Why Zeta Global (ZETA) Stock Continues to Underperform Despite Strong Fundamentals

Zeta Global (ZETA) has long been a standout in the AI-driven marketing sector, consistently delivering robust financial results and raising revenue guidance well above consensus estimates. Yet, despite these fundamentals-including a 26% year-over-year revenue growth in Q3 2025 and a projected 21% growth for FY2026-its stock price has languished, trading 53.6% below its 52-week high of $36.74 as of late 2025. This paradox of strong earnings and weak share price performance demands a closer look at the interplay of market sentiment, short-selling pressure, and retail investor behavior.

Market Sentiment: The AI Bubble and Profitability Concerns

The broader market's skepticism toward high-growth tech stocks has cast a shadow over ZETA. Analysts and investors remain wary of an overinflated AI sector, with shrinking profit margins and macroeconomic uncertainties pushing capital toward steadier investments. This anxiety is compounded by ZETA's own challenges: while the company reported $78.06 million in adjusted EBITDA for Q3 2025, it still posted a net loss of $3.63 million, raising questions about its path to consistent profitability.

Despite these concerns, ZETA's value proposition remains compelling. A Total Economic Impact™ study by Forrester Consulting found that enterprises using Zeta's AI Marketing Cloud achieved a six-time return on ad spend and 295% return on tech investment. Analysts at RBC Capital and Goldman Sachs have even raised their price targets for ZETA, reflecting confidence in its long-term growth narrative. Yet, this optimism has yet to translate into sustained investor enthusiasm, as the stock remains vulnerable to broader sector-wide jitters.

Short-Selling Pressure: A Bearish Overhang

Short interest in ZETA has surged to 13.48% of its float as of October 15, 2025, up 19.2% from the previous month. This level of pessimism-while lower than Tempus AI's 22.99% short interest-suggests lingering doubts about ZETA's ability to sustain its growth trajectory. The short interest ratio of 3.0 further indicates moderate bearish sentiment, as short sellers would need three days to cover their positions if the stock rallied sharply.

The elevated short interest creates a double-edged sword. On one hand, it reflects skepticism about ZETA's valuation and execution risks. On the other, it sets the stage for a potential short squeeze if the stock experiences a rapid upward move. Such a scenario could amplify gains for long investors, but the current short-heavy environment has likely dampened buying momentum, as institutional and retail investors alike remain cautious.

Retail Investor Behavior: Mixed Signals and Mechanical Moves

Retail investor sentiment on platforms like Reddit has been mixed. Some users highlight ZETA's attractive risk-reward profile, citing its 25% annual revenue growth and improving operating margins as undervalued strengths. Others, however, point to underperformance relative to the S&P 500 and weak revenue guidance as red flags. This duality underscores the uncertainty surrounding ZETA's future, with retail traders torn between its long-term potential and near-term volatility.

Interestingly, ZETA's December 2025 rally-a 6-day streak with 19% cumulative gains-was partly driven by options mechanics and low float supply rather than organic retail demand. While this surge temporarily boosted sentiment, it also highlighted the stock's susceptibility to market structure forces rather than consistent retail participation. The lack of sustained retail buying pressure has left ZETA vulnerable to short-term swings, further exacerbating its underperformance.

Conclusion: A Stock at a Crossroads

Zeta Global's underperformance is not a reflection of its fundamentals but a symptom of broader market dynamics. The AI sector's volatility, coupled with short-selling pressure and mixed retail sentiment, has created a challenging environment for the stock. However, ZETA's strong financials-including a 53% year-over-year increase in free cash flow and a 28.7% five-year revenue CAGR-suggest that its long-term growth story remains intact.

For investors, the key lies in balancing skepticism with opportunity. While the current underperformance may persist due to macroeconomic and sentiment-driven factors, ZETA's strategic advantages-such as its proprietary AI platform and high-margin B2B model-position it to outperform in a more stable market environment. As the company continues to raise guidance and demonstrate operational efficiency, the question becomes not whether ZETA can grow, but whether the market will eventually recognize its value.