

For the second quarter, we now expect revenue of $420 million at the midpoint, $4 million higher than our previous guidance and representing year-over-year growth of 36% or 21% when excluding political candidate and Marigold revenue. For adjusted EBITDA, we're increasing the midpoint of our 2026 guidance to $397 million, up $6 million from our prior guidance and representing a year-over-year increase of 43% at a margin of 22.3%, an improvement of 90 basis points over 2025. For the second quarter of 2026, we now expect adjusted EBITDA of $86.6 million at the midpoint, up from our previous expectation of $84.9 million and representing growth of 47% and a margin of 20.6%, up 155 basis points year-to-year.

We are also increasing our 2026 free cash flow guidance to $235 million at the midpoint, up from $231 million, representing year-over-year growth of 43% and a conversion of 59% of adjusted EBITDA, which likely has upside. And here's the broader point. A 19-quarter beat-and-raise track record is obviously something we're proud of and continues to demonstrate our consistency and strong execution. We also recognize the times we're in, specifically the need to underwrite investments in companies with strong free cash flow generation, durable revenue growth and share gains and demonstratable moats. Q1 was an excellent jumping off point for these emerging investor frameworks.

Not only did free cash flow set a record in the first quarter, but we are also tracking to the high end of our 2026 GAAP EPS range of $0.02 to $0.04 and long-term 2028 targets. As it relates to durable growth, this was the fourth quarter in a row we accelerated revenue growth, excluding acquisitions and political candidate revenue. And in terms of exhibiting our moats, our marquee wins with enterprises and agencies this quarter came at the expense of legacy marketing clouds and legacy DSPs, where Zeta's proprietary data and Athena operating system were capabilities our competition could not match. With that, I'll hand the call over to the operator for David and me to take your questions.

Operator?

Operator: [Operator Instructions] And the first question comes from the line of DJ Hynes with Canaccord Genuity.

David Hynes: Congrats on a fantastic quarter. Nice start to the year. David, I want to ask you a competitive question. So obviously, there's been more public backlash against the Trade Desk and the agency ecosystem. But I think for those living in the marketing and ad tech world, like that's been going on for a while now, right? So two related questions here. Number one, like how much do you think Zeta has benefited from that dynamic? And then second, if the Trade Desk figures out how to get pricing right or at least make it more transparent, does this rebalance competitive dynamics at all? Or is the horse already out of the barn there?

David Steinberg: Well, let's -- I mean, first of all, DJ, thank you. We appreciate it. Could not be happier with this quarter. And I think it really speaks to kicking off the year right and Athena really was a massive driver here. I want to separate the conversation about the agency and other technological platforms like the Trade Desk that are out there and struggling a bit because the agencies continue to thrive and they're not really having any issues from our vantage point. And I just got back from 3 days at the POSSIBLE Conference, where I did 54 meetings in 3 days, hosted 4 dinners and 3 cocktail parties, which is why I'm losing my voice going into this.

I think that -- and I don't want to speak to any particular platform, but I think the horse is out of the barn. I think that organizations that have built workflow management tools that do not have proprietary data, they do not have proprietary native artificial intelligence are going to really struggle in this next evolution of where sort of marketing is going as it relates to intelligence. Because if you're not creating intelligence in today's world, you're not winning. And I think that we are a direct reason that a number of our competitors are either growing slower or shrinking as we take meaningful market share.

Chris, in his prepared remarks, was very clear about the fact that we had a number of meaningful agency wins in the quarter that will continue to run out through the rest of this year and into future years that are starting with social. We're starting to see those move over to programmatic and connected TV as well. So I think if you separate the agencies, which are doing well and thriving from the technological platforms that have based their business on workflow management, I think they are going to struggle, and we are going to continue to beat them handily in the marketplace.

David Hynes: Yes. Perfect and helpful color. Chris, I want to follow up with you. So David gave a bunch of great anecdotal data points around Athena and the early success there. The product is not explicitly monetized, right? So what are the signs that we all, as investors, should be paying attention to from a financial perspective that will signal to us that Athena is moving the needle for Zeta?

Christopher Greiner: Great question, DJ. I'm glad you asked. There's a couple of leading indicator data points that I think you can already begin to look at. So as part of the press release, one of the data points that was called out was a 7x increase, and this is just in the first week of Athena's general availability. We saw a 7x increase in the type of -- in the amount of agentic interactions on the platform, coupled by 60% of the AI usage on our platform being driven by Athena. How that should ultimately translate to the usage part of our revenue can be seen through ARPU expansion, some of which you already started to see.

So if you look at ARPU in the quarter for super-scaled customers, it was $1.7 million. It was up 21% year-over-year. But if you look underneath that, what drove it are exactly the dynamics that Athena was engineered to be able to do, which is to make more of the platform available and visible for the customers to be able to exploit. If you look at multiple use case customers, it was up over 50% year-over-year. If you look at the customers that are using 4 or more channels, that's up over 40% year-over-year, which again are not just great examples of Athena as an unlock, but also Zeta working well.

David Steinberg: And by the way, she's just getting started, DJ.

David Hynes: Yes, totally. Congrats, guys.

Operator: And the next question comes from the line of Gabriela Borges with Goldman Sachs.

Gabriela Borges: David, I want to ask you about the people and process part of Athena, meaning the technology you've demoed, it clearly is able to do a huge amount of knowledge work. My question for you is, how do you then change the end user behavior? What does the training and enablement look like? How do you encourage more people to use it once your customers have already decided to adopt it?

David Steinberg: First of all, Gabriela, what a great question. First, let me say that we were incredibly proud that we were able to make the product not just generally available on time, but available to 100% of our enterprise clients, which was not a small task. At the same time, to your exact point, we have a learning and development group that is literally purpose-built to train our clients and get them up and running on this new product. And they've already done. Our top 30 clients have been onboarded through that group, and we're going to be adding all the other clients as we continue to expand out.

The other thing that's really important is we're doing a weekly leaders -- I'm sorry, a weekly learning and training program to all of our clients that's virtual, recorded and they're able to then watch it at their convenience inside of the platform when they want to. But we're doing sort of a ask Athena question of the week. Every week, a new question that you could ask Athena goes out to all of our customers so that they can begin they process of using her. And I know I'm sure you've seen the demo, you know how incredibly intuitive she is to use.

So what I would say is we're really focusing on it from a relationship management, learning, development, both in-person, virtually and weekly follow-ups. But the intuitive nature of her is, I think, one of the reasons you saw her so powerful. Just in the first week she was live, Athena drove 60% of all AI utilization across our platform. That is off the charts for a new product from an adoption perspective.

Gabriela Borges: Very good. And Chris, the follow-up for you on inference cost. So Athena has pieces of Zeta proprietary technology. And then I believe you have some third-party technology in there, too. How do you think about managing those inference costs or optimizing those inference costs? And then same question for your R&D team, your engineering team. We're at the stage where we've been through more token usage is generally better, but also can sort of outrun budgets very quickly. How do you think about managing that internally?

David Steinberg: So Gabriela, I'm going to take that one. Sorry, Chris. First and foremost, as the world moves from large language models to inference-based AI, our platform is purpose-built for that as the operating system and infrastructure for our clients. The vast majority of our queries, Gabriela, are done on our own platforms, on our own data. So we are not buying tokens as we roll this out to our customers. It's fully embedded, which is one of the reasons I think you're seeing us project substantially higher growth to profits and cash flow than we are even to revenue. We have put ourselves as sort of the perfect spot as the market moves to inference-based AI.

As it relates to our internal consumption, we have built a platform called Spade. Don't ask me what it stands for. It is an acronym. But the reality is that Spade is a tool that we custom built inside of Zeta and is being utilized by a very large percentage of our engineering team, where effectively, an engineer would go into Spade, they would create the construct for the code they are trying to develop. Spade would then automatically choose the most efficient and best large language model to do the coding itself. So if it's security-based, we might choose Claude. If it's general coding based, Spade might choose ChatGPT. If it's complex publishing, Spade might choose Gemini.

Now of course, Cursor is sort of at the center of this as we think about where that's expanding. The code is then auto generated by the LLM, which is the only time we utilize tokens. Everything else is sitting on our own platform, our own cloud. The LLM creates the code. It then goes to a program called Zippi because obviously, we have great nomenclature capabilities. And Zippi automatically QAs the code on our platform once again. Once it's done, it sends it to one of our senior architects. They review the code one more time, and they can make it generally available.

To put it in perspective, Gabriela, at the end of the first quarter, Zeta was already driving 75% automated new code creation. I believe that puts us even above Google as it relates to that. And the pods working on Athena today, I know for a fact are up from a productivity perspective between 400% and 600% year-over-year from an output and productivity perspective, all the while, the vast, vast majority of the compute and of the tokenization is on our own platform. So as you look at our growth, we will not experience some of the constriction of margin or additional CapEx.

We've already allowed for everything in the projections that we've got, and we're very, very comfortable with where we are externally and from an engineering perspective.

Operator: And the next question comes from the line of Arjun Bhatia with William Blair.

Arjun Bhatia: Congrats guys on a very strong quarter here. David, I have two questions, maybe I'll just do them one at a time. The first on awareness. It seems like the customers that are using it are getting great value out of it. It's early, but for this to have a material impact, for the company as a whole, you have a fairly large revenue base. Like how do you roll this out to all your large customers? Where is it right now in terms of customers having awareness and knowing what Athena can do? And how do you sort of plan to progress that?

David Steinberg: Yes. So great question, Arjun. First of all, from an awareness perspective, I would say that our marketing team today is doing the greatest job it's ever done in the history of our company. I just came back from the POSSIBLE Conference where you couldn't walk 5 feet without seeing the brand Athena and without seeing Buy Zeta. And it was really exciting. We did an Athena Suite. We did a Zeta Cafe Powered by Athena. And we're starting to see that we're moving to that next evolution of our brand where it's sort of moved to it's getting the must-have Zeta in our industry. And I didn't think I would say that this early.

As it relates to internal awareness, we have built an internal learning and development team, which is doing nothing but training and onboarding our clients. One of the things we're going to be rolling out in the next few months, which I'm super excited about, is an Athena certification. We're going to certify the individuals who work for our clients on Athena utilization. They'll get a full certification that they can put into their resume, and we're very excited about how that's going to be rolling out. So we're also doing sort of a hint of the week, tip of the week, question of the week. It's going out to all of our clients.

I would tell you, in all of the years I've run this company, which is a long time now, I have never seen a faster uptake of a technological product that we've rolled out, and it's really been exciting, Arjun.

Arjun Bhatia: Awesome. That's great to hear. And then maybe switching gears from Athena for a second. Marigold, that also looks like it was off to a strong start. I think you beat your sort of Q1 target on that front. But where are we on the cross-sell there? And what's the early traction you're seeing on, I guess, the 2-sided cross-sell, both into your base and into Marigold's base?

Christopher Greiner: Arjun, I'll take that, and David will wrap it up also. So a couple of places where you can see where it's evident that the cross-selling is working. So we talked about the number of multi-use cases. It's nicely contributing to the growth that we've seen across the base of super-scaled customers. But I think more broadly, if you look at the areas that we talked about being purposely conservative around Marigold, it was around the potential for their SMB and mid-market customers that were on the enterprise platform we anticipated churn. We're not seeing as much as we thought, which is good.

There were products that -- and geographies that we thought we would have less growth on and would also see churn. That hasn't happened yet. And then just more broad normal churn at the enterprise level, and it stayed healthy. And by the way, a lot of that is being driven by Zeta's interactions with those customers and partnering with Marigold's people.

David Steinberg: So it's been really interesting, Arjun. We've seen a meaningful uptick from existing Marigold clients with us integrating the data cloud into the platform. So the first thing we did and we had it done within 90 days was a full data cloud integration into their platforms, which allowed clients to begin to access data sets that they've never had access to before. So we've seen meaningful growth there. As it relates to cross-selling, we're really -- we're making progress, but not a lot of that is in the numbers yet. These products are complicated, and they're very big. I think you'll see more of that as the year progresses.

But I think -- I mean, to say we're very excited about how well we're performing with the asset would be an understatement. And a lot of that today is a result of the data cloud integration. Now whether you want to consider that a cross-sell because we're bundling the Data Cloud in to drive additional utilization or not, that's up to you. But to us, as we're rolling out loyalty to all of our global clients, and we're starting to take sell-through and roll it out to the LiveIntent clients and all of the different things we're doing, that's in the early stages, and I think will drive meaningful growth in the future.

Operator: And the next question comes from the line of Jack Nichols with KeyBanc Capital Markets.

Jackson Nichols: Maybe pivoting back to Athena. I was wondering if you could walk us through the early adoption trends among the enterprise customer base, specifically around how they're deepening engagement with the platform and then existing use cases today? And then I've got a quick follow-up.

David Steinberg: Well, first of all, welcome, Jack. It's great to have you on coverage. We really appreciate you. Second, we have been really blown away by the early adoption of Athena. We made it generally available to 100% of our enterprise clients, and we saw a 7x increase in agentic interactions from our clients in the first week of Athena alone. So we think of that as pretty good. 7x is always something we aspire to. But our long-term goal is for Athena to be the operating system of our clients' businesses, and we're just getting started on that. But early adoption has been very, very exciting.

Jackson Nichols: That makes sense. And then pivoting quickly to Marigold and thinking about the recurring revenue mix, as those customers adopt the Zeta platform, should we expect that mix to trend down or up over time or kind of remain in line with the 2025 60% expectation disclosure?

Christopher Greiner: Jack, it's Chris. I'll take this. And as David said, welcome. It should go up is the short answer. And I think a really interesting proof point that you'll see in the queue tomorrow is just how substantially RPOs went up quarter-to-quarter. They went up $66 million just from fourth quarter to the first quarter. Obviously, part of that is Marigold, which then helps with visibility. But I think an interesting thing for the audience here to understand is another large piece of that was not only these marquee wins that we talked about with the apparel retailer and the e-commerce pet retailer, but it was also agencies beginning to now also sign long-term committed contracts.

That is an exciting proof point for us. It adds to the recurring revenue, which then obviously adds to visibility, which both of those came into our confidence to be able to raise the guidance that we did on the top line by $30 million while continuing to keep to our 2% to 5% conservatism.

Operator: And the next question comes from the line of Clark Wright with D.A. Davidson.

Clark Wright: Awesome. I wanted to maybe quickly touch on the consolidation story. You noted on one of the marquee wins this quarter that you consolidated 4. And I recognize over the course of the last few quarters, you mentioned consolidation being a key piece. Can you talk about the use cases that beta continues to solve for and how you see that expanding over time?

David Steinberg: Yes. Thank you, Clark. Listen, when John and I founded this company, I don't know, 18, 19 years ago at this point, our vision was to put everything a marketer needed into one user interface with one reporting infrastructure. And I would tell you that because of Athena, I think we are finally there. And our ability to consolidate anywhere from 8 to 12 different vendors into one user interface and one reporting infrastructure has never been stronger. In the case of this global company because it's a retailer and a manufacturer of their clothing, we displaced what I think many people think to be certainly the longest serving of the marketing clouds.

They made, I think, their acquisition first in the space as they built their marketing cloud. And in fact, this particular client used that company for everything. They consider themselves a you know what shop, so to speak. So decoupling their marketing cloud from everything else they were doing, I think, was a very difficult decision. We also displaced another competitor of ours who tends to be more focused on mobile. They tend to be a little easier to displace because they're so singularly focused on mobile. And neither of those companies brought any data or any activation capabilities to task.

When you're working with one of the large marketing clouds and you displace them, you're almost always also displacing a professional service provider, who they have to then spend millions of dollars on to customize their platform versus our platform is pretty much ready to go from a cloud perspective. So that would be a really good example of a -- and we see this as one of the most important wins in our company's history, and it goes back to not just our ability to consolidate other vendors, but to do everything that each one of those point solution does better than they do while simultaneously putting everything into one place.

Clark Wright: Got it. That's helpful. And then if I could just add one more. Over the long term, you talked about increasing wallet share with customers. Do you think AI accelerates the rate of share capture, increases the total wallet share or both?

David Steinberg: I think both. I mean, remember, the single greatest way, Clark, to get market share is drive meaningful return on investment to your clients. The Forrester study that came out that said we have a 600% return on marketing spend, we're seeing early adopters of Athena at a materially higher return on investment than even that. The higher we drive return on investment, the more wallet share we're naturally going to get. And as you know, our existing global super-scaled customers will spend well over $100 billion to $110 billion on marketing this year. And at the middle of our range, we'll have, call it, 150 to 170 basis points of wallet share.

I believe we can get that to 700% to 1,000% of their wallet share in the years to come. The key will be driving better return on investment. Artificial intelligence, specifically Athena, plus our data as a moat into our business is going to drive return on marketing spend up meaningfully, which we think will then drive wallet share.

Operator: Our next question comes from Jason Kreyer with Craig-Hallum.

Jason Kreyer: Great job. So I wanted to stick with the point on wallet share because you announced some major wins and you've announced some major wins over recent quarters. But I'm curious, when you look at the aggregate data representing somewhere less than 2% of wallet share, how big of deals are you winning today? And how big a deal do you think you can win over time just in terms of the wallet share of those customers?

David Steinberg: It's interesting, Jason. I would say the last few wins we've had have been at a comparable wallet share to our current wallet share, but the clients are spending 4 or 5x as much per year on marketing and CRM. So they represent some of the largest deals we've ever done right out of the gate. Does that make sense just mathematically? At the same time, what we're starting to see is some of our clients who have been on the platform for 2, 3, 4, 5 years are getting to that 7% to 10% of wallet share and higher. And we're using that as a road map for how do we take new clients there.

So the wins are much bigger than they've ever been, but I'm not sure they're much bigger wallet share only because the companies are so big that we're winning. Now that will give us meaningful upside as they're on the platform, and Chris does a much better job than I do, talking about how ARPU grows the longer a client is with us, and these clients are starting at probably the highest ARPU we've ever seen clients starting.

Christopher Greiner: That also drives, Jason, with our sales pipeline. So we talked about its growth. But if you look at deal sizes and particularly the annual contract value of deals are up pretty substantially year-over-year.

Jason Kreyer: Perfect. Maybe one quick follow-up, David. You've been doing AI for a long time, but it seems like the release of Athena has certainly put you in a different conversation within the AI industry. I'm curious, how has that translated to conversations with customers? And like do you feel like Zeta is becoming more of an AI thought leader in the marketing ecosystem and that's driving that engagement?

David Steinberg: It's interesting, Jason. In some ways, being a native AI company has been complex for us over the last few years because everybody is rolling out shiny new products, most of which are not real, but most of the people are rolling them out. And we've always been seen as sort of like AI is under the engine. Athena is the hood ornament to what we're doing as a company. She is now us announcing ourselves with authority that we are not just an AI company, we are the leader and the disruptor in the AI space. And with the launch of Athena as a marquee product, it has changed the game for the way people are seeing us.

And I will tell you, the 2 client wins we talked about in the prepared remarks, there is 0 chance we would have been in the room if we had not launched Athena or started talking about her at Zeta Live. And there's -- I don't think a chance we would have won these accounts without Athena showing that we are the leader in artificial intelligence as it relates to marketing. From an internal perspective, we're also one of the best users of AI. I mean back to what I was saying around the Spade internal platform we've built.

If you had told me a year ago, we'd be auto generating 75% of our own code while simultaneously driving the type of quality products we're driving, I would have said that's just not possible. Spade has made that possible. And it's really been very interesting how we've done that in an environment where we're still using a very de minimis percentage of tokens versus what many of our competitors are doing, which is going to allow us to continue expanding our operating margin as we've done over the years.

Operator: Our next question is from Matt Swanson with RBC.

Matthew Swanson: And my congratulations for the quarter. I think the metric that really jumped out to me was the increase in multi-use case. And I know that's something we had kind of talked about with Athena and its ability to kind of create this organic expansion motion. Given that, that 50% increase was for the full quarter, like is Athena a real part of that? Is there other parts of your go-to-market driving that? If you could just kind of touch a little more there.

David Steinberg: The great news is Athena is just getting started. So we had a great trajectory going into our launch. Now I will tell you, every client that was on the beta became multi-use case. So it was -- but that was not a lot of clients, right? So as she rolled out to generally available, we saw an uptick there. But I think that's continued upside to growth in multi-use case. And the One Zeta team continues to just do an exceptional job. I'll remind you, Matt, we really started on the One Zeta mission just 18 months ago. So you've got a massive tailwind coming out of the work we've been doing there.

And then I think Athena is going to supercharge that.

Christopher Greiner: And Matt, I think the reason why you picked up on it, but for others, empirically, what we know is that when customers use more than one use case, their ARPU is 3 to 5x greater. So I think you're right on that being an exciting data point.

Matthew Swanson: Yes. No, I appreciate that. And we'll make sure to take note that 100% of Athena users will become multiuse case. That's what I heard.

David Steinberg: I wouldn't go quite there. I mean we -- obviously, that's the goal, Matt, but we certainly didn't say that just yet.

Matthew Swanson: Yes. The other one I want to talk about is the independent agencies. I know you called out advertising as a key vertical for you guys. I think your willingness to kind of share the credit with agencies and allow them to white label some of your technology has been part of the reason you've been so successful there. I guess with Athena, how much more can that help you in those deal environments as a lot of these independent agencies are trying to compete with the big holdcos and so on?

Christopher Greiner: One of the key wins we had, Matt, in the quarter was with a large independent. If you look at business done a year ago with them was 0. Business done within this quarter was 8 figures with Athena being, again, something that was visible to them as something they could also exploit for their benefit. The same was true with a very large new agency that began piloting Zeta in 2025. The spend was material, call it, a little less than $2 million, but that new agreement that was signed is more than 10x that size. So both the independent as well as the large agency continues to have a lot of runway.

In fact, amongst the 5 large holdcos, the number of brands we're working with year-over-year grew by 50%.

David Steinberg: And I just want to say, Matt, we're actually big fans of the agencies. They provide incredible services to their clients. And we've had clients approach us to go direct. And we always try to bring the agency back into it because we think it's a very healthy relationship when it's the three of us. And listen, we're good if the agencies make their money because they're providing meaningful services. But as it relates to our business, I'll remind you, none of the agencies really focus on the retain, which, as of last quarter, is about 60% of our business. So we have real greenfield opportunity there as it relates to the activation, which sort of create customers, monetize customers.

We're very, very happy to partner and give the credit to the agencies because they've built incredible businesses, and we're very excited now to be working with pretty much all of the large holdcos. I think now it's all. And well, certainly the biggest ones. And then to be partnering with a select number of independent agencies. There's a lot of them out there, but we want to work with only the best.

Operator: Our next question comes from Naved Khan with B. Riley.

Ethan Widell: This is Ethan Widell calling in for Naved. To start, can we talk about the ideal customer profile for Athena. I'd imagine there are two kind of distinct value propositions there, a, where Athena can drive efficiency gains for your larger enterprises that already have sophisticated marketing teams and whatnot; b, more small and mid-market players where Athena creates access to capabilities that these customers don't necessarily have in-house. So like which of these is management really seeing more of early traction-wise? And what's kind of the ideal customer size that you're leaning into with your early sales motion?

David Steinberg: Well, it's interesting you put it that way. I mean, today, to be honest, Ethan, we don't focus on midsize. We're really just focused on very large enterprise, although Athena opens up the midsized market to us at some point because you're very intuitive to understand that the cost of layering Athena out to midsized companies is so de minimis to us that would allow us to move into those -- that vertical -- or I'm sorry, into that sort of category without having to meaningfully hire people to do it. But today, we focus solely on very large enterprise.

So I would tell you the two things very large enterprises have really focused on is, a, and you're totally right, efficiency. What they're finding is it takes 70% less labor to manage the Zeta marketing platform with Athena than it did with hands-on keyboard. So you're effectively able to take 70% of your marketing workforce and retask them into other functions where they can be more valuable to your organization. We're also seeing that because -- and this is something I talk about a lot, Ethan, but when you buy software, whether it's us or it's Bloomberg or somebody else, you're buying a stealth fighter, right? We're all spending to build a Stealth fighter of a platform.

And most of our clients know how to fly Cessna with -- I mean think about a Bloomberg terminal, the vast majority of their customers only use 5% to 10% of the capabilities. As you look at our platform, being able to fly that Cessna, we're still delivering a 600% return on marketing spend. As clients are able to use Athena as their copilot, they can get right into the cockpit of that stealth fighter, and they can then fly the entire platform, which is driving meaningfully higher return on marketing spend than even that 600%.

Ethan Widell: Got it. That makes a lot of sense. And then coming out of first quarter, I think you mentioned 9 out of 10 top industries grew more than 20%. I know you spoke to some customer consolidation being a benefit there. But are there any verticals that you see showing any signs of softening, particularly anything sensitive to the macro and geopolitical risk going on right now on the discretionary?

Christopher Greiner: Yes. Short answer, no, Ethan. The 9 out of the 10 were effectively say 9 out of 10 that ended last year. The 1 out of 10 that wasn't growing over 20% is 4% of revenue. So it really gives you a sense for the vast, vast majority of revenues on all of the verticals we support are performing in a very healthy way.

Operator: Our next question is from Terry Tillman with Truist.

Terrell Tillman: I'll just keep it to one question because I know we're running over time. And maybe I'm getting too far ahead of myself, but I like hearing about 40% increase -- 40% plus increase in the sales pipeline. And I think you said your discretionary markets where you have a lot of activity is even higher. Is it too early to start to say because of the emphasis on agentic in AI in general that's in the market, plus you have Athena that's now credibly in the market and in production, could it start to tip the scales and move in some of this funnel activity faster and you actually close new deals quicker?

Or is it just too early or I'm just way too optimistic?

Christopher Greiner: I don't think you're too optimistic. But I do think it's -- from an expectation setting perspective and frankly, from a data-driven perspective, and this is a multi-quarter statement I'm about to make. Our deal cycles in good times and in less good times have stayed consistent. What we're seeing is more opportunities in RFPs, many more at-bats than we were given a year ago and certainly 2 years ago. Those by nature take longer. But again, our strategy many times is to work around those processes through pilots and proof of concepts. Those deals are getting bigger, as David said. So yesterday's $100,000 pilot is today is $1 million.

But I wouldn't say right now, it's an accelerant, but it's in addition to the pipeline.

David Steinberg: And I would concur. But I do want to be clear, Terry, we're getting at bats that we would have never gotten a few years ago. So it's sort of -- it's working really, really well.

Operator: Thank you. This concludes the Q&A session and our call. You may disconnect your lines at this time, and have a wonderful day.

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