LiveRamp Earnings Call Signals Profitable AI-Driven Growth

LiveRamp Holdings, Inc. ((RAMP)) has held its Q3 earnings call. Read on for the main highlights of the call.

LiveRamp Holdings’ latest earnings call struck an upbeat tone, underscoring a company leaning into profitable growth while investing for an AI-driven future. Management highlighted double-digit improvements in margins, record free cash flow, and steady subscription gains, and framed near-term headwinds as largely timing-related rather than structural, reinforcing confidence in multi‑year financial targets.

Revenue Growth Above Guidance

LiveRamp reported total revenue of $212M, up 9% year over year and modestly ahead of the midpoint of guidance, signaling healthy underlying demand in a choppy ad-tech and data landscape. Subscription revenue matched that pace at $158M, also up 9%, which is important for visibility and supports the narrative of a durable, recurring-revenue engine.

ARR and Net New ARR Momentum

Annual recurring revenue climbed by $11M sequentially and 7% versus last year, reflecting consistent new business and expansion. Net new ARR topped $11M for the second consecutive quarter, indicating that recent initiatives in pricing, product, and go‑to‑market are beginning to translate into tangible contract growth.

Customer Expansion and Retention

Customer metrics moved in the right direction, with 15 net new customers added, the strongest quarterly gain in three years. High-value relationships deepened as million-dollar-plus customers increased by eight to a record 140, while subscription net retention held at 101%, squarely within the company’s 100–105% long‑run target range.

Record Profitability and Cash Generation

Profitability reached new highs as non‑GAAP operating income jumped 36% to $62M and operating margin expanded six points year over year to 29%, underscoring strong operating leverage. Free cash flow hit a record $67M in the quarter, giving LiveRamp ample financial flexibility to fund growth initiatives and capital returns without stressing the balance sheet.

Balance Sheet Strength and Shareholder Returns

The company closed the quarter with roughly $403M in cash and short-term investments and no debt, an enviable position in a rising-rate environment. Management continued to return capital, repurchasing $39M of stock in the quarter and $119M year to date, with $137M still remaining under its buyback authorization.

Strong RPO Backlog

Remaining performance obligations rose 23% to $710M, signaling robust contracted demand locked in for future periods. Current RPO, which focuses on the next 12 months, grew 9% to $471M, reflecting healthy bookings momentum but also normal seasonality from renewal patterns.

Marketplace and Product Momentum

LiveRamp’s data marketplace and connected TV offerings showed renewed strength, with demand reaccelerating to double-digit growth late in the quarter after a slower start. Marketplace and other revenue reached $54M, up 8% year over year, and management noted the improvement carried into January, hinting at a stronger setup heading into the new fiscal year.

Strategic AI Positioning and Partnerships

Management cast LiveRamp as a foundational data network for AI, pointing to more than 20 AI partners signed across the ecosystem. The data marketplace has been expanded to include AI models, agents, and applications, enabling customers to support AI training and licensing on a privacy-safe, interoperable data backbone.

Usage-Based Pricing Progress

A year-long pilot of usage-based pricing has delivered encouraging results, supporting more flexible land-and-expand motions with customers who scale usage over time. LiveRamp is extending this model to major reseller partners, including agency and platform accounts, with a broader rollout envisioned for fiscal 2027 as integrations and commercial terms mature.

Clear Rule of 40 Roadmap

The company reiterated a detailed roadmap to reach the “Rule of 40” by fiscal 2028, targeting 10–15% annual revenue growth alongside non‑GAAP operating margins between 25% and 30%. For fiscal 2026, LiveRamp framed its outlook as a “Rule of 31” year, aiming for roughly 9% growth and a 22% operating margin as it balances investment in AI and pricing innovation with disciplined cost control.

Data Marketplace Timing Headwind

Not everything went smoothly, as marketplace and other revenue of $54M came in slightly below internal expectations due to slower data marketplace growth early in the quarter and project sequencing. However, management stressed that growth reaccelerated from mid‑November onward, suggesting the softness was more about timing than underlying demand erosion.

CRPO Sensitivity and Contract Timing

Current RPO metrics were pressured by the runoff of several large multiyear deals in their final year, which weighed on near-term comparisons even as total RPO rose sharply. Executives cautioned that renewal timing can distort backlog metrics quarter to quarter, and encouraged investors to focus on total RPO and ARR trends for a clearer view of demand.

Short-Term Margin and Spend Timing Impact

Near-term, gross margins will dip as LiveRamp completes the final stages of a back-end platform upgrade in the fourth quarter, with management guiding to 72–73%, down 1–2 points. Some project-related spending slipped from the third quarter into the fourth, implying operating expenses will step up by roughly $15M sequentially before normalizing.

Rollout and Commercialization Risks

Management acknowledged that revenue benefits from usage-based pricing expansion and new AI offerings will take time to fully materialize given complex reseller negotiations and technical integrations. Investors should expect incremental ARR gains from these initiatives to flow in over multiple quarters rather than in a single inflection, even as early signals remain positive.

Guidance and Forward Outlook

For fiscal 2026, LiveRamp guided revenue to $810–814M, about 9% growth, gross margins of roughly 72–73%, and non‑GAAP operating income of $180M, implying a 22% margin and supporting the “Rule of 31” framing. Fourth-quarter guidance calls for revenue of $203–207M, an 18% non‑GAAP operating margin, solid free cash flow with EBITDA conversion above 75%, ongoing buybacks, and management voiced confidence in returning to double-digit revenue growth next year as ARR momentum, AI partnerships, and usage-based pricing gain traction.

LiveRamp’s earnings call painted a picture of a company in control of its growth algorithm, pairing steady top-line gains with expanding margins and strong cash generation. While investors will need to watch near-term marketplace trends and the pace of AI and pricing monetization, management’s reaffirmed path to the Rule of 40 and disciplined capital returns underpin a constructive outlook for shareholders focused on durable, profitable growth.