Prepared remarks
Hello, everyone, and welcome to PubMatic Second Quarter 2026 Earnings Call. My name is Annabeth, and I will be your Zoom operator today. Thank you for your attendance today. As a reminder, this webinar is being recorded. I will now turn the call over to Stacie Clements.
Good afternoon, everyone, and welcome to PubMatic's earnings call for the second quarter of 2026. This is Stacie Clements, and I'll be your host today. Joining me on the call are Rajeev Goel, Co-Founder and CEO; and Steve Pantelick, CFO. Before we get started, I have a few housekeeping items. Today's prepared remarks have been recorded, after which Rajeev and Steve will host live Q&A. Operator provided instructions. A copy of our press release can be found on our website at investors.pubmatic.com. I would like to remind participants that during this call, management will make forward-looking statements, including, without limitation, statements regarding our future performance, market opportunity, growth strategy and financial outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, macroeconomic environment and future conditions. These forward-looking statements are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict.
You can find more information about these risks and uncertainties in our reports filed with the Securities and Exchange Commission and available at investors.pubmatic.com, including our most recent Form 10-K and any subsequent filings on Forms 10-Q or 8-K. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. All information discussed today is as of August 6, 2026, and we do not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, cash flows from operations, free cash flow and free cash flow margin.
These non-GAAP measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our press release. And now I will turn the call over to Rajeev.
Thank you, Stacie, and good afternoon, everyone. We delivered an outstanding second quarter. More importantly, we returned to double-digit year-over-year revenue growth well ahead of schedule, and we expect that growth will accelerate through the second half of the year. I'm extremely proud of what the team has accomplished, in particular our innovation and leadership in agentic advertising. Over the past several years, we've made disciplined investments to diversify the business and strengthen our competitive position to deliver both faster growth and strong operating leverage. Today, approximately 60% of our business comes from CTV, mobile app and emerging revenues, all of which fuel profitable double-digit growth. This represents a remarkable transformation of our business and fundamentally strengthens our long-term growth profile. With this strong foundation in place, Steve has announced his plans to retire.
He will remain as CFO into the first quarter of 2027, and then in an advisory role through July 1, ensuring a smooth transition as we conduct a search for his successor. Steve and I have worked together for 15 years, and it's difficult to overstate the impact he's had on PubMatic. Under his leadership, we've built a global company with the financial discipline to invest for the future while consistently generating cash, maintaining a debt-free balance sheet and returning capital to shareholders. I'm deeply grateful for his partnership, his friendship and his many, many contributions to PubMatic. He's built an exceptional finance organization that positions PubMatic to create long-term value for years to come. Helping us build that future is our new Global Chief Revenue Officer, Megan Ramm, who joins us on Monday, August 10. Megan brings deep direct-to-brand and performance advertising expertise with established relationships across marquee brands.
Her rigor around sales process and execution will enhance our sales effectiveness and is a natural fit with our culture. Together, these strengths will help accelerate adoption of our AI-powered platform while strengthening our commercial capabilities. These leadership milestones reflect the evolution of both our company and our industry. It is clear digital advertising is entering its next major technology transition as AI reshapes how media is bought and sold across the open Internet, and PubMatic is at the epicenter of this change with market-leading scale. Since launching AgenticOS in January, we've delivered over 80 agentic campaigns, including with all five global agency holding companies. This is up from 30 campaigns just a quarter ago. For years, the walled gardens have delivered superior advertising performance because they operate a single, integrated technology platform that optimizes media and audiences for advertisers.
With Activate and AgenticOS, we're bringing those same performance and technical advantages to the open Internet. As a result, we're monetizing far more of the value chain between advertisers and publishers than at any point in our history, and attracting entirely new customer types to our platform. And because our business is built on outcomes and usage, we generate revenue when we deliver the best outcomes for our customers. This creates powerful alignment as advertisers increasingly prioritize measurable performance and efficiency. Further, as advertising shifts to agentic execution, competitive advantage will be determined not by traditional software user interfaces, but rather by AI-native infrastructure, proprietary intelligence, and the ability to consistently deliver superior outcomes. We've spent two decades building these capabilities. Today, they're redefining how value is created across the open Internet by delivering compelling, measurable outcomes.
Level Agency is a great example of this. In a controlled comparison against their incumbent DSP, AgenticOS delivered in excess of 2x more reach per dollar on qualified audiences, while significantly accelerating campaign setup and activation time. Additionally, AgenticOS delivered retargeting at scale within days compared to the one to two months ramp typically required by DSP-led campaigns. As a result, Level increased ad spend with PubMatic to expand its buying across the open Internet. Patrick Van Gorder, Chief Partnership Officer at Level Agency said it best, "What AgenticOS delivered changed how we're thinking about where the open Internet can compete for client budgets, and that's exactly the kind of adaptive advantage and innovation we're always looking for." Level is one of many examples. Across Havas and Telefonica, Amnet and InterBev, Abovomaxlead, Butler/Till and many others, we're consistently delivering better performance, faster execution and greater efficiency, and it's changing how buyers are thinking about the value chain.
Those results are driven by our unified platform, where multiple competitive advantages compound and are increasingly difficult to replicate. They're built on years of investment across our infrastructure, intelligence, solutions and customer relationships. First, is AgenticOS. We have deployed over 20 agents to automate and optimize core buying and selling workflows. As agentic advertising compresses the traditional workflow, more of the transaction runs through PubMatic's infrastructure. This allows us to create more value for our customers and drive incremental revenue back to PubMatic. This week we announced an exciting new agent for enterprise buyers. It provides configurable controls, approved workflows and full audit trails for autonomous campaigns. As customers move more budget into agentic buying, trusted governance becomes essential, and we believe this capability will help accelerate enterprise adoption of AgenticOS.
Second, is Activate. Activate enables advertisers to buy directly in our SSP. This significantly increases working media and operational efficiency, while also targeting audiences at the point of auction. The result is better advertiser performance and improved publisher yield. Third is our proprietary data intelligence and AI-native infrastructure. We combine signals from more than 300 data partners, including Comscore, Nielsen, Experian, TransUnion, PayPal, Intuit, Klarna, Walmart and more, with our own proprietary bidstream data, which exists only on PubMatic. As our business continues to grow, particularly in logged-in environments like CTV and mobile app, the quality and depth of those signals continues to improve, making our platform smarter with every campaign and every transaction. This intelligence runs on our AI-native infrastructure. Through our partnership with NVIDIA, we're able to process massive amounts of data and execute increasingly sophisticated AI-driven decisioning in real time.
And fourth, is our premium SSP inventory which includes nearly the entire open Internet. Over 2,000 publishers representing 100,000 plus streamers, mobile apps and web sites. Most recently, we added marquee broadcaster Channel 4 in the U.K. and announced a strategic partnership with Sony Pictures Entertainment as their preferred sell-side platform, delivering access to hundreds of millions of monthly users across PlayStation and Sony Bravia TVs. Importantly, these advantages reinforce one another. Premium supply generates unique signals. Those signals strengthen our proprietary intelligence. That intelligence improves advertising outcomes. Better outcomes attract more advertisers, more campaigns and more data, creating a compounding advantage with every transaction. Building on this advantage, in Q2, we introduced Decision Fabric, the next evolution of our platform. Introduced in June, Decision Fabric enables advertisers, DSPs and technology partners to securely deploy their proprietary models directly within PubMatic's infrastructure.
This is commonly referred to as containerization. By running their models closer to our inventory, data and the point of auction, customers remove the traffic shaping and latency constraints that have historically limited performance across the open Internet, allowing them to unlock better advertising outcomes. We're seeing encouraging traction with launch partners, including MiQ, Chalice AI, SWYM.ai, InPowered and a growing number of DSPs. This is an exciting opportunity that we believe will transform the way advertising is transacted on the open Internet. More importantly, our unified platform and compounding intelligence are unlocking performance advertising budgets on PubMatic. It's expanding our market, adding entirely new categories of advertisers and ad budgets to our platform. For example, programmatic trading desk Klever, on behalf of Rouge Care Therapy, a direct-to-consumer wellness brand, expanded into premium CTV without sacrificing the performance measurement and optimization it relies on in social media.
Using AgenticOS, the campaign delivered a 5x return on ad spend, double the client's original objective, while significantly accelerating optimization and campaign execution. We're seeing this same trend scale across our DSP partnerships. Smadex, a leading performance CTV advertising platform for apps and games and a business unit of Entravision, partnered with PubMatic to leverage our premium CTV inventory, using our first-party audience targeting and cross-device measurement capabilities. As performance improved, Smadex increased spend on PubMatic over 10x year-over-year, with 75% of that incremental spend flowing into CTV. This kind of measurable performance is unlocking entirely new advertiser budgets for PubMatic and it's reshaping the inventory advertisers want to buy. Creator-led video is another incremental opportunity, which now accounts for 26% of all TV and video viewing. Yet, much of that market has remained within walled gardens, even as TV platforms have brought creator content to the living room.
As brands look to stand out, they're increasingly seeking creators whose audiences, values and content naturally align with their brand. With the launch of our Creator Marketplace, we're bringing our infrastructure and AgenticOS to the creator economy, enabling advertisers to connect to premium inventory and reach highly engaged audiences while giving creators new ways to monetize across the open Internet. For PubMatic, this positions us well as the creator economy, which is approximately $250 billion globally, moves into the open Internet advertising market, representing an entirely new category of publishers to our platform. Performance is also driving growth across our live sports marketplace, where activity more than doubled year-over-year, highlighting the scale of our premium inventory and the strength of our offering. We were recently recognized with several industry awards, including The Drum's Technology Innovation Award for helping advertisers buy live sports inventory with precision.
As more premium events enter the programmatic market like U.S. Open for Tennis, NFL, NBA, MLB and NCAA, there is significant opportunity to scale growth from this vertical. Accelerating the value of our live sports offering, we recently partnered with Gracenote to bring real-time content intelligence, including contextual signals and live sports schedules, directly into our platform. By bringing this intelligence directly to the point of auction, our AI-native infrastructure can make decisions within the milliseconds available before every impression is served. That's particularly valuable in live sports, where context changes continuously and buyers need to optimize campaigns in real time. Whether it's contextual signals from live sports or commerce signals tied to purchasing behavior, our strategy is the same: bring differentiated data closer to every advertising decision. As more buyers, publishers and transactions run across our platform, that intelligence compounds and improves advertiser performance, increases publisher yield and makes our platform more valuable with every interaction.
That's the power of the platform we've built. The investments we've made over the last several years are translating into accelerated, profitable growth. By investing early in AI, we've established a leadership position that continues to widen as more customers adopt our platform. We've built a platform that is attracting more buyers, more publishers, more data and more advertising spend. Just as importantly, we're expanding the market we can serve, bringing new forms of advertising, new sources of demand and new intelligence onto our platform. That not only increases the value we create for customers, it also expands the long-term growth opportunity for PubMatic, which we believe is significantly larger than the business we operate today. I'll now turn the call over to Steve for the financials.
Thank you, Rajeev, and welcome, everyone. We delivered an outstanding second quarter, significantly exceeding our expectations on both the top and bottom line. Our revenues grew 11% year over year, adjusted EBITDA increased 38% and free cash flow increased 47%. We saw strength across channels and formats, underscoring the breadth and depth of our platform. Our high-value formats and channels gained momentum and scale, and we continued diversifying the business. AI adoption across our company is accelerating our innovation, driving revenue growth, improving customer outcomes and unlocking incremental cost efficiencies. Importantly, we returned to double-digit revenue growth ahead of schedule. Today, our revenue mix is fundamentally different than it was three years ago. The majority of our business now comes from high-value formats and channels which are the fastest-growing segments of digital advertising.
In Q2, approximately 60% of our revenue came from CTV, mobile app and emerging revenue streams, double that from three years ago. Together, these categories grew nearly 40% year-over-year. Breaking this down further. CTV growth was led by the Americas, which grew 25% year-over-year driven by new CTV advertisers and expansion of premium inventory including live sports. Globally, CTV revenue grew 13% year-over-year and accounted for approximately 20% of total revenue. Mobile app grew more than 40% year-over-year and represented approximately 25% of total revenue in Q2. Growth was driven by the mediation platform integrations we highlighted last quarter, ongoing product innovation and continued expansion of our global app publisher base. Emerging revenue streams continued their strong momentum and nearly doubled year-over-year, reaching an all-time high of approximately 15% of total revenue.
Growth was driven by increased adoption of our new AI products, including AgenticOS. On a global basis, direct buying on Activate more than doubled year-over-year. Total display revenues grew strongly at 12% year-over-year, primarily driven by mobile app growth. In Q2, we saw the benefit of our broad, diversified omnichannel platform. Across our channels and formats, we generated several million dollars of incremental revenues from the World Cup, Amazon Prime Day and political advertising. We continue to enhance our platform with capabilities that make it easier for advertisers of all sizes to achieve strong ad performance. This is contributing to a broader and more diversified DSP mix. Activity from our mid-market DSP partners accelerated compared to the first quarter, growing over 25% year-over-year in Q2. Looking ahead, we expect activity from mid-market DSP partners to further increase, driven by new inventory categories like content creators, growing demand from direct-to-consumer brands and continued investment in our go-to-market teams.
Turning to our diversified ad verticals, in aggregate, our top 10 ad verticals increased 15% year-over-year. We saw double-digit percentage growth in five of the top 10 verticals, led by shopping, health and fitness and personal finance. This helped offset some softness in food and drink, arts and entertainment and travel. Our owned and operated infrastructure continues to be a significant competitive and financial advantage. The investments we've made over the last five years are enabling us to introduce higher-value capabilities while improving the efficiency of our platform. That was evident in the second quarter, where revenue grew 11% and gross profit increased 19%. With our increasing focus on AI native capabilities, we are realigning our platform's compute and processing resources towards products that create the greatest economic value for our customers and our business. We intend to reduce the number of gross impressions processed to unlock cost savings and repurpose compute capabilities while increasing the number of monetized impressions.
We saw the first results of these efforts in the second quarter as we reduced gross impressions sequentially by 2% while increasing monetized impressions by 4%. This is an intentional outcome of how we are evolving the platform and should result in an even more efficient business over time. As we prioritize the impressions that create the most value, we expect our monetization rate to continue rising in future quarters. AI is also improving productivity across the organization. In the second quarter, total head count declined year-over-year as AI and automation increased efficiency across engineering, marketing, customer success and finance. These productivity gains allow us to continue investing in our highest-growth sales opportunities while maintaining a disciplined approach to operating expenses. As a result, we funded incremental investments in our buyer-focused sales team and broader go-to-market organization while holding total OpEx growth to 4%, well below our revenue growth.
Q2 adjusted EBITDA was $19.6 million or 25% margin compared to 20% margin a year ago, our 41st consecutive quarter of positive adjusted EBITDA. Q2 GAAP net loss was $1.2 million or minus $0.03 per diluted share. Moving to cash and our capital allocation. Our balance sheet remains a core strategic advantage. We generated $20.2 million in net operating cash flows in the second quarter, up 36% over Q2 last year, and delivered free cash flow of $13.7 million, a 47% increase over last year. To underscore our long-term ability to generate cash, since the beginning of 2021 through Q2 2026, we have generated nearly $450 million in net cash from operations and more than $246 million in free cash flow. During the quarter, we used $21.5 million in cash to repurchase 2.1 million Class A common shares. We ended the quarter with $137.5 million in cash and marketable securities and zero debt. Our capital allocation strategy remains disciplined and balanced, focused on long-term shareholder value creation.
We continue to invest in innovation and infrastructure to drive incremental organic growth while maintaining the flexibility to pursue strategic M&A opportunities. We have also made a long-term commitment to return capital to shareholders via our share repurchase program. Since the inception of our repurchase program in February 2023 through the end of Q2, we have bought back 15.5 million Class A common shares for $211.4 million. We have $63.6 million remaining in this program authorized through the end of 2026. Moving onto our outlook. The strong momentum we built throughout the second quarter continued into July. In Q3, we anticipate continued double-digit year-over-year revenue growth, with revenue of $75 million to $77 million or 12% growth at the midpoint. Q3 adjusted EBITDA is expected to be in the range of $17 million to $19 million. We expect cost of revenue and OpEx to increase by a low-single-digit percentage sequentially in Q3, with continued go-to-market investment through the balance of the year.
As revenues expand with our leveraged cost model, we expect Q4 adjusted EBITDA margin similar to last year's fourth quarter, leading to meaningful full year margin expansion. Last quarter, we described our plans to further shift our platform investments to targeted GPU centric infrastructure that will strengthen our proprietary data intelligence, creating a compounding advantage as the business continues to grow. We believe this approach will be a durable accelerant to growth over the long term while also supporting the broader industry shift to performance-based advertising. Our results in the second quarter and our momentum in AI powered products, reinforce this strategy. Accordingly, we are increasing our full year CapEx outlook to a range of $20 million to $25 million. These additional investments support increased AI workloads and our strategic innovation with NVIDIA, and we expect them to generate incremental revenues with a payback of approximately 12 months or less.
In closing, the results this quarter reinforce what we've been building over the past several years. We returned to double-digit revenue growth ahead of schedule, continued to shift our revenue mix toward high-value formats and channels and demonstrated the strength of our financial model through expanding profitability and higher free cash flow. PubMatic is reshaping digital advertising by leveraging our AI-native infrastructure, compounding intelligence and automation to deliver better outcomes for customers. These are durable, competitive advantages that we believe will continue to strengthen our financial model and drive long-term profitable growth. Let me close with a personal note. As Rajeev mentioned, I plan to retire early next year. It wasn't an easy decision. Rajeev recruited me in 2011 when PubMatic was a small private company. And together, with an exceptional team, we've built something I'm very proud of: a global public company with revenue that's nearly doubled since our IPO, zero debt and 41 consecutive quarters of positive adjusted EBITDA.
I'm grateful to Rajeev for his partnership every step of the way. On the transition, my successor will inherit a finance organization we've spent 15 years building and a leadership team as strong as any I've worked with. One of the greatest privileges of my career has been working alongside such talented team members and building trusted relationships with our customers, investors and analysts. I believe PubMatic is in the strongest position I've seen in my time here. My priority is continuing the momentum in our business. With that, I'll turn the call over to Stacie for questions.
Operator provided instructions. The first question comes from Shweta Khajuria at Wolfe.
Questions and answers
First of all, Steve, congratulations. And I'll miss you. We have some time with you still, but congratulations, and I'm super happy for you, and it's been a great run, and it's been nothing but a joy to work with you. So all the best.
Thank you, Shweta. Very much appreciate that.
Well, on to the earnings. I guess a couple of questions for me, please. One is what are some of the top two to three things that you would point to that imply durability of this strength that you're seeing, whether it is top line growth, demand trends, product adoption? Anything that you can point to on the durability of the growth you're seeing? And second, at a high level, are you seeing clear indications that the overall environment is changing to benefit the supply side? And if so, what are some of the tangible indicators that you're seeing that are to your advantage?
Yes. Thanks, Shweta. I can kick that off. I think the two questions are actually closely related. So I think it's clear that the industry is rapidly moving towards an agentic future, and PubMatic is not only at the epicenter of that shift, but we're driving it. And with that comes a shift in decisioning to the PubMatic platform. So you saw some of the stats, rapid agentic adoption. Obviously, it's still early, but the trend is very clear: 80 Agentic campaigns, 4,000 AI-powered deals. Agentic is driving improved ad performance. So advertisers are getting better performance while also reducing ecosystem complexity and operational overhead, which is growing our addressable market. And when we look at our platform, we're very uniquely positioned with our AI-native owned and operated infrastructure, the scale of our publisher relationships, Activate, which we've been building for several years now, direct buying in the SSP with AgenticOS, the 20-plus agents and then the intelligence that we have from our own proprietary data from all of the impressions that we process as well as over 300 data partners.
As I talked about in the prepared remarks, the competitive advantage of the past that was built around the software user interface and the lock-in that created with buyers is very rapidly eroding. Now competitive advantage is increasingly being determined by AI-native infrastructure, proprietary intelligence and the ability to consistently deliver advertising performance. We have a second major front in this AI area with Decision Fabric. Decision Fabric allows curators and DSPs to run their models in our infrastructure, which leverages the impressions and data from our SSP along with our proprietary intelligence. So these are what we see in terms of customer uptake and activity. These are durable signs of not only our ability to continue to grow at double digits, but also this structural shift towards the sell-side with more of the decisioning, more of the processing happening in our infrastructure, which allows us to add more value and participate in that value creation.
Yes. I'd just add to Rajeev's comments, and that is, as an organization, we've always been very focused on operational excellence and execution is in our DNA. And when you think about our strong innovation and all the things that we pioneered over the last 15-plus years, we've really been working towards this position for a very long time, and we're very confident in the trajectory and the durability of everything we've built. Part of it is our DNA, and we're very enthusiastic about the future.
Our next question comes from Naved Khan at B. Riley. I'm going to keep moving just in the interest of time. I'll come back to you if we can get you back on the line. Our next question comes from Robert Coolbrith.
All right. First of all, Steve, you're my idol. I don't give you permission to leave, but congratulations on an amazing run at the company and best wishes for your retirement.
Thank you, Rob. Very, very appreciated.
We're looking forward to spending a lot more time with you between now and when you eventually leave. So Rajeev, I wanted to ask you maybe about the pace at which agencies and advertisers are leaning into AgenticOS and agentic more broadly across the landscape. Any way to contextualize that? A lot of this sounds very exciting, but I just wanted to think about how you're thinking about how quickly this could go in terms of agentic penetration of programmatic media budgets or pools? It seems to be going fast. It seems like there's a lot of incentives for people to make this move, but I wanted to ask about that. And then I just wanted to ask you maybe broadly for your thoughts on, there's a lot of different flavors, different approaches to how people are talking about agentic programmatic media right now, maybe some hops in the supply chain being cut out, some people thinking about fee savings in different parts of the ecosystem. Just wondering what do you think is going to be most essential? Are we going to continue to have a robust sort of highly decisioned programmatic landscape? Any thoughts there on what's going to remain after we have this agentic shift?
Yes. Thanks, Rob. So on the first part of your question, in terms of the agentic pace, maybe the Clayton Christensen framework is useful. We're definitely still in the phase of the early adopters. But what's very promising is that all of the clients that we've run agentic campaigns with have come back for much more. So it's working. We've put out case studies in multiple countries around the world. We're running things with every agency holdco. The seeds are planted and the grass is starting to grow. I've said publicly that I think by the end of 2028, about 25% of our ecosystem will be traded agentically. And by the end of 2030, it will be 50%. I continue to believe that's the case. That implies a rapid continued trajectory of growth and acceleration between where we are, still early stages, and that projection. We are seeing that advertisers and agencies are able to execute. We're seeing broad-based adoption across independent agencies and holdcos and brands pushing on this.
On your second question in terms of where are some of the benefits, you talked about hops and other things. Our focus is on using this technology as more than just a technical revolution, but as a value chain revolution. Our focus is compressing the distance between the publisher and the advertiser, whether it's programmatic transactions or agentically executing IOs, bringing the publisher and advertiser much closer together so that when they transact, they can transact more directly, primarily on our platform, where between AgenticOS, Activate and our SSP, we have all of the components needed for full end-to-end execution of the transaction. By doing that, we're able to demonstrate significantly increased advertiser performance, and a lot less operational overhead and complexity. That's leading to a massive win for our clients and for our business.
Our next question comes from Naved who I think I have back now. Naved, if you can—there you go.
All right. Can you guys hear me now?
Yes, we can.
Perfect. So maybe a question on this monetization of AgenticOS. What's your view on how this is being monetized? Is this something you're charging for as an added feature or are you monetizing because of the lift you might be seeing to the CPMs and to the overall monetization and getting participation in that? Just give us your thoughts on that. And then I have a follow-up.
Sure. Steve, you want to take that one?
I mean, first off, Naved, the AgenticOS opportunity, first and foremost, is opening up net new business for us. It's new channels and new opportunities. AgenticOS can be either a DSP's agent, it could be PubMatic's, it could be any number of third-party agents. What we've done is we've created Activate that we launched several years ago, which is the direct buying interface onto our platform. When that happens, we generate a buying fee as a result of that. And importantly, that dollar now is entirely within our ecosystem. So we're making incremental fees and the absolute dollar amount is growing. It's a compounding benefit to us as a company. Overall, our portfolio of emerging revenues nearly doubled in the quarter, and that's been a consistent trajectory. That category hit an all-time high of 15% of revenues. From our perspective, we're building on the platform that we've created, making it even stronger and broader and more efficient. What you're seeing as a business is we're getting leverage not only from top line growth, but also the cost structure. So you should expect to see margin expansion as well.
Okay. That's great to hear and pretty impressive performance across the board. Versus your own expectations that you set for us for the quarter coming into the quarter, where were you surprised in terms of the amount of upside in which segment?
From our perspective, we were very pleased because we saw positive incremental results across the board. Areas that we've been investing in and executing against all came in better than we expected. CTV, better. As a reminder, CTV in the Americas grew 25% year-over-year. Total CTV globally was up 13%. Mobile app, which is about 25% of our revenues, grew 40% in the quarter, and that's better than we had anticipated. Emerging revenues nearly doubled. We really saw great incremental progress across the board. In addition to that, display increased double digits, largely a function of our mobile app progress. We're very pleased with the results, and it wasn't just one factor. It was across the board. That's something we've been sharing with analysts and investors: we see a big vision and we've been building it on our platform, and now we're starting to see the early stages of that ramp.
Perfect. Congrats on the retirement.
Thank you. Really appreciate that.
Our next question comes from Eric Martinuzzi at Lake Street.
My congrats as well to you, Steve, and thanks for sticking around through our September investor conference.
Thank you, Eric.
I was curious to know just on — we are sort of one year removed from a pretty substantial disruption that you experienced with a large DSP. Your business has changed dramatically in those 12 months. I was just wondering if there was sort of a decrementing of your inventory with that DSP. I was wondering if there's been a kind of a return or a warming of the relationship, if you could comment there?
Let me start and then turn to Rajeev on the relationship. From our perspective, we've been investing and modifying and evolving our business for a number of years. We shared a stat that about 60% of all of our revenue comes from high-value formats, and that's a material number that's growing double digits. We've been growing through the challenges we've called out in the past, and we had anticipated this was going to happen. As both Rajeev and I called out, we did it ahead of schedule. Our focus has always been on investing and making sure that we are developing our capabilities for wherever the fastest-growing opportunities are. You're seeing that in our results. At the same time, we've been building out our relationships with DSPs and continue to maintain very healthy positive relationships. I'll turn it over to Rajeev for any other comments.
Sure. The relationship with the DSP remains positive and healthy. We continue to do significant business together. But as Steve pointed out, our DSP base has diversified significantly. Generally, DSP growth and penetration is diversifying into many different facets of the market: vertical specialization, mid-market advertisers, SMB advertisers, performance CTV, performance mobile app. The market has grown much faster than that DSP in question, contributing to diversification on our platform. As we've been growing our sales team, we've been connecting more directly with advertisers as well as agencies. We've always been deeply connected into agencies, but as we've gone deeper into building advertiser relationships, it's giving us the ability to demonstrate the capabilities of our platform where the advertisers are saying they specifically want to buy on PubMatic because of AgenticOS, Activate, Decision Fabric. Our solution set and ability to take that to market to the end customer is strengthening diversification in our business.
Okay. And I wanted to follow up. You talked about greater than doubling of the AgenticOS adoption within the installed base. As far as the size of those campaigns, the 80 campaigns versus the 30, are we getting repeat customers coming back with larger campaigns or are they still kind of same size campaigns dipping their toe in the water?
There are two aspects. One, there are more new buyers every quarter, and those new buyers typically start with small campaigns and then ramp. The existing buyers, the ones that are repeating from Q1 to Q2, are definitely ramping the size and volume of their buys as they work through change management within their organization and they rapidly see the benefits from agentic execution on PubMatic.
Our next question comes from James Heaney at Jefferies.
Great. And Steve, congrats on the retirement. Really enjoyed getting to work with you, I think, since the IPO. So wishing you all the best.
Thank you.
Maybe I'll start with you. Could you just talk about the pockets of strength and weakness, probably more strength than weakness, but just what you're seeing across different verticals? Do you want to ask specifically on maybe categories like prediction markets that we've been seeing doing quite well, and interested if that's something that you're seeing on your end?
As I've shared, one of the strengths of our business is a very diversified set of ad verticals. In the second quarter, the top 10 grew in aggregate around 15%. For example, we have very strong results from shopping and a couple of other categories that helped offset some softness in food and drink and travel. Overall, we haven't seen material softness. July was fairly healthy in momentum. There are certain pockets, like prediction markets that rolled into certain advertising categories where we see some growth. From our perspective, we're doing what we need to do, making sure we continue to develop relationships on the publisher side that provides valuable inventory and exposing that to an emerging group of new buyers. Performance DSPs, which largely include the category you described, are part of what we call mid-market DSPs, and that part of our business accelerated in the second quarter and grew 25% year-over-year. Overall, quarter-to-quarter some verticals are softer and others stronger, but our diversity helps us navigate that.
James, I'll add that there have been notable standouts around prediction markets within our live sports business. Live sports has been growing rapidly. For instance, during the World Cup, some of the major prediction markets advertised heavily on our platform. As they scale, I expect them to attract more spend on an ongoing basis.
Okay, great. And then maybe one for you, Rajeev. Could you just talk about the partnership you have with Roku? I know they're one of your CTV supply partners. I'm interested in hearing how conversations have evolved with them since the acquisition of Fox. And even if you want to broadly comment on other mega deals we're seeing across the media landscape and how you think about your position in that consolidation?
Absolutely. Consumers are spending more time in streaming, which is driving growth and scale of CTV. We're also seeing former walled gardens take a more open approach to monetization and appreciate capabilities in our platform that drive performance and scale of data, plus our buyer relationships. Roku is a great example where we monetize a significant portion of their inventory and expect expansion, including with Fox. We also announced earlier that we'll be the primary SSP partner for Sony Pictures Entertainment for their streaming service launch later in the year. If we were three or four years ago, somebody might have approached that as a walled garden, but now they're doing it from an open perspective and have chosen our platform. There are many examples such as Roblox and others. We remain encouraged by the open nature of monetization and the strength of our platform and buyer relationships that create the ability to monetize that inventory.
Our next question comes from Barton Crockett at Rosenblatt.
Okay, great. I was curious about share of your business. You've given us some growth for Activate doubling. You said that the mid-market DSPs grew 25%. But can you give us a sense of how much of your business is on Activate now? And just broadly, how much of your business is not involving a DSP on the other side, just kind of coming direct through your platform one way or the other?
I'll take that. We've shared in the past that we estimate our market share to be about 4% globally, and that's been growing over time. The categories within our emerging revenues portfolio are clearly growing significantly. These are rapidly evolving new opportunities and are self-reinforcing. We're capturing them in this portfolio and not currently planning to break them out specifically until they get to a certain size. Emerging revenues at 15% of total revenues is becoming more material. We've been growing in the fastest-growing areas of the market and expect to grow at or faster than the market as a result of our investments and progress. None of our expectations or guidance assume any resolution of the DOJ case against Google, so any resolution would be upside to our market share assumptions.
Okay. If I could just follow up because your earnings call is coincident with another company where their revenues flattened out this quarter and yours accelerated. In broad strokes, is there some broad transition among DSPs and SSPs, some kind of shake up there that you can speak to that maybe these things are related or is it coincidental?
Barton, there are broad macro trends favoring the sell-side and PubMatic in particular. The Agentic opportunity and the industry's movement towards agentic monetization and execution comes with a shift in decisioning to the PubMatic platform, so we're processing more of the transaction between AgenticOS, Activate, our sell-side platform and our data platform. More of that end-to-end transaction between publisher and advertiser is processed in our platform, including decisioning, which means we're adding more value and participating in value creation. Decision Fabric is another front: our containerization solution allows curators and DSPs to run their models directly in our infrastructure, leveraging impressions and data from our SSP along with our proprietary intelligence. That gives buyers more time to make bidding decisions and allows more sophisticated models. This is early, but it's another sign of the shift toward the sell-side. Underlying all of it is the erosion of user-interface-based lock-in that some primary buying platforms had built. Now advertisers and publishers are asking what delivers the best performance and ROI, and that's the opportunity we're focused on with AgenticOS and Decision Fabric.
Okay. That's interesting. And just one final check box. You guys in past few quarters have talked about a drag from a DSP transition. That's not happening this quarter, right? That's done.
Yes, Barton, that is now fully behind us.
Our next question comes from Simran Biswal at RBC.
This is Simran on for Matt Swanson. Congrats on the quarter and congrats, Steve. Just thinking about your go-to-market investments, how are they balanced across your growth initiatives versus how much are you leaning into your customers to understand agentic or do you think it's becoming more pervasive?
Our go-to-market approach is to think about different segments of the buyer community and go in with value propositions tied to performance, transparency and control. Primary audiences include advertisers, agency holdcos and independent agencies, alongside tech-forward companies like DSPs and curators. Our go-to-market investment is broadening the sales footprint so we can go deeper into each category. For advertisers, we want to cover the top several hundred, not just the top 100. With holdcos, we want to cover the investment teams and brand-by-brand teams. With independent agencies, we're expanding from the top 50 to the top 250. There's both account management and sales functions. With our internal use of AI, each account manager can handle more accounts and focus on relationship rather than day-to-day management, and you're seeing that flow through in the leverage we called out this quarter.
A quick stat: in the quarter, year-over-year, we increased our investment and head count in go-to-market areas by 12% while our total head count was slightly down. This reflects how we plan and manage and execute using AI as financial leverage, delivering on both top line and bottom line.
Okay, cool. That's helpful. And then, Steve, anything from political that you're embedding into Q3 guidance or just…
Yes. We are assuming incremental political. There was a large benefit to the company in the 2024 presidential cycle. Many of the capabilities we first developed then, in terms of Activate and our AI capabilities, have gotten better and stronger. We're well positioned to take advantage of political dollars. We saw a small amount in Q2 and expect it to ramp over the balance of the year. We don't think it will be as large as 2024, but we are optimistic about getting more than our fair share based on our capabilities. I expect it to be more back-end loaded into Q3 and mostly Q4 impact, and we'll update as we go along.
We have time for one more question from Brianna Diaz at Citizens. Brianna, can you hear us? Okay. Rajeev, I'm going to—unless Brianna comes back, I'm going to throw it back to you for closing remarks.
Thank you, Stacie. We delivered an outstanding second quarter, returning to double-digit revenue growth well ahead of schedule while expanding profitability and free cash flow. Importantly, our growth was driven by the strategic areas of our business where we've invested over the past several years, reinforcing our confidence in continued double-digit growth in the second half of the year. Our leadership in agentic advertising continues to strengthen as more customers choose PubMatic for superior ad performance and measurable business outcomes, and that performance is expanding our addressable market. We look forward to seeing many of you at upcoming conferences, including Oppenheimer's 29th Annual Tech Internet and Communications Conference, Rosenblatt's Age of AI Virtual Conference, Wolfe's TMT Conference in San Francisco and Lake Street's Big Investor Conference in New York. Thank you, everyone, for joining us today. Have a great rest of your afternoon.