ZETA Q2 Deep Dive: AI Platform and Agency Expansion Drive Revenue Acceleration

Advertising and marketing company Zeta Global (NYSE:ZETA) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 35.4% year on year to $308.4 million. Guidance for next quarter’s revenue was better than expected at $328 million at the midpoint, 1.2% above analysts’ estimates. Its non-GAAP profit of $0.14 per share was 12.7% above analysts’ consensus estimates.

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StockStory’s Take

Zeta’s second quarter saw a significant positive market reaction, reflecting the company’s robust growth and operational execution. Management credited the strong results to rapid adoption of its AI-powered marketing platform, with CEO David Steinberg highlighting the launch of Zeta Answers, a prescriptive AI solution that automates and optimizes marketing actions. Expansion among both large holding company agencies and independent agencies also played a central role, as did successful multiuse case deployments through the OneZeta initiative. Management emphasized that its focus on AI and data integration into the marketing workflow differentiated Zeta from competitors and delivered superior customer return on investment.

Looking ahead, Zeta’s raised guidance is anchored in continued expansion of its AI capabilities and broader customer adoption, particularly as more clients embrace multiuse case deployments. Management believes that ongoing investments in sales and engineering, especially supporting the OneZeta strategy, will drive profit growth faster than revenue. CEO David Steinberg noted that the upcoming Zeta Live conference will showcase additional AI product advancements, while CFO Chris Greiner pointed to expected improvements in free cash flow and operating leverage through disciplined capital allocation. The company’s strategic priorities remain centered on expanding its agency ecosystem and deepening customer engagement through integrated AI-driven solutions.

Key Insights from Management’s Remarks

Management attributed the latest quarter’s outperformance to strategic advances in AI-powered products, growing agency relationships, and the success of multiuse case deployments.

• AI innovation and adoption: The launch of Zeta Answers, a prescriptive AI tool, enabled marketers to automate next-best actions in real time, which management views as a key differentiator driving increased customer engagement and return on investment.
• Agency ecosystem expansion: Growth was fueled by deeper partnerships with both large holding company agencies and independent agencies. The average number of scaled brands per large agency grew 40% year-over-year, indicating strong momentum within this channel.
• OneZeta strategy traction: The OneZeta initiative, which consolidates acquisition, growth, and retention marketing into a unified platform, led to several notable client wins, including a national discount retailer and a leading hospitality brand. Clients using multiple use cases reported higher satisfaction and platform stickiness.
• Salesforce productivity gains: Management reported higher pipeline conversion rates and improved sales productivity driven by experienced hires and targeted investments, particularly in the U.S. These efforts are enabling Zeta to accelerate customer acquisitions and deepen wallet share.
• Margin improvement and cost discipline: Direct channel revenue increased to 75%, helping to lower cost of revenue and expand margins. Capital allocation discipline, including targeted engineering hires and elimination of non-core functions, supported higher operating leverage and free cash flow conversion.

Drivers of Future Performance

Zeta expects continued growth to be driven by scaling its AI product suite, broadening agency and enterprise penetration, and disciplined spending.

• AI suite expansion: Management is prioritizing ongoing investment in AI and agentic workflows, with a dedicated Data & AI Lab developing new tools to maintain a lead over competitors. The upcoming Zeta Live conference is expected to showcase further AI-driven capabilities, aiming to boost adoption across both new and existing customers.
• Agency and enterprise penetration: The company is focused on increasing both the number of brands served within agency holding companies and the depth of relationships with independent agencies. Management sees substantial runway, as penetration remains below 5% of potential clients within agency partners, and multiuse case deployments continue to drive higher customer satisfaction and spending.
• Margin and cash flow discipline: Enhanced cost controls, a higher mix of direct revenue, and capital-efficient investments in sales and engineering are expected to further improve operating margins and free cash flow conversion. However, management cautioned that working capital requirements from large agency contracts and continued investment in talent could moderate the pace of margin expansion.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be monitoring (1) the pace of adoption and measurable impact of new AI modules, especially Zeta Answers, (2) the ability to expand brand penetration within large agency holding companies and independent agencies, and (3) the ongoing success of the OneZeta initiative in driving multiuse case deployments and customer satisfaction. Execution on sales productivity improvements and the upcoming product releases at Zeta Live will also be important markers of progress.

Zeta currently trades at $18.64, up from $15.89 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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