[Management View]
LiveRamp reported $200 million in total revenue for Q2 FY2026, an 8% increase, surpassing guidance and consensus. Subscription revenue reached $150 million, up 5%, while marketplace and other revenue grew 18% to $50 million. Net new ARR was $14 million, marking the largest organic quarterly increase in seven quarters. The company added five million-dollar-plus subscription customers, reaching a record 132. GAAP operating income was $21 million, with a margin expansion of seven points. Non-GAAP operating income was $45 million, up 10%, with a margin of over 22%.

[Outlook]
For Q3 FY2026, LiveRamp projects total revenue between $209 million and $213 million, with non-GAAP operating income expected between $55 million and $57 million. The non-GAAP operating margin is forecasted around 27%, with a gross margin similar to Q2. FY2026 revenue guidance has been raised to a range of $804 million to $818 million, with a non-GAAP operating income margin targeted at 22%. The company aims to achieve Rule of 31 this fiscal year and remains confident in reaching Rule of 40 by FY2028.

[Financial Performance]
Revenue increased by 8% YoY, with subscription revenue up 5% and marketplace and other revenue up 18%. Net new ARR grew by 7% YoY. GAAP operating income more than doubled, and non-GAAP operating income increased by 10%. Gross margin was 72%, down three points YoY due to increased cloud hosting costs.

[Q&A Highlights]
Question 1: Can you elaborate on some of the drivers of the improvement in ARR in the quarter?
Answer: The strength of gross new ARR was driven by cross-sell and upsell of clean room solutions, particularly for CTV measurement and commerce media use cases. There was also a significant uptick in new logo activity, reflecting increased focus and a new pricing model. Lower customer churn also contributed to the improvement.

Question 2: How do you feel about the upsell opportunity over the next two quarters with new solutions and integrations coming to market?
Answer: We feel optimistic about the upsell opportunity, with multiple growth levers such as cross-media intelligence, commerce media networks, CTV expansion, and AI opportunities. Customers are excited about these new offerings, and we are confident in our ability to deliver.

Question 3: How are you thinking about the implications of AI search and AI overviews on your business?
Answer: Our exposure to the open web is low, and we have benefited from the growth in CTV, social media, and commerce media. AI models rely on first and second-party data, which positions us well for future growth. Our investments in AI readiness and usage-based pricing build a strong foundation for success as AI adoption increases.

Question 4: Can you provide an update on the degree of macro conservatism baked into the revenue guide for the year?
Answer: We have built in some conservatism, particularly in variable revenue sources like subscription usage and data marketplace. The midpoint of our guidance assumes a stable macro environment, while the low end accounts for potential deterioration.

Question 5: Can you elaborate on the mix of retail and CPG versus non-retail in terms of incremental ARR in the second half?
Answer: We are seeing growth in both areas. Traditional retail media is focused on scaling usage, while new logos in commerce media, such as PayPal and Uber, open up new TAM and drive growth.

Question 6: Can you elaborate on the step-up in platform investments this year and whether it stretches into fiscal 2027?
Answer: Investments are focused on upgrading the platform, AI product capabilities, and the new usage-based pricing model. These investments are expected to drive incremental revenue and are anticipated to moderate by the end of FY2026, positioning us for growth in FY2027.

Question 7: Has the subscription customer count stabilized, and do you have visibility on potential growth?
Answer: The subscription customer count is stabilizing, with a notable uptick in new logo activity. The new pricing model and clean room strategy are expected to drive customer count growth over time.

[Sentiment Analysis]
The tone of the management was optimistic and confident, highlighting strong execution, positive customer feedback, and strategic investments in AI and pricing models. Analysts' questions focused on growth drivers, macro conservatism, and the impact of AI, reflecting a cautious yet positive outlook.

[Quarterly Comparison]
| Key Metrics | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 |
|------------------------------|-----------|-----------|-----------|
| Total Revenue | $200M | $185M | $185M |
| Subscription Revenue | $150M | $143M | $143M |
| Marketplace & Other Revenue | $50M | $42M | $42M |
| Net New ARR | $14M | $10M | $10M |
| GAAP Operating Income | $21M | $18M | $18M |
| Non-GAAP Operating Income | $45M | $40M | $40M |
| Gross Margin | 72% | 72% | 75% |

[Risks and Concerns]
- Increased cloud hosting costs impacting gross margin.
- Potential macroeconomic deterioration affecting variable revenue sources.
- Execution risk in rolling out the new usage-based pricing model.

[Final Takeaway]
LiveRamp delivered strong Q2 FY2026 results, exceeding both top and bottom-line expectations. The company's strategic investments in AI and a new usage-based pricing model are driving growth and positioning it for future success. Management remains confident in achieving long-term financial targets, including the Rule of 40 by FY2028. While there are some risks related to macroeconomic conditions and execution, the overall outlook is positive, with significant opportunities for revenue growth and margin expansion.