PubMatic’s Q3 2025 Earnings Call: Contradictions Emerge on DSP Changes, SPO Landscape, and SSP Evolution

Date of Call: November 10, 2025

Financials Results

• EPS: -$0.14 per diluted share (GAAP net loss of -$6.5M)
• Operating Margin: Adjusted EBITDA margin 16% (Q3 adjusted EBITDA $11.2M; included ~ $1M FX headwind)

Guidance:

• Q4 revenue expected $73M–$77M; assume the large DSP flat vs Q3.
• Q4 adjusted EBITDA expected $19M–$21M; Q4 operating expenses expected similar to Q3.
• Full-year 2025 revenue expected $276M–$280M; adjusted EBITDA $53M–$55M (includes >$5M estimated negative FX).
• CapEx for full year maintained at $15M.
• Management expects CTV (ex-political) to grow double digits and emerging revenues to grow 30%+.

Business Commentary:

* Revenue and Adjusted EBITDA Growth: - PubMatic reported revenue exceeding expectations, with total omnichannel video revenues growing 21% year-over-year, excluding political ad spend. - Adjusted EBITDA reached $11.2 million, a 16% margin. - Growth was driven by strong performance in CTV and mobile app ads, along with effective cost management and AI-driven efficiencies.

• CTV Expansion and Market Share:
• CTV revenue grew over 50% year-over-year, excluding political advertising, representing 38% of total revenue.
• This expansion was supported by increased premium supply, scaling of agency marketplaces, and traction in live sports marketplaces.
• The company monetized CTV inventory from over 90% of the top 30 global streamers, highlighting its strong market position.

• Emerging Revenue Streams Growth:
• Emerging revenue streams grew over 80% year-over-year, scaling to 10% of total revenue in Q3.
• Growth was driven by new AI solutions, such as AI-powered yield optimization for publishers, and the integration of commerce media and sell-side curation.
• The increasing adoption of AI solutions and strategic partnerships with data providers like Nielsen contributed to this growth.

• AI and Infrastructure Investments:
• PubMatic's investments in AI infrastructure, including collaboration with NVIDIA, have led to 5x faster bid responses and 85% fewer auction timeouts.
• This has resulted in improved advertiser performance and higher publisher yields, directly closing the infrastructure advantage of walled gardens.
• The company's focus on AI is expected to drive future growth by enhancing platform usage and generating new revenue streams.

Sentiment Analysis:

Overall Tone: Positive

• Management: "delivered a stronger-than-expected quarter with revenue and adjusted EBITDA ahead of guidance." Q3 adjusted EBITDA $11.2M (16% margin); generated $32.4M operating cash flow and $22.8M free cash flow; ended quarter with $136.5M cash and zero debt; repeated emphasis on AI leadership, accelerating CTV and emerging revenue growth.

Q&A:

• Question from Andrew Marok (Raymond James): How would you characterize the state of play around SPO given Trade Desk moves (OpenPath/OpenAds/reseller claims) and your DYD management API collaboration?
  Response: PubMatic is a direct SSP (not a reseller), focused on yield optimization and direct publisher integrations; it collaborates with DSPs (e.g., Trade Desk) via price-discovery/provisioning APIs and leverages Activate and AI to capture incremental buyer spend.

• Question from Andrew Marok (Raymond James): On COGS/unit cost leverage, how should we think about improvements in absolute dollars or percent of revenue going forward?
  Response: Owning infrastructure plus AI/software optimizations drive sustained unit-cost reductions; management expects gross-margin expansion as revenue reaccelerates without heavy incremental CapEx.

• Question from Matthew Swanson (RBC): Can you give color on the evolution of the CTV environment over the past year and how you're investing to sustain growth next year?
  Response: CTV growth is driven by expanded premium publisher coverage (~90% of top 30 streamers), a surge of mid-market DSPs and advertisers, live-sports momentum and AI-enabled product features; management will continue global investment and buyer onboarding via Activate.

• Question from Matthew Swanson (RBC): Regarding GenAI and Agentic AI, what's your right-to-win versus the broader noise?
  Response: Right-to-win stems from owning infrastructure, having massive transaction/data scale, and demonstrated execution (multiple live AI agents and AdCP), giving PubMatic an early, practical advantage.

• Question from Shweta Khajuria (Wolfe): Are you seeing Trade Desk going direct (Kokai) materially impact your impressions or business?
  Response: No material, lasting impact—management revised ML and worked with SPO partners to stabilize spend (August/September); they are diversifying DSP mix and seeing strong mid-market DSP growth.

• Question from Matthew Condon (JMP): What impact are AI platforms having on publisher search traffic across your publisher base?
  Response: Impact is limited; worst-case exposure is mid-single-digit revenue, ~60% of impressions are CTV/mobile app and unaffected, and mitigation comes from diversifying inventory and new AI-driven opportunities.

• Question from Matthew Condon (JMP): Explain the NVIDIA partnership (5x faster bid responses) and how it structurally increases win rates or drives sustainable growth.
  Response: NVIDIA GPUs accelerate real-time decisioning (faster bids, fewer timeouts), enable advanced traffic shaping and speed up reporting, resulting in more bids in auctions, higher publisher yield and improved advertiser outcomes.

• Question from Robert Coolbrith (Evercore): Can you unpack the 5x claim and do demand-side partners need to change; and do you see growth alongside Trade Desk into H2'26?
  Response: The infrastructure advantage enables deeper vertical integration to help mid-market DSPs and benefits Activate buyers (similar performance gains to walled gardens), and management expects growth to reaccelerate in 2026 driven by CTV, mobile and emerging revenues.

• Question from Jacob Armstrong (KeyBanc): How must the SSP role evolve as Agentic AI expands and what investments are required to capitalize on that transition?
  Response: SSPs will expand into workflow automation—audience/inventory discovery, planning and measurement—and PubMatic is building standards (AdCP) and investing in transaction and application layers to enable agent-to-agent workflows.

• Question from Ed Alter (Jefferies): Where are investments to serve mid-market DSP demand showing up—more headcount or elsewhere?
  Response: Management reallocated resources toward high-return areas, increased buyer-focused headcount ~19% while keeping overall headcount flat, expects headcount roughly flat in 2026 with continued reallocation and no increase in planned CapEx.

Contradiction Point 1

Impact of DSP Changes and Optimization

It involves the impact of DSP changes on the company's performance and the strategies employed to mitigate these impacts, which directly affects market positioning and revenue expectations.

Is Trade Desk increasingly going direct, affecting your impression volume? Is this related to the Kokai platform's launch? - Shweta Khajuria (Wolfe Research, LLC)

2025Q3: Spend from Trade Desk stabilized in August and September after optimizing our algorithms and working with SPO partners. - Rajeev Goel(CEO)

Could you elaborate on the DSP change and optimization process? How does the guidance balance DSP and macro factors? - Matthew John Swanson (RBC Capital Markets)

2025Q2: A top DSP buyer shifted clients to a new platform, impacting inventory valuation and SPO settings, causing a drop in July and stabilization in August. - Rajeev Goel(CEO)

Contradiction Point 2

Role and Evolution of the SSP

It involves the company's position on the role of SSPs in the industry and their strategic focus, which impacts market strategy and product development.

How should SSP evolve with Agentic AI growth and what investments are needed for PubMatic to capitalize on this transition over the next few years? - Jacob Armstrong (KeyBanc Capital Markets Inc.)

2025Q3: The SSP role is expanding beyond transaction automation to workflow automation. - Rajeev Goel(CEO)

How do you assess the industry's evolution and risks for stand-alone DSPs and SSPs? - Shweta R. Khajuria (Wolfe Research, LLC)

2025Q2: The industry evolution is moving towards end-to-end platforms due to shifts in CTV and performance-based advertising. - Rajeev Goel(CEO)

Contradiction Point 3

Impact of Trade Desk and SPO

It involves the impact of Trade Desk's moves and SPO on PubMatic's business, which directly affects strategic positioning and revenue expectations.

Are you seeing a shift in Trade Desk’s strategy toward direct partnerships that could affect your impression volumes? Is this related to the Kokai platform launch? - Shweta Khajuria (Wolfe Research, LLC)

2025Q3: We are a platform for direct inventory, unaffected by Trade Desk's Kokai platform or direct integrations. Spend from Trade Desk stabilized in August and September after optimizing our algorithms and working with SPO partners. We're diversifying our DSP mix, with 25% plus year-over-year growth in mid-market DSPs. - Rajeev Goel(Co-Founder, CEO & Director)

Can you share the progress with mid-market DSPs and the future direction of this partnership? - Zach Cummins (B. Riley)

2025Q1: The DSP market has changed, with a growing mid-market of advertisers and agencies not tied to big holding companies. We're seeing potential for growth in this segment, both in new dollars and SPO shares. Expansion is happening globally. - Rajeev Goel (Co-Founder and CEO)

Contradiction Point 4

Role of PubMatic in the SPO landscape

It involves clarification on PubMatic's role in the supply path optimization (SPO) process, which impacts how the company interacts with buyers and sellers in the ad tech ecosystem.

Can you elaborate on SPO, particularly Trade Desk's recent moves into OpenPath and the launch of OpenAds, and how you characterize the current state of SPO? - Andrew Marok

2025Q3: Regarding SPO, PubMatic is a platform for direct inventory, not a reseller. We work directly with publishers, which is a more efficient way for buyers to access inventory. Trade Desk’s reseller claim is not accurate for us. - Rajeev Goel(CEO)

Why was the DSP impact limited to display and delayed until late in the quarter? Should the bidding algorithm be addressed with this DSP? - Rob Coolbrith

2024Q4: The DSP issue is the last reseller to move to first price bidding, and we do not anticipate a recurring challenge like that on the supply side. - Steve Pantelick(CFO)

Contradiction Point 5

Customer Diversification and DSP Growth

It involves the strategy for diversifying customer mix and growth potential in the DSP segment, which are critical for revenue and market share expansion.

How has the CTV environment evolved in the past year, and how is PubMatic investing to drive growth next year? - Matthew Swanson (RBC Capital Markets, Research Division)

2025Q3: We've expanded to 90% of the top 30 global streamers. AI has unlocked incremental budgets, with AI-powered live sports marketplaces and dramatically increased advertiser engagement. The focus remains on global investment in CTV, leveraging AI to drive growth. - Rajeev Goel(Co-Founder, CEO & Director)

Can you discuss the traction with mid-market DSPs and the future of this relationship? - Zach Cummins (B. Riley)

2025Q1: The DSP market has changed, with a growing mid-market of advertisers and agencies not tied to big holding companies. We're seeing potential for growth in this segment, both in new dollars and SPO shares. Expansion is happening globally. - Rajeev Goel (Co-Founder and CEO)