PubMatic Earnings: Recovery in Digital and Programmatic Ads Likelier, as Displayed by PubMatic

PubMatic’s PUBM first-quarter results indicate increasing optimism by the advertising technology providers and advertisers, as year-over-year revenue growth continued to improve in February and March, and remained steady in April. While economic uncertainty and pricing pressure partially due to the further transition of connected TV onto programmatic will hamper PubMatic’s growth a bit, these are likely to be offset by the firm’s access to more ad inventory through more publishers, more CTVs welcoming programmatic advertising, and the firm’s focus on supply path optimization. We did not make any significant changes to our projections and are maintaining our $22 fair value estimate, to which the PubMatic shares are trading at an attractive discount.

Total revenue increased 1.6% from last year to $55.4 million, as growth in revenue from omnichannel video advertising (13%) was partially offset by the decline in display advertising. Within omnichannel, the firm’s connected TV publisher customer base and revenue increased 10% and 50% year over year, respectively, displaying an increase in CTV ad inventory on, and higher usage of, PubMatic’s platform. We remain confident about the growth opportunity in the CTV market, which we still expect to increase at an average annual rate of 21% through 2027, in which PubMatic will be one of the main players on the supply side.

On the supply path optimization front, we think the acquisition of Martin, the launch of Activate, and further focus on CTV are positioning the firm to strengthen its client (publishers) and partner (advertisers and ad-holding firms) relationships. This helps meet the demand from advertisers for shorter and more efficient paths to access ad inventory. Revenue generated through supply path optimization during the quarter represented 35% of total revenue, up from last year’s 27%.