PubMatic stock drops 28% despite strong earnings, impacted by DSP partnership concerns.

PubMatic's stock fell 28% despite strong earnings due to concerns about a demand-side platform partnership. Management cited platform changes by a major partner as a significant headwind. The stock drop overshadowed quarterly results, highlighting the challenges facing the company in the rapidly changing digital advertising landscape.

PubMatic Inc. reported its second-quarter 2025 earnings, revealing a notable revenue increase but a significant decline in stock price following the announcement. The company surpassed revenue expectations with $71.1 million, compared to the forecasted $67.84 million, marking a 4.81% surprise. However, the earnings per share (EPS) fell short, posting $0.05 against an expected -$0.16, resulting in a -131.25% surprise. Despite the positive revenue growth, PubMatic’s stock fell 3.29% to close at $10.93, further declining slightly in after-hours trading [1].

The company's revenue grew 6% year-over-year, reaching $71.1 million. The company maintained a 20% adjusted EBITDA margin, marking its 37th consecutive profitable quarter. New AI-powered products and platform expansions were highlighted. Guidance for Q3 2025 projects revenue between $61 million and $66 million [1].

However, the stock drop overshadowed quarterly results, highlighting the challenges facing the company in the rapidly changing digital advertising landscape. Management cited platform changes by a major partner as a significant headwind. The company addressed these concerns by emphasizing its strategy to diversify revenue streams and its confidence in navigating current challenges [1].

Investors should note that while the company maintains strong financial health with a current ratio of 1.44 and holds more cash than debt on its balance sheet, the stock is currently undervalued, trading at a significant discount to its Fair Value. The company maintains a healthy gross profit margin of 64.91% and has demonstrated consistent profitability over the last twelve months [1].

For deeper insights into PubMatic’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers [1].

References:
[1] https://www.investing.com/news/transcripts/earnings-call-transcript-pubmatic-q2-2025-sees-revenue-growth-stock-dips-93CH-4183981