Well, thank you so much for everybody for stopping in. We're excited to have PubMatic with us. Steve, thank you so much for taking the time. I greatly appreciate it.
Great. Glad to be here, Matt.
You reported last week.
Mm-hmm.
Can you maybe just walk us through the 4Q results or just give us a recap of the quarter? you know, you described it as an inflection point for the company. Just what exactly does that mean?
Sure. Well, we had a great fourth quarter. We came in well ahead of our expectations on the top and bottom line. I mean, one of the metrics that I think is important for investors to understand is if you adjust for political and a DSP change that we called out mid-2025, our core business, which was over 80% of our revenues, grew 18% year-over-year. A real, you know, significant number, well ahead of the market. It reflects, you know, a variety of factors. But I think the thing that we're particularly excited about it's a continuation of the runway we've had in terms of transforming our business.
We've been very focused on, developing, you know, the highest value data-rich, formats channels on our platform. In the fourth quarter, that represented nearly 50% of all of our revenues. Those are things like CTV, Mobile App, and then a whole category of Emerging Revenues. Particularly excited because all of those did quite well. For example, Emerging Revenues, which is a composition of, you know, our buy-side product, Activate, our curation product, our data product, our commerce product, and our AI solutions for publishers and buyers, grew 75% in the quarter. Just three years ago, that category was less than 1% of revenue, and it exited the year at 12% of revenue. Really nice, very rapid growth.
At the same time, other, you know, very valuable, formats channels, Mobile App grew 25% in the quarter. And, you know, over a four-year CAGR period, Mobile App has been growing 15% per annum. And then finally, CTV, which is about 20% of our revenues. The CAGR for that, for our business has been over 50%, and all that organic growth. So, it was important, not just in terms of the financial results, but also in terms of just the trajectory of our business. One of the things that we have been very entirely focused on is making sure that we are innovating to create incremental value in the future.
We've been developing agentic advertising, which, I hope we can get into in a couple of minutes. That's been, you know, important sort of what I call future opportunity for us and is, you know, will become a tailwind. Really, when I step back and think about the inflection point, it's that overall we've been broadening our revenues in the most valuable areas, and we've become more efficient and profitable. I think it set us up very well for 2026. You know, from my perspective, it really came together in the fourth quarter and give us a lot of confidence in terms of our 2026 trajectory.
You know, you mentioned agentic advertising. That was the big topic, I think, on the last call. Just can you explain to the audiences what exactly is agentic advertising and just what's driving it?
Sure. Agentic advertising, you know, I'd say think of it as the next logical extension beyond sort of AI assist. Agentic advertising now can make decisions in the programmatic ad ecosystem. From our perspective, it's moving from, you know, helping humans make those decisions better, but actually agents making those decisions. What I mean by decisions is that you have the whole value chain of activities. You have up stream, you have the discovery of what inventory a buyer or advertiser wants to, you know, place their ad on, to the planning of that campaign, and then of course, the execution, the transaction, and then the downstream, which is the measurement, you know, efforts. Agentic advertising is the whole system.
What we've done is to, you know, create the, you know, the first capabilities in our space to do that agentically. You know, we launched PubMatic's AgenticOS a couple of months ago, which is a system-level system where whether it be a advertiser's buyer agent or a DSP's buyer agent, or our own buyer's agent can now operate within our platform because we've MCP-enabled all the use cases, MCP, Model Context Protocol, that allows agents to, you know, synthesize the information and make decisions based upon the parameters and the guardrails that the, you know, whoever has set it up.
I think like the almost like the key point is, like PubMatic is just in a structural position as we think about agentic advertising. Can you talk about just like what are the advantages that PubMatic has specifically, I think sitting on the publisher side, you know, that enables a lot of unique things?
Yes. great question, Matt, and I think that really speaks to sort of what makes PubMatic unique. First and foremost, for this overall system to work, you have to have access to inventory. Over 20 years, we've integrated with over 100,000 websites, apps, where, you know, high-quality content has been, you know, brought into our platform. These are integrations that just don't happen overnight. They take years and years of developing the relationships and obviously the deep-seated technical integrations. Structurally, we have access to basically the whole open internet. That's really an important, you know, aspect. Now with that comes all the data-rich opportunities.
You know, roughly 60% of our inventory that we process every day is coming from data-rich environments like CTV and Mobile App. Structurally, we have access to all the relevant inventory in the open internet, and all the data that, you know, makes it valuable. That's really just sort of the top layer of, I'd call, something that cannot be replicated. Now, as some, you know, it could be possible to replicate some parts of that, the software elements of it, but three guys, you know, leveraging a LLM subscription is not gonna vibe code, you know, hundreds of thousands of, you know, relationships like that. We have that clear advantage.
Number two, it gets to some of the technological evolution that we built into our platform, and that's we have a unified platform where we've created the ability for a buyer to actually buy on our platform all of these sources of inventory not sort of parsed out between one silo on the DSP side and the SSP side, but a buyer can add to it through our Activate product, which we launched a number of years ago. They have direct access, immediate access to the inventory and the data on our platform.
Why is that important in an agentic world is that it's self-evident, now for all of us that when AI is not fettered in terms of silos, but it has ubiquitous access to data and, you know, all the relevant inventory, decisions that, you know, that help them, you know, make a better outcome. If you have it, uniform and ubiquitous, it's gonna be a better outcome. That's, you know, the long-term, premise and expectations out of AI. Our unified platform, you know, structurally has been created that way. The third aspect that I think is really important to understand, and that's around the AgenticOS that I just referenced.
We now have created a system, level, opportunity for buyers agents, whether it be ours or someone else's, to interact with MCP servers and then to make decisions throughout that system. We don't need to wait for standards to emerge because we've already created that within this environment. When you can access 98% of the open internet, then you don't need to wait for someone to tell you how to do it. We're actually doing it. Over the last month or two, we've launched, you know, hundreds of campaigns agentically, well ahead of anybody in our space.
The final thing, which is I think critical to understanding PubMatic, is, you know, almost 20 years ago, we made the strategic decision to own and operate our own equipment to, you know, manage in a world of real-time data processing where decisions have to be made, you know, used to be 300 ms, now it's down to, you know, 10 ms. We've been doing that for a very long time. In the last couple of years, we've partnered up with NVIDIA, where we've infused our infrastructure with NVIDIA capabilities. You know, our engineers have worked side by side with NVIDIA engineers to, you know, find whatever the hardest problem in our space is and start to solve it. That's sort of the, I'd say the foundation of what's made everything else possible.
When you think about this maybe flowing through to results, is it more about driving, you know, advertising performance? Is it about efficiencies that could be gained, or is it, you know, revenue-driving? Just how should investors think about, you know, as we progress, you know, how should this impact the financials and, you know, specifically the top line?
The exciting thing for a company like PubMatic is that it's going to drive all three of those. It comes down to, let's just start out with the performance level. Back to the point I was making around, you know, not having silos. When you can actually, you know, have access to data that help you in the discovery, planning, and optimization, you know, unfettered, you're gonna make better decisions as a, as an agent, because ultimately you're gonna see, you know, thousands and thousands of data points to figure out, okay, well, what makes sense in the context of what the advertiser is trying to do? Performance absolutely is a key component of that.
It's also relevant that, you know, in that process of upstream and downstream activities that I referenced, there's a lot of labor involved in that, people having to sort of, you know, digest, you know, what is available, how do I wanna plan it, etc. For advertisers and agencies, the promise of using agents to actually do a lot of that work, you know, based upon best practices, maybe IP that an agency has in-house, will, you know, absolutely take, you know, effort out of the system. Then, you know, finally from our perspective, it's really about expanded TAM.
What's gonna happen is, and it really is, you know, something that we started to see over the last couple years, is the focus on performance. Now you have brand advertisers who are looking for measurable outcomes. When you have a system where you can digest data very quickly, you know, without, you know, silos, and you're able to sort of optimize against that, what's gonna happen is that there are more dollars that are gonna flow into the system. By definition, you know, if somebody hits their ROI and they have incremental dollars, they typically don't let's say, "Okay, I'm good. I'm gonna, I'm good with the customers that I've acquired." They're gonna keep driving dollars back into it until they hit their break-even ROI.
That's the promise of this whole area that we are particularly excited on and why we're absolutely leaning in.
Yeah. I think maybe just to hit on that point one more time, because I do think there's a shift that's taking place in the advertising market where, I think Jeff Green talked about it on the last call, that there's no more cheap reach. Like, there's no more, like, just going out and just trying to get reach, and there's no performance associated with it. Is there a shift that's taking place in the market that everything's becoming performance-oriented, and is that really what you're leaning into at PubMatic?
Absolutely. A hundred percent. You know, one of the, I'd say, telltale signs of that is, you know, when we launched our AI accelerator program a couple of months ago, we had never gotten so much adoption and interest in sort of, you know, joining that program because it is around brands are absolutely, you know, in a place where they need to get more impact from their dollars. Now we're moving into a world with data-rich logged-in users, Mobile Apps, CTV, et cetera, that they can absolutely get that. I do see that shift going on. What's exciting for us, like PubMatic, is that we're able to meld now very high-quality audiences and content with performance that historically was locked behind the walled gardens.
Yeah. No, that makes a lot of sense. Maybe shifting gears a little bit, just sticking on the AI theme though, how are you implementing AI internally? I mean, you gave a lot of helpful color on the last call just about the efficiencies that you're seeing across the entirety of the business. Can you talk about that maybe from an internal perspective?
Sure
...just from a cost perspective?
I would say that has been something that we have ingested as a company now for a couple of years. Like most companies, presumably it started on the technical engineering side. You know, three years ago, our engineers, you know, were turned loose on AI capabilities. This past year, 2025, over 40% of all the code that was written was AI assisted or enabled. Clearly, you know, an area that's a win and it's gonna grow. Number two, and what we've learned is you have to just get usage and trial and then, you know, refine. We started to do that two years ago, then this past year we really started to see the fruits of all that effort.
Case in point, you know, in our legal area, you know, AI tools to, you know, get contracts, you know, reviewed more quickly, that not only sort of saves the time, from time to market, but also the capacity grows. You know, in our accounting area, our procure-to-pay systems, you know, are 30%+ more efficient as a result of utilizing AI tools. The way that I think about it as a CFO is that, unless you are willing to try and identify opportunities, you're never gonna get off the mark. We did that two years ago, we saw the progress last year, and I expect that to continue to grow, you know, this year and beyond.
Yeah. I think maybe just to hit on this point a little bit more too, 'cause I think, you know, you're lapping some of the DSP, you know, headwinds from last year. Just as revenue growth really comes back, I think can you maybe just speak to the just the pure operating leverage that's embedded in the model...
Sure
just as revenue grows?
Yeah, no, I'm very pleased about, you know, the fruits of our, you know, labor, but which is really over many years. We've created a business with, you know, a high degree of leverage. It starts out with, for example, the owned and operated infrastructure. You know, we create a fixed cost base at any fixed point in time, and then we really work hard to get more efficiencies out of that, whether it be through AI or, you know, workflow, et cetera. What that has allowed us to do is every time that we meet or beat our revenue target, the marginal profitability of that next dollar is very high. You can see that in the fourth quarter.
The dollars that we exceeded, you know, over our guide, 100% dropped to the bottom line. That's a great position for any business to be in, and that's something that we've been working on for a very long time. What I expect as I look ahead to the balance of this year is we are obviously very focused on driving down, you know, our costs, you know, making sure that we're, you know, deploying all of our resources efficiently. I expect in the second half as revenue re-accelerates, that margins will expand. Having said all that, it's not just about cost savings, it's about where do you deploy your resources.
One of the things, back to your earlier question around sort of what I'm excited about, you know, what we accomplished in the fourth quarter is we were actually able to reduce our headcount in 2025 while actually increasing our headcount in sales by 20%. That's a function of making sure that you find the right places to invest, and then putting wood behind that, and then making the various, you know, shifting priorities, et cetera, around your business. That's what we're gonna continue to do. I'm really, you know, excited about the cost structure that we have coming into 2026 and the expectations, you know, as we lap the DSP change mid-year.
Yep. Then on, just on capital allocation, can you maybe just walk through the priorities and share buybacks?
Sure.
M&As. M&A on the table? Or is it more of an execution you're just-
Sure.
Yeah.
For those of you who are not familiar with, you know, our approach at PubMatic, we launched a share buyback program back in 2023. You know, when we launched it, you know, we took the view this was gonna be a long-term part of our overall capital allocation strategy. Since then, we've bought back over $12 million Class A common shares. You know, it's a part of our strategy, as is, you know, first and foremost, making sure that we are investing in organic opportunities. You know, as identified sort of by all the innovation around agentic and, you know, moving more resources into our ad solutions teams. It's really about, you know, being disciplined about it.
M&A is always on the table for us, but we're very disciplined about it. Typically what we've done in the past, is to identify opportunities where maybe we can accelerate a particular product line, you know, to market. We did that, you know, with a small company that we bought that ultimately became our Activate product. Absolutely M&A is a part of the mix, but we're gonna be disciplined. You know, from our perspective, what makes us a unique company and opportunity is that we have, you know, ended the last quarter with $145 million in cash, zero debt. We generated, you know, over $40 million in free cash flow last year, 30% increase.
Since we, you know, went public, you know, we've generated over $200 million in free cash flow. We are very well capitalized to really continue to invest in terms of organic growth opportunities, to do, you know, disciplined share repurchases, and to opportunistically find M&A opportunities and then execute against those.
Great. Maybe we can open it up if there's any questions in the audience. No, that's okay. We'll keep moving. Maybe we can go back to Activate.
Yes.
I do wanna like, just drill in.
Mind if I ask a question?
Oh, sure.
Yeah.
Such a great powerful platform that you started, the market entry point where you're winning the clients. I'm wondering, this is where the conversation can go, what's the plan for then upselling the platform to clients to increase the long-term NRR and lifetime value from it?
Great question, I'm pleased you asked that. One of the things that I think makes PubMatic unique is that, you know, we have one holistic platform. Every time that, let's say, someone in our ad solutions teams upsells a new relationship with a brand or an agency, the benefit of that doesn't accrue just to that product. Actually, it spills over to other opportunities because when a buyer, you know, starts to buy on our platform, they have very easy tools to buy across the platform. Our goal has always been to, you know, sell ourselves as an omni channel platform, so CTV, Mobile App, Display.
Our focus has been make it super easy to use the platform and to make it economically, you know, enticing for them to do that. That's one of the reasons why you see such high marginal profitability from our efforts, because we are not creating multiple platforms. It's one platform, and we, you know, the ability to upsell and cross-sell is very straightforward for us. An interesting data point in that regard is, as we move more resources into our ad solutions team, focused on CTV, you know, focused on video, focused on agentic, we actually are starting to see some spillover benefits on display, for example. Display in the fourth quarter for us, you know, grew in the single digits.
If you adjusted for the DSP that I referenced, mid 25%, display actually grew 20% in the fourth quarter. Are we putting incremental resources against drive and display? The answer is no. What we're doing is we're focusing on sort of all the fast-growing areas and then having sort of the spillover effect on those other opportunities.
Thank you.
Maybe just on ad and Activate, 'cause I do wanna talk about this. Specifically, it seems like in the past in ad tech, like, you know, sorry, software or the UI was really like.
Yeah
...a differentiation point. That's really changing, and it's starting to change just the ad tech environment overall as you think about the ecosystem between DSPs and SSPs. You know, clearly you have Activate that's going direct to buyers. That's a little bit of a change from the past. How do you think about, you know, that impacting the platform as you're able to actually go directly to buyers, like, how is adoption going? You're investing these.
Sure.
...ad salespeople here, just can you talk about Activate more in general? 'Cause it is a strategic shift, it seems, in what's going on.
Yeah, absolutely. It very much is strategic for us. I would say, you know, right next to agentic advertising, sort of a co number one. What's going on with Activate? In 2025, the activity on that increased 3x, so huge 2025 for us, but really still scratching the surface. What's going on? One of the underlying theses that we had was, how do we sort of break that UI lock-in? We focused on, you know, leveraging the abilities of AI to make, you know, a buyer-UI agnostic. They can use natural language processing to sort of decide what they wanna do on our campaign, type it in.
I wanna do this, I wanna do that, I want it in this geo, I want this kind of user." They don't need to know what the UI, how it operates. They just type in what they wanna do. That, yeah, absolutely is to your point, I think the where you're going with it is, it is an unlock. What it's now doing is, formally where there was, you know, legions of folks, you know, in agencies and in brands that had to learn a UI, they don't have to learn a UI anymore. That's why, you know, when we talk about sort of the unlock that we see with Activated and agentic, it's...
We now have, can bring in a whole new set of audiences, users that we otherwise would have had to invest millions of dollars and years to sort of get into that mainstream. Very much a part of our future, but I do wanna be clear, DSPs are absolutely an important part of our, you know, overall partnership structure because, you know, it's such a huge industry. You know, a $100 billion industry, not any one channel is gonna be the channel that dominates. Our approach has always been able to focus on, you know, ease of use and work with as many different partners as possible, and making sure that we're delivering on what they need.
illustration is one of the things that we set out to do in 2025 is to further diversify our DSPs. In the course of 12 months, we increased the number of DSPs buying on our platform or having access to our platform by 50%. It didn't happen by chance. It happened by us, you know, putting incremental resources against it, but also making sure that we have the technology and the tools that these new buyers wanted, which is a real shift in the ecosystem because the legacy DSPs, you know, historically are now morphing into sort of very specialized DSPs because of the proliferation of new tools and new, you know, very valuable areas like pharma.
Yeah. Well, Steve, there's a lot of stuff that's changing, not only in PubMatic but in the ad tech environment. It seems like PubMatic's well-positioned. Thank you. I appreciate you coming.
Excellent. Thank you for having me, Matt. Appreciate it.