By Karsten Weide, Chief Analyst
Executive Summary
PubMatic reported its second-quarter 2025 earnings on Monday, August 11, 2025, delivering results that exceeded both internal guidance and Wall Street expectations. The quarter showcased healthy revenue growth, strategic progress in connected TV (CTV) and omnichannel video, and continued investment in AI-driven capabilities. Yet, despite the strong operational story, the company’s shares fell sharply. Investor sentiment toward the entire sector is being weighed down by concerns over Amazon’s aggressive push into CTV and the erosion of publisher traffic as AI increasingly replaces traditional search. Those worries came into sharp focus the previous week, when The Trade Desk – despite posting solid results – saw its stock plunge nearly 40% after earnings.
The company’s performance in Q2 underscored its momentum in high-growth categories and its ability to deepen relationships with both publishers and buyers. Revenue from omnichannel video – which includes CTV – grew 34% year-over-year and accounted for 41% of total revenue, with CTV alone up more than 50%. PubMatic’s Supply Path Optimization (SPO) initiatives drove over 55% of total platform activity, buoyed by strong adoption of its Activate offering, where buying activity more than doubled sequentially.
The launch of its Live Sports Marketplace expanded access to premium live sports inventory, while mid-tier DSP and performance marketer spend rose more than 20% year-over-year, diversifying PubMatic’s demand base. New AI-powered tools – from predictive diagnostics to real-time yield optimization – reinforced its focus on efficiency and performance for both publishers and advertisers.
Revenue: Back To growth
For Q2 2025, PubMatic reported revenue of $71 million, up 6% from $67 million in the same period a year ago. This increase brought PubMatic back to growth after 4% revenue loss in Q1 2025. This marked a solid rebound from the flat-to-declining growth rates seen in 2023, although it still trails the double-digit growth rates the company used to post until 2022. By comparison, rival Magnite’s revenue growth has consistently been in the low double-digits, and overall SSP segment growth remains modest in the face of macroeconomic uncertainty and intensified competition.
Revenue by Product Segment
PubMatic’s revenue mix continues to shift toward higher-value formats. In Q2, omnichannel video generated 41% of total revenue. This was driven by CTV, which stood for 20% with a 50% growth rate, making CTV the fastest-growing segment. The display legacy business contributed 20%, down from 30% a year ago. The remainder came from other formats, which have faced more muted growth, especially in light of changes to auction mechanics by a major DSP partner in 2024.
This shift toward video mirrors broader industry trends and is essential for PubMatic’s future development, as premium video inventory offers higher CPMs, more defensible positioning, and better alignment with SPO and curated marketplace strategies. Compared to competitors, PubMatic’s CTV share of revenue is growing faster, although it remains at about the same revenue share of the total as is Magnite’s (44% for CTV in Q2 2025).
Revenue by Geography
More than half of PubMatic’s revenue is contributed by the United States market, about a third by Europe, The Middle East and Africa (EMEA), and about 10% by Asia-Pacific. Over time, PubMatic’s regional mix has been relatively stable, even though the U.S. has slowly lost share to EMEA over the last few years. But last quarter, the U.S. business actually lost 1% in revenue while EMEA thrived (+18%), leading to a surprising 5-point drop in the U.S. share of revenue, from 60% to 55% in the course of just one quarter.
Operating Income
GAAP net loss for the quarter was $5.2 million, representing a -8% margin, compared to GAAP net loss of $4.0 million a year ago. Adjusted EBITDA came in at $14.2 million, for a 20% margin, versus $21.1 million (31% margin) in Q2 2024. The year-over-year margin decline reflects ongoing investments in AI capabilities, go-to-market expansion, and product innovation. PubMatic had been largely profitable to the end of 2022, but then lost money every quarter except for the Christmas quarters. These lower margins could be caused by greater competitive pressure on margins and the need to invest in research and development to stay ahead of the changes in digital advertising.
Performance Vs. Guidance, Stock Price Impact
The company beat both its own guidance and analyst consensus on revenue and adjusted EBITDA. Analysts had expected mid-single-digit growth and a roughly 18% adjusted EBITDA margin; PubMatic delivered 6% growth and a 20% margin, reinforcing the underlying health of its core business.
Despite the earnings beat, PubMatic’s shares fell by 20% the following day, a casualty of sector-wide sentiment after The Trade Desk’s Q2 earnings call triggered concerns about Amazon’s competitive threat and the decline of traffic forwarded from traditional search to the open Internet. The Trade Desk’s stock went down by 38%.
Cash Reserve
As of June 30, 2025, PubMatic held $117 million in cash, cash equivalents, and marketable securities, with no debt. Operating cash flow for the quarter was $14.9 million, up from $11.9 million a year earlier. The company has ample liquidity to fund expansion, ongoing software development, and potential strategic acquisitions. Its share repurchase program remains active, with 12.2 million shares repurchased to date, representing 24% of fully diluted shares since inception.
Looking Ahead
Management’s Q3 2025 guidance calls for revenue between $61 million and $66 million, a 12% drop year-on-year at the midpoint. The lower sequential revenue reflects the anticipated full-quarter impact of the DSP headwind (where a DSP client changed their bidding method), but underlying growth is expected to remain positive. The company’s strategic priorities are clear: diversify its DSP mix, deepen leadership in CTV, scale emerging revenue streams like commerce media, and integrate AI across its technology stack.
Strengths: PubMatic’s owned and operated infrastructure delivers cost advantages, reducing cost per million impressions by 20% over the trailing twelve months. Its growing share of high-value CTV revenue, strong SPO adoption, and deep publisher relationships give it defensible market positioning.
Weaknesses: The business remains exposed to revenue concentration risk from large DSP partners, as seen with the impact of the 2024 auction mechanics change. Margins have compressed from historical highs, and the company is small relative to walled gardens and some larger SSP peers.
Opportunities: AI-driven capabilities – from predictive diagnostics to yield optimization – can improve client performance and deepen platform stickiness. The continued shift of ad budgets toward streaming video, live sports, and commerce media presents avenues for accelerated growth, particularly if PubMatic can capture more buy-side budgets through Activate.
Threats: Competitive pressure from Amazon, The Trade Desk, and other large platforms looms large, especially as they expand into CTV. Broader macroeconomic uncertainty, potential regulatory changes, and the growing influence of AI-driven search and content discovery could also reshape traffic patterns and advertiser priorities.
Conclusion
The digital advertising industry is at an inflection point. Programmatic growth is slowing in the open web, while walled gardens consolidate market power. At the same time, the rise of streaming, retail media, and AI-powered targeting creates both challenges and opportunities. PubMatic’s strategy to blend SSP infrastructure with curated, AI-powered buying aligns with these shifts, but execution will be critical.
PubMatic’s Q2 2025 results reflect a company outperforming expectations, advancing in strategic growth areas, and investing in future-proof capabilities. Yet, the market’s reaction highlights the reality that even strong execution can be overshadowed by sector-wide sentiment and competitive concerns. As the industry continues to evolve, PubMatic’s focus on CTV, SPO, and AI-powered efficiency will be tested by macro forces and formidable rivals. For now, the company’s operational momentum and solid financial foundation suggest it remains well-positioned to navigate the turbulence.
About PubMatic
PubMatic (NASDAQ: PUBM) is an independent technology company that delivers the digital advertising supply chain of the future. Its sell-side platform empowers independent app developers and publishers to maximize their digital advertising monetization, while enabling advertisers to drive ROI by reaching and engaging their target audiences in brand-safe, premium environments across ad formats and devices. Website: https://pubmatic.com.
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