B.Riley downgrades PubMatic stock to Neutral on DSP partner issues

Investing.com - B.Riley downgraded PubMatic Inc (NASDAQ:PUBM) from Buy to Neutral and slashed its price target to $9.00 from $17.00 following the company’s second-quarter earnings report. The stock, which has declined 38% over the past six months and trades at a P/E ratio of 93x, appears undervalued according to InvestingPro analysis.

While PubMatic delivered strong second-quarter 2025 results that exceeded consensus expectations, with revenue outperforming by approximately 5% and adjusted EBITDA beating estimates by roughly 30%, the company’s shares fell approximately 24% in after-hours trading due to disappointing third-quarter guidance. The company maintains strong financial health with more cash than debt on its balance sheet and liquid assets exceeding short-term obligations, according to InvestingPro data.

The downside outlook for the third quarter stems from changes with a major legacy demand side platform (DSP) partner that negatively impacted PubMatic’s available inventory and pressured ad spending with key supply path optimization advertisers and agencies.

B.Riley noted that although spending trends with this DSP partner stabilized in August compared to July, PubMatic’s management anticipates it will take several months to iterate and optimize traffic for these changes.

Despite encouraging momentum in PubMatic’s CTV business and increasing contribution from emerging revenue streams, B.Riley determined that the DSP partner headwind has derailed the anticipated second-half 2025 and fiscal year 2026 recovery that underpinned its previous investment thesis. Notably, four analysts have recently revised their earnings estimates downward, though the company is still expected to remain profitable this year. For deeper insights and 10+ additional ProTips on PubMatic, check out the comprehensive research report available on InvestingPro.

In other recent news, PubMatic Inc. reported its second-quarter 2025 earnings, showcasing a significant revenue increase that exceeded expectations. The company achieved $71.1 million in revenue, surpassing the forecasted $67.84 million, resulting in a 4.81% surprise. However, the earnings per share (EPS) did not meet projections, coming in at $0.05 compared to the expected -$0.16, leading to a -131.25% surprise. Despite the positive revenue results, PubMatic’s stock experienced a decline following the announcement. This development highlights a mixed outcome for the company, with strong revenue figures but disappointing EPS results. Investors and analysts will likely be watching closely for future updates.

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