Executive Summary / Key Takeaways

• Zeta Global's AI-powered omnichannel platform, built on a foundation of proprietary data and native AI, is driving significant market share gains by delivering measurable and superior ROI for enterprise marketers amidst a technology replacement cycle.
• The company reported robust Q1 2025 results, with revenue growing 36% year-over-year to $264.4 million and Adjusted EBITDA increasing 53% to $46.7 million, marking its 15th consecutive quarter of exceeding and raising guidance.
• Key operational metrics demonstrate strong underlying business health, including 19% growth in scaled customers, 12% growth in scaled customer ARPU (reaching $467k), 23% growth in super-scaled customer ARPU (reaching $1.4M), and double-digit growth across all three core use cases (Acquire, Grow, Retain).
• Strategic initiatives like the "One Zeta" approach, momentum in the agency business (including platforming independent agencies), and the integration of the LiveIntent acquisition are expanding the company's reach and driving higher-margin direct platform revenue.
• Management raised full-year 2025 guidance, projecting $1.242 billion in revenue (23% reported growth, 21% ex-LiveIntent/Political) and $258.5 million in Adjusted EBITDA (21% margin), while also reaffirming the Zeta 2028 targets ($2B+ revenue, 25%+ Adjusted EBITDA margin, 16%+ FCF margin), signaling confidence despite macro conservatism in the guidance.

The AI-Powered Engine of Enterprise Marketing

In the complex and ever-evolving world of enterprise marketing, the pressure to deliver measurable results and maximize return on investment (ROI) has never been higher. Against this backdrop, Zeta Global Holdings Corp. has emerged as a significant force, leveraging its foundational investments in artificial intelligence (AI) and proprietary data to disrupt traditional approaches and capture market share. Since its re-architecture in 2021, which made AI and data native to its platform, Zeta has consistently demonstrated its ability to provide marketers with the tools needed to target, personalize, measure, and optimize campaigns across all addressable channels more efficiently and effectively than legacy solutions. This strategic pivot has not only fueled consistent financial outperformance, marked by 15 consecutive quarters of exceeding and raising guidance, but has also positioned Zeta as a critical partner for enterprises seeking to modernize their marketing technology stack.

Zeta's core technological differentiator lies in its AI-powered Zeta Marketing Platform (ZMP). At its heart is the Zeta Data Cloud, one of the industry's largest proprietary opted-in data sets, which captures billions of structured and unstructured data signals from over 240 million U.S. consumers. This data is processed by sophisticated machine learning algorithms and generative AI (GenAI) capabilities to predict consumer intent with high accuracy. Unlike competitors whose AI often operates outside their core marketing clouds, requiring cumbersome data transfers and introducing latency, Zeta's native integration of AI and data allows for real-time processing and optimization. This technological architecture provides tangible benefits: it enables personalized marketing at scale, streamlines workflows, and, crucially, drives superior ROI for customers. Management highlights that AI adoption leads to substantially higher revenue from customers, with consumption revenue (roughly half of total revenue) growing over 40% in 2024, partly driven by early GenAI products.

The company continues to push the boundaries of AI innovation. The recent launch of AI Agent Studio and agentic workflows allows marketers to create and link specialized AI agents to automate complex tasks across the customer journey. An example workflow coordinates agents to identify high-value audiences, craft messaging, and deploy marketing across channels, significantly reducing time from insight to execution. While specific quantifiable improvements from these newest tools are still emerging, the strategic intent is clear: enhance marketer productivity and campaign precision, further solidifying Zeta's technological lead. The company continues to invest heavily in R&D, almost exclusively in AI, viewing it as the primary driver of future value and growth.

This technological foundation underpins Zeta's strategic approach and competitive positioning. In a market intensely competitive with established players like Adobe (ADBE), Salesforce (CRM), and Oracle (ORCL), and specialized firms like HubSpot (HUBS), Zeta differentiates itself by offering an all-in-one platform that can replace multiple point solutions. While larger competitors may have greater scale and broader portfolios, Zeta's native AI and data integration provides a speed-to-intelligence advantage that legacy systems with "tech debt" struggle to match. This allows Zeta to claim superior personalization accuracy and efficiency in data processing, enabling it to take meaningful market share from last-generation marketing clouds and DSPs. Although precise, directly comparable market share figures for all niche competitors are not publicly detailed, Zeta's rapid growth suggests it is effectively competing. The company also strategically partners with "Walled Gardens" like Meta (META), viewing them as channels for activation rather than direct competitors in the platform space.

The effectiveness of Zeta's platform is reflected in its recent financial performance. In the first quarter of 2025, revenue grew by a robust 36% year-over-year, reaching $264.4 million. This growth was broad-based, with $54.2 million coming from new customers (including $19.4 million from the LiveIntent acquisition) and $15.3 million from existing customers. Organic growth, excluding LiveIntent and political revenue, was a strong 26%. This top-line expansion translated into significant profitability improvements, with Adjusted EBITDA increasing 53% year-over-year to $46.7 million, resulting in a margin of 17.7%, a 200 basis point expansion. This marked the company's 17th consecutive quarter of year-over-year Adjusted EBITDA margin expansion, demonstrating consistent operating leverage.

Operational metrics further underscore the company's momentum. Scaled customer count grew 19% year-over-year to 548, while super-scaled customers increased 10% to 159. Scaled customer ARPU rose 12% to $467 thousand, and super-scaled customer ARPU jumped 23% to $1.4 million, driven by increased platform usage and the "One Zeta" strategy of expanding use cases and channels. All three core use cases—Acquire, Grow, and Retain—saw double-digit revenue growth. The fastest-growing cohort consists of scaled customers using three or more channels, up 42% year-over-year, highlighting the success of cross-selling efforts. The direct platform revenue mix increased to 73% in Q1 2025 from 67% in the prior year, indicating a favorable shift towards higher-margin business, partly driven by agencies moving to direct channels faster than expected.

Strategic initiatives are actively contributing to this performance. The "One Zeta" strategy, focused on selling multiple use cases and channels in integrated deals, is reported to be ahead of schedule and a major driver of growth. The agency business, working with both large holding companies and independent agencies, is experiencing significant momentum. Zeta is often cited as one of the most profitable partners for holding companies, leading them to bring more brands onto the platform. The company is also successfully platforming independent agencies, a market with over 1,000 potential prospects, which is expected to drive further on-platform revenue and improve cash flow conversion.

The recent LiveIntent acquisition, closed in October 2024, is already yielding benefits. It contributed approximately $19.4 million in revenue in Q1 2025 and strengthened the Data Cloud with its identity graph and publisher network. The integration was completed ahead of schedule in early 2025, leading to synergistic products like Zeta Direct, which enables personalized ads within newsletter emails – a high gross margin opportunity.

Financially, Zeta maintains a solid liquidity position. As of March 31, 2025, cash and cash equivalents stood at $364.4 million, with net working capital of $421.0 million. Net cash provided by operating activities was $34.8 million in Q1 2025, and free cash flow was $28.2 million, representing a strong 60% conversion from Adjusted EBITDA.

The company is actively returning capital to shareholders through a share repurchase program, buying back $25.0 million worth of stock in Q1 2025 and continuing purchases post-quarter.

Management views buying back shares as a compelling investment opportunity given the company's valuation and free cash flow generation. They are also taking steps to reduce stock-based compensation and core share dilution, targeting 4%-6% dilution in 2025 and 3%-4% in 2026, a significant reduction from 2024 levels.

Looking ahead, management expressed confidence in the company's momentum, raising second quarter and full-year 2025 guidance. The full-year revenue outlook is now $1.242 billion at the midpoint (23% reported growth), with Adjusted EBITDA guided to $258.5 million (21% margin). While acknowledging increased macro uncertainty at the start of Q2, management emphasized that this guidance incorporates a "disciplined and conservative approach," assuming a softer macro environment in the second half. They are not currently seeing any turbulence or client pullbacks, and the conservatism is intended to create a buffer. The company also reaffirmed its long-term Zeta 2028 targets, aiming for over $2 billion in annual revenue, at least 25% Adjusted EBITDA margin, and 16%+ free cash flow margin, underscoring their belief in the enduring strength of their business model and strategic drivers.

Despite the positive momentum, investors should be mindful of potential risks. Macroeconomic conditions, including inflation and potential recession, could negatively impact customer spending, although management believes Zeta's ROI focus offers resilience. The intensely competitive industry requires continuous innovation. Operational risks include managing growth effectively and potential challenges in integrating acquired businesses like LiveIntent, although integration progress has been positive so far. Reliance on technology resources in non-U.S. locations like India presents risks related to wage inflation, currency fluctuations, and geopolitical factors. Payment-related risks from customers, particularly agencies with longer payment cycles or sequential liability clauses, could impact cash flow, although credit risk is currently deemed low. Finally, while independent reviews have addressed past allegations, perceived failures to comply with evolving data protection and privacy regulations remain a risk in the data-driven marketing space.

Conclusion

Zeta Global's Q1 2025 results and updated guidance paint a picture of a company successfully executing its strategy and gaining market share in a dynamic industry. The core investment thesis is firmly rooted in its differentiated, AI-powered platform and proprietary data, which enable enterprises to achieve superior marketing ROI. This technological edge, combined with strategic initiatives like the "One Zeta" approach and expansion in the agency market, is driving robust growth in revenue, ARPU, and profitability. While management's guidance incorporates a degree of conservatism regarding the macro environment, the underlying business momentum, strong pipeline, and consistent track record of outperformance provide a compelling narrative. The reaffirmed long-term targets underscore the significant opportunity management sees ahead. For investors, Zeta represents a high-growth player in the essential marketing technology sector, leveraging AI and data to disrupt legacy systems and deliver tangible value, positioning it for continued expansion despite potential economic headwinds.