Programmatic advertising platform Pubmatic (NASDAQ: PUBM) reported Q3 CY2024 results topping the market’s revenue expectations , with sales up 12.7% year on year to $71.79 million. Revenue guidance for the full year exceeded analysts’ estimates, but next quarter’s guidance of $88 million was less impressive, coming in 2.2% below expectations. Its non-GAAP profit of $0.12 per share was also 36.4% above analysts’ consensus estimates.

Is now the time to buy PubMatic? Find out in our full research report.

Company Overview

Founded in 2006 as an online ad platform helping ad sellers, Pubmatic (NASDAQ: PUBM) is a fully integrated cloud-based programmatic advertising platform.

Advertising Software

The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.

Sales Growth

A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, PubMatic’s 11.8% annualized revenue growth over the last three years was sluggish. This fell short of our expectations.

This quarter, PubMatic reported year-on-year revenue growth of 12.7%, and its $71.79 million of revenue exceeded Wall Street’s estimates by 8.7%. Company management is currently guiding for a 4% year-on-year increase next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5.8% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and indicates its products and services will face some demand challenges.

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Customer Retention

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

PubMatic’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 107% in Q3. This means that even if PubMatic didn’t win any new customers over the last 12 months, it would’ve grown its revenue by 6.8%.

Trending up over the last year, PubMatic has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.

Key Takeaways from PubMatic’s Q3 Results

We were impressed by how significantly PubMatic blew past analysts’ EBITDA expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed analysts’ expectations and its EBITDA guidance for next quarter fell short of Wall Street’s estimates. Overall, this quarter was mixed. The stock traded up 2.3% to $16.80 immediately after reporting.

Is PubMatic an attractive investment opportunity at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.