PubMatic, Inc. (NASDAQ:PUBM) Q3 2025 Earnings Call Transcript

PubMatic, Inc. (NASDAQ:PUBM) Q3 2025 Earnings Call Transcript November 10, 2025

PubMatic, Inc. beats earnings expectations. Reported EPS is $0.03, expectations were $-0.01.

Emmanuel: We’ll begin momentarily. Hello, everyone, and welcome. We will begin momentarily. Hello, everyone, and welcome to PubMatic, Inc.’s third quarter 2025 earnings call. My name is Emmanuel, and I will be your Zoom operator today. Thank you for your attendance today. As a reminder, this webinar is being recorded. I will now turn the call over to Stacie Clements with the Blueshirt Group.

Stacie Clements: Good afternoon, everyone, and welcome to PubMatic, Inc.’s earnings call for 2025. This is Stacie Clements with The Blueshirt Group, and I will be your operator today. Joining me on the call are Rajeev K. Goel, Co-Founder 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 Steve will host a live Q&A. If you plan to ask a question, ensure you set your Zoom name 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 investors.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 are available at investors.pubmatic.com, including our most recent Form 10-Ks and any subsequent filings on Form 10-Q or 8-Ks. 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 11/10/2025, and we do not intend and undertake no obligation to update any forward-looking statement, whether as a result of new information, 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, non-GAAP net income, cash flow from operations, and free cash flow. These 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. And now I will turn the call over to Rajeev.

Rajeev K. Goel: Thank you, Stacie, and welcome, everyone. We delivered a stronger than expected quarter with revenue and adjusted EBITDA ahead of guidance as well as strong cash flow, demonstrating the power of our platform, continued diversification of our business, and our accelerated pace of innovation. CTV significantly outpaced the market rate of growth and grew over 50% year over year, excluding political, driven by increased premium supply, continued scaling of agency marketplaces, traction in our live sports marketplace, and growth of small and mid-market advertisers. Emerging revenues grew over 80% year over year as sell-side targeting and newly AI solutions quickly ramped. We also strengthened our end-to-end platform with cutting-edge AI innovations that are deepening our competitive moat and unlocking measurable incremental revenue opportunities.

Q&A Session

The industry is rapidly redefining itself, and we are actively shaping its future. The impending Google AdTech remedies verdict will very likely shift market share. The prioritization of data targeting and performance is shifting value creation in the ecosystem to the sell side. Over the past few months, we’ve seen a groundswell of AI-driven innovation reshaping the entire ecosystem. AI is now at the center of every strategic conversation, whether the objective is advertising performance, transparency, or automation. As an early adopter of AI, our leadership is a defining advantage for us and will grow over time. We continue to innovate with an AI strategy centered around three distinct layers of programmatic advertising: the infrastructure layer, the application layer, and the transaction layer.

For the infrastructure layer, we own and operate our full technology stack, giving us the efficiencies, control, and independence that many of our peers don’t have, evidenced by multiple recent public cloud outages. Through our technical collaboration with NVIDIA, we are deploying next-generation AI models on the world’s most advanced GPU architecture. Five years in the making, this collaboration required three ingredients: physical infrastructure capable of deploying GPUs at scale, massive transaction volume to test and optimize across the full open internet, and technical sophistication to be an early adopter. Today, our infrastructure is a clear differentiator we believe years ahead of peers. The business impacts are tangible: 5x faster bid responses and 85% fewer auction timeouts, all recovering millions in ad spend.

These results close the infrastructure advantage of walled gardens and directly translate into advertiser performance with higher publisher yield. Looking ahead, as autonomous AI agents begin planning and negotiating ad campaigns, industry compute requirements are expected to grow dramatically. These early investments only widen our infrastructure advantage as legacy players are constrained by cloud and computing limits. This is the monumental shift for open Internet digital advertising that PubMatic, Inc. has been building for. Next, at the application layer, we’re deploying some of the most exciting and innovative capabilities we’ve ever launched, embedding AI directly into our products to power intelligent workflows and decision automation.

We launched AI-powered buyer and publisher platforms that now handle more complexity with significantly less manual effort. Our solutions cut campaign setup time by 87% and speed up issue resolution by 70%, translating directly into faster activations, higher productivity, and better outcomes for our customers. Independent agency Butler Till has been using our AI-powered PubMatic for buyers platform. Scott Ensign, their chief strategy officer, said, and I quote, “Historically, systems don’t talk to each other. Data sets are disparate. Walled garden data is hard to connect. AI allows us to scale human reasoning and run campaigns that truly look across all channels and optimize across them. Working with PubMatic for buyers helps make that possible.” End quote.

This same enthusiasm is building on the publisher side. Our newly launched publisher suite already includes 17 operational AI agents guiding yield, diagnostics, and creative setup. Customer feedback has been exceptional. One of our largest omnichannel partners, Overwolf, told us that the PubMatic Assistant AI chatbot is unique with respect to the accuracy and speed of execution. And finally, at the transaction layer, we’re preparing for the next major step: agentic AI, where advertisers’ and publishers’ AI agents will be able to transact directly through our infrastructure. We are a co-founder of the newly established AdContext Protocol or ADCP, alongside partners like Yahoo, LG Ad Solutions, and Raptive, and the first to publish a model context protocol specification for agent-to-agent communication in the programmatic industry.

Establishing the protocols, safety mechanisms, and interoperability standards will enable AI agents across the entire ecosystem to transact efficiently and securely. With this three-layer strategy—infrastructure, application, and transaction—we are building the complete system for agentic AI to drive on and the traffic laws to govern it all. While still in early days, we are already seeing material benefits. First, AI is driving increased platform usage. As we roll out new generative AI and agentic AI features across our platform, customers are able to launch campaigns and resolve issues faster and improve performance. Validating our leadership in AI, customers have repeatedly said they are not seeing this level of innovation from other companies in the industry.

Second, AI solutions are generating new revenue streams. One example is our new AI-based yield optimization solution for publishers, which uses adaptive learning models to automate pricing and improve auction efficiency. This AI solution is driving growth for our publishers, increasing their revenue on average by 10%. Launched just a few months ago, it has already unlocked tens of millions of dollars in incremental revenue for our publishers, and in turn is generating new PubMatic, Inc. revenue as part of our emerging revenue category. And third, AI is improving our operational efficiency and profitability. In the last two months, we deployed a dozen AI agents internally to automate operational workflows, accelerate development, and reduce overhead.

Our goal is to deploy substantially more agents in the coming quarters to give us measurable margin leverage while we continue to invest and strengthen our long-term moat. Looking ahead, despite the significant progress we have made, we believe we’re just scratching the surface. AI will continue to drive higher usage across our platform, generate incremental revenue streams, and improve operational leverage. And because we’re investing across all three layers, PubMatic, Inc. is poised to lead the next era of agentic AI advertising. While AI is a powerful driver of our long-term growth strategy, it’s equally important that we execute across the four other strategic priorities I outlined last quarter. I’m pleased to report that we’re making significant progress in each of those areas.

First, we’re broadening our demand-side ecosystem and accelerating our pipeline. We expanded a top-three DSP partnership, introducing programmatic guaranteed deals that streamline execution for advertisers across premium streaming content. This integration reduces friction in deal setup, accelerates time to market for campaigns, and unlocks incremental budgets. A great example of how our relationships with global DSP partners are becoming more strategic as we diversify beyond the legacy DSPs. We also launched a new partnership with Bliss, an omnichannel DSP that brings high-value demand from leading global brands across automotive, retail, and financial services. Bliss combines T-Mobile’s app engagement data with real-world movement patterns and transaction signals to drive performance-focused campaigns with measurable outcomes, from brand awareness to store visits and sales.

This partnership expands our reach into premium brand advertisers who prioritize full-funnel measurement and offline attribution. These mid-market-focused DSPs like Bliss represent one of the fastest-growing advertising segments. In Q3, ad spend from this segment grew 25% plus year over year, reflecting meaningful progress in our diversification strategy. Second, we’re accelerating our investment on the buy side. We’re extending our reach with independent agencies and direct advertisers, expanding our focus from the top 20 agencies to the top 150, and from the top 500 advertisers to approximately 1,500. Supply path optimization remains a key growth driver, with the majority of this addressable market as a greenfield opportunity. SPO represented over 55% of activity on our platform in Q3.

As a pioneer in SPO, we are the leading incumbent offering scale and a rich history of performance and efficiency gains. Building on this momentum, we are onboarding more buyers onto Activate, our direct-to-supply buying platform. Over the first nine months of the year, the number of active campaigns grew more than 4x over last year, with a 35% increase in customers. Activate is a key solution that enables the ecosystem-wide push for increased transparency and efficiency of programmatic advertising. And this is only the beginning. We’ve begun integrating AI-powered agent-to-agent workflows into Activate to boost performance and reduce friction, making advertiser adoption even easier. We believe that this new technology could have a massive impact on Activate adoption over the medium term as we accelerate investment in mid-tail buyers.

Finally, we continue to deepen our integration with DSPs to create value beyond real-time bidding transactions. We are the first SSP to integrate the Trade Desk’s price discovery and provisioning API, which allows publishers and advertisers to share deal metadata between our platforms and better identify and resolve issues with underperforming deals in real time. Today, over 50% of programmatic deals sit dormant because this information was previously only available offline. We anticipate this innovation will accelerate our share of PMP and PG deals as we drive adoption together with The Trade Desk. Third, our momentum in Activate is also fueling our growth in CTV. Excluding political advertising, CTV revenue grew more than 50% year over year.

The format remains a primary growth engine for our business. Live sports is an especially exciting category. Buying activity rose more than 150% sequentially from Q2 to Q3 as we scaled our AI-powered live sports marketplace and launched new programmatic guaranteed deals around tentpole events like the US Open for Tennis and Monday Night Football. We also continue to expand our CTV publisher footprint. New deals and expanded partnerships with a number of free, ad-supported streaming services, including Tubi, Future Today, and Local Now, added to a strong roster with over 90% of the top 30 global streamers now on PubMatic, Inc. We offer these premium content streamers incremental ad demand that other platforms can’t offer because of the scale of our SPO, Activate, Curation, and Commerce businesses.

For example, Fremantle, one of the world’s largest entertainment content creators behind franchises like American Idol, America’s Got Talent, and The X Factor, generated a 78% increase in incremental programmatic demand across their expanding fast channel portfolio by partnering with PubMatic, Inc. This is a remarkable outcome and highlights the significant incremental ad revenue our platform generates for our partners. Additionally, we are expanding ad formats on our platform. In collaboration with Dentsu, we recently launched PozAds for CTV through Activate. Advertisers can now serve dynamic, contextually relevant ads when viewers pause content, representing a premium brand-safe moment that boosts engagement and yields incremental revenue for publishers.

What’s more, with $155 billion of ad dollars still in linear television, we believe our CTV business has a long runway for growth given the scale, performance, and ad formats now available for buyers on PubMatic, Inc. And fourth, we’re making significant progress in scaling our emerging revenue streams, which grew over 80% year over year in the third quarter. Commerce media continues to gain momentum. We continue onboarding and scaling with some of the world’s leading retailers and enterprise businesses as they seek to activate and monetize their first-party audience intelligence. These partnerships are expanding our reach beyond the traditional impression model, generating platform fees and database monetization that accelerate revenue growth.

Sell-side curation is another fast-growing emerging revenue stream. We expanded partnerships with leading data providers around the world. Nielsen, for example, tapped PubMatic, Inc. as their exclusive sell-side partner to bring their more than 10,000 audience segments to Australian advertisers and agencies. Together with the previously mentioned AI yield solution for publishers, these initiatives drive incremental high-margin revenue that is scaling quickly. In closing, our results demonstrate the power of our differentiated business model. We continue to innovate, diversify our business, and operate with discipline. We are leading from a position of strength. We’re confident that the investments we’re making today, particularly across the three layers of our AI strategy, are expanding our competitive advantage while creating sustainable profitable growth over the mid to long term.

All of this is happening alongside a once-in-a-generation shift in digital advertising that will likely result in the competitive landscape being reshaped, where even a modest share shift could unlock substantial incremental high-margin revenue for us. Given our owned and operated infrastructure, PubMatic, Inc. is not only positioned to adapt, we are helping define what comes next. We have the technology, the talent, and the financial foundation to build a more intelligent, efficient, and enduring business that creates lasting value for our customers, partners, and shareholders. Let me now turn the call over to Steve.

Steven Pantelick: Thank you, Rajeev, and welcome, everyone. We exceeded expectations on both revenue and adjusted EBITDA. This outperformance was driven by CTV combined with stronger than expected year-over-year growth for online video and mobile app. We managed expenses, leveraged AI, and delivered improved margins and strong free cash flow. Stepping back, it is important to call out that our efforts to transform our business started several years ago as we anticipated the value of the ecosystem shifting to the sell side. We built an end-to-end solution that prioritizes control, performance, and transparency while recognizing the need to diversify our business and unlock new paths to monetization. Today, over 40% of our revenue is derived from CTV, mobile app, and emerging revenue streams, which represent long-term value for our business, up from less than 30% two years ago.

Further, these efforts directly benefit our profitability and enable continued innovation and investment in the business. Turning to the quarterly results, starting with the revenue breakdown. To provide apples-to-apples comparability, year-over-year growth rates for video are adjusted to exclude political ad spend. On that basis, total omnichannel video revenues grew 21%, underscoring the strength of our premium video portfolio and growing adoption of AI-powered optimization across formats. Within this category, CTV once again grew over 50% year over year, driven by the success of our live sports marketplace and growth in programmatic guaranteed deals across expanding buyer relationships. We monetize CTV inventory from over 90% of the top 30 global streamers.

Omnichannel video contributed approximately 38% of total revenue in Q3 2025. Emerging revenue streams continued their high growth trajectory, growing over 80% year over year, scaling to 10% of total revenue in the third quarter. This growth represents incremental durable revenue streams beyond our core sell-side platform capabilities. Most notably, year-over-year revenue from Activate grew over 100%, and our Curation and Databases Connect grew over 40%. Based on the results we are seeing, we will continue to invest for incremental growth opportunities that diversify our revenue, like the new AI-driven product capabilities for publishers that are already showing meaningful traction. The growth across these key secular areas helped offset the impact from lower spend by a large DSP we identified last quarter.

Following our optimizations and integration adjustments by SPO partners, spend stabilized from this DSP in August and September, resulting in a lower but steady run rate. As anticipated, display revenue was down minus 5% year over year and was the format most affected by the DSP impact. Excluding this DSP, display grew in the low single-digit percentages. With respect to Q3, ad spend across the top 10 verticals, in aggregate, grew in the single-digit percentages year over year. Health and fitness, personal finance, and technology each increased over 15%. We saw softer trends in business and automotive, which declined in single-digit percentages in the quarter. Ad spend from our mid-tier DSP partners grew over 25% year over year in Q3. Importantly, our AI-driven buyer platform is resonating well with performance-focused buyers across CTV, mobile app, and e-commerce verticals, and we believe lays the foundation for sustainable growth in the quarters ahead.

We anticipate that new buyer relationships like Bliss and Mountain will bring incremental ad demand across our wide portfolio of verticals. Regionally, APAC and EMEA revenues grew plus 12% and plus 7%, respectively, offsetting a minus 14% decline in The Americas, which was primarily due to spend declines from a large DSP buyer. Moving on to our operating priorities. We continue to invest and reallocate resources to the highest return areas of the business. As Rajeev noted, we’re seeing strong growth across our DSP mix and within Activate as customers increase usage and new products drive incremental revenue. Our focus on generative AI is also improving operational agility, streamlining internal workflows, and allowing us to redirect resources towards growth initiatives without adding structural cost.

This efficiency has allowed us to expand our sales team, focus on buyers, grow spend from existing partners, and onboard new partners. We are making great progress integrating with the fast-growing mid to long-tail segment, and so far in 2025, we’ve added over 25 new DSP partners. All of these efforts help us counter the near-term headwinds from legacy DSPs and further diversify beyond the top five as I described last quarter. Core to our long-term strategy is being nimble in identifying opportunities and then executing rapidly to capitalize on them. We have achieved this while managing our costs and consistently delivering profits in many different environments. The foundation of this approach is expanding our capacity and driving down our unit costs.

We processed approximately 87 trillion gross impressions in Q3, a 24% increase over last year, and a 12% sequential gain versus Q2. Nearly 60% of total impressions were from CTV and mobile app inventory, highlighting our increasing focus on high-engagement channels. Further, the increase in impressions is highly leveraged over a fixed cost base. Over a trailing twelve-month basis, unit cost in the third quarter declined 19% over the comparable prior year period. In terms of operating expenses, our investments in AI to drive operational efficiency are yielding measurable results. Year to date, every quarter, we have successfully kept our total operating expenses roughly flat at $51 million while realigning investments to the areas that deliver the strongest ROI.

This allows us to scale profitably even as we invest ahead of growth. For example, we increased our buyer-focused sales team by 19% in Q3 compared to the prior year, while the overall total headcount was flat. This disciplined approach enables us to deliver our thirty-eighth straight quarter of adjusted EBITDA profitability. This is a track record few companies in our sector can match. Q3 adjusted EBITDA was $11.2 million or 16% margin, which included foreign exchange costs of approximately $1 million due to the weakening US dollar over the quarter. U.S. GAAP net loss was minus $6.5 million or minus $0.14 per diluted share. Moving to cash and our capital allocation. Our balance sheet remains a core strategic advantage. In the third quarter, we generated $32.4 million in net operating cash flows and free cash flow of $22.8 million.

In addition to efficient working capital management, there were two other factors that improved our cash flow for this period. A DSP that had made changes in mid-2024 returned to growth in Q3, which favorably improved our DSOs. There was also a reduction in cash tax paid because of the new federal tax bill that went into effect earlier this year. To underscore our long-term ability to generate cash, since the beginning of 2021 through Q3, we have generated over $390 million in net cash from operations, and more than $215 million in free cash flow. We ended the quarter with $136.5 million in cash and zero debt. Given the strength, we continue to deploy our capital to shareholder value. Since the inception of our repurchase program in February 2023 through Q3, we have bought back $12.4 million Class A common shares for $180.6 million.

We have $94.4 million remaining in our repurchase program authorized through 2026. This program, combined with our ongoing investments in AI innovation, reflects a balanced approach to capital allocation and a commitment to long-term shareholder value. Turning to our Q4 outlook, we anticipate strong growth in secular areas of the business, including double-digit growth for CTV when excluding political advertising, and 30% plus growth for emerging revenues. As a reminder, Q4 2024 political advertising represented about 12% of revenue, nearly 80% of which was via CTV. In terms of the latest trends in October, the typical holiday seasonal uptick thus far has been relatively muted for some consumer discretionary ad verticals, such as food and drink and arts and entertainment.

Accordingly, we are taking a prudent approach to guidance based on the latest trends. We expect Q4 revenue to be in the range of $73 million to $77 million. As it relates to the large DSP that declined in July, we are assuming its associated revenue to be flat in Q4 relative to Q3. We anticipate Q4 operating expenses to be similar to Q3’s level as AI-driven efficiencies continue to offset selective investments in our sales team. Q4 adjusted EBITDA is projected to be in the range of $19 million to $21 million, which also factors in continued weakness of the US dollar. For the full year, we expect revenue to be in the range of $276 million to $280 million and adjusted EBITDA to be in the range of $53 million to $55 million, inclusive of more than $5 million of estimated negative FX impact.

We are maintaining our full-year CapEx projection at $15 million, which is a year-over-year reduction made possible by AI-driven optimization efforts. In closing, our Q3 results highlighted the durability of our financial model and validate the progress we are making behind our business transformation. Looking ahead, we are confident in our robust multifaceted strategy. Our AI-first end-to-end platform is driving measurable results. We’re adding new revenue streams, expanding our SPO relationships, and rapidly diversifying our DSPs in line with future growth opportunities in commerce, performance CTV, and mobile app. With respect to potential remedies in the Google AdTech antitrust trial, we continue to believe that any remedies that level the competitive playing field, whether structural, behavioral, or both, benefit the open Internet and PubMatic, Inc.

In 2026 and beyond, as revenue growth reaccelerates, we anticipate margin expansion in both the gross and adjusted EBITDA levels because of our efficient and leveraged business. Our decade-plus experience owning and operating our global private cloud infrastructure has given us several advantages. First, it has enabled us to expand capacity while at the same time progressively reduce our rate of CapEx and drive down unit costs through optimization initiatives. Second, it’s allowed us to invest early on in next-generation technology with NVIDIA. Today, our infrastructure is a clear differentiator with investments well ahead of our peers that will continue to drive efficiencies and business impact. We’re also continuing to leverage AI to drive efficiency and increase our team’s productivity.

We anticipate total headcount will remain relatively flat in 2026, while investments supporting our fastest-growing areas of our business will continue to increase through internal reallocations. And finally, we’re also laser-focused on free cash flow generation and aim to increase cash flow next year supported by further working capital improvements and incremental AI-driven efficiencies. Collectively, we believe our efforts will lead to a return to double-digit revenue growth in the future. With that, I’ll turn the call over to Stacie for questions.

Stacie Clements: As a reminder, you can ask a question by raising your hand located on the dashboard, or if you’re on your phone, please press 9. In the interest of time, we ask that you please limit your question to one and one follow-up. With that, the first question comes from Andrew Boone at Raymond James. Please go ahead, Andrew.

Andrew Boone: Hi. Can you hear me now?

Rajeev K. Goel: Yes. We can.

Andrew Boone: Okay. Thanks. Rajeev, if you can maybe expand a bit on the topic of SPO and some of the recent moves companies like The Trade Desk have made, kind of leaning into OpenPath, launching open ads, and declaring all SSPs as resellers. But then on the other hand, the two of you are collaborating on that data ID management API. So I guess since we last spoke last quarter, how would you characterize the state of play there? And then I have a follow-up for Steve.

Rajeev K. Goel: Sure. Yeah. Thanks, Andrew, for the question. So, yeah, let me first just address the reseller kind of noise that’s out there. So the industry standard definition, which has been in the industry for over a decade, is that a reseller is the term for when inventory flows from a publisher to an intermediary and then to an SSP. An intermediary can be another exchange or some sort of aggregator of inventory. In contrast, direct is when inventory flows from the publisher directly to the SSP. PubMatic, Inc. is a platform for direct inventory monetization. Reselling is not our business. We are a direct connection to publishers, and that’s how we’re able to provide significant incremental value to publishers and to buyers.

And I think it’s pretty clear we provide value in ways that DSPs do not. Yield optimization is a key example of that. So Trade Desk, in particular, has been very clear that they are not in the yield optimization business. And so a publisher needs to have a yield function in place in order to maximize their revenue, which is core to what we do. At the same time, we’re also providing value to Trade Desk and others, right, who, as you noted, Andrew, are relying on us to improve deals, you know, with our price discovery and provisioning API integration announcement. So I think, you know, what you can see here is that the ecosystem is multifaceted, certainly complex. Our focus is really on taking those direct integrations with publishers that we have, all of that inventory flowing through our platform, the data, the audiences, and really creating value for buyers in such a way that they’re able to generate increased return on ad spend, increased ROI, which causes them to then spend more on our platform.

Then, that in turn generates higher yield for our publishers. And so that’s really the core and the focus that we have. What we’re finding with Activate and other capabilities on our platform, a lot of the focus on AI that we talked about in the prepared remarks is that we have a lot of opportunity coming at it from the sell side of the ecosystem based on the auctions and the data and our close integrations with publishers to be able to add value to both the buyers and the publishers.

Andrew Boone: Great. Thank you for that. And then, maybe, Steve, if I could, on the COGS point, can you just expand a little bit on the ability to drive that unit cost leverage there and how we should think about that line either on an absolute dollar or a percentage of revenue going forward? Thank you.

Steven Pantelick: Sure. Well, good to reconnect, Andrew. So, you know, from our perspective, you know, we for many years have been focused on owning and operating our own infrastructure and have done it very successfully, as you noted, you know, driving down unit costs. We’ve consistently done that for a decade, you know, often double-digit unit growth reductions. And so, from our perspective, you know, ’26 is no different, other than that, you know, we continue to leverage AI more and more, you know, to drive optimizations. As you saw in our prepared comments, you know, we increased the number of gross impressions processed by over 20% in the quarter. We didn’t do that by just throwing a lot of CapEx at it. We did it through software and AI.

So that basic process is going to continue, but we have more tools and more ability to do that. So I would expect, in the future, as our revenue reaccelerates, we’re going to increase our gross margin. It’s going to be a function of revenue and, you know, managing our costs.

Stacie Clements: Thanks, Steve. Our next question comes from Matthew John Swanson at RBC. Please go ahead, Matt.

Matthew John Swanson: Great. Thank you guys for taking my question. Obviously, super strong quarter for CTV growth, excluding political. And you called out a lot of the drivers there, right, the great growth in the live sports, maybe some of that expansion of mid-market DSPs in the 90% coverage now of top 30 streamers. Could you just give us kind of a little more color maybe over the past year, just what sort of evolution you’ve seen in the CTV environment? And kind of how you’re investing to grow or continue to grow next year?

Rajeev K. Goel: Sure. Yeah. Thank you, Matt, for the question. So, you know, CTV has been obviously a very strong growth area for us. And we’ve seen tremendous, you know, scale really building from zero organically several years ago to where we are today. And I think, you know, there’s a couple of trends that are happening. First of all, we are working with more and more premium publishers. Right? So this quarter, we shared over 90% of the top 30 globally. We added some new fast streamers, Tubi, Future Today, and Local Now. This builds on our base of premium inventory from existing publishers like Roku and Paramount and NBC. At the same time, there’s huge growth in the advertiser mix in CTV. So whereas traditional TV, you know, has a couple hundred, maybe 500 advertisers in aggregate that are the lion’s share of ad budgets, with streaming TV, what we see is that there’s tens of thousands, reaching now into the hundreds of thousands, and that number is growing very quickly.

And as we have focused on going after mid-market focused DSPs, many of them are focused on small and medium businesses, like Mountain or TV Scientific, or they’re focused on performance advertising. Again, some of those same folks. There’s a lot more dollars that we’re able to bring onto the platform. And so that’s creating another layer of growth. Then third is, you know, we’ve really leaned into AI, as you could tell from the past calls and also the prepared remarks today. You know, all three layers of the technology stack. I think that’s really unlocking incremental budgets as well. So live sports is just one example of that. Actually, one of our first generative AI creative tools we launched last year was focused on helping publishers bring in more political ad spend by scanning political ad creatives.

And so we’re continuing to apply that technology for other use cases. So there’s a lot of other verticals like pharma, for instance, health, you know, health and wellness where there’s sensitive categories, but we’re able to generate the unlock of spend through AI. So we think it’s a really, obviously, exciting area for us. We’re going to continue to focus and invest globally in this area. And as we bring more buyers onto our platform via Activate, via our curation capabilities, and now with the ADCP launch, we think there’s a long runway of growth ahead of us for CTV.

Matthew John Swanson: Yeah. That’s super helpful. Maybe following up on your commentary on generative AI and some of the agentic AI. Obviously, we’ve been hearing a lot from a lot of players in the space around these two themes. Can you just talk a little bit about the kind of the right to win and how you help, you know, your stakeholders understand the value creation versus the noise around these themes? Maybe as you said with the ads.

Rajeev K. Goel: A couple of things. First of all, it’s owning all of our own infrastructure. So what that means is that we’re in a unique position to be able to deploy additional infrastructure, you know, like the partnership that we announced with NVIDIA. And that came as a result of multiple years of collaboration. So it’s not just, you know, something you can wake up and do all of a sudden. But to be able to do that, you know, you have to really own and control and be in a position to manage all of that infrastructure. So I think that’s the first right to win is our long-term capability set there and expertise. Second is you gotta have the transactions and the data flowing on your platform. So an AI algorithm, you know, is only useful to your customers and only relevant to them if you have the scale and ability to transact.

Of course, we have that, you know, with a trillion or so daily ad impressions going through our platform, almost 2,000 publishers, depth in CTV and mobile app and, you know, in display and so on and so forth. So I think that’s the second key for the right to win. Then I think the third is, you know, a demonstrated ability to innovate and to really build solutions, not just talk about them. I think what you’ve seen from us over the last is that we are significantly ahead of our competition. You know, we have launched 17 agents in our publisher platform already using AI. I think one of our competitors shared that they’re planning to build their first agent. Right? So you can see that’s a, you know, one to two-year advantage that we have in terms of track record of execution.

What that means is that, you know, when we’re launching things like ADCP, the ad context protocol, which is, you know, managing workflow via AI, we are in a position to be able to go talk to both publishers and buyers about here’s how you get started. Here are the first use cases to implement. These things are available on our platform today. I think that’s a key part of creating value within the ecosystem is being able to participate in those early transactions, being on the frontier, benefiting from, you know, the groundswell of growth that we see in front of us.

Stacie Clements: Thank you. Our next question comes from Shweta R. Khajuria at Wolfe. Go ahead, Shweta.

Shweta R. Khajuria: Thanks, Stacie. Thanks for taking my question. I have a follow-up on the first question on OpenPath, not specifically just OpenPath, but are you seeing, Rajeev, any trends that would suggest that perhaps, you know, Trade Desk is increasingly going direct and you are getting impacted by not only just as a reseller, but in terms of the impressions volume? Are you seeing any impact to your business in general? And is it related to them actually launching that Kokai platform? I would think not, but there is this concern in the industry. So if you could please, perhaps comment on that to correct that, that would be great. Thank you.

Rajeev K. Goel: Sure. Yeah. Absolutely. So, you know, first of all, good news is we are a platform for direct inventory. So regardless of what label anybody wants to put on anything, we know that we are working directly with premium publishers. There is not a more efficient way for buyers to access the inventory than what is, you know, coming through our platform. So I think, underlying your question, you know, the new Trade Desk platform, Kokai, does evaluate and buy media differently from what we have seen. And so we took two important steps over the course of Q3 resulting in spend from them stabilizing in August and September, as Steve mentioned. The first is that we revised our machine learning algorithms to ensure we’re sending an optimal mix of inventory to them.

That work is largely behind us, so, you know, we’re always doing some level of continuous optimization to drive more spend. And then second, we worked with our SPO, supply path optimization partners, to help them configure their seat in the DSP to ensure that they’re getting the benefit of their SPO relationship with us. And that work is largely completed as well. We have, you know, agency marketplaces set up with pretty much every major holdco in different parts of the world, in many different parts of the world. And so these agencies had to make changes, you know, over the last couple of months, to ensure that their marketplaces stay intact and that they continue to get the performance and efficiency that they’re seeking. And, of course, these marketplaces are critical to the agency’s media buying offerings that they provide to their advertiser clients.

So we’ve, you know, talked publicly, for instance, about how we power WPP’s premium marketplace. And so that’s built on top of our SSP. And so making sure that they’re receiving their SPO data workflow efficiency benefits is key to their being able to continue to offer that in market. Similarly, you know, given we’re a leader, market leader in curation, we work with our curation partners to ensure that their campaigns continue to run via our SSP and that they get the ROI, the transparency, and the control that caused them to choose to work with us in the first place. So I think Trade Desk shared that, I believe, 85% of their clients are now up and live on Kokai. So yeah, we think probably the bulk of this movement is behind us. But that’s a key part of why we’re also very rapidly diversifying our DSP mix.

As the market evolves to a more fragmented DSP landscape, we’re finding, you know, significant success with 25% plus year-over-year growth with mid-market DSPs on our platform in Q3.

Stacie Clements: Our next question comes from Matthew Dorrian Condon at JMP. Please go ahead, Matt.

Matthew Dorrian Condon: Thank you so much for taking my questions. My first one is just on there’s been a lot of talk about the impact across the open web on publisher traffic, just given these AI platforms that are taking increased share. Can you just talk about what you’re seeing across your publisher base as far as your traffic?

Rajeev K. Goel: Yeah. Absolutely. So we’ve seen, I would say, a fairly limited impact, and I would say just stepping back, you know, we believe the overall impact in our business is limited to a single-digit percentage of revenue if there was zero search traffic going to our publishers and we took no steps to mitigate it. So that’s probably a high-end, you know, kind of watermark of potential impact. So, you know, we shared in our comments today that roughly 60% of the impressions that we are processing are for CTV and mobile app. So, of course, those are unaffected by AI search. Of the remaining business, which is browser-based, where search is relevant, industry data indicates that search referral traffic is roughly 15%, with the rest of publishers’ traffic coming from either social or direct navigation.

And given that we work in the head of the market with the top publishers, rather than the long tail, I would expect, you know, that 15% number to actually be even a little bit lower. And so if you, you know, take 40% of the impressions, 15% impact, at the high end, to a mid-single-digit percentage potential impact. Again, if we had no mitigating steps that we took. But, actually, you know, there’s a lot that we can do in terms of bringing continuing to bring onboard, you know, more CTV, more mobile app, more commerce impressions, and the like. I think the other thing that we’re seeing is the offensive opportunity, which is that there’s a growing number of AI search experiences that consumers are spending more and more time on. So for instance, you know, Connect launched a solution where users on their properties can, you know, search the archives of Connect articles and, you know, get hands of inventory of opportunity for us to questions.

And so that, I think, is actually a growing canvas as consumers get, you know, more and more used to that AI search, you know, kind of consumption behavior, then they’re looking for that from many of their traditional content partners where they consume content. And so we think that’s a new tailwind that is emerging in the business.

Matthew Dorrian Condon: That’s very helpful. And then my second one is just on your own infrastructure and just the differentiation there and partnership that you announced with NVIDIA. Just the 5x speed improvements in bid response times. Just can you just talk about the structural difference that’s allowing? And is it allowing, like, just win rates and options to be higher? And just talk about the differentiation there and how that can drive sustainable growth in 2026.

Rajeev K. Goel: Yeah. Absolutely. So, actually, the good news is that there’s multiple ways that having, you know, this kind of infrastructure cooperation collaboration with NVIDIA, you know, can benefit our business. And it really is a collaboration, not just in hardware, but also in software. I think NVIDIA themselves, you know, says that I think it’s over half, maybe over 60% of their revenue comes from software solutions. Right? So, obviously, they’re well known for hardware, but it’s really a combination of hardware and software. I’ll give you kind of three specific examples. So we use NVIDIA GPUs to power real-time ad decisioning in very low latency environments. So think about things like connected TV or live sports, where if we can process ad transactions faster, if we can cut latency, that leads to fewer timeouts, more bids in the auction on our platform, and then more opportunities for us to win with the publisher.

And so that, you know, boosts outcomes, ROI for both advertisers and publishers, also boosts our revenue. The second example is using NVIDIA Triton inference servers, where we use a specific hardware or software with them for traffic shaping. Traffic shaping is a very important and critical role that anybody on the sell side plays, which is to figure out which of the roughly trillion ad impressions we have per day we should send to each particular DSP. Some DSPs, you know, we might send tens of billions. Some might be single-digit billions. Some might be hundreds of billions of ad impressions. It’s really important that we pick, you know, the right ones. And for every DSP, there’s gotta be a different decision set based on the types of advertisers and campaigns that are in their platform.

Of course, these decisions have to be made, you know, within milliseconds of the publisher requesting a bid from us. And then third is in the reporting area. So we’re using an NVIDIA software accelerator for Apache Spark, which allows us to streamline and improve the speed at which we’re able to process data, and that in turn allows for smarter optimization across a wide range of different use cases. So those are, I think, hopefully, three tangible examples of how our NVIDIA partnership is really leading to the leadership that we talked about in the prepared remarks, in particular, at the infrastructure layer. Then allows us to derive benefit in the application and transaction layers of the AI stack.

Stacie Clements: Next one comes from Robert Coolbrith of Evercore. Please go ahead.

Robert Coolbrith: Great. Thank you very much. Rajeev, I wanted to go back to this 5x faster bid response for you to unlocking optimization strategies previously impossible to their programmatic rates. Can you unpack that? And assuming you have a very lead in accelerated computing in the space, are there counterparties on the demand side who can take advantage of that, or do you think you need to take on a bigger role either in, you know, optimizing demands, you know, demand or hosting demand-side logic and optimization to sort of fully take advantage of those capabilities, akin to what the walled gardens do maybe in terms of their, you know, highly vertically integrated supply chains? And then, Steve, just wanted to, you know, maybe get a finer point on this Trade Desk issue. Just given current trends, do you see the potential to maybe see growth alongside their growth in ’26? Thank you.

Rajeev K. Goel: Yeah. Thanks, Rob. So, yeah, let me start with your first question, then I’ll hand it over to Steve. So we absolutely do see opportunity to better leverage our infrastructure through vertical integration, and I’ll give you two examples of that. So one is, you know, as we work more and more with mid-market focused DSPs who themselves, you know, tend to be smaller, what we find is that there’s a lot of opportunity for us to use our platform to help them compete more effectively. So what I mean by that is, you know, we have huge amounts of data on our platform, you know, from this trillion daily ad impressions. A typical mid-market DSP, they may see 5 to 10% of the traffic that a very large DSP like a Google DV360 would see.

So these mid-market DSPs, because they’re smaller in nature, they don’t have access to all of that same data. At the same time, they also don’t have access to all of the performance aspects of the auction that we’re running on behalf of the publisher. And so there’s opportunities for us, which we are working very hard on, to use our platform to help those DSPs, you know, derive better performance, better targeting, and ultimately better ROI. And that, you know, plays very closely with the infrastructure that we’ve deployed. So that’s one example, Rob, of where I think vertical integration where we can do more than we have done traditionally for a legacy DSP. I think these mid-market DSPs, because they’re growing quickly, they’re very hungry for that kind of collaboration and our ability to help them solve problems.

And then the second is with our Activate solution, where buyers are buying directly in our SSP. So here, you know, that faster processing of bids, better inferencing, all of these things, they help make Activate a very effective solution. Seeing that play out in terms of the growth, you know, up 4x year over year. Campaign numbers are, you know, growing on a similar basis in terms of the number of campaigns run. So we think there’s a lot of benefit from vertical integration. And, you know, as you said, Rob, that is somewhat akin to what the walled gardens do. And, of course, it’s no secret that they’re very good at driving performance, and we think that vertical integration is a key part of that. I’ll turn it over to Steve now.

Steven Pantelick: Sure, Rob. Just correct me if I don’t have the right question, in terms of our growth opportunities in ’26. So obviously, we’re going to come back shortly with the next earnings talk about 2026. But there’s a lot of things that we’ve focused on to put us in a very strong position to reaccelerate growth. You know, you’ve heard some of the stats from the third quarter, strong CTV growth, mobile as well as our emerging revenues. So, you know, once we work through the current transition that, you know, we’ve identified in the second half of this year, we are very confident that we’re going to be growing on a number of different fronts. Now just as a reminder, we’ve been investing in secular growth areas. This has been a long-term strategy.

We’re seeing the results of that. We are expanding, diversifying our DSP base. You know, we’re growing very strongly with commerce DSPs. You know, specialized DSPs are on pharma. And so the couple, you know, are focused on secular growth, expanding our buyer base, and then innovation around AI. You know, not just in the infrastructure, but certainly, you know, in terms of capabilities, functionality. We launched this past quarter, you know, AI-driven publisher products, and that will continue to be, you know, sources of growth. So we’re very positive about the growth in the second half of ’26, you know, as we look at, you know, the plethora of opportunities ahead of us.

Stacie Clements: Our next question comes from Jacob Armstrong at KeyBanc. Please go ahead, Jacob.

Jacob Armstrong: Thanks for taking my questions. This is Jacob on for Justin. Can you discuss how you believe the role of SSP needs to evolve in coming years as agentic AI expands? And what are the key investments needed to ensure PubMatic, Inc. is best positioned to capitalize off this transition over the next few years?

Rajeev K. Goel: Sure. Yeah. So, you know, I think the role of the SSP is going to expand significantly from transaction automation to a much bigger role in workflow automation, around audience and inventory discovery, planning, and measurement. If we think about, you know, where programmatic technologies have been applied so far, maybe for the last, you know, fifteen or so years, I would say it’s been heavily applied at the transaction level. So meaning, we have an ad impression. We want to get a number of advertiser bids on it. And then we’re helping out DSPs, you know, bid on that individual ad impression. So there’s been a lot of, you know, maturation and innovation and focus on that, like, single atomic impression. But we still have, you know, RFPs that advertisers send or agencies send out to publishers via email.

Fill out the spreadsheet, you know, or launching this ad campaign. We you might have available. understand what audiences or what Some human at the publisher fills that out. Then they email that back, to the agency. The agency collects those, and then they decide you know, where where they’re gonna, you know, set up and and allocate budget. So that’s still a a largely, manual process. Some things have have improved, but still a lot of, manual approaches. I think there’s a huge opportunity, you know, to think outside of the pure atomic impression or transaction. Around the discovery and planning and then after the transaction to the measurement. To use AI where, you know, an advertiser’s agent or an agency’s agent can say, hey. I’m launching this product or or service Please tell me what you can do for me as a publisher media owner from an audience and an inventory perspective.

Take a structured response, you know, aggregate that up across, you know, many of the publishers that we’re working with. And then deliver, you know, a preconstructed campaign brief to the agency. Agency can begin to buy that, you know, using our transaction pipes. And then we can have a feedback loop around, you know, measurement with that. And then the agency can, you know, revise their their campaign. So I think there’s a lot that can be done outside of that, single transaction. Element, and that’s really where we are focused with the transaction layer of the stack that I mentioned earlier, you know, with ad context protocol, we’re working out, you know, what exactly should those structure requests and responses look like. And then how, you know, how do they how do they get set up, who owns what data.

And then how do they get optimized. So I think there’s a a long runway, Jacob, ahead, in that area.

Stacie Clements: Thank you. This question comes from Ed Alter at Jefferies. Please go ahead.

Ed Alter: Hi, thanks for the question. I wanted to talk about the investments you’re making to meet the demand from the mid-market DSPs like Mountain. Where exactly are those going to show up? Is that more headcount, tech investments? Just be great to talk about the color on that.

Steven Pantelick: Sure. So, you know, we’ve been very focused throughout this year and really leading into this year. It’s to be as efficient as possible, you know, in terms of where we deploy our teams. We made a very conscious decision in the last eighteen months to move more and more resources towards the fastest-growing areas, segment growth areas, of which, of course, you know, critical DSPs are a part of that. And so we’ve been increasing investment in the team that goes directly and calls on these DSPs. This year, we increased, thus far, about 19% in terms of headcount. And we’ve done that by reallocating members, you know, around the organization. You can see from our results. Our overall headcount is roughly flat. And so, we’ve done a very, you know, careful analysis of, you know, how we’re going to keep on, you know, leveraging our existing resources.

And, of course, all of this is supported by, you know, the progress we made in AI, in terms of becoming more efficient just in our daily activities. And so when I look ahead to ’26, we’re going to keep increasing the resources against those areas that, you know, are driving the greatest results. And, you know, we’re on a great mission to do that, and it’s not just on the OpEx side. You know, we are looking at our CapEx, and we don’t anticipate, you know, increasing our CapEx in ’26. Based upon sort of all the optimization, the work with NVIDIA, you know, a lot of other things that, you know, are in the pipeline around efficiency and optimizations. And so from our perspective, we’re very confident that we are able to move dollars against the right opportunities without burning the P&L.

So, feeling good about the progress and, you know, our ability to increase our margins as revenue reaccelerates.

Stacie Clements: Unfortunately, we are just about out of time. So I’m going to turn the call back over to Rajeev for closing remarks, and we’ll talk to you all in your calls very shortly.

Rajeev K. Goel: Thank you, Stacie, and thank you all for joining us today. Our results demonstrate the power of our differentiated business model. We continue to innovate, diversify our business, and operate with discipline. AI innovation is leading the industry with measurable outcomes driving momentum across the ecosystem. Looking to 2026 and beyond, as revenue growth reaccelerates, we anticipate margin expansion at both the gross and adjusted EBITDA levels because of our efficient and leveraged business. We look forward to seeing many of you at upcoming conferences, including the UBS Technology and AI Conference on December 2, the Wolfe Virtual SMIDCAP Conference on December 3, and the Raymond James TMT Conference on December 9. Thank you, everyone, for joining us today. Have a great afternoon.