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Why PubMatic Stock Soared on Tuesday

What happened

Shares of adtech companies PubMatic (NASDAQ: PUBM) skyrocketed on Tuesday. Investors were impressed with its second-quarter results. Shares were up about 22% at 11:20 am ET.

The tech company bucked a trend of decelerating growth seen by many of its digital advertising peers. PubMatic also provided guidance for double-digit third-quarter revenue growth — a growth rate well ahead of the decline forecast by Facebook parent Meta Platforms and the guidance for low-single-digit growth from the streaming TV platform Roku.

So what

PubMatic’s second-quarter revenue increased 27% year over year to $63 million. This was an acceleration from a first-quarter year-over-year growth rate of 25%.

Impressively, PubMatic’s net income for the period was $7.8 million, or 12% of revenue. Total cash, cash equivalents, and marketable securities was $183 million. Debt remained at zero.

PubMatic CEO Rajeev Goel noted that these growth rates were well ahead of market growth rates. He is right. A quick look at Meta’s second-quarter year-over-year revenue decline of 1% and Roku’s platform revenue growth of 26% all but confirms this view.

So what

Where PubMatic really stands out is its guidance. Management guided for a year-over-year growth rate of about 15% despite expected headwinds from further softening in Europe and “muted ad spending” in Asia Pacific amid worsening economic conditions.

This growth would be much higher than Meta’s expectation for a year-over-year decline in the third quarter and Roku’s forecast for just 3% growth during the period.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Meta Platforms, Inc., PubMatic, Inc., and Roku. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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