What happened

Shares of Magnite (MGNI -9.12%), the supply side ad-tech company, were soaring today after it beat estimates in its third-quarter earnings report and also benefited from the lower-than-expected inflation reading this morning.

As of 1:36 p.m. EST, the stock was up a whopping 58.3%.

So what

Magnite, which helps publishers optimize their digital ad inventory, said revenue, excluding traffic-acquisition costs (ex-TAC) in the quarter, increased 12% to $127.7 million, which was better than analyst estimates at $124.2 million.

Connected TV (CTV) revenue ex-TAC increased 29% to $55.8 million and now makes up 44% of total revenue. 

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also rose 11% to $44.4 million, equivalent to a 35% margin ex-TAC, and adjusted earnings per share improved from $0.14 to $0.18, ahead of the consensus at $0.14.

CEO Michael Barrett said,

We were able to show improvement in Q3 growth rates in CTV and DV+ (display, video, and other) as compared to Q2, despite challenging macro conditions. We continue to build upon and scale our CTV capabilities to better serve new and existing customers and believe we are well positioned to grow revenue in 2023.

Now what

Magnite's guidance also pleased the market as it called for fourth-quarter revenue ex-TAC of $151 million to $157 million, or 8% growth at the midpoint, which was better than estimates at $152.7 million. Notably, rival Pubmatic forecast just 1% revenue growth in its Q4.

While the better-than-expected results and guidance clearly gave the stock a boost, it also likely benefited from the inflation news as the ad-tech sector jumped broadly today. Advertising is cyclical, after all, and if the economy can avoid a recession, that would be good news for Magnite and its peers.

After falling more than 80% from its peak during the pandemic boom, Magnite stock looks well priced if its CTV business continues to bloom.