Magnite, Inc. (MGNI) Earnings

Management highlights

### Core Business Performance & Market Position - Magnite significantly outperformed consensus expectations across the business in Q2 2026, with broad-based strength driven by both CTV and DV+ segments, translating to strong bottom-line outperformance - CTV growth accelerated to mid-to-high 40% YoY across the company's top 10 CTV accounts, with strong growth across major global media owners including Disney, ESPN, Netflix, Roku, Vizio, Walmart, and Warner Bros. Discovery - DV+ returned to year-over-year growth, with mobile in-app growing 17% YoY; Magnite's growth in this segment is outpacing the broader market as the company gains share ### Key Structural Growth Drivers - **SpringServe as CTV Operating System**: SpringServe has evolved from a best-in-class ad server to a full control layer for premium streaming that combines ad serving, mediation, monetization, demand facilitation, and data enablement, increasingly enhanced by AI tools. Key recent wins include Samsung selecting SpringServe to power ad serving for its global smart TV home screen inventory, opening it to programmatic buying for the first time. - **Supply-side audience enablement and decisioning**: Optimization decisions are shifting from the buy side to the supply side as first-party data and AI tools become more widely available. Commerce media is a key early application, with 21 active deployed partners including Fanatics, CVS Media Exchange, Best Buy, and PayPal Ads, plus a partnership with Walmart Connect that combines Walmart's first-party commerce data with premium CTV inventory. - **AI and Magnite Orchestration for Agentic Advertising**: AI is increasing demand for trusted coordination infrastructure rather than disintermediating existing ad technology players. Magnite Orchestration is a new orchestration layer that enables any agent from publishers, marketers, data providers, and measurement firms to interact seamlessly in a trusted, scaled independent marketplace. Multiple major industry players including Disney Advertising, Spectrum Reach, Dentsu, and DirecTV are already working with components of Magnite's AI suite. ### Operational Updates - CFO David Day will retire at the end of September 2026 after 13 years with the company; the search for his successor is progressing well with a strong pool of internal and external candidates - AI is already driving productivity gains across engineering, operations, sales, and G&A, supporting continued margin expansion - The company ended Q2 with $333 million in cash, $165 million remaining under its share repurchase authorization (effective through February 2028), and a net leverage ratio of 0.1x

Guidance

- For Q3 2026, management expects total Contribution XTAC of $188 to $192 million, representing 13% to 15% YoY growth; CTV Contribution XTAC of $98 to $100 million (29% to 32% YoY growth); DV+ Contribution XTAC of $90 to $92 million (-1% to +1% YoY growth); and adjusted EBITDA margin of 36% to 38% - Full year 2026 guidance was raised across all metrics: total Contribution XTAC growth is now expected to be 13% to 14% (up from prior guidance of at least 11%); adjusted EBITDA growth is now expected to be greater than 20% (up from prior guidance of mid-teens growth); adjusted EBITDA margin is now expected to be at least 37% (up from prior guidance of at least 35.5%); free cash flow growth is now expected to be in the high 40% range (up from prior guidance of mid-30% range) - Capital expenditures are reaffirmed at approximately $60 million, a reduction from the prior year - There are no updates on the Google AdTech trial, and guidance does not include any potential market share gains from future trial remedies - Even with the raised full year guidance, estimates remain conservative to account for potential macroeconomic risk - Management is cautiously optimistic that 2026 political advertising spend could come in above the mid-cycle level embedded in guidance, following stronger than expected primary season performance

Segment performance

Q2 2026 total revenue was $193 million, up 11% year-over-year (YoY). Total Contribution XTAC was $190 million, up 17% YoY, beating consensus expectations by $10 million. The CTV segment posted Contribution XTAC of $97 million, growing 36% YoY, accounting for 51% of total Contribution XTAC, and contributed $6 million of the overall consensus beat. The DV+ segment posted Contribution XTAC of $93 million, growing 2% YoY, accounting for 49% of total Contribution XTAC, and contributed $4 million of the overall consensus beat. Within the overall Contribution XTAC mix, mobile represented 35% and desktop represented 14%. By vertical, health and fitness, technology, and finance were the strongest performers; automotive returned to growth after declining in Q1 2026 but remains depressed. Adjusted EBITDA was $71 million, growing 30% YoY, with an adjusted EBITDA margin of 37% (up from 34% YoY), beating consensus by $8 million. Net income was $19 million, up from $11 million YoY; GAAP diluted EPS was $0.13, up from $0.08 YoY, and non-GAAP EPS was $0.26, up from $0.20 YoY.

Risks & headwinds

- Macroeconomic uncertainty, including stubborn inflation, volatile energy prices, and related geopolitical challenges, creates uncertainty for near-term advertising demand - Agentic advertising is still in early stages of adoption, with an unclear timeline for large-scale market penetration and meaningful revenue contribution - Q2 CTV Contribution XTAC growth is being partially boosted by the wind-down of the low-contribution managed service business, which will act as a drag on growth through Q4 2026 before lapping in early 2027 - The shift of advertising to programmatic CTV and agentic AI could lead to industry consolidation, with uncertain competitive dynamics - 2026 political advertising spend remains difficult to forecast due to volatility in race competitiveness and candidate turnover

Analyst Q&A

• Q: Where does the 40%+ YoY growth for Magnite's top 10 CTV accounts come from, and how does Magnite's strategy shift to drive more demand flow to its existing large inventory base? /

  A: Growth comes from two main buckets: growing general adoption of programmatic CTV among large premium streamers, which is now table stakes for upfront ad deals, and increased adoption of Magnite-facilitated programmatic, where Magnite brings demand from DSPs and advertisers that premium publishers do not have existing direct relationships with, carrying favorable take rates. To reduce friction for demand flow, Magnite's supply-side audience enablement and AI orchestration initiatives make it easier to match first-party data from publishers and advertisers across any DSP, democratizing access and bringing more seamless demand to the ecosystem. Early AI tooling is already transacting a few million dollars in volume, with much larger growth expected in future years.

• Q: Is there anything that drove unexpected upside to CTV growth in Q2, and when will agentic advertising ramp and impact Magnite's growth rate? /

  A: Q2 CTV upside was broad-based, not concentrated in one area, with two clear drivers: broader adoption of programmatic by premium buyers and publishers, and faster international expansion by large streamers, which is almost always programmatic-first and Magnite benefits from this as a key programmatic partner. Agentic advertising is the top topic of customer conversations currently, but it is still early, with no clear timeline for a mass adoption tipping point. It will not meaningfully impact 2026 financials, but is expected to be a material mid-to-long term growth driver that expands programmatic advertising TAM by bringing direct sold deals into the programmatic ecosystem.

• Q: What will the take rate for Magnite Orchestration be, and why is Magnite adding headcount at a time when AI should be reducing labor needs? /

  A: While standalone SpringServe ad serving has a lower take rate, SpringServe is now embedded across Magnite's full platform, and overall take rates for SpringServe-enabled offerings are healthy. Magnite Orchestration will be charged at similar take rates to Magnite's core product offerings, and all early agentic transactions carry standard take rates. The small number of new headcount added are mostly mission-critical engineers to capture upcoming growth opportunities, and AI is already driving meaningful cost savings: Magnite has replaced all contract operations staff with AI agents, and built an in-house load balancer that cuts cloud costs by $20,000 per day, which is already flowing through to margin expansion.

• Q: How sustainable is current CTV growth, and where can further margin expansion come from going forward? /

  A: Magnite's goal is to consistently outpace overall CTV market growth, and the company believes a 25% annual CTV growth rate is achievable over the next several years. For margins, natural operating leverage from double-digit revenue growth drives strong incremental flow-through to EBITDA. Further cost gains will come from ongoing cloud efficiency improvements (including moving more workloads to cheaper on-premise infrastructure, which can be up to 3x more cost-effective than public cloud). While the company has added a small number of key employees currently to capture growth, headcount growth will slow over time, adding further margin upside. Long-term margins can exceed the prior 35-40% target range.