Key Highlights

● Revenue and adjusted EBITDA rose sharply

● All full-year measures were raised

● Connected TV now exceeds half of contribution ex-TAC

● Google remedies upside was left out of the forecast

Magnite, Inc. (NASDAQ:MGNI) gave Advertising technology names within communication stocks a fresh data point, with third-quarter results in which connected television accounted for more than half of contribution ex-TAC, up from less than half a year earlier. Revenue, gross profit, contribution ex-TAC, adjusted EBITDA and Net Income all rose from the prior-year quarter, and management raised every element of its full-year outlook.

The company describes itself as the world's largest independent advertising company serving the Supply side of the market. Publishers use its technology to monetize content across connected TV, online video, display and audio, while agencies and brands use the platform to reach inventory. Contribution ex-TAC, the measure management emphasises, is a non-GAAP figure that strips out traffic Acquisition costs, and on that basis the quarter finished above the guidance range on every line: total, connected TV and DV+, the company's label for mobile and desktop combined.

Chief Executive Officer Michael G. Barrett credited the quarter to strength in both connected TV and DV+, citing "outstanding operating leverage" as the reason adjusted EBITDA grew so much faster than the top line. Chief Financial Officer Brian Gephart told analysts the company was "extremely pleased" with the results.

Operating Leverage in the Numbers

The gap between growth rates is the most striking feature of the income statement. Revenue rose at a mid-teens pace, contribution ex-TAC grew faster, and adjusted EBITDA grew faster again, lifting the Margin on contribution ex-TAC well above the prior-year level. Total expenses, by contrast, were slightly lower than a year earlier, mainly because cost of revenue declined, while sales and marketing, technology and development, and general and administrative lines each increased modestly.

The year-to-date figures echo the quarter, with revenue, Gross Profit and contribution ex-TAC all ahead of the same period last year, and adjusted EBITDA margin wider. Connected TV's share of contribution ex-TAC over that longer period also moved above half, while mobile and desktop shares each slipped. Income from operations in the third quarter approximately doubled, net income rose strongly despite a much heavier tax provision, and Diluted Earnings per Share increased on a share count that was slightly smaller than a year ago. Non-GAAP earnings per share also advanced. Stock-based compensation declined from the prior year, while the expense for litigation, which the release attributes to the Google (NASDAQ:GOOGL) action and to defending a privacy class action, moved higher.

Gephart told analysts that the company is seeing "encouraging productivity benefits from AI across engineering, operations, sales, and G&A," and said cloud costs were being kept roughly flat year over year by moving capacity on-premises. Barrett added, in response to Laura Martin of Needham, that AI has sharply shortened product development cycles. Those remarks offer management's explanation for how expenses stayed contained while the Business grew. Capital Expenditure for the full year was reaffirmed at a level below the prior year.

Where Connected TV Growth Came From

Connected TV contribution ex-TAC rose steeply and cleared the top of its guidance range. Barrett said on the call that "the CTV market has reached an important inflection point," and that the largest accounts in the category grew at a pace above the segment's overall rate. He named Disney (NYSE:DIS) and ESPN, Fox (NASDAQ:FOXA) and Tubi, LG Ads, Netflix (NASDAQ:NFLX), Roku (NASDAQ:ROKU), Skydance, Vizio and Walmart (NYSE:WMT) among the partners connected to the momentum.

Several relationships deepened during the year. LG Ad Solutions signed a multi-year extension and expansion, and HPTV selected Magnite as its primary video ad server, according to the call transcript. Barrett noted that some recent deals "haven't really contributed meaningful revenue" so far and said they will begin to do so next year, which gives one reason management's commentary on the following year is firmer than it might otherwise be.

Walmart illustrates the shape of these arrangements. Market commentary noted in the spring that Walmart Connect launched Connect Select, a curated programmatic connected TV marketplace inside Walmart DSP that pairs television inventory with the retailer's first-party shopper data. The supply partners at launch included Magnite, alongside FreeWheel, index Exchange and PubMatic, and Magnite said its technology powers the Vizio integration. Walmart's ownership of Vizio gives that link added relevance, because targeting can draw on purchase signals rather than broad demographic segments.

Samsung offers another example from outside the call. In a June announcement, Samsung Ads said advertisers could automate the purchase of home screen placements on its smart televisions through integrations with The Trade Desk and Google's display and video buying platform. The company's release stated that Magnite's SpringServe ad server technology powers that home screen inventory, and quoted a Magnite revenue executive describing the integration as enabling brands to activate "one of the most valuable surfaces in CTV."

Live sport, long regarded as a slower area for programmatic buying, also came up. Barrett called it "such a mainstream piece" of the business and said of its arrival, "It's not about when; it's now." International connected TV was described as growing at "a very healthy" rate, and he said Magnite follows Netflix as the streaming service enters new markets.

The Political Surge and Its Hangover

Election advertising far exceeded internal forecasts, and it is a large part of why the outlook moved. Barrett said political spending "far exceeded" expectations in the quarter and made clear that the final quarter would be larger still, with the full-year contribution estimate now far above the projection management had previously given. The release said the bulk of that spending is flowing through connected TV.

ClearLine, described on the call as a buying tool that shortens the path between political advertisers and connected TV supply, took a noticeable share of those political dollars. Barrett stated that "ClearLine only operates on the Magnite platform," and that because it charges a fee, the spend adds incrementally to contribution ex-TAC. Tim Nolan was among the analysts who asked whether the product affects transaction Volume and take rate.

The boost carries a cost that management did not hide. "There's no question it crowded out advertising," Barrett said, adding that "one of the unknowns is how quickly it comes back after the election last night." Matt Swanson of RBC Capital Markets pressed on Demand conditions outside of political, and Barrett replied that the year would still have been outstanding for the company without election spending.

This creates an unusual comparison for next year, since an election cycle's dollars will not recur in the same way. Magnite addressed that directly by framing its early view for the following year excluding political, which allows the underlying growth rate to be seen separately from the reported one. On a reported basis, the expected growth rate is lower, reflecting the tougher base.

DV+ Holds Up, But the Open Web Is Shifting

The older half of the business also beat guidance. DV+ contribution ex-TAC grew modestly from the prior-year quarter, with mobile and desktop both rising, though the group's share of the total declined as connected TV expanded. Barrett singled out mobile in-app as a primary contributor, growing at a faster pace than the category as a whole.

Management's framing of this area was measured. Gephart said the company thinks about the business as "roughly flat to modest, low single-digit growth," and the guidance for the fourth quarter sits within that description. The year-to-date figures show that dynamic clearly, with mobile slightly higher and desktop slightly lower than in the comparable period of last year.

Jason Cryer of Craig-Hallum asked about pressure on open-web and search referral traffic and its effect on DV+. Barrett's answer was candid: "The numbers would be much stronger if it were more of a search-generated traffic world as opposed to answer engines." For a company whose publisher clients depend on those visits, this is a structural issue rather than a seasonal one, and Barrett pointed to commerce media and mobile apps as offsets.

AI Agents, OpenAI and Pinterest

Discussion of artificial intelligence on the call split between hype and measurable revenue. Barrett characterised agentic advertising tools as attracting "a lot of interest, a lot of test and trial, not a lot of dollars." He said usage of the company's own tools is split about evenly among market participants, a remark that suggests adoption is still early. Samsung's June announcement also mentioned support for future agentic and AI-assisted media buying, an indication that the concept is spreading across the television ecosystem even while spending remains modest.

Martin also asked whether AI labs could become a large new advertising category, and Barrett said they are a growing category for the company though not among its largest. Barton Crockett of Rosenblatt probed the OpenAI relationship. Barrett said Magnite is operating as a supply-side platform in that arrangement, "piping in demand into the OpenAI advertising inventory." He also said Pinterest (NYSE:PINS) had announced the global launch of programmatic deals and selected Magnite as its primary supply-side platform. Neither relationship was quantified on the call, and Barrett's earlier statement about deals yet to contribute meaningful revenue is a useful caution in reading them.

Google Remedies: Upside Left Out of the Forecast

The advertising technology case against Google continues to hang over the sector. Barrett said the company applauded the court's adoption of the "key behavioral remedies" proposed by the Department of Justice, and added that the industry was still awaiting a final order from Judge Brinkema. The release separately cites the Google action in its litigation expense and in its outlook.

Timing is the critical unknown. Barrett said Google has estimated a longer period for the required technical work than the range cited by others in the industry, and that item-by-item timing was "not there yet." Management therefore excluded any upside from remedies from its expectations for next year, so any eventual benefit would come on top of those expectations rather than being built into them. Crockett asked about the timing and revenue effect of the remedies, and Shweta Kajaria of Wolfe Research asked what investors might watch in the case to judge whether Magnite and peers such as PubMatic would benefit.

A Stronger Balance Sheet After the Convertible Payoff

Cash fell from the end of last year, yet the reason is largely favourable. Magnite repaid its convertible senior notes during the year, reducing current Debt to a small amount, and drew and fully repaid its revolver. Cash at quarter-end exceeded total debt, a change from year-end when the balances were close to level. Operating Cash Flow for the year to date rose from the prior-year period, while capital spending on property and equipment declined.

Gephart said the company repurchased or withheld shares for a meaningful sum during the quarter, and that a substantial amount remained available under the current repurchase authorization, which runs into the year after next. Treasury stock purchases across the year to date were well above those of the same period last year. He also discussed a repricing of the term loan, which he said will lead to annualized cash interest savings.

Stockholders' Equity increased, and Goodwill was unchanged. Accounts Receivable and Accounts Payable both grew, a pattern consistent with greater transaction volume flowing through the platform, although the release does not itself draw that link.

The Forecast, and the Caveats Around It

For the fourth quarter, management guided to higher contribution ex-TAC in total, with connected TV again the fastest-growing part and DV+ contributing modest growth. Adjusted EBITDA operating expenses were also guided. For the full year, Magnite lifted its expected growth in contribution ex-TAC and adjusted EBITDA, its adjusted EBITDA margin, and its free cash flow growth, each from a lower previous expectation.

The commentary on next year is unusually specific for a company at this stage of its calendar. Management expects top-line growth, excluding political, to accelerate over this year, along with an adjusted EBITDA margin at least equal to this year's expected level. Barrett also described a long-term connected TV growth rate of about a quarter a year over a multi-year horizon. These are company forecasts, and the release flags the usual risks attached to forward-looking statements, including its dependence on the Google litigation, AI developments and identity solutions.

The picture that emerges is a company whose largest segment has crossed a visible threshold, helped by an election year that will not repeat next year. How quickly non-political advertisers return to streaming inventory, when the Google order arrives, and whether recently signed partners begin producing revenue on the schedule management described are the items that the next set of results will start to answer.