What happened

Shares of LiveRamp Holdings (RAMP -1.12%) rocketed higher after the company released better-than-expected earnings results. The stock price was up 17.7% as of 10:46 a.m. EDT on Friday.

The shares had been down in recent weeks, so investors were pleasantly surprised that LiveRamp posted accelerating revenue growth in the fiscal first quarter, along with adjusted profits that were higher than analysts had expected.

It's been a bumpy ride, but the stock is currently up 86% over the last five years. The strong earnings results could change investor sentiment in the near term.

RAMP Chart

RAMP data by YCharts.

So what

"Global companies are increasingly turning to LiveRamp to power their customer data strategies, and momentum across our key expansion levers continues to build," CEO Scott Howe said. These demand trends fueled a 20% rise in revenue for the fiscal first quarter, up from 13% growth in the fourth quarter. Investors are seeing the acceleration as a sign of a potentially lucrative run for the company.

LiveRamp helps companies use data to improve the customer experience. In the previous year, it worked with 825 customers, but the company sees the potential clients at 2,000 of the world's top marketers. Management believes there is still tremendous opportunity for growth over the long term.

Two business people shake hands in a conference room.

Image source: Getty Images.

Now what

CFO Warren Jenson suggested that growth should continue. He issued a statement saying, "Our Q1 results were strong, and our trendlines are building." LiveRamp added 30 net new customers in the quarter and now works with 40% of the largest consumer packaged-goods companies worldwide. 

Guidance now calls for fiscal second-quarter revenue to increase by 18% year over year to $124 million, with adjusted operating income expected to land at $4 million. Full-year revenue is expected to also increase by 18% over the previous fiscal year. 

LiveRamp's earnings per share are still relatively minuscule at just $0.09 on an adjusted basis in the first quarter. This explains the stock's high forward price-to-earnings ratio, which implies that investors are betting on higher margins down the road to grow earnings and bring the high valuation back down.

The key to improving profitability ultimately depends on revenue growth, and that's why the recent acceleration is so important. LiveRamp is expanding its relationships with major clients, and that bodes well for the company's future.