PubMatic (PUBM) Q3 2025: CTV Revenue Surges 50% as AI Drives Margin Expansion
PubMatic’s quarter was defined by a 50%+ surge in CTV revenue and 80%+ growth in emerging streams, fueled by accelerating AI adoption and infrastructure innovation. The company’s end-to-end platform, anchored by its NVIDIA partnership and agentic AI roadmap, is delivering tangible operational leverage and new revenue streams, even as legacy DSP headwinds linger. Management’s disciplined capital allocation and diversification efforts are positioning the business for renewed double-digit growth as the digital ad ecosystem shifts toward the sell side.
Summary
- CTV and Emerging Revenue Acceleration: Connected TV and new AI-driven products are reshaping PubMatic’s revenue mix.
- AI-Driven Efficiency Gains: Proprietary infrastructure and agentic AI are materially reducing cost and boosting publisher yields.
- Strategic Diversification: Expansion into mid-market DSPs and commerce signals a pivot beyond legacy buyer concentration.
Performance Analysis
PubMatic delivered revenue and adjusted EBITDA ahead of guidance, with CTV (Connected TV, streaming TV ad inventory) and emerging revenue streams as the primary growth engines. CTV revenue, excluding political, grew over 50% year-over-year, now monetizing inventory from over 90% of the top 30 global streamers. Omnichannel video accounted for 38% of total revenue, while emerging streams—driven by AI-powered yield optimization and data curation—grew over 80% and now comprise 10% of the business.
Unit cost leverage was a standout: PubMatic processed 87 trillion gross impressions in Q3, up 24% YoY, with nearly 60% from CTV and mobile app. Despite this volume, unit costs declined 19% over the trailing twelve months, enabled by AI-driven infrastructure optimization and a disciplined approach to CapEx. Adjusted EBITDA margin reached 16%, with free cash flow of $22.8 million and zero debt, underscoring the financial durability of the model.
- Buyer Mix Shift: Mid-market DSP (demand-side platform) partner spend grew 25%+, offsetting weakness from a top legacy DSP.
- Operating Discipline: Operating expenses remained flat at $51 million, even as the sales team expanded 19% in buyer-facing roles.
- Regional Dynamics: APAC and EMEA posted positive growth, while Americas declined 14% due to DSP headwinds.
PubMatic’s ability to grow high-margin, recurring revenue streams while maintaining cost discipline is creating operating leverage that positions the company well as broader ad market volatility persists.
Executive Commentary
"CTV significantly outpaced the market rate of growth and grew over 50% year over year, excluding political, driven by increased premium supply, continued scaling of agency marketplaces, traction in our live sports marketplace, and growth of small and mid-market advertisers. Emerging revenues grew over 80% year over year as sell-side targeting and newly launched AI solutions quickly ramp."
Rajiv Goel, Co-founder and CEO
"We processed approximately 87 trillion gross impressions in Q3, a 24% increase over last year, and a 12% sequential gain versus Q2. Nearly 60% of total impressions were from CTV and mobile app inventory, highlighting our increasing focus on high engagement channels. Further, the increase in impressions is highly leveraged over a fixed cost base. Over a trailing 12-month basis, unit costs in the third quarter declined 19% over the comparable prior year period."
Steve Pantelik, CFO
Strategic Positioning
1. AI Infrastructure as Competitive Moat
PubMatic’s proprietary infrastructure, built in partnership with NVIDIA, is a clear differentiator. The company’s deployment of next-generation AI models delivers 5x faster bid responses and 85% fewer auction timeouts, directly boosting publisher yield and advertiser ROI. This full-stack ownership enables rapid innovation and cost control, distancing PubMatic from peers reliant on public cloud.
2. Agentic AI and Workflow Automation
AI is embedded across the platform, powering both buyer and publisher experiences. Seventeen operational AI agents now guide yield, diagnostics, and campaign setup, slashing manual effort and accelerating campaign launch by 87%. PubMatic’s leadership in agentic AI—where autonomous agents transact across the ecosystem—positions it at the forefront of the next wave of programmatic advertising.
3. Diversification Beyond Legacy DSPs
PubMatic is aggressively expanding its demand ecosystem, onboarding 25+ new DSP partners in 2025 and growing mid-market DSP spend 25%+ YoY. The Activate platform, enabling direct-to-supply buying, saw active campaigns quadruple and customer count rise 35%. This reduces reliance on top legacy DSPs, a key risk highlighted by recent spend declines.
4. CTV and Commerce Media as Growth Engines
CTV remains the primary growth engine, with PubMatic now serving over 90% of the top 30 global streamers and driving 150% sequential growth in live sports buying. Commerce media and data curation streams are scaling rapidly, expanding PubMatic’s reach into high-margin, non-traditional ad budgets and providing new monetization pathways.
5. Capital Allocation Discipline and Shareholder Returns
PubMatic’s strong balance sheet underpins continued innovation and buybacks. With $136.5 million in cash and $94.4 million remaining under its repurchase program, management is balancing investment in AI with direct returns to shareholders, all while maintaining zero debt and robust free cash flow generation.
Key Considerations
PubMatic’s Q3 was a showcase of how AI-driven innovation and platform ownership are enabling both operational leverage and strategic diversification as legacy ad tech models are disrupted. The company’s ability to capture emerging revenue streams and expand its buyer base is critical to offsetting ongoing DSP concentration risk.
Key Considerations:
- AI-Driven Margin Expansion: Proprietary tech stack and AI agent deployment are materially lowering costs and boosting gross margins.
- Buyer Ecosystem Diversification: Rapid expansion in mid-market DSPs and Activate adoption reduces dependency on top legacy buyers.
- CTV and Commerce Media Scale: Strong traction in CTV and commerce media is increasing the share of high-growth, high-margin revenue streams.
- Capital Allocation Flexibility: Ongoing buybacks and disciplined CapEx reflect a focus on maximizing shareholder value while funding innovation.
Risks
Legacy DSP spend volatility remains a headwind, with recent declines in a top DSP impacting Americas revenue and display format performance. Industry shifts such as the Google ad tech remedies verdict and evolving DSP strategies (e.g., Trade Desk’s Kokai and OpenPath) create both opportunity and uncertainty. AI search’s impact on publisher traffic is currently limited, but ongoing shifts in user behavior and ad spend allocation warrant monitoring. Currency fluctuations and macro ad market softness could also pressure near-term results, especially in consumer discretionary verticals.
Forward Outlook
For Q4, PubMatic guided to:
- Revenue of $73 to $77 million
- Adjusted EBITDA of $19 to $21 million
For full-year 2025, management maintained guidance:
- Revenue of $276 to $280 million
- Adjusted EBITDA of $53 to $55 million (including $5 million negative FX impact)
Management highlighted continued double-digit growth in CTV (ex-political) and 30%+ growth in emerging revenues, with Q4 operating expenses expected to remain flat as AI-driven efficiencies offset targeted sales investments. CapEx is projected at $15 million for the year, reflecting optimization gains.
- Muted holiday uptick in some consumer verticals is tempering near-term guidance.
- DSP-related revenue is assumed flat sequentially in Q4.
Takeaways
PubMatic’s quarter confirms the strategic payoff of its AI-first, infrastructure-led model, with CTV and emerging streams now driving a significant share of total revenue. Disciplined cost management and capital allocation are enabling margin expansion, even as buyer mix shifts and macro uncertainty linger.
- AI and Infrastructure Lead: Proprietary stack and agentic AI are delivering both new revenue and operating leverage, extending PubMatic’s lead over peers.
- Buyer and Revenue Diversification: Expansion into mid-market DSPs and commerce media is reducing risk and opening new growth vectors.
- Future Watch: Track continued CTV share gains, Activate platform adoption, and the impact of industry-wide AI and regulatory changes on PubMatic’s competitive positioning.
Conclusion
PubMatic’s Q3 2025 results highlight a business in transition—leveraging AI and infrastructure to both diversify and accelerate growth. The company’s ability to scale high-margin streams while maintaining cost discipline positions it for renewed growth as the digital ad market evolves.
Industry Read-Through
PubMatic’s results signal a broader industry pivot toward sell-side value creation, as AI and infrastructure ownership become critical differentiators in digital advertising. CTV’s rapid growth and the rise of agentic AI workflows suggest that walled garden advantages are eroding in favor of open platforms with deep technical integration. Legacy DSP concentration risks and macro ad volatility remain sector-wide concerns, but companies with proprietary tech stacks and diversified demand ecosystems are best positioned to capture the next wave of programmatic growth. Expect further consolidation and strategic partnerships as the market recalibrates around AI-driven efficiency and transparency.