PubMatic (PUBM) Q1 2026 Earnings Transcript

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DATE

Thursday, May 7, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Rajeev Goel
• Chief Financial Officer — Steven Pantelick

TAKEAWAYS

• Revenue -- $62.6 million reported, with both revenue and adjusted EBITDA exceeding guidance ranges.
• Adjusted EBITDA -- $2.6 million, representing a 4% margin and marking the 40th consecutive quarter of positive adjusted EBITDA.
• Free Cash Flow -- $10.7 million generated, reflecting a 17% free cash flow margin and a 47% increase from last year.
• Underlying Business Growth -- 13% year over year, representing 83% of total revenues when excluding the legacy DSP buyer.
• Emerging Revenues -- Grew over 80% year over year and comprised 14% of total revenues, primarily driven by adoption of AI products, notably Agentic OS.
• CTV Revenue -- Grew 13% in the Americas, accounting for 80% of total CTV revenue; global CTV revenue (excluding the legacy DSP) grew 18% year over year.
• Mobile App Revenue -- Increased over 25% year over year, benefiting from expanded integration with leading mediation platforms and a global publisher base.
• Display Revenue -- Rose 5% year over year, supported by growth in mobile app video and display segments.
• Activate Direct Buy -- More than tripled year over year, reflecting sharp uptake in direct buying via platform tools.
• Mid-Market DSP Ad Spend -- Up over 20% year over year, underscoring diversification away from the largest DSPs.
• Impressions Processed -- Increased 26% year over year, now surpassing 1 trillion impressions per day due to optimization and targeted CapEx.
• Cost of Revenue -- Managed to 2% year-over-year growth, while unit cost declined 20% on a trailing twelve-month basis.
• Operating Expenses -- Rose 3% year over year due to investments in sales and product, though total company headcount declined.
• Net Loss -- GAAP net loss of $12.5 million, or negative $0.27 per diluted share, including a $1 million foreign exchange headwind.
• APAC and EMEA Revenue -- Grew 25% and 10% respectively; Americas revenue declined 12% due to anticipated legacy DSP spend reductions.
• Ad Vertical Performance -- Double-digit percentage revenue growth in health and fitness, technology and computing, and hobbies and interests; food and drink vertical experienced softness.
• Share Repurchases -- 1 million Class A shares repurchased in the quarter; cumulative buybacks of 13.5 million shares since February 2023 for $190 million, with $85 million still authorized through 2026.
• Cash Position -- Ended with $145 million in cash and no debt on the balance sheet.
• Q2 Revenue Outlook -- Management guided to a range of $68 million to $70 million and adjusted EBITDA of $8 million to $10 million, including a similar FX headwind as Q1.
• AI Solutions Adoption -- Over 20 operational AI agents for buyers and publishers, with more than 1,000 AI-powered deals transacted and over 30 live fully autonomous campaigns worldwide.
• New Partnerships -- Announced integrations with Walmart Connect and PayPal Ads ID, enhancing performance and data targeting capabilities.
• CapEx Guidance -- Full-year capital expenditures expected at $16 million to $19 million, with most investment in AI and advanced computing infrastructure.
• Leadership Transitions -- Chief Growth Officer Pauline and Americas CRO Kyle Dozeman are departing, with a global CRO search underway.

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RISKS

• Americas revenue down 12% year over year, attributed by management to anticipated spend declines from the legacy DSP buyer.
• Net dollar-based retention was "flattish" due to continued legacy DSP impact, though management anticipates a return to positive retention in the second half.
• GAAP net loss of $12.5 million and negative $0.27 per diluted share, including a $1 million FX headwind.
• Leadership turnover cited as an operational factor, with the Chief Growth Officer and Americas CRO both leaving for personal reasons.

SUMMARY

PubMatic (NASDAQ:PUBM) reported 13% year-over-year growth in its underlying business in Q1 2026, with emerging revenues growing over 80% year over year; operational efficiencies contributed to a 4% adjusted EBITDA margin and $10.7 million of free cash flow for the quarter.

Strategic partnerships such as integrations with Walmart Connect and PayPal expanded platform capabilities and addressable market opportunities. The company processed over 1 trillion ad impressions daily through ongoing infrastructure investments. Guidance for the next quarter pointed to continued revenue momentum, margin expansion, and expected renewed growth acceleration as the company laps legacy DSP headwinds and drives further adoption of AI-powered solutions across its ecosystem. AI is transforming the company’s operating leverage, customer outcomes, and monetization opportunities, while management is actively responding to leadership departures and optimizing organizational structure.

• Guidance includes "continued momentum from high-value formats and channels and expanded use of our AI tools and Agentic OS," per Pantelick.
• Management stated, "Emerging revenues grew over 80% year over year and climbed to 14% of total revenues, aided by Agentic OS."
• Goel described a "third transformation of even larger magnitude is underway: AI-driven agentic advertising," positioning PubMatic, Inc. at the intersection of buyers, publishers, and audiences for global AI deployment.
• Fully autonomous agentic campaigns—over 30 currently live—produced "80% to 90% time savings in campaign setup" for agencies and brands.
• Integration with Amazon’s Dynamic Traffic Engine is yielding "up to a 10% increase in CPM since its launch" for publishers on the platform.
• Pantelick confirmed, "The majority of the revenue beat once again flowed through to adjusted EBITDA."
• Regional growth in APAC and EMEA offset declines in the Americas, highlighting the company’s geographically diversified revenue streams.
• Annualized cost efficiencies have been enabled by both AI-driven productivity improvements and ownership of advanced GPU-based infrastructure in partnership with NVIDIA.
• Management expects to "return to revenue growth and accelerate through the second half," citing anticipated margin expansion and AI-driven cost controls.

INDUSTRY GLOSSARY

• Agentic OS: PubMatic’s AI-powered operating system, enabling fully autonomous campaign execution and end-to-end optimization in programmatic advertising workflows.
• Activate: PubMatic’s direct buying platform that connects ad demand and premium supply in a single environment to improve ROI and simplify ecosystem complexity.
• Legacy DSP: A demand-side platform partner that caused year-over-year revenue comparisons and retention rates to be materially affected due to spend decline starting in mid-2025.
• Monetized Impressions: The count of ad impressions processed and sold through PubMatic, Inc.'s platform, representing the basis for revenue.
• Net Dollar-Based Retention: A measure of recurring revenue growth or contraction from existing customers, adjusted for expansion, contraction, and churn.

Full Conference Call Transcript

Rajeev Goel, cofounder and CEO, and Steven Pantelick, CFO. Before we get started, I have a few housekeeping items. Today’s prepared remarks have been recorded, after which Rajeev and Steven will host live Q&A. If you plan to ask a question, please ensure you have set Zoom to display your full name and firm and use the raise hand function located at the bottom of your screen. A copy of our press release can be found on the website at pubmatic.com. I would like to remind participants that during this call, management will make forward-looking statements, including, without limitation, statements regarding our future performance, market opportunity, growth strategy, and financial outlook.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and future conditions. These forward-looking statements are subject to inherent risks, uncertainties, and changes in circumstances that are difficult to predict. You can find more information about these risks, uncertainties, and other factors in our reports filed from time to time with the Securities and Exchange Commission, and available at investors.pubmatic.com, including our most recent Form 10-K and any subsequent filings on Forms 10-Q or 8-K. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements.

All information discussed today is as of May 7, 2026, and we do not intend and undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law. In addition, today’s discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, cash flow from operations, and free cash flow. Non-GAAP measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our press release.

I will now turn the call over to Rajeev.

Rajeev Goel: Thank you, Stacie, and welcome, everyone. We delivered an exceptional first quarter with revenue and adjusted EBITDA ahead of guidance. These results reflect the continued strength of our business and accelerating adoption of our AI solutions. We delivered 13% year-over-year growth in our underlying business. Emerging revenues grew over 80% year over year and climbed to 14% of total revenues, aided by Agentic OS. The new strategy we launched in 2025 is delivering tangible results. We are diversifying our DSP mix, growing in high consumer engagement channels such as CTV and mobile app, and creating more value for key stakeholders across the advertising ecosystem.

As a pioneer in AI, our multiyear investments are paying off in fueling new revenue streams, operating leverage, and market-leading advantages that are at the early stages of compounding. Agentic AI is more than just a productivity tool. It is a structural shift that is redefining the entire digital advertising market. It simplifies the connections between advertisers and outcomes and transforms how value flows through the ecosystem. Over the past two decades, digital advertising has undergone two profound transformations, each creating markets measured in the hundreds of billions of dollars. The first was real-time bidding, and the second was the shift to mobile consumption. Today, a third transformation of even larger magnitude is underway: AI-driven agentic advertising.

AI simplifies the ecosystem by automating decisions that once required teams using fragmented systems. Our platform sits at the intersection of buyers, publishers, and audiences, enabling us to apply AI at global scale across the entire value chain, from planning and discovery to activation and measurement. Our approach fundamentally changes how value is created. It drives performance that the legacy fragmented model is structurally challenged to deliver. Importantly, Agentic AI prioritizes outcomes, not interfaces. At the same time, AI is leveling the playing field between walled gardens and the open internet. Capabilities that once benefited closed platforms—like efficiency, lower operating costs, and stronger advertising ROI—are now achievable in the open internet, with the added benefits of transparency and choice.

As advertisers allocate spend based on measurable performance, our addressable market expands, and we are well positioned to capture that shift. Importantly, our growth engine is directly aligned with customer outcomes. We are evaluated on our ability to monetize every ad impression we process, and we earn revenue only when we deliver superior results for publishers and buyers. As customers see stronger performance, they increase usage, creating a self-reinforcing model where greater adoption and utilization drive both customer ROI and our own profitable growth. Our Agentic OS and Activate products extend this alignment further into the value chain. Underpinning this model are five competitive advantages—assets that are increasingly difficult for new entrants to replicate and that compound over time.

Further, they cannot be vibe-coded. First is scale. Nearly the entire advertising-supported open internet is available on PubMatic, Inc. We have nearly 2,000 premium publishers representing over 100,000 websites, apps, and streamers, including 28 of the top 30 global streamers. This breadth and depth of access to omnichannel inventory is built through years of trust and performance. Second is Activate. Our direct buying platform was designed from the beginning to drive performance and simplify the complexity of the ecosystem. By connecting ad demand and premium supply in a single environment, advertisers see higher ROI and publishers benefit from increased deals. Third is Agentic OS and our growing portfolio of AI agents.

We have over 20 different operational agents available for media buyers and publishers, with new agents rolling out every month to automate and optimize core advertising workflows. Our newest agent enables buyers to discover and activate curated omnichannel supply in seconds through natural language queries. For example, a media buyer simply asks for CTV inventory for male sports enthusiasts, and the agent instantly surfaces relevant opportunities, audience reach estimates, and deal options. This process used to take hours or days and is now reduced to minutes. Fourth, our owned and operated infrastructure. This is a structural advantage in the AI era. Our long-standing collaboration with NVIDIA brings advanced GPU technology directly into our platform with a variety of distinct benefits.

GPU technology improves data processing to handle the massive advertising-specific workloads that underpin bidding, pricing, and campaign optimization, cutting compute time and cost. We are using NVIDIA Triton Inference Server to deploy real-time inferencing for bidding and audience decisioning. As a result, we process data and train models faster and more cost effectively than cloud-based alternatives, while also improving model performance. In AI, faster feedback loops lead to better models, and better models attract more advertising activity. By owning our infrastructure, we keep that compounding advantage within PubMatic, Inc., allowing our competitive moat to widen with every transaction processed. Our data platform, Connect, is a key input of this flywheel.

Comprised of data assets from over 300 data and commerce media partners, it is our fifth competitive advantage. With faster processing, we are improving our proprietary model training in real time, resulting in significant performance improvements and better optimization for advertiser return on ad spend. Connect is a powerful platform that enables advertisers to shift their audience targeting strategies to the sell side with greater efficiency and reach, which is a further catalyst for Activate and Agentic OS performance. There is no other company that has all five of these components and is innovating at this pace. Further, revenue growth is building and customer adoption continues to scale quickly. PubMatic, Inc. now has AI embedded across its entire platform.

Publishers use PubMatic AI assistant to seamlessly make their inventory available to buyers on PubMatic, Inc. via deals. Over 1,000 AI-powered deals have been transacted to date, resulting in millions of dollars in publisher monetization. Similarly, buyers use our AI assistant’s chat-based interface to discover audiences and inventory and to activate new advertising campaigns. Even more exciting is the adoption of fully autonomous agentic campaigns. What launched at CES in January with a single campaign has now scaled to more than 30 live fully autonomous campaigns from independent agencies, large buying platforms, and global brands across the United States, France, the Netherlands, Australia, and India. PubMatic, Inc. is the only platform that has operationalized fully agentic campaigns at scale.

Agencies like Butler/Till, MiQ, and Breakthrough—digital media solutions provider for more than 1,000 brands and 235 agencies—alongside Amnet and Abovo Max Lead in EMEA, are seeing compelling results: a material reduction in fees, more dollars shifting into working media, high-performing KPIs, and 80% to 90% time savings in campaign setup. These are not marginal gains. These are step-function efficiency unlocks that validate agentic buying as a value chain shift. I am incredibly proud of the team and the results we are delivering. We have the technology, infrastructure, scale, and innovation to lead this seismic industry shift. At the same time, we continue to strengthen our underlying business.

The DSP landscape continues to evolve and fragment, with the growing share of digital advertising spend coming from outside the Fortune 1,000 advertisers. Our growth profile mirrors this trend as we diversify our business and accelerate expansion beyond the largest DSPs. In Q1, activity from mid-market and performance DSPs continued to grow over 20% year over year. Many of these DSPs are also quickly innovating around Agentic. AdRoll became the first DSP to connect a PubMatic, Inc. PMP deal troubleshooting AI agent via Model Context Protocol. This integration enables their agent to autonomously troubleshoot private marketplace deals, cutting resolution time from days to minutes, as compared to traditional programmatic workflows.

This is an exciting area of innovation and demonstrates how existing software interfaces are quickly becoming obsolete. We also continue to innovate with the largest performance DSPs. A significant milestone this quarter was our integration with Amazon’s Dynamic Traffic Engine, now launched globally. This integration shares demand signals from Amazon directly with PubMatic, Inc., so that we can better match inventory to their advertiser demand in real time. Early results are delivering increased monetization for publishers on PubMatic, Inc., up to a 10% increase in CPM since its launch. We also delivered growth in high consumer engagement channels, including CTV and mobile app.

New products like Creative Innovation Suite are now live across Agentic OS, enabling brands to connect with viewers across interactive content and devices. For example, a viewer may start a show on their TV, pick it up later on a phone, or pause the content to check something online. Our technology lets advertisers deliver a consistent story across all of these moments. Premium publishers like Sling TV are unlocking more value from their inventory, while agencies such as Horizon Media, Crossmedia, and Kelly Scott Madison use Creative Innovation Suite to deliver more engaging, measurable campaigns for their clients. Our live sports marketplace continues to be one of the most powerful ways to reach engaged audiences.

Through PubMatic, Inc., buyers can access premium CTV inventory across major sporting leagues and global events. The scale behind this growth opportunity is significant. We expect the FIFA World Cup alone will bring more than 100 million high-value impressions per day to our platform, with growing demand from buyers across the UK, France, Germany, and Italy. According to eMarketer, digital live sports viewership is projected to grow 20% between now and 2030. With expansive partnerships across some of the largest premium live sports inventory, coupled with over 300 data partners and innovative CTV solutions, we expect live sports to be a strong growth driver over the next several years. Our mobile app business grew over 25% year over year.

Over the past quarter, we deepened our integrations across the mobile ecosystem. We are now live with the three leading global mediation platforms—AppLovin MAX, Google AdMob, and, most recently, Unity LevelPlay. PubMatic, Inc. now has access to over 90% of global SDK inventory. For example, Zynga, a global leader in interactive entertainment that reaches hundreds of millions of players worldwide, has integrated our SDK to provide advertisers with programmatic access to their high-value mobile audiences at global scale. Much like mobile app, commerce media also benefits from logged-in user engagement, where buyers can prioritize performance and measurable outcomes. With an addressable market of $18 billion, we see a significant long-term opportunity in commerce media.

Fueling this are new partnerships that add scale and audience data to the PubMatic, Inc. Connect platform. We recently announced an exciting partnership with Walmart Connect, which unlocks new advertisers and new ad spend on our platform, particularly for CTV. Our partnership with Walmart Connect Select integrates their first-party shopper audiences with the media on our platform, enabling new performance-oriented ad transactions for SMB and enterprise advertisers. I am also excited to share that we have integrated with payments leader PayPal, integrating the PayPal Ads ID. This integration brings over 25 billion transactions across 400 million verified PayPal and Venmo accounts to the platform, giving buyers high-value data to activate across the open internet.

It enhances targeting accuracy, verified identity across devices, and true closed-loop attribution in a privacy-safe way. As this partnership scales, we expect it to contribute to emerging revenue streams and deliver incremental margin. In closing, we delivered a great quarter. We continue to add marquee partnerships, focus on innovation, and execute across our strategic priorities. AI is an accelerant to our already diverse growth engine. The repeat engagement we are seeing from customers underscores that this technology is driving performance. Each additional transaction compounds our data advantage, driving superior performance and accelerating organic growth across our core business, including CTV, mobile app, and commerce media.

With our proven model, differentiated infrastructure, and expanding global footprint, PubMatic, Inc. is positioned to capture this next transformational shift in digital advertising, creating long-term value for our customers, partners, and shareholders. I will now turn the call over to Steven for the financials.

Steven Pantelick: Thank you, Rajeev, and welcome, everyone. We delivered a strong quarter with Q1 revenue of $62.6 million and adjusted EBITDA of $2.6 million, both ahead of the preliminary figures we shared on April 22 and well above the high end of our guidance ranges. Excluding revenues related to the legacy DSP referenced mid-2025, our underlying business grew 13% year over year and represented 83% of our total revenues. This double-digit growth reflects the health of our business, ongoing benefits from our multiyear secular growth investments, and the momentum of our strategic transformation. This execution, coupled with the rapid expansion of PubMatic, Inc.

AI tools and Agentic OS, positions us for accelerating double-digit revenue growth in the second half of the year. The majority of the revenue beat once again flowed through to adjusted EBITDA. Q1 was the 40th consecutive quarter of positive adjusted EBITDA, underscoring the inherent durability of our model, ongoing productivity gains, and expense discipline. We also generated $10.7 million of free cash flow, a 17% free cash flow margin, and returned value to shareholders through the repurchase of 1 million Class A common shares. Moving on to the quarterly highlights. Our outperformance was driven by double-digit year-over-year growth in total company monetized impressions, reflecting the structural strength of our usage-based model.

Our investments in high-value formats and channels also delivered outsized growth. Combined, revenue from CTV, mobile app, and emerging revenues grew over 20% year over year and represented the majority of total revenues. Breaking this down further, strength in CTV was led by the Americas, where revenues grew 13% year over year and represented approximately 80% of total CTV revenue. With 28 out of the top 30 global streamers on PubMatic, Inc.'s platform and growing access to live sports, we saw an increase in both the number of CTV advertisers and premium inventory available. Excluding the legacy DSP buyer, global CTV revenues grew 18% year over year. Mobile app extended its momentum as revenue increased over 25% year over year.

This growth reflects the ramp-up of strategic partnerships, ongoing product innovation, and continued expansion of our global app publisher base. Notably, mobile app saw broad-based growth in both video and display. With its sizable scale on our platform, mobile app also meaningfully contributed to our overall display revenues, which grew 5% year over year. Emerging revenue streams were again a standout category and grew over 80% year over year and represented 14% of total revenues, driven by increased adoption across our new AI products, including Agentic OS. On a global basis, direct buy on Activate grew more than 3x year over year. We also continue to diversify our DSP mix.

Q1 ad spend from our mid-market DSP partners was up over 20% year over year, highlighting the impact of our increased focus and investment accelerating these high-growth, innovative partners. Revenues in the first quarter related to the legacy DSP buyer were better than expected as we further optimized our platform to meet the needs of this buyer. Across our well-diversified portfolio of ad verticals, we saw double-digit percentage growth in health and fitness, technology and computing, and hobbies and interests. This growth helped offset softness in the business and food and drink verticals. Overall, our top 10 ad verticals increased mid-single-digit percentages year over year.

Regionally, our APAC and EMEA businesses grew rapidly with year-over-year revenue growth of 25% and 10%, respectively, offsetting a 12% decline in the Americas, which was primarily due to the spend declines we anticipated from the legacy DSP buyer. Turning to our owned and operated infrastructure. The number of impressions we processed increased 26% year over year through optimization efforts and targeted CapEx investments. The combination of these efforts and AI-driven efficiencies enabled us to manage our cost of revenue growth to 2% year over year, despite industry-wide utility cost pass-throughs from data center colo providers. On a trailing twelve-month basis, our unit cost declined 20% year over year.

Today, we officially process over 1 trillion impressions per day, which is a significant asset and long-term revenue opportunity for us as we accelerate our strategic transformation. Our platform is becoming smarter, faster, and more profitable because of the compounding effects of our multiyear investments in AI and advanced computing, growing pool of premium inventory, and 300-plus data partnerships. We will continue shifting our investment away from predominantly capacity expansion toward targeted GPU-centric infrastructure that supports higher value, differentiated offerings like live sports, CTV, mobile app, and Agentic OS. We believe this approach will be a durable accelerant to growth over the long term and supports the broader industry shift to performance-based advertising.

We will also continue to harness AI automation internally across our company. Last quarter, I called out significant productivity gains in engineering, finance, and legal. We also extended AI operationally across our customer success organization, which is now achieving double-digit productivity gains performing their function. Cumulatively, these internal efficiency gains are sizable and allow us to reallocate people and investments toward our biggest revenue growth initiatives. Moving on to operating expenses. Total operating expenses in the first quarter marginally increased 3% as compared to last year, and include incremental investments in our buyer-focused sales team and product go-to-market organization. Our productivity gains from AI that I just called out help fund these investments.

Our total company headcount was down year over year as a result of this operating strategy. Q1 adjusted EBITDA was $2.6 million, or 4% margin, which included a foreign exchange headwind of approximately $1 million due to the weakening US dollar over the quarter. Q1 GAAP net loss was $12.5 million, or negative $0.27 per diluted share. Moving to cash and our capital allocation. Our balance sheet remains a core strategic advantage. We generated $17.3 million in net operating cash flows in the first quarter, up 11% over Q1 last year, and delivered free cash flow of $10.7 million, a 47% increase over last year.

To underscore our long-term ability to generate cash, since 2021 through Q1 2026 we have generated over $429 million in net cash from operations and more than $232 million in free cash flow. We ended the quarter with $145 million cash and zero debt. Our capital allocation strategy remains disciplined and balanced, focused on long-term shareholder value creation. We continue to invest in innovation and infrastructure to drive incremental organic growth while maintaining the flexibility to pursue strategic M&A opportunities. We have also made a long-term commitment to return capital to shareholders via our share repurchase program.

Since the inception of our repurchase program in February 2023 through the end of Q1, we have bought back 13.5 million Class A common shares for $190 million. We have $85 million remaining in this program authorized through 2026. Moving on to our outlook. We expect Q2 revenue to be in the range of $68 million to $70 million, which includes continued momentum from high-value formats and channels and expanded use of our AI tools and Agentic OS. In April, our usage-based model continued to perform well with continued growth in monetized impressions. Ad spend across our top 10 ad verticals was also healthy in April.

As a reminder, our Q2 outlook includes the impact from the legacy DSP we called out mid-2025, and which we will lap in Q3. Q2 adjusted EBITDA is expected to be in the range of $8 million to $10 million and assumes a similar FX headwind as Q1. The sequential margin expansion compared to Q1 reflects revenue scaling on a largely fixed cost base. Beginning in Q3, we expect to return to revenue growth and accelerate through the second half. With this revenue growth, we anticipate margin expansion, supported by targeted investments in sales and AI products, expense discipline, and continued AI-driven cost efficiencies across all functional areas.

Sequentially, quarterly cost of revenue and operating expenses are anticipated to marginally increase in the low- to mid-single-digit percentages. Full-year CapEx is projected to be approximately $16 million to $19 million, with the majority of our CapEx to be invested in AI capabilities and advanced computing infrastructure. In closing, Q1 was a strong start to the year, demonstrating both the durability of our model and the momentum building behind our strategic transformation. Our growing diversification across DSPs, verticals, geographies, and high-engagement environments reduces concentration risk and positions us to grow from a broader base. As we lap the DSP impact in Q3 and accelerate through the second half, we are well positioned for both revenue and margin expansion.

Importantly, AI is not just a product catalyst, it is a financial lever. We are driving new revenue from AI-powered solutions while using AI to expand margins, improve productivity, and fund the investments that drive our next phase of growth. With that, I will turn the call over to Stacie for questions.

Operator: Thank you, Steven. As a reminder, you can ask a question by raising your hand located on the dashboard. Or if you are on your phone, please press 9. Our first question comes from Matthew Swanson at RBC. Please go ahead, Matt.

Matthew Swanson: Great. Thank you, guys. I guess just a couple of things. First, Steven, picking up where you left off. The headwind from the DSP last year has obviously made things a little bit murkier to see all the good growth drivers. Can you just remind us in terms of timing in Q3? Is Q3 completely neutral—so no more headwind—or was it at a certain point within the quarter that the headwind really started to pick up? Just first to think about that.

Steven Pantelick: Sure. Good to reconnect, Matt. We will see the benefit of lapping it not really at the start of the quarter. We saw some of the impact flow in at the beginning of the quarter, but by mid-quarter we will be fully lapping the impact.

Matthew Swanson: Thank you. And then maybe for Rajeev, once we get through that headwind, you will just have to deal with the cyclical/secular conversation everybody else does. You have a lot of really fast-growing segments of your business, and then there are also areas that are growing less quickly. Can you help us think through how these newer emerging technologies ramp and how you think about those as they become a bigger portion of your business, and what the timeline would be on that?

Rajeev Goel: Sure. Thanks, Matt. There are a couple of factors that give us good confidence to achieve double-digit growth in the second half of the year. First of all, AI. As I said in the prepared remarks, there is a huge agentic transformation underway in the industry. It is the third transformation after RTB and mobile, and I think it will be bigger than those two. That opportunity for us—something we are innovating very hard against and making terrific progress—is a huge TAM expansion opportunity. I see AI as more than just a technical revolution; it is a value chain revolution. We can connect the buyer and the advertiser much closer together and increase our TAM.

That will cut across every ad format, not just the high-growth formats we are participating in, like CTV, mobile app, or commerce media. Even within display and online video, as we reshape the value chain with Agentic execution, there is an opportunity for us to deliver more value across the ecosystem and for us, in turn, to capture more value. I am excited about the AI growth opportunity, and I am also excited about CTV growth, mobile app growth, which has been very strong for the last several quarters, commerce media where I think we are really gaining steam, and our other emerging revenue streams, which, as Steven noted, grew over 80% year over year in Q1.

Matthew Swanson: Thank you both.

Operator: Our next question comes from Barton Crockett at Rosenblatt. Please go ahead, Barton.

Barton Crockett: Thanks for taking the question. I was first just wanting to understand in the guide, given the noise around the DSP exit, did you tell us what the growth is ex-DSP in your guide for the second quarter?

Steven Pantelick: No, we did not share that. But the trajectory will be similar to what we saw in the first quarter. The reality is, as Rajeev and I have called out, we have a lot of really strong growth drivers, and the second quarter will be the last full quarter where we are lapping the impact. I would expect the midpoint of the guide to be in the single-digit range excluding the DSP impact, and the upper boundary is going to be high single digits—absolutely underscoring the fundamental growth that we are seeing in our business across the board, which I think is the important point for investors to understand.

It is not just one particular format and channel; it is mobile app, it is CTV. Even display showed very strong growth in the first quarter.

Barton Crockett: Okay. As a follow-up, it does suggest slower than the really robust 18% growth ex-DSP in the first quarter. Is that just conservatism in the guide, or is there something out there—tougher comp or something else—that argues for a bit of a slowdown?

Steven Pantelick: Just to clarify the data point, it is actually 13% in the first quarter. It is absolutely not a slowdown signal. We feel very good about the momentum we are seeing. If you step back, we are not seeing deterioration in the macro, but we are being appropriately prudent given the amount of noise out there across the globe in terms of impacts from war and consumer reticence to buy. From my perspective, we are well set up for a solid Q2 and, more importantly, the momentum going into the second half. We anticipate returning to reported growth in the third quarter and accelerating to double-digit growth in the second half.

Barton Crockett: Okay. And then just one final question. When you are talking about the growth in agentic volume, and you talked about 1,000 campaigns, just to reality check, is this still an immaterial percentage of your business? And can you give us a sense of the degree of materiality we might see over the next few quarters?

Steven Pantelick: The way to think about our overall AI initiatives is that it is not just one particular vector. We are operating on a number of different vectors from an AI-powered impact on our revenues. It includes fully agentic campaigns that Rajeev described, but also other solutions that help drive our overall emerging revenues. We shared that emerging revenues grew over 80%, and AI-powered revenues are a big part of that growth. I fully anticipate that, along the spectrum of AI-powered or enabled tools—from publishers setting up campaigns more quickly, to troubleshooting, to fully agentic campaigns—AI will help drive double-digit revenue growth for us in the second half, alongside strong momentum in mobile app and CTV.

Barton Crockett: Alright. Thank you.

Operator: Our next question comes from James Heaney at Jefferies. Please go ahead, James.

James Heaney: Great. Thanks for the question. Rajeev, can you talk about the momentum that you are seeing within the mid-market DSP segment? And over time, how big of a driver you think that can be for your business compared to maybe the top five DSPs?

Rajeev Goel: Thanks, James. We are seeing really tremendous growth opportunity in that mid-market DSP cohort, consistent with where advertising spend growth is. If we look at Fortune 1,000 advertisers—many large enterprises, incumbent brands—their ad budgets are pretty stagnant, as, in many cases, their revenues are stagnant. Instead, challenger brands—mid-market, upper mid-market, SMB brands—are growing much faster in their core business, and that means their advertising budgets are growing faster. In particular, we see that in the upper mid-market category. As a result, there is a lot of fragmentation in the DSP space. In the last year, we have added over 50 DSPs. We continued to add more in the first quarter.

We are seeing strong growth there, and over time it will change the composition of the market and diversify the opportunity base for us. AI will enhance that because it will make it easier for these DSPs to onboard new clients in that mid-market or small advertiser category and lower the cost of service. I do not have a specific forecast for the percentage of overall business, but it already is significant, and I expect it to grow as a share of the total in the coming years.

James Heaney: Great. That is helpful. And then, Steven, as we think about the second half, what are your macro assumptions? Is there an element of conservatism? And how are you sizing up political for Q3 and Q4?

Steven Pantelick: The results that we saw in April showed healthy ad spending. We saw double-digit growth for a number of ad verticals on a year-over-year basis. As a reminder, we have a very well-diversified set of ad verticals—20-plus—so strength in several certainly helps offset softness in others. That is a function of long-term investments we have made in our publisher base and tools. We have operated in a number of different macro environments. The environment right now is stable and healthy. Programmatic benefits when there are stresses because we can show transparency and results. I am cautiously optimistic about the macro for the balance of the year. Set against that, we have significant drivers to power results through the year.

Rajeev described the AI leadership we have established, which will be a tailwind. Many of the 50 new DSPs we brought in last year were performance-based, which is a great place to be in a challenging economic environment if that happens. We continue to see great CTV leadership, have been investing in secular growth areas, and you can see the tremendous growth in emerging revenues. Overall, going into the second half, we are well poised in a number of different macro environments to continue to grow. We will return to growth, and given a stable macro environment, we expect to return to double-digit growth. We feel really good about where we are as a business.

Operator: Our next question comes from Robert Coolbrith at Evercore. Please go ahead, Rob.

Robert Coolbrith: Great. Thanks for the opportunity to ask a question. Congratulations on the results. Steven, a couple for you. Any improvement in the trends of the legacy DSP in the quarter? It was well publicized that they had some disruption in terms of the direct connects with some of the agencies, and we have heard those direct connects may have lost some share of voice within the DSP during the quarter. The vertical commentary and macro commentary also seemed helpful, but did you see any slowdown in March—related to the situation in Iran or fuel prices—and some recovery in April?

Any indications on whether you already saw a slight slowdown and then recovery, and maybe that gives you more confidence in the shape of the macro? And then finally, Rajeev, with all the moves you are making around Agentic AI, can you discuss the potential opportunity for you to power ads within the LLMs themselves? Are those discussions you are having, and is that an area where you see opportunity?

Steven Pantelick: With respect to the legacy DSP we called out mid-2025, a part of our Q1 performance was that results were a little better than we anticipated. That was a contributing factor—not a huge factor—but a good indicator of the progress we have made because we continue to optimize our platform to meet this buyer’s needs. The takeaway for investors is that we have established a stable business with this DSP after the initial drop back mid-2025. What I saw in April was similar, and we are going to lap that in the coming months. That will be one headwind we will not have, contributing to our accelerated growth in the second half.

On the macro, I want to underscore our diversified ad portfolio across shopping, health and fitness, food and drink, hobbies and interests, arts and entertainment, etc. Over a long timeframe, there will be strength in some and softness in others, and we have worked hard not to over-index in any one area. In the first quarter, results were pretty healthy across the board and offset some softness—food and drink was a little soft. In April, we saw strong results in the same categories as in Q1, with more than half of our ad verticals growing nicely, and a little softness in travel and in arts and entertainment. By and large, with our diversified portfolio, it is not constraining our business.

Looking ahead, TBD, but I would rather be in our position in programmatic—investing in performance advertising, transparency, and data—tapped into where advertisers want to invest.

Rajeev Goel: Thanks, Steven. Rob, to underscore Steven’s last point around performance, it is worth highlighting our partnerships with both Walmart and PayPal. These commerce media partnerships are great counterbalances from a performance advertising growth perspective to any macro uncertainty. With Walmart Connect, we are a preferred partner for Walmart Connect Select. We are marrying their shopper audiences—great first-party data from one of the largest retailers in the world—with our high-quality inventory across CTV, mobile app, and web, giving Walmart advertisers—enterprise and SMB—the ability to target those audiences on our platform. That is a great opportunity to bring performance dollars and incremental ad spend to our platform.

With PayPal, there are about 25 billion transactions and 400 million verified accounts from PayPal and Venmo. We are integrating their transaction graph, ID graph, and data into our platform, bringing performance advertising solutions to market. These are great opportunities in the second half to counteract any potential macro. Turning to your question around OpenAI and LLMs, we all likely saw their $100 billion ambition around advertising. For me, that indicates they will have to work with a wide variety of partners across the ecosystem. They will have to tap into enterprise advertisers and SMBs, brand and performance advertising, and both display and richer video formats. It will be an ecosystem-wide effort for them to get to that level.

We have an opportunity to partner with companies like that to bring the value of our business relationships, infrastructure, data, and environment relationships. We have been working with smaller companies in the space like Context and Dapier. We are already innovating on ad formats and appropriate signals to monetize that kind of inventory, which puts us in a good position.

Operator: Our next question comes from Eric Martinuzzi at Lake Street. Please go ahead, Eric.

Eric Martinuzzi: You hear me? Sorry about that. Yeah. So I was curious—maybe I missed it—did you give a net dollar-based retention number for Q1, Steven?

Steven Pantelick: It was basically flattish, very similar to our overall reported number, and reflects the impact from the legacy DSP. I fully anticipate that to return to positive going into the second half of the year.

Eric Martinuzzi: Okay. So when you say flattish, it was sequentially up versus Q4? I think Q4 was 96.6%.

Steven Pantelick: Yes, a little bit better.

Eric Martinuzzi: And the expectation—historically, you have been above 100%. Is the expectation that once we anniversary the large DSP, that is what happens?

Steven Pantelick: Absolutely. It is important to underscore that we have made tremendous progress across a number of fronts focused on secular growth areas and managing through the DSP impact. Going into the third quarter, we are going to return to year-over-year revenue growth and see revenues accelerate to double-digit rates based upon the multitude of initiatives we have called out and continue to see great adoption, with a long-term trajectory ahead of us.

Eric Martinuzzi: Okay. And then you had high-level leadership turnover. That was part of the reason for the prelim results. Can you give us an update there, specifically with regard to a single, global CRO? Any update?

Rajeev Goel: We have two tremendous leaders that have been here for 15 years in one case and 13 years in another who are leaving for personal reasons. Pauline, our Chief Growth Officer, has made the difficult decision to leave due to health reasons, and Kyle Dozeman, our Americas CRO, is leaving to pursue an entrepreneurship opportunity, which has long been a personal ambition of his. Both are still in their roles for a transition period. We have engaged Heidrick & Struggles to work with us on a global CRO search. There is an opportunity to consolidate some of our revenue-generating functions under a global CRO for execution consistency and structure.

At the same time, we have a deep leadership bench and full confidence in the rest of the team. The search is moving apace, and we are seeing a lot of great quality candidates. Where we are positioned—in terms of the business model, profitability and cash generation, the diverse portfolio of growth drivers, and our AI leadership—is a very attractive combination. I am looking forward to getting the right person in place in the next couple of months.

Eric Martinuzzi: Got it. Thanks for the update.

Operator: Our next question comes from Analyst at KeyBanc. Please go ahead.

Analyst: Great. Thank you, and good afternoon. I was hoping you could expand a bit more on what you think the business looks like over time as Agentic OS scales and more AI is running through. Should we think of any changes in the margin structure and then the type of client needs you can serve?

Rajeev Goel: There is an opportunity to simplify the complexity that exists in the ecosystem today. We have a highly siloed ecosystem—advertiser/agency, DSP, SSP, publisher, consumer—with other parties like verification and data management. Our focus is on applying AI across the full value chain, which is different from others. The true value of AI can only be achieved when it is not operating within a silo. Instead of AI operating within an SSP that connects with AI operating within a DSP, the best outcomes occur when AI runs end-to-end and data is available end-to-end. AI agents running agentically will do their best work—increasing effectiveness and efficiency—when they can operate broadly and autonomously against the customer’s objective.

That opens up a lot more of the addressable market to us. For instance, when a customer is using Activate—direct buying in our SSP—and then accessing that agentically with Agentic OS, customers are seeing tremendous working media efficiencies. More of their dollars go to purchasing media, with 30% to 40% improvements in CPMs and 40% more media being bought. Importantly, we see increases in revenue because we are delivering more ROI and more value across the ecosystem. So it is an absolute revenue growth opportunity for us. AI also levels the playing field between walled gardens and the open internet.

When advertisers buy directly in our SSP—a single layer of technology—it looks a lot like the walled gardens’ leverage to drive ad performance. The strong advertiser ROI that historically advantaged walled gardens is now achievable for advertisers in the open internet. Lastly, user interfaces are becoming obsolete. AI agents have no use for them, and humans operating with AI have decreasing utility from UIs, which feel both constrictive and taxing. We have published case studies where clients using Agentic OS see 80% to 90% time savings for campaign setup. That is a tremendous value add and a big opportunity within both agencies and advertisers.

Steven Pantelick: From our perspective, this is an ideal opportunity for our company. Many of the things we have focused on for over a decade—owning and operating our own infrastructure, being a first mover in leveraging AI capabilities through engineering to drive revenues—position us to take advantage of the revenue opportunity and a significant margin opportunity because of our fixed cost leverage. We can continue to manage our costs on a unit basis while incrementally adding new revenue streams. Many of them are net new to us as a business. We are very positive about the impact of this generational trend. We continue to put incremental resources in the right areas—secular growth areas and advanced infrastructure.

Our expense discipline and focus on productivity will help us drive margins as the revenues emerge from this opportunity.

Operator: Our next question comes from Analyst at Wolfe. Please go ahead.

Analyst: Thank you for taking my question. Rajeev, can you provide an update on your view of Google’s antitrust trial and the potential impact?

Rajeev Goel: We, alongside everyone else in the ecosystem, are eagerly awaiting the verdict in terms of remedies. Some folks anticipated it would already have been released, so we are expecting to see it any day or week now. We are waiting to see the extent of remedies, as well as behavioral remedies. Our view is that behavioral remedies can be implemented quite quickly—it is pretty clear and straightforward—so we see the potential for opportunity pretty imminently post-verdict, subject to what exactly that verdict is. As a reminder, Google is a 60% market share player, and each 1% market share could add $50 million to $75 million in revenue to our business with very high margins, around 80%.

We think there is an opportunity to more than double our share of the market, currently 4%, again depending on what the verdict looks like. So it is a massive opportunity, and we are waiting for that verdict at any point now.

Analyst: Sounds good. That is it for me. Thanks, guys.

Operator: We have time for one more question. Analyst at Citizens. Please go ahead.

Analyst: Hi. Thanks so much for taking my question. Rajeev, on Agentic OS, it launched a couple of months ago and you have already seen thousands of deals. What has surprised you most—positively or negatively—about how customers are using Agentic OS, and how is that feedback shaping where you take the product from here? And on Agentic OS, you mentioned last quarter that you were still figuring out pricing. Are there any updates to pricing structure you can share for those deals that are active today?

Rajeev Goel: In terms of surprises, there is an ecosystem-wide expectation that the use of AI can lead to efficiency—less manual time, less trader time to set up campaigns, less time reviewing reports—and we are clearly seeing that. But a very positive surprise is what we are seeing in terms of the effectiveness of advertising. We have been able to optimize much faster than what humans can do. Humans have built-in biases that a machine does not have. We are seeing a dual benefit of both efficiency and effectiveness increasing, which is a powerful opportunity for us. We are investing behind that significantly. Steven mentioned using AI internally at PubMatic, Inc. to create efficiencies so teams can take on more work.

We are taking some of that upside and reinvesting it back into sales, GTM, and product innovation. That will be a key driver of our double-digit growth in the second half. Another surprise is how quickly independent agencies are moving around AI. The holdcos are focused on it, but with bigger teams and systems they tend to move more slowly. The speed with which we are seeing independent agencies move is fantastic.

Steven Pantelick: Two brief comments on pricing. First, we anticipate the benefit of our Activate product—which is our buying interface on our platform and is revenue-share based—to be the interface with the agentic buying software, very much consistent with our overall revenue-share approach. We are also looking at subscription models in certain cases for our AI-powered tools. Finally, with respect to overall benefit to our business, when an agentic buyer comes in and utilizes Activate, the whole dollar that gets bought stays within our ecosystem—meaning it accrues to our publishers—as opposed to if that dollar had gone to a DSP, where we would get only our share of that DSP wallet.

So we get both incremental benefit from the revenue share via Activate plus all of the revenue share that we normally charge for our supply-side platform. That is significant incremental upside for us.

Analyst: Thank you both.

Operator: Great. Thank you. Thanks, Steven. We are out of time, so I am going to turn the call back over to Rajeev for a few closing remarks.

Rajeev Goel: Thank you, Stacie. We delivered a strong Q1, with momentum continuing into the second quarter. Further, we expect to return to double-digit revenue growth in the second half of this year along with corresponding margin expansion. Agentic advertising is transforming the industry. It is creating automation and workflow that no longer require a software interface and will materially change the value chain of our industry. We are scaling Agentic faster than our peers, and each additional transaction compounds our data advantage and drives superior performance.

I am looking forward to seeing many of you at upcoming conferences, including the Needham Technology, Media & Consumer Conference in New York, the Jefferies Software, Internet & AI Conference in Newport Coast, Evercore’s TMT Global Conference in San Francisco, and Rosenblatt’s Age of AI Technology Virtual Summit. Thank you, everyone, for joining us today, and have a great rest of your afternoon.

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