PubMatic (PUBM) Q4 2025: Emerging Revenue Soars 75% as Agentic AI Adoption Accelerates
PubMatic’s Q4 marked a structural inflection as emerging AI-driven solutions, CTV, and mobile app segments fueled broad-based growth and margin expansion. With 83% of the business growing 18% YoY after adjusting for legacy DSP and political spend, the company’s pivot to agentic AI and direct buying is rapidly reshaping its competitive position. Management’s conviction in double-digit revenue growth for the second half of 2026 rests on accelerating adoption of AI, deeper DSP diversification, and a more resilient revenue mix.
Summary
- Agentic AI Drives Platform Shift: PubMatic’s early lead in agentic advertising unlocks new revenue streams and operational leverage.
- Revenue Mix Diversifies: CTV, mobile app, and emerging products now comprise half of total revenue, reducing legacy risk.
- Margin Expansion Set to Continue: AI-driven automation and cost discipline position PubMatic for sustained profitability as growth accelerates.
Performance Analysis
PubMatic delivered a pivotal quarter, with revenue and adjusted EBITDA surpassing guidance and broad-based strength across secular growth engines. After normalizing for political and legacy DSP headwinds, 83% of the business posted 18% year-over-year growth, powered by CTV, mobile app, and emerging revenue streams. CTV, connected TV ad inventory, marked its fourth consecutive year of 50%+ CAGR, now monetizing 28 of the top 30 global streamers and over 450 publishers. Mobile app revenue accelerated to 25% growth, reflecting deep partnerships and product innovation, while emerging revenues—spanning Activate, Commerce Media, and AI solutions—grew over 75% and now represent roughly 12% of total revenue.
Margin strength was a standout, with adjusted EBITDA margin expanding to 35%, underpinned by operating leverage from scale and AI-enabled efficiencies. PubMatic’s fixed-cost infrastructure absorbed a 28% increase in impression volume while keeping cost of revenue flat, driving unit cost down 20% year-over-year. Segmental outperformance was further supported by robust display growth (excluding legacy DSP, up 20%), and double-digit growth across key verticals like shopping, health, and technology. Regional diversification also played a role, with APAC and EMEA growing at 25% and 15% respectively, offsetting a decline in Americas due to legacy and political spend normalization.
- Emerging Revenue Acceleration: New AI-driven solutions and Activate, direct buying platform, nearly doubled YoY, now 12% of total revenue.
- Secular Growth Engines Outperform: CTV and mobile app segments delivered sustained double-digit growth, driving durable platform scale.
- Cost Structure Leverage: AI and automation compressed unit costs and held total opex flat, despite increased investment in sales and innovation.
PubMatic’s broad-based momentum, combined with disciplined cost management, sets a strong foundation for margin expansion and cash flow growth as AI adoption accelerates across the platform.
Executive Commentary
"Our results highlight continued growth in our underlying business, our leadership position in AI solutions, and the durability of our business model... These moves represent the first critical steps of our five-year roadmap designed to reaccelerate growth, expand margins, and compound long-term shareholder value."
Rajiv Goel, Co‐Founder & CEO
"Q4 was a pivotal turning point for us as we significantly exceeded expectations on both revenue and adjusted EBITDA... We ended the year with nearly 50% of our revenues coming from high engagement, first-party, data-rich environments of CTV, mobile app, and emerging revenues."
Steve Pantelik, Chief Financial Officer
Strategic Positioning
1. Agentic AI and Platform Innovation
PubMatic is rapidly establishing itself as a leader in agentic AI, a new paradigm where autonomous systems execute and optimize advertising in real time. The Agentic OS platform has already powered over 250 deals, unlocking 5x cost efficiencies and compressing campaign setup time by 87%. Management expects agentic AI to drive a step change in market efficiency and expand the open internet advertising market, with the company’s deep publisher integrations and proprietary infrastructure forming a durable moat.
2. Revenue Diversification and DSP Expansion
Diversifying the buyer base remains a core strategic priority. PubMatic added 50 new DSP partners in 2025, with mid-market DSP ad spend growing 30% YoY in Q4. This shift reduces concentration risk and aligns the business with faster-growing, performance-oriented advertisers, especially in commerce and pharma verticals. The company’s Activate platform further enables direct buying, collapsing the value chain and capturing incremental economics.
3. CTV and Mobile Scale
CTV and mobile app now account for nearly half of revenue, up from a much smaller share just three years ago. PubMatic’s integration with 28 of the top 30 global streamers and recent wins with major brands (such as Sony Network Communications) extend its leadership in video and streaming formats. Mobile app momentum is reinforced by strategic integrations with Google AdMob and Google Ad Manager, positioning PubMatic for continued secular tailwinds as spend shifts to app-based environments.
4. AI-Driven Operational Efficiency
AI is deeply embedded across the business, driving both productivity and cost savings. Over 40% of new code was AI-generated in H2 2025, and automation in legal, accounting, and FP&A has delivered double-digit efficiency gains. These savings are reinvested into sales and innovation, supporting growth without expanding headcount.
5. Capital Allocation and Balance Sheet Strength
PubMatic’s $146 million cash position and zero debt provide strategic flexibility. The company continues to invest in AI infrastructure, maintains a disciplined share repurchase program (with $94 million remaining authorization), and is positioned to pursue strategic M&A as opportunities arise.
Key Considerations
Q4’s results reflect a business in transition, with secular growth engines and AI leadership offsetting legacy headwinds and setting the stage for renewed acceleration. Investors should focus on the following:
- Agentic AI Early Mover Advantage: PubMatic’s rapid deployment and customer adoption of agentic solutions position it ahead of industry peers as digital advertising transitions to AI-driven workflows.
- Revenue Mix Resilience: With CTV, mobile app, and emerging revenues now forming half of the business, PubMatic’s exposure to legacy DSP and political ad volatility is structurally reduced.
- DSP Diversification Momentum: Addition of 50 new DSPs and robust mid-market growth de-risks buyer concentration and opens new verticals.
- Margin Expansion Levers: AI-powered automation and a fixed-cost infrastructure create operating leverage and fund continued investment in innovation.
Risks
Key risks remain around the pace of agentic AI revenue scaling, potential pricing pressure as AI collapses the value chain, and the uncertain regulatory outcome of the Google AdTech remedies trial. While management expects AI adoption to drive incremental margin, the transition may involve short-term volatility as legacy DSP headwinds are fully lapped and as the economics of new models are tested. Macroeconomic stability and ad spend trends also remain variables, though current signals are constructive.
Forward Outlook
For Q1 2026, PubMatic guided to:
- Revenue of $58 to $60 million, reflecting high single-digit growth YoY after adjusting for legacy DSP impact.
- Adjusted EBITDA of minus $0.5 million to plus $1 million, including FX headwinds.
For full-year 2026, management expects:
- Return to double-digit revenue growth in the second half, with corresponding margin expansion.
Leadership emphasized the following:
- Emerging revenues and AI solutions will be the primary growth drivers, with Agentic OS adoption outpacing all prior product launches.
- Legacy DSP headwinds will be fully lapped by end of Q2, setting up acceleration in H2.
Takeaways
PubMatic’s Q4 performance marks a strategic inflection, with secular growth engines gaining momentum and agentic AI adoption accelerating faster than anticipated.
- AI as Both Growth and Margin Engine: PubMatic’s dual use of AI to drive both incremental revenue and operational efficiency is unique among peers and underpins the outlook for sustained profitability.
- Legacy Headwinds Nearing Resolution: With DSP and political spend normalization nearly behind, the business is positioned for cleaner YoY comparisons and renewed acceleration.
- Execution on Diversification and Innovation: The company’s ability to scale new revenue streams and deepen buyer relationships will be critical to sustaining double-digit growth targets in the second half and beyond.
Conclusion
PubMatic exits 2025 with a structurally improved revenue mix, early leadership in agentic AI, and a scalable, efficient cost base. As legacy headwinds subside and AI-driven products scale, the company is positioned for accelerating growth and expanding margins, with strategic optionality supported by a strong balance sheet.
Industry Read-Through
PubMatic’s rapid agentic AI adoption signals a new phase for the ad tech sector, where autonomous, real-time campaign execution and direct buying models challenge traditional value chains. The shift toward CTV, mobile app, and AI-enabled platforms highlights the growing importance of data-rich, high-engagement environments. Competitors lacking deep publisher integrations, proprietary infrastructure, or AI development capabilities risk being disintermediated as advertisers and publishers seek greater efficiency and transparency. The industry should expect continued fee compression, buyer-publisher convergence, and rapid scaling of new AI-driven ad formats, with early movers like PubMatic setting the pace for innovation and market share gains.