PubMatic, Inc.

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Risks Related to Our Business, Results of Operations and Growth

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Our revenue and results of operations are highly dependent on the overall demand for advertising.

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Our business depends on the overall demand for advertising and on the economic health of our current and prospective publishers and buyers. In recent years, macroeconomic factors such as general economic volatility, recessionary fears, inflation, volatile interest rates and softening demand in certain verticals caused some advertisers to reduce their advertising budgets. Such macroeconomic factors, as well as broader economic downturns, recessions, transnational trade wars or disruptions, inflation, further volatility in interest rates or foreign exchange rates or any supply chain disruptions, changes in the tax treatment of advertising expenses, or general financial uncertainty in North America, Europe, and Asia, where we do most of our business; could adversely affect our business, results of operations, and financial condition. In addition, the conflict in Ukraine and the resumption of the conflict in Israel could cause unpredictable economic effects in Europe and EMEA, including potentially softening general consumer demand. Additionally, the imposition of significant tariffs and retaliatory trade measures by the United States and its trading partners, and any resulting trade war or prolonged disruption to global trade flows, could dampen advertiser budgets, increase operating costs, reduce consumer spending, and adversely affect economic conditions in the markets in which we operate, including North America, Europe, and Asia. Escalating geopolitical tensions, including in the Middle East, could compound these effects by disrupting energy markets, global supply chains, and general consumer and business confidence. Such conflicts may increase costs of labor and other items impacting our cost of revenue, and these factors and potential others may do so in the future. Reductions in overall advertising spending due to these factors or other factors could make it difficult to predict our revenue and could adversely affect our business, results of operations, and financial condition.

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Our results of operations may fluctuate significantly and may not meet our expectations or those of securities analysts and investors.

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We operate in an evolving industry with ever-changing customer needs and behavior, and, as a result, our business has evolved over time such that our operating history makes it difficult to evaluate our business and future prospects. Our results of operations have fluctuated in the past, and future results of operations are likely to fluctuate as well. Although we have experienced prolonged revenue growth, we may not be able to sustain this growth rate, current revenue levels, or profitability. In addition, because our business is evolving, our historical results of operations may be of limited utility in assessing our future prospects. We expect to face challenges, risks, and difficulties frequently experienced by growing companies in rapidly developing industries, including those relating to:

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•changes in demand and pricing for ad impressions sold on our platform;

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•changes in our access to valuable ad impressions from publishers;

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•responding to evolving industry standards and government regulations that impact our business, particularly in the areas of data protection and consumer privacy;

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•developing, maintaining, and expanding relationships with publishers, DSPs, agencies, advertisers, and buyers;

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•seasonality in our business;

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•changes in demand due to real or perceived economic stagnation or recession in certain markets;

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•innovating and developing new solutions that are adopted by and meet the needs of publishers, DSPs, agencies, advertisers, and buyers;

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•competing against companies with a larger customer base or greater financial or technical resources;

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•changes in the structure of the buying and selling of ad impressions;

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•changes in the pricing policies of publishers and competitors;

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•changes in the bidding behavior of buyers of ad impressions;

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•changes in buyer bidding algorithms, including the deployment of artificial intelligence or automated optimization technologies by buyers that reduce the volume or value of impressions purchased through our platform;

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•disruption to the digital advertising ecosystem driven by artificial intelligence, including the displacement of traditional programmatic advertising channels or reduction in open-web publisher traffic resulting from AI-powered search features or large language model-based services;

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•changes in demand due to changes in macroeconomic environment, including as a result of an economic downturn, recession, inflation, volatility in interest rates or foreign exchange rates, disruptions to supply chains, disruptions to global trade, or otherwise;

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•further expanding our business internationally; and

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•recruiting, integrating, and retaining qualified and motivated employees, particularly engineers.

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Any one or more of the factors above may result in significant fluctuations in our results of operations. You should not rely on our past results as an indicator of our future performance.

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Risks Related to Artificial Intelligence and Machine Learning

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We rely on machine learning and artificial intelligence technologies that may produce inaccurate or biased outputs, and our models may become less effective over time.

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Our core platform operations, including real-time bidding, auction optimization, yield management, and audience targeting, depend on machine learning and artificial intelligence technologies that require large volumes of high-quality data. These models may produce inaccurate, incomplete, biased, or otherwise flawed outputs. If our training data contains errors, biases, or inconsistencies, or if market conditions, consumer behavior, or buyer and publisher dynamics change in ways not reflected in our historical training data, our models may perform below expectations. Poor model performance could result in suboptimal auction outcomes for our publishers and buyers, degraded platform competitiveness, loss of customer trust, and revenue decline. Our model validation and monitoring procedures may not detect all failures or performance degradation in a timely manner, particularly under novel or unanticipated conditions. Retraining or replacing models could be costly and time-consuming. Additionally, if our AI systems produce or inform decisions that are perceived as biased or unfair, we could face reputational harm, legal liability, or regulatory action. Any of these outcomes could adversely affect our business, results of operations, and financial condition.

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Generative artificial intelligence and AI-powered search features may reduce open-web publisher traffic and disrupt the programmatic advertising ecosystem.

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Generative artificial intelligence technologies, including AI-powered search features, large language model-based assistants, and agentic AI systems, may reduce the volume of user traffic directed to publisher websites by providing direct answers to user queries and bypassing traditional web navigation. As publishers experience traffic declines resulting from AI-mediated content consumption, the volume and value of advertising inventory available on our platform may decrease. This risk is particularly acute for open-web publishers that rely on search-driven and algorithmically distributed traffic to monetize their content through programmatic advertising. Additionally, the emergence of AI agents—autonomous systems that act on behalf of consumers—could further disrupt traditional web browsing behavior and the programmatic advertising ecosystem in ways we cannot fully anticipate. If these shifts reduce advertiser and publisher reliance on programmatic supply-side platforms, we may be unable to develop alternative revenue streams or adapt our platform sufficiently to offset the disruption. Any such development could have a material adverse effect on our business, revenues, and results of operations.

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Competition from companies with greater artificial intelligence capabilities may adversely affect our business and market position.

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We compete with large technology platforms and other companies that have significantly greater resources to invest in artificial intelligence and machine learning capabilities. These competitors are deploying generative AI and advanced machine learning systems to build advertising solutions, expand closed ecosystems, and develop identity-independent targeting approaches that may reduce the value of independent supply-side platforms. If our competitors develop AI capabilities that are superior to ours, or if AI-driven consolidation accelerates buyer and publisher preferences for closed ecosystems or vertically integrated platforms, we could lose market share, experience pricing pressure, or face reduced demand for our services. Competition for engineers and data scientists with AI and machine learning expertise is intense, and our ability to attract and retain such talent is essential to our competitive position. If we are unable to develop, acquire, or retain competitive AI capabilities, our business, results of operations, and financial condition could be adversely affected.

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Evolving laws and regulations governing artificial intelligence may impose significant compliance obligations and expose us to liability.

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Regulatory frameworks governing the development and use of artificial intelligence are evolving rapidly across the United States, the European Union, and other jurisdictions in which we operate. In particular, the European Union’s Artificial Intelligence Act (“EU AI Act”) imposes obligations on providers and deployers of AI systems, with key provisions applicable to general-purpose AI and higher-risk applications taking effect on August 2, 2026. Compliance with the EU AI Act may require us to classify our AI systems, conduct conformity assessments, implement risk management and human oversight procedures, maintain technical documentation, and provide transparency to affected parties. Failure to comply could expose us to penalties of up to €15 million or 3% of worldwide annual turnover, as well as operational disruptions and reputational harm. In the United States, numerous states are considering or have enacted legislation governing AI systems, automated decision-making, and algorithmic transparency, and the regulatory landscape continues to evolve. The cost of compliance with AI regulations, individually and in the aggregate, may be substantial, and evolving requirements could require us to modify product design, data practices, or business operations in ways that are difficult to predict. Any failure to comply with applicable AI laws and regulations could adversely affect our business, financial condition, and results of operations.

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The proliferation of AI-generated content may create brand safety risks and inventory quality challenges that adversely affect our business.

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The rapid proliferation of AI-generated content across publisher websites presents emerging brand safety and inventory quality challenges. AI-generated content may contain inaccurate information, biases, or inappropriate material that advertisers may consider unsuitable for association with their brand. If advertisements served through our platform are placed alongside AI-generated content that harms an advertiser’s brand reputation, our customers may reduce their spending on our platform, seek alternative solutions, or pursue claims against us. Our ability to accurately identify and classify AI-generated content in real time as part of our inventory quality and brand safety processes is still developing, and we cannot guarantee that our detection and mitigation tools will be effective against all forms of AI-generated content. In addition, emerging regulatory requirements for the disclosure and labeling of AI-generated content may impose additional compliance obligations on us and our publisher customers. If we are unable to adequately address AI-generated content risks, our business, results of operations, and financial condition could be adversely affected.

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Risk Related to our Operations

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We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of the trading price of our stock and diminish our cash reserves.

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In February 2023, our board of directors authorized and approved a program pursuant to which we could repurchase up to $75.0 million in aggregate of shares of our Class A common stock, with the authorization to expire on December 31, 2024 (as amended, the “2023 Repurchase Program”). On February 22, 2024, our board of directors authorized an increase and extension to the 2023 Repurchase Program from $75.0 million to $175.0 million through December 31, 2025. On May 7, 2025, our board of directors authorized a further increase and extension to the 2023 Repurchase Program, increasing the total amount authorized for repurchase from $175.0 million to $275.0 million and extending the 2023 Repurchase Program through December 31, 2026 (the “2025 Repurchase Program Extension”). As of March 31, 2026, we have repurchased approximately $189.9 million of our Class A common stock in aggregate under the 2023 Repurchase Program. Although our board of directors authorized the 2025 Repurchase Program Extension, the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our Class A common stock. The actual timing and amount of repurchases remain subject to a variety of factors, including stock price, trading volume, market conditions and other general business considerations, all of which may be negatively impacted by macroeconomic conditions and factors, including, for example, volatile interest rates, inflation, and geopolitical uncertainty. The 2023 Repurchase Program may be modified, suspended, or terminated at any time, and we cannot guarantee that the 2023 Repurchase Program will be fully consummated or that it will enhance long-term stockholder value. The program could affect the trading price of our Class A common stock, increase volatility and diminish our cash and cash equivalents and marketable securities, and any announcement of a termination of this program may result in a decrease in the trading price of our stock.

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Risks Related to Regulations

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We are subject to constantly evolving laws, regulations and industry requirements related to data privacy, data protection, information security, and consumer protection across the markets we operate in.

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We receive, store, and process data about or related to consumers in addition to publisher, buyer, partner, employee, and services provider or vendor data. Our handling of this data is subject to numerous federal, state, and foreign laws and regulations that are constantly evolving and not always consistent across jurisdictions. We are also subject to regulation by various governmental authorities in addition to federal and state regulations. Our data handling is further subject to contractual obligations and may be deemed to be subject to industry standards and trade associations.

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The U.S. federal government and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use, and storage of data relating to individuals, including the use of contact information, precise geolocation information, and other data for marketing, advertising and other communications with individuals and businesses. In the United States, various laws and regulations apply to the collection, processing, disclosure, and security of certain types of data. Additionally, the U.S. Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination, and security of data. These regulatory regimes are constantly evolving and not always interpreted in a consistent manner. If we fail to comply with any such laws or regulations, we may be subject to enforcement actions that may not only expose us to litigation, fines, and civil and/or criminal penalties, but also require us to change our business practices, each of which could adversely affect our business, results of operations, and financial condition.