What happened

Shares of PubMatic (NASDAQ:PUBM) charged sharply higher Wednesday, surging as much as 33.2%. As of 11:55 a.m. EST, the stock was up 28.7%.

The catalyst that drove the digital advertiser higher was third-quarter financial results that came in above even the most bullish estimates.

So what

PubMatic delivered revenue of $58.1 million, up 54% year over year, allaying investor fears that its growth story might take a hit. Furthermore, the company delivered earnings per share (EPS) of $0.24, which soared 140%. This marked the fourth consecutive quarter of growth over 50% and net margin over 10%. 

To give the top and bottom-line results some context, analysts' consensus estimates were calling for revenue of $52.5 million and EPS of $0.10, so this was by all accounts a blowout. 

A person sitting on a chair looking at a smartphone.

Image source: Getty Images.

Like many companies in the digital advertising space, the warning bell sounded by Snap earlier this quarter had investors on edge, fearing the one-two punch of Apple's new privacy measures, coupled with Alphabet's plans to phase out Google's ad-tracking cookies, would stunt PubMatic's growth.

However, not all digital advertisers are created equal, as investors recently discovered when The Trade Desk reported explosive results earlier this week.

Now what

As a result of PubMatic's continued strong growth, the company provided its fourth-quarter forecast, which was more robust than expected, while simultaneously raising its full-year outlook.

PubMatic is guiding for fourth-quarter revenue of $75 million, which would represent year-over-year growth of roughly 34% at the midpoint of its guidance. It also raised its full-year revenue forecast to about $226 million (up from $207 million), which would represent growth of 52%.  

The stock isn't cheap in terms of traditional valuation metrics, with a price-to-sales ratio of 11. Thus far, however, investors have been willing to give the company a pass, as the result of PubMatic's track record of strong growth. 

Additionally, the company's beat and raise -- beating analysts' consensus estimates, while raising its full-year guidance -- was enough to send PubMatic stock soaring.

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.