Here's Why You Should Retain ZETA Stock in Your Portfolio Now

Zeta Global Holdings Corp.’s ZETA growth prospects include AI-led adoption, expanding customer relationships and Marigold synergies. However, channel-mix pressure, agency exposure and the execution required to achieve full-year GAAP profitability limit the case for a more bullish stance.

AI-Native Momentum Strengthens ZETA’s Position

Zeta’s second-quarter 2026 revenues increased 43.5% year over year to $442.8 million, including $48.1 million from Marigold. Excluding acquisitions, revenues grew 28%. Eight of its top 10 industries expanded more than 20% on a trailing-12-month basis, while the sales pipeline increased more than 60% year over year.

Zeta Global Holdings Corp. Revenue (TTM)

Zeta Global Holdings Corp. revenue-ttm | Zeta Global Holdings Corp. Quote

The results suggest that enterprises are increasingly consolidating marketing functions onto AI-native platforms capable of delivering measurable returns. Athena became available to all Zeta Marketing Platform customers in the first quarter and is helping simplify workflows and expand platform adoption.

Super-scaled customer ARPU increased 17% to $1.8 million in the second quarter, exceeding Zeta’s 12-16% long-term model. Customers using more than one use case increased 90%, while those using five or more channels rose more than 50%. Cross-sell and upsell deals also grew 43%, indicating that customers are expanding beyond initial platform deployments.

Beat-and-Raise Record Improves Visibility

The second quarter marked Zeta’s 20th consecutive beat-and-raise quarter. Management lifted its 2026 revenue guidance midpoint to $1.82 billion and raised the adjusted EBITDA midpoint to approximately $405 million. Free cash flow guidance increased to a midpoint of $255 million, representing 63% conversion of adjusted EBITDA.

Zeta also raised its full-year GAAP earnings guidance to 9-11 cents per share after generating second-quarter GAAP net income of $8.2 million, or 3 cents per share. However, the company still posted a $5.1 million GAAP net loss for the first half, making continued second-half operating leverage important.

Marigold integration savings contributed to second-quarter efficiency gains across research and development, general and administrative, and sales and marketing expenses. Cross-selling Marigold’s loyalty offerings with Zeta’s acquire-and-grow use cases provides an additional expansion opportunity.

Cash Generation and Buybacks Support Shareholders

Second-quarter free cash flow increased 73% year over year to $58 million, while operating cash flow rose 65% to $69 million. Zeta repurchased approximately 1.65 million shares for $29.9 million during the quarter.

As of July 30, the company had spent $74.6 million on share repurchases in 2026 and had approximately $89.4 million remaining under its authorization. Stronger cash generation and active repurchases support shareholder value while giving Zeta flexibility to fund growth initiatives.

Channel Mix and Agency Exposure Warrant Caution

Zeta’s cost of revenues represented approximately 41% of second-quarter revenues, up 300 basis points year over year, primarily because new agency customers initially adopted higher-cost social channels. Although the ratio improved 10 basis points sequentially and social remains accretive to adjusted EBITDA and free cash flow, slower migration toward Zeta-owned channels could restrain gross-margin improvement.

Management expects third-quarter adjusted EBITDA margin of 24.4-24.7%, up from 20.7% in the second quarter. Achieving this improvement depends on integration savings, expense leverage and a favorable channel mix.

Discretionary industries were among the strongest contributors to first-quarter pipeline growth, while agencies typically have longer payment cycles. Consequently, macroeconomic weakness or slower campaign spending could introduce variability in revenue and cash-flow timing.

Earnings Estimates Remain Encouraging

The Zacks Consensus Estimate for third-quarter 2026 revenues is pegged at $470.48 million, implying 39.5% year-over-year growth. The consensus estimate for earnings of 28 cents suggests growth of 27.3%.

For 2026, the consensus estimate indicates revenues of $1.82 billion and earnings of 98 cents per share, representing respective increases of 39.4% and 34.3%. Revenues and earnings are projected to grow another 14.4% and 26.9%, respectively, in 2027.

Last Words

Zeta’s strong AI adoption, expanding pipeline, Marigold synergies and improving cash generation argue against exiting the stock. Nevertheless, channel-mix pressure, discretionary exposure and dependence on second-half execution temper the near-term upside.

The company’s Zacks Rank #3 (Hold) appropriately captures this risk-reward balance. Existing investors may continue holding ZETA while monitoring margin progression, Athena monetization and the transition of agency spending toward Zeta-owned channels.

Stocks to Consider

A couple of better-ranked stocks in the broader Business Services sector are Bright Horizons Family Solutions Inc. BFAM and CBIZ, Inc. CBZ.

Bright Horizons Family Solutions carries a Zacks Rank #2 (Buy) at present. It has a long-term earnings growth expectation of 13.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BFAM delivered a trailing four-quarter earnings surprise of 7.6%, on average.

CBIZ also carries a Zacks Rank of 2 at present. It has a long-term earnings growth expectation of 11.6%.

CBZ beat earnings estimates in three of the last four quarters and missed once, with an average earnings surprise of 8.9%.

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This article originally published on Zacks Investment Research (zacks.com).

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