ZETA Stock Before Q2 Earnings Release: To Buy or Not to Buy?

Zeta Global ZETA will report second-quarter 2025 results on Aug. 5, after market close.

The Zacks Consensus Estimate for revenues in the to-be-reported quarter is set at $296.4 million, suggesting 30.1% growth from the year-ago quarter’s actual. The consensus mark for earnings per share is set at 14 cents per share, indicating a 7.7% increase from the year-ago reported figure. No estimate for the quarter has moved north in the past 60 days, versus three southward revisions.

The company does not have an impressive earnings surprise history. It missed the Zacks Consensus Estimate in three of the trailing four quarters and surpassed once, delivering an average negative surprise of 7.7%.

ZETA’s Chances of Q2 Earnings Beat Are Low

Our proven model does not conclusively predict an earnings beat for Zeta Global this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

ZETA has an Earnings ESP of -8.26% and a Zacks Rank of 5 (Strong Sell) at present.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Gen-AI & Agentic Workflows: Zeta Global’s Key Driver in Q2

In the first quarter of 2025, Zeta Global launched AI Agent Studio, a suite of generative AI tools that allows users to select and activate pre-built tasks. With the gen-AI market experiencing an explosive growth trajectory, it is expected to grow, seeing a 43.4% CAGR from 2025 to 2032. We anticipate the company to improve on the back of this expanding market.

ZETA announced agentic workflows that provide marketers with the ability to build and customize AI agents that operate in unison to complete complex tasks across the customer journey. We expect ZETA to benefit from the rising use cases of agentic AI use cases increasing in BFSI, Retail and Travel sectors in 2025 (per ISG).

ZETA Shares Dipped

Zeta Holdings shares have declined 34.8% in a year. It has underperformed the 62.3% rally of its industry and the 17.2% rise of the Zacks S&P 500 composite. It has also underperformed its industry peers, Coherent COHR and Futu Holdings Limited FUTU. Coherent and Futu Holdings have surged 64.3% and 157.4%, respectively.

1-Year Price Performance

The ZETA stock appears to be undervalued and is currently trading at a trailing 12-month price-to-earnings ratio of 19.74, which is lower than the industry average of 23.24. The stock in question is trading cheaper than Coherent and Futu Holdings Limited as well. COHR and FUTU are trading at a trailing 12-month price-to-earnings ratio of 23.39 and 19.99, respectively.

P/E - F12M

ZETA’s Investment Considerations

Zeta Holdings’ revenue generation is based on the volume of advertising a client runs via its platform. Approximately 73% of the top line is generated from the direct platform. The core risk with this business model is that companies often cut their marketing budgets when the economy slows down, affecting ZETA’s top line. Per JPMorgan, the United States is anticipated to experience slower growth in the second half, which may pose a threat to Zeta Holdings’ growth narrative going forward.

Since most sales are tied to ZETA’s platform, its growth may slow down if fewer new clients or existing ones switch to the platform. This will limit Zeta Holdings’ ability to improve profit margins and may hurt its operating leverage. Additionally, major advertising clients, which are expected to generate a large portion of the company's business, have the power to negotiate lower rates. A decline in rates will directly impact ZETA’s gross margin.

We are pessimistic about the predictability of Zeta Holdings’ free cash flow generation. The reason is that revenues are tied to variable ad spending. To make it more predictable, the company will have to generate more revenues from fixed-rate and subscription-based bookings. The company has never paid out any dividends and does not plan to do so in the future. Hence, this stock is a red flag for income-seeking investors.

Final Verdict

Despite a growth opportunity being presented by AI-led technology, ZETA is anticipated to find itself amid an economic slowdown, which can hurt its revenue generation. With a significant decline in its shares over the past year and a bleak chance of an earnings beat, we are highly pessimistic about the stock’s trajectory post earnings.

Other factors like the unpredictability of the free cash flow and the inability to pay dividends act as obstacles for investors. Considering these negatives, we recommend investors holding the ZETA shares currently sell off and book their profits. Potential buyers are urged not to consider buying this stock.

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This article originally published on Zacks Investment Research (zacks.com).

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