Shares of Zeta Global Holdings Corp. (NYSE: ZETA) rallied sharply in early trading on Wednesday, climbing 15.4% to $28.00 as of 9:53 a.m. EDT. The surge came after the marketing technology company delivered second-quarter results that exceeded revenue expectations and, more notably, raised its full-year free cash flow forecast by a significantly larger margin than revenue.
Strong Q2 Performance
For the second quarter of 2026, Zeta reported revenue of $442.8 million, a 43.5% increase from $308.4 million in the same period last year. This topped the company's prior guidance midpoint of $420.5 million by approximately 5.3%. Adjusted EBITDA surged 56% to $91.7 million, while free cash flow climbed 72.7% to $58.0 million. The company also swung to a GAAP net income of $8.2 million, a $21.0 million improvement from a loss of $12.8 million in Q2 2025.
Adjusted EBITDA margin expanded to 20.7%, up 170 basis points year-over-year, while GAAP net margin stood at 1.8%. Stock-based compensation totaled $52.1 million, representing 11.8% of revenue.
Guidance Upgrade Focuses on Cash Generation
The company raised its full-year 2026 guidance across key metrics, but the most notable revision was in free cash flow. The midpoint for free cash flow increased by 8.6% to $255.3 million, compared to a more modest 1.8% rise in revenue midpoint to $1.818 billion. Adjusted EBITDA guidance was lifted 2.0% to $405.2 million, and GAAP EPS guidance more than tripled to $0.10 per share.
This disproportionate increase in cash flow guidance highlights a shift in investor focus toward cash conversion. The updated guidance implies a free cash flow margin of 14.0% to 14.1% for the full year.
Customer Growth and AI Adoption
Zeta also reported strong customer metrics. The number of "super-scaled" customers—accounts generating at least $1 million in trailing twelve-month revenue—rose 17% to 197. Average revenue per such customer also increased 17% to $1.8 million.
Chief Financial Officer Chris Greiner attributed the performance to "AI adoption and usage across the platform," a key driver of the company's growth strategy.
Analyst Reactions
Following the earnings release, at least three analysts updated their price targets. RBC Capital Markets raised its target from $29 to $31, maintaining an Outperform rating. B. Riley Securities increased its target from $30 to $32, keeping a Buy rating. Morgan Stanley, however, maintained an Equal-weight rating and raised its target from $23 to $25, which remains below the current share price.
The average analyst price target now stands at $29.61, implying a potential upside of 5.8% from Wednesday's trading level. Prior to the surge, the same target suggested a 22% upside, meaning nearly 75% of that buffer was erased in a single session.
Market Context and Risks
The rally in Zeta shares did not lift other marketing software stocks. Braze Inc. (NASDAQ: BRZE) was down 0.1%, while Klaviyo Inc. (NYSE: KVYO) gained 1.2%.
Looking ahead, Zeta projects third-quarter revenue in the range of $469 million to $472 million, representing 39% to 40% growth year-over-year. Excluding acquisitions and political revenue, growth is expected to be 23% to 24%. Adjusted EBITDA margin for Q3 is anticipated between 24.4% and 24.7%.
Risks remain, including trading near the average analyst target, slower organic growth when excluding acquisitions and political revenue, elevated stock-based compensation, and potential integration-related expenses that could pressure cash conversion. Wednesday's market response suggests that simply beating revenue estimates may no longer be sufficient; investors are increasingly rewarding companies that demonstrate strong cash flow generation and margin expansion.
