PubMatic reports revenue decline in Q1 2025, but CTV growth exceeds 50%
Ad tech firm's underlying business grows 21% as company diversifies revenue streams amid shifting digital advertising landscape.
PubMatic Inc. (PUBM) reported a 4% year-over-year revenue decline for Q1 2025, with total revenue of $63.8 million compared to $66.7 million in the same period last year. Despite this overall decline, the company maintained profitability with an adjusted EBITDA of $8.5 million and a 13% margin, marking its 36th consecutive quarter of adjusted EBITDA profitability.
The company's stock rose 9.56% to $11.7 in aftermarket trading following the earnings announcement, as investors responded positively to strong performance in key growth areas and the company's strategic positioning in emerging digital advertising segments.
PubMatic's Q1 results highlighted the company's ongoing transformation toward high-growth, secular areas in digital advertising. According to PubMatic CEO Rajeev Goel, the company's underlying business excluding one specific DSP buyer and political advertising grew by 21% year-over-year, accelerating from 17% growth in the second half of last year.
Several key performance metrics demonstrated strong momentum in strategic areas:
- Revenue from Connected TV (CTV) increased over 50% year-over-year
- Omnichannel video revenue, which includes desktop, mobile, and CTV, grew 20% year-over-year and represented 40% of total revenue
- Supply Path Optimization (SPO) represented over 55% of total activity on the platform, up from 50% in Q1 2024
- Emerging revenue streams more than doubled year-over-year
"Our business continues to shift to secular growth areas, an important transformation that will provide resiliency as we navigate the current ad spend environment," said Goel during the earnings call. These growth segments now account for approximately 70% of PubMatic's total revenue.
The overall revenue decline can be attributed primarily to a technical change in auction methodology from one of PubMatic's major DSP buyers, which began affecting results in mid-2024. CFO Steve Pantelick noted this impact will anniversary in a few weeks, removing a significant headwind for the company's growth.
Display revenue, which was disproportionately affected by this DSP change, declined 10% year-over-year. However, excluding this specific buyer, all other display revenues grew strongly at over 20% year-over-year.
"Q1 total revenue, inclusive of the impact from the DSP buyer, declined 4%. Our underlying business excluding this DSP and political advertising increased 21%," Pantelick explained.
The company is navigating varying performance across advertising verticals. Health & Fitness, Food & Drink, and Style & Fashion verticals in aggregate increased over 10%, while Technology & Computing and Automotive sectors showed softer trends, declining by over 10%.
PubMatic executives highlighted two major industry developments that they believe will create significant long-term tailwinds for the business.
First, the recent verdict in the Google AdTech antitrust case is expected to provide a more level playing field in the open internet advertising market. While timing depends on appeals and remedies, Goel noted that "the court's decision forces a major shift in the market as publishers and buyers opt for independent and transparent solutions." With Google currently holding approximately 60% market share compared to PubMatic's 4%, company leadership sees substantial opportunity for market share gains.
Second, Google's announcement that third-party cookies will continue in the Chrome browser removes a potential disruption to browser-based content and ad monetization. This development allows PubMatic to continue leveraging its investments in diverse data solutions while focusing on growth in newer media environments like CTV and commerce media.
AI-driven innovation and operational efficiency
On May 7, PubMatic announced what it describes as "the industry's first GenAI-powered end-to-end platform that gives buyers direct access to nearly the entire open internet." This platform aims to simplify and optimize the media buying process from inventory discovery to performance optimization.
"By simply describing their ideal inventory in natural language, our Generative AI models instantly create optimized deal packages, eliminating manual workflows, reducing time-to-launch, and improving targeting precision," Goel explained.
The company is also leveraging AI for internal operational efficiency. Over the past two years, PubMatic has increased the number of impressions processed by 60% while managing cost of revenue to an increase of only 16%. In Q1 2025, the company processed nearly 75 trillion impressions, a 29% increase over Q1 2024, while reducing the unit cost of impressions by 20% year-over-year.
Financial position and capital allocation
PubMatic maintains a strong balance sheet with $144.1 million in cash and marketable securities and no debt. The company generated $15.6 million in cash from operations in Q1 and $7.3 million in free cash flow.
The board of directors has authorized a $100 million expansion of the company's share repurchase program, extending it through the end of 2026. Since February 2023, PubMatic has repurchased 8.7 million shares of Class A common stock for $138.2 million, representing approximately 17% of fully diluted shares outstanding at the program's inception.
Q2 outlook and full-year expectations
For Q2 2025, PubMatic expects revenue between $66 million and $70 million and adjusted EBITDA between $9 million and $12 million. This guidance assumes continued 15%+ year-over-year growth in the underlying business.
Looking to the second half of 2025, the company expects to deliver year-over-year revenue growth despite a 5-7 percentage point headwind from political spending that occurred in the back half of 2024.
The company also reduced its full-year capital expenditure forecast by more than 15% to approximately $15 million through optimization efforts and cost-saving measures.
Why this matters
These results highlight several key trends reshaping the digital advertising landscape that marketers should consider:
- The accelerating shift from linear TV to streaming represents a significant opportunity. With PubMatic reporting 50%+ growth in CTV revenue and partnerships with 80% of the top 30 streaming publishers, marketers should evaluate how to optimize their video strategies for programmatic CTV buying.
- Supply path optimization is gaining prominence as ad budgets come under greater scrutiny. The record 55%+ of activity on PubMatic's platform now coming through SPO indicates marketers are increasingly prioritizing efficiency, transparency, and performance in their programmatic buying.
- Commerce media is emerging as a powerful performance channel. PubMatic's work with companies like Kroger Precision Marketing and Instacart demonstrates how retailers' first-party data can be leveraged across premium inventory to improve performance while maintaining privacy compliance.
- AI is transforming both buying processes and operational efficiencies. Marketers should explore how generative AI tools can streamline workflow, improve targeting precision, and drive performance gains in digital media buying.
- The Google antitrust verdict may reshape the competitive landscape. As the digital advertising market potentially becomes more fragmented and independent solutions gain traction, marketers may need to reassess their technology partnerships and supply chain strategies.
Timeline
- May 7, 2025: PubMatic's Board of Directors authorizes $100 million expansion of share repurchase program through 2026
- May 7, 2025: PubMatic announces industry's first GenAI-powered end-to-end buying platform
- Q1 2025: CTV revenue grows over 50% year-over-year
- Q1 2025: Supply Path Optimization reaches record 55%+ of total platform activity
- Q1 2025: Revenue from emerging revenue streams more than doubles year-over-year
- Mid-2024: Major DSP buyer changes auction methodology, creating headwind for PubMatic revenue