Zeta Global Q2 2026 Earnings Report

Zeta Global EPS Results

• Actual EPS: $0.03
• Consensus EPS: $0.20
• Beat/Miss: Missed by -$0.17
• One Year Ago EPS: -$0.10

Zeta Global Revenue Results

• Actual Revenue: $442.77 million
• Expected Revenue: $420.61 million
• Beat/Miss: Beat by +$22.15 million
• YoY Revenue Growth: +43.60%

Zeta Global Announcement Details

• Quarter: Q2 2026
• Date: 8/4/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, August 4, 2026
• Conference Call Time: 4:30PM ET

Zeta Global (NYSE:ZETA), founded in 2007 and headquartered in New York City, is a leading data-driven marketing technology company. The firm’s mission centers on helping brands acquire, grow and retain customers through a unified customer lifecycle management platform. Over the years, Zeta Global has built a reputation for leveraging big data and predictive analytics to power digital marketing programs across multiple channels.

At the core of Zeta’s offering is the Zeta Marketing Platform, which combines identity resolution, audience insights and real-time engagement capabilities. Key components include the Zeta Identity Graph, a proprietary data asset that maps consumer touchpoints, and Zeta Data Cloud, which aggregates and enriches first- and third-party data for targeted campaigns. The platform supports email marketing, display and social advertising, mobile messaging, CRM integration and advanced analytics, enabling clients to execute personalized campaigns at scale.

Zeta Global serves a diverse client base spanning industries such as retail, financial services, travel and telecommunications, with operations primarily in North America and growing footprints in Europe and Asia-Pacific. Under the leadership of founder and CEO David A. Steinberg, the company went public in March 2021 via a special purpose acquisition company (SPAC) transaction and trades on the New York Stock Exchange under the ticker ZETA. Zeta’s executive team draws on deep expertise in data science, digital marketing and enterprise software to guide its continued expansion and product innovation.

Zeta Global Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record growth and raised guidance: Q2 revenue rose 44% year over year to $443 million, while adjusted EBITDA increased 56% to $92 million. Management raised 2026 revenue guidance by $33 million to $1.818 billion and free cash flow guidance by $20 million to $255 million.
• Positive Sentiment: AI adoption is driving expansion: More than 40% of super-scaled customers were monthly Athena users within 130 days of launch, and comprehensive AI adopters are generating higher revenue growth and net revenue retention than customers earlier in adoption.
• Positive Sentiment: Customer and sales momentum remained strong: Super-scaled customers grew 17% to 197, pipeline increased more than 60% year over year, and cross-sell and upsell wins rose 43%. Partnerships with OpenAI, Palantir, and Snowflake are generating additional enterprise opportunities that are largely not included in current guidance.
• Positive Sentiment: Profitability and cash generation improved: Adjusted EBITDA margin expanded 170 basis points to 20.7%, free cash flow increased 73% to $58 million, and Zeta reported positive GAAP net income of $8.2 million versus a loss last year. The company also repurchased $29.9 million of stock during the quarter.
• Neutral Sentiment: Expansion beyond marketing is still developing: Zeta Business Intelligence is being used for real-time business decision-making across areas such as sports, retail, and energy drinks, but new enterprise sales cycles may be longer than existing-customer expansions as the company reaches CIOs and CTOs.

Presentation

[Operator]

Good day, welcome to Zeta Global second quarter 2026 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Trey Campbell. Please go ahead, sir.

[Trey Campbell, SVP of Investor Relations at Zeta Global]

Thank you, operator. Hello, everyone, thank you for joining us for Zeta's second quarter 2026 conference call. Today's presentation and earnings release are available on Zeta's investor relations website at investors.zetaglobal.com, where you'll also find links to our SEC filings, along with other information about Zeta. Joining me on the call today are David Steinberg, Zeta's Co-Founder, Chairman, and Chief Executive Officer, and Chris Greiner, Zeta's Chief Financial Officer. Before we begin, I'd like to remind everyone that statements made on this call, as well as in the presentation and earnings release, contain forward-looking statements regarding our financial outlook, business plans and objectives, and other future events and developments, including statements about the market potential of our products, potential competition, revenues of our products, and our goals and strategies. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.

[Trey Campbell, SVP of Investor Relations at Zeta Global]

These risks and uncertainties include those described in the company's earnings release and other filings with the SEC, speak only as of today's date. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures. We should be considered in addition to, and not as a substitute for, our GAAP results. We use these non-GAAP measures in managing our business and believe they provide useful information for our investors. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, where appropriate, can be found in the earnings presentation available on our website, as well as our earnings release and other filings with the SEC. With that, I'll now turn the call over to David.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Thank you, Trey, welcome to the team. We are very excited to have you. Good afternoon, everyone, thank you for joining us today. I will start with the headline. We delivered our 20th consecutive beat and raise quarter, delivering the rule of 64 as a company and the rule of 49 excluding M&A. In the second quarter, our year-over-year revenue growth accelerated to 44%, up from 35% in the second quarter of last year. This is the result of Zeta increasingly becoming the system of intelligence for our customers. The second quarter performance once again shows this strategy is working. Second quarter revenue was $443 million, representing year-over-year growth of 44%. That's up 28% year-over-year, excluding M&A revenue. Adjusted EBITDA was $92 million, up 56% year-over-year, with margin expanding 170 basis points year-over-year to 20.7%.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Based upon this strength, we are once again raising the midpoint of our 2026 revenue guidance by $33 million. 20 consecutive beat and raise quarters reflects more than just strong execution. It is evidence of growing and durable demand for our platform that turns data into intelligence into decisions, and decisions into measurable outcomes. Investors have historically viewed Zeta as a market technology company. Marketing is where our platform was first applied and where we built our leadership position, that description no longer fully encapsulates who we are today. Zeta has evolved into an intelligent AI infrastructure platform. Marketing is our first application, not our limit. Our platform combines proprietary data, AI, workflow automation, and activation into a single operating system that helps enterprises make better real-time decisions and take action.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

The foundation is our Data Cloud, built on proprietary data covering more than 535 million individuals globally, trillions of signals, and 20 years of model tuning. To be clear, this data is owned, not rented, because nothing you rent can be a moat around your business. Athena serves as the intelligence layer, allowing customers to interact with that foundation using natural language and embed AI directly into their everyday workflows. It truly allows customers to focus on outcomes versus navigating the platform. Our activation platform turns those insights into actions across channels while continuously learning and getting smarter via the results. This has contributed to the strength of our net revenue retention.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

With Zeta Business Intelligence, AKA ZBI, we are also extending beyond helping enterprises to acquire, grow, and retain customers to a fourth use case, enabling organizations to transform business and customer data into intelligence, insights, and real-time actions. To be clear, this is not static dashboards or old-school business intelligence used to explain what happened. ZBI helps predict what happens next and acts on it in real-time. A major sports and entertainment company uses ZBI today to understand its fans share of entertainment spending, and engagement across live events and streaming. This helps quantify the value of current distribution partnerships, identify the most attractive future streaming relationships, and strengthen its negotiations at renewal. A leading energy drink brand uses ZBI to quantify the incremental value it drives for retail partners, including customer growth, spending, and long-term value.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

This helps demonstrate the brand's impact at retailers and identify opportunities to deepen distribution and partnership investment. Taken together, these capabilities position us as the intelligent AI infrastructure layer that sits at the center of enterprise decision-making. This transformation has been accelerated by four strategic catalysts. First is our OpenAI partnership. Our collaboration with OpenAI validates the AI strategy we have been building for years, enhances Athena's capabilities, and creates new commercial opportunities. As foundation models continue to improve and become more widely available, we believe the durable advantage will come from what's built around them: proprietary data, governance, workflows, and decisioning systems that turn intelligence into outcomes. Those decisioning systems are our own inference models, smaller, purpose-built models that we have been training on the Data Cloud since 2017. OpenAI powers Athena's voice.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

The decisions run on our models, and no large language models ever touch the data in our Data Cloud. The second is Athena. Launched earlier this year, Athena is fundamentally changing how customers interact with the Zeta platform. Athena is true voice enablement and fully conversational. Instead of navigating dashboards or conducting manual analysis, customers can simply ask for outcomes. The platform knows their business, decides, acts, and learns from every single result. That dramatically lowers the barrier to adoption and expands use across teams, channels, and use cases. We have seen that users who interact with Athena through voice exemplify this rapid adoption. Over the last 60 days, Athena's voice users are interacting with the platform at a 500% higher level than non-Athena users. We are also realizing the benefits of AI within Zeta.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

In the second quarter, 90% of our new code generated was automated, helping our teams to innovate faster and continuously enhance the platform for our customers. The third is Snowflake. We deepened our existing partnership with Snowflake, and we now have over 100 shared customers, reinforcing Zeta's role in the enterprise data ecosystem, where customers increasingly want to connect data environments with intelligence and activation. Zeta is uniquely positioned not only to help customers store and analyze data, but to act on it. The fourth is Palantir. Our partnership with Palantir significantly expands Zeta's enterprise opportunity. Palantir provides the ontology, governance, and enterprise AI infrastructure that large organizations require. Zeta contributes proprietary customer intelligence, proprietary data, identity, decisioning, and activation. We have reached two important milestones in this partnership already.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Our Data Cloud was fully integrated with Foundry as of July 31st, and we have already received multiple agreements for our initial combined sale, with several other meaningful opportunities in flight. Together, these four catalysts are accelerating Zeta's transformation and strengthening our position as the intelligent AI infrastructure layer for the enterprise. We believe the defining characteristic of an infrastructure platform is not just innovative technology. It is a platform that becomes more valuable the more customers use it. Every decision it powers makes the next one better. Because those decisions run on our own inference models, not rented tokens, we make millions of them a day at infrastructure economics. That is the flywheel driving our results. We are seeing it play out across our existing customer base.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

A leading telecommunications provider recently expanded its relationship with Zeta into real-time personalization, adding grow and retain use cases to its existing footprint. It is a powerful example of our land and expand model. Start with one use case, prove value, and expand across the customer lifecycle. Athena is beginning to accelerate that dynamic. To give investors greater visibility into its impact, Chris will provide more detail on our initial framework for measuring key metrics like revenue contribution, adoption, and usage later in this call. We will continue to expand on our reporting around these metrics in the back half of this year. GAP is a powerful example of our platform evolution. As part of its broader AI-led transformation, GAP selected Zeta to help architect its next-generation marketing stack, with Athena at the center of how customer data, decisions, and execution come together. Our role extends well beyond powering individual campaigns.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

We are helping Gap to remove silos, unify decision-making across its iconic brands, and build a more intelligent marketing engine that learns, adapts, and acts in real time under a multi-year agreement as Gap's system of record. That is what it means for Zeta to become the transformation agent for the enterprise. This momentum was also evident at Cannes Lions, which served as an important proof point for the growing market interest in Zeta and Athena. We launched Athena for agencies, hosted more than 115 executive meetings, and delivered 37 live Athena demonstrations, resulting in a record sales pipeline coming out of the event. The conversations we began in Cannes will continue at Zeta Live, where we will provide an even deeper look at the future of Zeta and intelligent AI infrastructure. Zeta Live will be in New York City on October 8th.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I'm excited to announce we already have two incredible headline speakers: Olympic gold medalist, entrepreneur, and founder Lindsey Vonn, and entrepreneur and global superstar Kevin Hart. Zeta Live has always been our opportunity to show customers, partners, and investors where we are going next. This year, we expect to introduce the next generation of Athena, continuing the extension of Athena as a super intelligent agent, answering questions, empowering workflows to a system of intelligence that knows, decides, acts, and learns. The opportunity in front of us is no longer just about modernizing marketing. It's about helping enterprises turn fragmented data into intelligence into decisions, and decisions into measurable growth and cost savings in their businesses. The past year has been an inflection point for Zeta, bringing together capabilities and investments we have been building for years. Yet, we are still in the very early stages of this opportunity.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

AI is changing how enterprises operate, how software is consumed, and what businesses expect from their technology platforms. For Zeta, that creates an opportunity to expand our role from helping customers execute marketing programs to becoming the intelligence layer that enables them to move faster, make smarter decisions, and drive better outcomes across the enterprise. We continue to be the disruptor in this new ecosystem. As always, I want to thank our customers, partners, and shareholders for their continued support, and to Team Zeta, thank you for your hard work, your commitment, and belief in what we are building together. Now let me turn it over to Chris to discuss our results in greater detail. Chris?

[Chris Greiner, CFO at Zeta Global]

Thank you, David. I'll echo by welcoming Trey to the team. As we announced last week, Trey is perfectly suited to help lead Zeta's evolution into an intelligent AI infrastructure company, and I'm thrilled to see Matt Pfau step up to lead FP&A for Zeta. In my conversations with investors, one thing is clear, a new framework for investing in companies is emerging. Investors are prioritizing their time with companies gaining share and delivering durable, predictable growth. They're increasingly screening for companies generating free cash flow and positive GAAP earnings, and they're ultimately backing companies with defensible AI moats proven by results. Zeta embodies each of these characteristics, and the second quarter's results make this evident. Q2 was our 21st straight quarter of greater than 20% revenue growth excluding M&A and political candidate revenue. Our increased second-half revenue guidance continues that trend.

[Chris Greiner, CFO at Zeta Global]

Q2 was also our highest-ever free cash flow, paired with positive GAAP net income, showcasing the quality of our earnings and driving the largest full-year guidance raise to free cash flow and GAAP EPS in our history. We're listening to shareholders. We're introducing an initial framework to measure adoption and monetization of Zeta's AI, one underpinned by revenue, because moats are ultimately proven by how long customers stay and how much more they spend over time. I'll cover all of this in detail, along with updates on our pipeline, sales productivity, and drivers behind our increased Q3 and full-year guidance. Let's start first with the top line. For Q2 revenue came in at $443 million, up 44% year-over-year or 28% excluding M&A.

[Chris Greiner, CFO at Zeta Global]

That beat our guidance by $23 million or 5%, driven by faster growth in both super scaled customer count and ARPU, each exceeding the growth rates in our 2028 model. Super scaled customers grew to 197, up 17% year-over-year, more than double our 4%-8% 2028 model growth rate driven by demand for Athena. Customer gains were especially strong in consumer and retail, telecom, and healthcare. Super scaled quarterly ARPU expanded to $1.8 million, also up 17% year-to-year and above our 12%-16% long-term 2028 model. We're seeing some interesting usage dynamics unfold in ARPU. First, Athena engagement is increasingly voice-first. 83% of customer interactions are now spoken, reinforcing our thesis that natural language will become the primary interface for marketing and business intelligence use cases and has the propensity to drive higher utilization on the platform.

[Chris Greiner, CFO at Zeta Global]

Second, the One Zeta sales initiative is gaining speed. Customers using more than one use cases are up 90% year-over-year. Customers using five or more channels are up more than 50% year-over-year. Cross-sell and upsell deals won in the quarter were up 43%. We saw double-digit revenue growth across email, CTV, and social, as well as double-digit revenue growth across all three marketing use cases, retain, grow, and acquire. Third, demand for the platform was broad-based across industries. Eight of our top 10 grew more than 20% year-over-year on a trailing 12-month basis, with consumer and retail, financial services, automotive, and healthcare all accelerating from last quarter. Also notable in the quarter was the significant expansion of the sales pipeline and strength in seller productivity.

[Chris Greiner, CFO at Zeta Global]

At the end of Q2, the total sales pipeline was up more than 60% year-over-year and up over $100 million compared to just 90 days ago. On a per seller basis, pipeline creation is up more than 100% year-over-year as One Zeta and Marigold cross-selling take hold. This is driving higher average contract values on deals won in the quarter, up more than 40% compared to last year. Overall deal sizes in the pipeline increased more than 25% year-over-year, driven by higher attachment rates across channels and use cases, all while quota-carrying headcount increased by just one versus last quarter to 198, up 11% year-over-year. That gap between pipeline growth and headcount growth speaks to the strength of sales productivity. Importantly, this growth and revenue upside came with impressive operating leverage.

[Chris Greiner, CFO at Zeta Global]

Specifically, we generated $92 million of adjusted EBITDA, up 56% year-over-year at a margin of 20.7%, an increase of 170 basis points versus last year and $5 million better than the midpoint of our guidance. Marigold restructuring actions and integration savings drove total Zeta expense-to-revenue ratio efficiencies across R&D, G&A, and sales and marketing, improving 30, 180, and 250 basis points year-over-year respectively. GAAP cost of revenue came in at 41% as expected. This was 10 basis points better sequentially and 300 basis points higher year-over-year, reflecting strong social channel adoption by agencies. Cash grew even faster than adjusted EBITDA in Q2. Net cash provided by operating activities was $69 million, up 65% year-over-year, with free cash flow of $58 million, up 73% year-over-year, a margin of 13.1%, and free cash flow conversion of 63%.

[Chris Greiner, CFO at Zeta Global]

We also generated positive GAAP net income in the second quarter of $8.2 million, compared to a net loss of $12.8 million in the same quarter last year, resulting in GAAP earnings per share of $0.03. In the second quarter, we prioritized using cash to repurchase shares, deploying $29.9 million to buy back 1.6 million shares. Year to date, as of July 30th, we've spent $74.6 million on share repurchases with approximately $89.4 million remaining on our authorization. Dilution in the quarter was just 0.1%, and we remain on track to hit our normal course net dilution target of 3%-4% for 2026. Finally, we closed a new $1 billion credit facility, including a $250 million term loan A and a $750 million revolving credit facility that remains undrawn, giving us the capital flexibility for M&A, share repurchases, and disciplined investment.

[Chris Greiner, CFO at Zeta Global]

To that end, we've been investing in AI for nearly a decade. Today's introduction of metrics showing how AI adoption drives deeper platform usage, longer customer relationships, and higher net revenue retention is not new. It's just more visible than ever. Super scaled customer adoption of AI is ramping nicely. Since Athena's launch for enterprise customers 130 days ago, more than 40% of our super scaled customers are already monthly active users, and together, they've generated thousands of campaigns using Athena. Customers who comprehensively adopt our AI, using it for audience creation, activation, and other means, contribute a disproportionate share of revenue. This shows up in several ways. Across our total customer base, including pilots, proof of concepts, and scaled customers, the 20% of customers who have comprehensively adopted our AI tools account for roughly 70% of revenue.

[Chris Greiner, CFO at Zeta Global]

Among super scaled customers, the 50% who have comprehensively adopted our AI tools drive 75% of super scaled customer revenue. These AI super users grew four times faster than the 80% of customers still early in their AI adoption journey. It's not only AI adoption that's ramping, it's also leading to longer customer relationships. Super scaled customer relationships now average 56 months, up from 48 months a couple of years ago, and that's based on data going back to 2018. In addition to longer customer relationships, we're also seeing them spend more, generating higher net revenue retention among AI adopters.

[Chris Greiner, CFO at Zeta Global]

Customers who have most comprehensively adopted our AI tools have a year-to-date net revenue retention that is 400 basis points above overall Zeta, and more than 20 percentage points above customers still ramping in their adoption of our AI, showing that adoption is translating into stronger, more durable expansion. With tailwinds from AI adoption, higher sales productivity, and strong operating leverage, we're once again raising our top and bottom-line guidance for the third quarter and full year. In doing so, we're maintaining our typical conservatism, building in a 2%-5% cushion that assumes minimal go-get revenue from partnerships and uses 2028 model growth rates for customer and ARPU growth. To be clear, if new customer additions and ARPU growth exceed our 2028 model growth rates driven by rapid Athena AI adoption or newly announced partnerships, that would push us towards the high end of that 2%-5% range.

[Chris Greiner, CFO at Zeta Global]

For the full year 2026, we're increasing the midpoint of our revenue guidance by $33 million to $1.818 billion, representing growth of 39% or 25% year-over-year excluding M&A and political candidate revenue. For the third quarter, we now expect revenue of $471 million at the midpoint, up $10 million from our prior guidance, representing growth of 40% or 23% excluding M&A and political candidate revenue. You'll note we're continuing to maintain our original second half guidance for political candidate revenue in Q3 and Q4 of $7 million and $8 million respectively. For adjusted EBITDA, we're increasing the midpoint of our 2026 guidance to $405 million, up $8 million from our prior guidance, representing a year-over-year increase of 45% and a margin of 22.3%, up 90 basis points year-to-year.

[Chris Greiner, CFO at Zeta Global]

For the third quarter, we now expect adjusted EBITDA of $115 million at the midpoint, up $3 million versus our previous guidance. We are also increasing the midpoint of our 2026 free cash flow guidance to $255 million, $20 million higher than our previous full year guidance, representing year-over-year growth of 55% at a margin of 14% and a conversion of 63%, tracking well towards our 2028 conversion target of 65%. Finally, we're raising our full year GAAP EPS guidance to a midpoint of $0.10, well above our prior range of $0.02-$0.04. It's worth noting this guidance increase excludes the impact of a potential one-time tax benefit from the release of a valuation allowance that has a reasonable probability of occurring later this year, which could represent additional material one-time upside. With that, I'll close where I began.

[Chris Greiner, CFO at Zeta Global]

Demand for Zeta is robust and durable, we're expanding our platform organically and through partnerships to accelerate share gains. That durable demand and record pipeline improves our visibility, giving us the confidence to raise guidance across the board. That visibility supports disciplined investment, our balance sheet is well-positioned to support our growth priorities, focused execution drives greater profitability and cash generation, which has us pacing ahead of our long-term Zeta 2028 model. With that, I'll hand the call back to the operator so David and I can take your questions. Operator?

[Operator]

If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Again, press star one to ask a question. Our first question comes from Jason Kreyer with Craig-Hallum.

[Jason Kreyer, Analyst at Craig-Hallum]

Great. Thank you, guys. Congratulations. Another great quarter. Chris, you talked about One Zeta and how that's accelerating the adoption of multiple use cases. I think you said 90% growth in multi-use case customers in the quarter. What do you think that looks like over the next several quarters? How does Athena continue to optimize customers and maximize both channels and use cases?

[Chris Greiner, CFO at Zeta Global]

Great question, thanks, Jason. The short answer is I think we've got continued runway because of One Zeta and the Marigold cross-selling continued driving both multi-use case adoption, which I just said was up 90% year-over-year, but also five or more channel usage was up 50%, cross-sell and upsell deals within the quarter itself was up 43%. If you look at the trend for ARPU growth over the last couple of quarters, it's been nicely above our 12%-16% long-term model, I see that continuing.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

We're seeing Athena really just the tip of the spear. It's just getting started. It's one of the single most powerful tools we've ever had for cross-selling against use cases and channels, Jason.

[Jason Kreyer, Analyst at Craig-Hallum]

Maybe a follow-up for you, David. On the ZBI, can you just talk about how you go to market with existing customers? What does that cross-sell conversation look like, and what are the key functions in ZBI that are really speaking to customers?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

It's interesting because we've had customers that have been using the ZBI for a few months now before we announced it, because we really wanted to get use cases in and tried it. The use cases I gave in my prepared remarks are real-world use cases that they are paying us to develop and create with them. What we're seeing is that customers no longer want static business intelligence. They're not looking to have large numbers of people come in, put data into a user interface, spit out a static report. What they're looking for is how do they make real-time decisions? How do they better negotiate on contracts that they're in flux on, like broadcasting for sports networks? How do they figure out how to better invest marketing dollars and develop retail partnerships, like with energy drink companies and so on and so forth?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

We're actually getting pulled into the ZBI use cases more than we've been selling them in. We're now sort of doing a combination of both together.

[Chris Greiner, CFO at Zeta Global]

Jason and investors in the call, we've included slides in the earnings supplemental, to David's point, to bring those existing customer BI use cases to life. It's actually slides 32 through 38, David mentioned there's dozens of customers spanning real estate intelligence, customer experience, market sizing, loyalty growth, business expansion, and business measurement, just to name a few.

[Jason Kreyer, Analyst at Craig-Hallum]

Wonderful. Thank you, guys.

[Operator]

If you find that your question has been answered, you may remove yourself from the queue by pressing star two. We'll go next to Matt Swanson with RBC Capital Markets.

[Matt Swanson, Analyst at RBC Capital Markets]

Great. Thank you so much. David, we talk a lot about that transition from ZetaWho to ZetaWhy to ZetaNow. Can you just talk a little bit about when you get names like OpenAI and Palantir and Snowflake? It's probably about as good of a trio of partners in this day and age as you could find. How that helps you in your go-to-market process of skip the evangelizing, but also what it can do for initial deal sizes.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Yeah. Thanks, Matt. I would tell you that it has been game-changing for us. The two engagements that we signed with Palantir happened in real-time. The Palantir guys walked us into two of the largest advertisers in the world, and literally we walked out with some of the largest test case and use cases we've ever had as a company based on the fact that they chose us to be their marketing platform partner. If you listen to Alex's remarks yesterday, they are over-indexing on partnerships. One of the interesting things that I don't think people understand is that the Palantir relationship will be one of the biggest we've ever done because there isn't a boardroom today that doesn't know who they are and isn't interested in use cases that they can do with them. With us as their marketing partner, it's become an incredible entry point.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

If you look at the number of customers they published just yesterday, that is the number of marketing opportunities we effectively have in partnership with them. Add into that the OpenAI relationship, which has been one of the biggest we've ever signed, and the Snowflake evolution, we are seeing more at bats than ever. If you saw the 17% growth in super scaled customer count, that's not even the beginning of what we're going to be doing with these new partnerships. In the evolution from ZetaWho to ZetaNow, these are game-changing, even when we're not in the room with the Palantir, OpenAI, and Snowflake people. When we're out there, we're coming into meetings now, and everybody, the first thing I get is, "Wow, how did you get that deal done?" I have to say to them, "Which one?" We all laugh and sort of move on.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I think this is sort of, as they said in the movie Casablanca, the beginning of a beautiful friendship.

[Matt Swanson, Analyst at RBC Capital Markets]

That's great. I think we touched on it a little bit when you were talking about the ZBI and the different uses for data, but when you talked about how your platform is just currently being utilized for marketing but is not necessarily a marketing platform, how far do you think some of those adjacencies can go in terms of use cases? Have you seen within any of your larger customers any use cases that really have made you think about product development?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Yeah. Well, every day we're getting asked questions by our largest clients, "Can you help us fix this problem or answer this question in a way that we've never thought of?" It's causing just an incredible amount of excitement. I think it's important to note that if you look at the first quarter of this year, we were super proud to announce that using our internal workflow management tool, Spade, we were able to literally automate 75% of all new code generated. If you look at the update, the actual number for Q2 was 89.6%. I think we rounded it to 90% in my prepared remarks. This is changing the game for how we take interaction with clients and turn it into product development almost in real-time.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

If you look at this very large sports league that is using us, we were looking, we were in the room with them and their CMO. They're like, "Listen, how do we better negotiate our streaming rights?" With the two partnerships that are coming up for bid, how can we equate viewership and mind share for their. They own multiple products, multiple leagues that are owned by one holding corporation. How do we help them to better show it's not just who's watching it in that moment, but it's the halo effect that comes for the broadcaster by having them on? We were able to put together a solution in hours that came back and they believe will result in millions of dollars of incremental revenue to them on the renegotiation of those streaming contracts.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

It then becomes a flywheel because then we get part of the marketing for those streaming rights. It really becomes a major flywheel in and around the company, Matt.

[Matt Swanson, Analyst at RBC Capital Markets]

Thank you.

[Operator]

We'll go to our next question from DJ Hynes with Canaccord.

[DJ Hynes, Analyst at Canaccord]

Hey, thank you, guys. Congrats on the nice quarter. David, maybe we can just follow up on the last point. I mean, ZBI and business intelligence is a massive category, right? You talk about getting pulled into this. There's a lot of different directions you could take it. How do you think about formally productizing some of the use cases? How do you sequence which ones make sense first? Just high-level thoughts on kind of the multi-year playbook would be interesting as you think about building out that fourth use case.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Yeah. Obviously, as usual, great question, DJ. What we're seeing is that our Zeta Data Cloud is able to really help enterprises to make better decisions around certain things very quickly. We're seeing big examples inside of retail. What products should they be moving into retail? How do they use co-op dollars and marketing dollars to get better shelf space? How to create deeper and more meaningful relationships with the end customer. It starts with the business intelligence around a retail use case. You then end up identifying meaningful opportunities for them to move inventory around geographically, which retailers they should be doing more with, maybe which retailers they should invest less with. We end up being able to market to the end user to drive them into the retailer on behalf of the product and vice versa.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Yes, we are seeing logical productization, much like we've talked about in the past, where, DJ, you've heard us say, yes, our platform can help almost any vertical, but the more industry expertise our salespeople have across the 15 verticals that we operate in, the better they can sell, the higher the sales productivity per rep, and so on and so forth. We're seeing multiple use cases by vertical that we're building into the ZBI. Every new request from every customer becomes productized immediately. That goes back to the ability to do 90% of your new code on an automatically generated basis. It's really building a very interesting flywheel as we're growing the ZBI, not just from a revenue perspective, because by definition, that's our fastest-growing use case right now because it was starting from a smaller number.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

The reality is it's becoming products every moment of every day that we're adding them in from a client question perspective.

[DJ Hynes, Analyst at Canaccord]

Yeah, very clear. Chris, maybe a more tactical question for you. Look, obviously, we're heading into U.S. midterm cycle. I'm just curious what you're seeing in terms of political advertising demand, how much visibility you have there today, and how that feeds into the guidance.

[Chris Greiner, CFO at Zeta Global]

Look, from a guidance perspective, DJ, we've held to that consistent political candidate guide of $7 million in the third quarter and $8 million in the fourth quarter purposely because we wanted what to come through in the numbers was as the strength of the business unfolds in the actuals, the raise is all tied to the strength of the core business as well. The visibility is good in terms of we expect it to be very robust. It comes into the pipeline pretty late, because these can be programs that spin up quickly, and we execute even more quickly. We get paid ahead, which is nice, so it's good for free cash flow. We're optimistic that the number we have in there is conservative. We've got for the full year guide is maintaining our normal level of conservatism.

[Chris Greiner, CFO at Zeta Global]

Despite this being the largest raise of the year, $33 million revenue, it still maintains our normal 2%-5% cushion.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I think it's also important to note, we raised revenue by $33 million, we raised free cash flow by $20 million. You're seeing a disproportionate percentage of incremental revenue into this business at this point drop to the bottom line. You saw 170 basis point increase in operating margin, you saw a meaningful increase in free cash flow at 73% growth.

[DJ Hynes, Analyst at Canaccord]

Yep. Thank you, guys.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Thanks, DJ.

[Operator]

We'll move next to Ron Josey with Citi.

[Jake Hallac, Analyst at Citi]

Hi, this is Jake Hallac on for Ron. Congrats on the great quarter, and thanks for taking my questions. My first is on the OpenAI partnership. Curious, how deeply is OpenAI integrated into Athena and Zeta's broader platform? Could you help us better understand the capabilities Zeta brings to OpenAI's ad ops? Is there a direct revenue opportunity associated with either side of that partnership?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

That's three big questions, Jake, let's start with OpenAI powers the voice component of Athena. No large language models ever see the data in our Data Cloud or our clients' data. We keep all of that totally and completely safe. Now the Data Cloud is built on Foundry with Palantir's ontology. You're looking at a really interesting use case. What does OpenAI bring to Athena? It personalizes Athena, so now Athena gets to know the user at the enterprise better and can begin to understand what questions they have before they even ask them, and help them better navigate to outcomes instead of having to navigate a platform the entire way. As it relates to the integration to their ad platform, we are actively serving ads, and it is a meaningful revenue opportunity. It is also scaling very quickly.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I think it's also, as Chris pointed out, part of the conservatism we've put in going into the year, where we really haven't included pretty much anything from either Palantir or OpenAI as it relates to our forward guidance. Next week we have a follow-up meeting with OpenAI. We've got 20 people in a room literally brainstorming what else can we do together. I think they consider us one of their most important enterprise partnerships, and we certainly look at them in the same way.

[Jake Hallac, Analyst at Citi]

Thanks. That's so helpful. I know it's a three-parter, can I just sneak in one more here? Did appreciate the update on the 90% of new code generated through AI and Athena operating largely on in-house inference. Could you just touch on how those capabilities and that AI code is changing your product development speed?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

It's just accelerating it at a pace that I never thought humanly possible, Jake. When you look at the fact that, yes, we increased operating margin by 170 basis points, we added engineers in the quarter. We did not eliminate engineers in the quarter. The fact that we're even able to add horsepower to that while simultaneously having 90% of all new code being auto-generated is pushing sales cycles, I'm sorry, pushing development cycles, I should say, to what would've been years at one point to what is now months, and new products inside of the ZBI as we productize it to hours versus what could have been months in the past. I think when we get to Zeta Live on October 8th, we're going to have a massive unveiling that I'm incredibly excited about.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

That's a product offering that will continue to evolve Zeta as a company in a very meaningful way, and it's something that would've taken years that we're now going to be able to have done in months.

[Jake Hallac, Analyst at Citi]

Thanks a lot, David. Appreciate the color.

[Operator]

Our next question comes from Elizabeth Porter with Morgan Stanley.

[Elizabeth Porter, Analyst at Morgan Stanley]

Great. Thank you so much. I just want to do another follow-up on ZBI and how that's changing some of the market opportunity. We used to talk about Zeta having 1% of the marketing wallet, but an opportunity to be closer to 10%. Just as you're going beyond marketing to the broader business intelligence, how should we think about the wallet share that's up for grabs and how that changes the ZBI? Just as a follow-up, how should we think about the sales cycles as you expand from more of a CMO-focused product to just broader touch points across the organization?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Elizabeth, let me start by saying welcome back. We've missed you.

[Elizabeth Porter, Analyst at Morgan Stanley]

Thank you.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

You're welcome. From a ZBI perspective, I want to be clear, we're still looking to get to 7%-10% of our clients' marketing wallet share. That's not changing. We believe that we are on our path to building a $10 billion business with a 30% operating margin, with the vast majority of that dropping to free cash flow on the marketing component of our business alone. When you look at the ZBI and the opportunity that it's opening, what we're seeing, and what really happened, Elizabeth, is we started getting pulled in that direction by our clients at first.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

That accelerated massively with the Palantir partnership, where by putting our data cloud on top of Foundry and the ability to onboard seamlessly our clients' data in ways that we couldn't before, and using their ontology in a way that we couldn't have done without Palantir as a partner, that's opened up this entire new use case from a productization perspective. I think we're going to look at two different sales cycles. I think we're going to have existing clients that are going to adapt or adopt the ZBI very quickly. I think we're going to have new clients that we're going to go out and get, where you're going to start with the CIO or the CTO. That could take a little longer. As you know, our normal product cycle is anywhere from 90-180 days.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I think this will maybe start out on the longer end of that for new customers, but we'll start on the shorter end of that for existing customers. Quite frankly, we've seen much faster than that from an adoption perspective from existing customers who are adding ZBI as their third or fourth use case. Does that make sense?

[Elizabeth Porter, Analyst at Morgan Stanley]

That does. Thank you very much. I wanted to do a quick follow-up on Athena for agencies. It sounds like you had a lot of high interest in France this summer. When we think about the base of agencies, is there a certain proportion that's a good client base for Athena, for agencies? Is there any sort of specific sub-segment, or do you really think that most agencies could adopt Athena over time? What are you learning about the onboarding cycle that could potentially drive some faster penetration?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

To answer your question, I was shocked because I thought it would really start at the mid-size agencies from an entry point perspective. We're actually seeing the larger agencies adopt it faster and at scale very quickly. It really changes the game for them from a navigation perspective and the ability to showcase for their customers our Data Cloud and the ability to drive substantially higher return on marketing spend. As you know, Elizabeth, we always talk about we deliver according to Forrester 600%-700% return on marketing spend. We're seeing clients who are adopting Athena at substantially higher rates than that. In partnership with a very large agency that adopted Athena and a very large airline, we're seeing that airline today at a 1,400% return on marketing spend, post the agency bringing Athena in and us putting together the project together.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I actually thought it would be small to mid-size. It's starting very large, and it's scaling, quite frankly, a little faster than we expected.

[Elizabeth Porter, Analyst at Morgan Stanley]

Great. Thank you.

[Operator]

We'll move next to Arjun Bhatia with William Blair.

[Arjun Bhatia, Analyst at William Blair]

Perfect. Thank you, my congrats on a great quarter. David, I'm going to start with you just on Palantir. It sounds like, obviously you did the tech migration and you're on board on Palantir, but it also sounded like you're closing some deals already on the cross-sell. Would be curious to hear just what that pipeline looks like into Palantir's commercial customers and, just as you look across different verticals, are there any inside that commercial base that get you more excited than others from an opportunity perspective?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Yeah, I'll be honest. I publicly said that I plan on doing the first 20 deals in partnership with Elias Davis, who's become a very good friend of mine, who's one of the top guys at Palantir, reports directly into Alex's office. We've been going out, and I would tell you that if I put the numbers of the deals we're working to into our pipeline, it would artificially skew our pipeline up too much at this point. It is that big an opportunity. I'm sort of working on it on an internal pipeline that I'm running in my own office at this point. I'm embarrassed to say I'm doing it inside of Claude. The reality is that this is maybe the biggest opportunity we've ever had in front of us. Certainly the biggest opportunity we've ever had from a partnership perspective.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

As you know, we have 15 different verticals that we operate against. Not one of them is a massive concentration. When I look at their client base, I started by saying, "Why don't we just start with the 20 customers who spend $1 billion a year on marketing to consumers?" The list was so much longer than 20, we had to pare it back to start going out there and getting into it. The two deals we closed were at 100% hit rate. Met with two, closed two. We've got some other very large ones in flight. We see this as a meaningful and very large opportunity that, as Chris said, is not baked into the numbers just yet.

[Arjun Bhatia, Analyst at William Blair]

All right. That's great to hear. Chris, maybe one for you, or I guess maybe for David also, but would love to hear sort of your updated thoughts on capital deployment with the new credit facility. I think you pointed out M&A as obviously a potential use case, which you've been sort of consistent on, but I'm curious if there's any sort of change in the type of acquisitions or assets you're looking at in the market.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Chris pointed to me, I'll answer it. What I would tell you is we are going to continue to focus on our five pillars of M&A. That is not going to change. You can look at the fact that for us at this point, we have to continue to evolve the type of deals we've done or will do because some of the smaller deals we've done over the years just wouldn't move the needle for us at this point. I will tell you, Arjun, you've heard me say this many times over years, I believe transformative M&A transforms both companies for the worse. We are not looking to go do one huge transformative deal.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

We will continue to do small to mid-size deals where we're adding great human capital, great data sources, incredible products that our clients want to buy and clients that want to buy our products, and so on and so forth. This does give us optionality around the buyback. It could cause us to accelerate it in the short run, depending on how the stock trades. The reality is it puts us in a position that we have a lot of flexibility as a company. You can see the cash position is also very strong at the close of the quarter, we're projecting, I'm pretty sure this will be a record free cash flow quarter for us, right?

[Chris Greiner, CFO at Zeta Global]

Yeah.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Yeah. Last quarter, you can do the math, we bought more than 50%, I think closer to 75%+ of our free cash flow and share repurchasing last quarter. We're going to continue to buy the stock back at these prices because we think the best investment we can make with our free cash flow is purchasing back our existing shares.

[Arjun Bhatia, Analyst at William Blair]

Right. Very helpful. Appreciate the color. Thank you.

[Operator]

We'll move next to Callie Valenti with Goldman Sachs.

[Callie Valenti, Analyst at Goldman Sachs]

Hey, team. Thank you so much for taking the question. New AI products have generally taken a while to ramp in usage for many software companies. Are there a couple key things you would point out that you think have made your customers adopt new AI tools faster than what we're seeing in the rest of the market?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

First of all, Callie, congratulations. We are super happy to have you covering us. Return on investment. I think one of the things you see in our business strategy is our ability to show a return on investment is second to none. Most AI products where you are making a large investment into, whether it is infrastructure, software, or technology, take years for enterprises to show return on investment. Our four use cases show massive return on investment. As we have talked about, our marketing use cases show a 600%-700% return on marketing spend effectively day one. If you look at the ZBI, we cannot quantify it just yet, but we are giving real-time business decisioning that drives massive incremental profits into our clients in real time.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I think that has been one of the big differentiators for us versus companies that are out there selling very expensive technology that will take years to pay off.

[Callie Valenti, Analyst at Goldman Sachs]

That makes a lot of sense. Thank you. Just one more from me. We are hearing more companies talk about headless architectures as agentic potentially disrupts the UI or traditional UI. How do you think about this in the context of Zeta? What makes sense for you? What would not make sense for you?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Listen, we have been no-code for many years around here. When you look at what they are talking about as it relates to headless, that is not something that I think we end up dealing with on either side. I do not think it becomes a competitive force for us, and I do not think it is something that we would move into quickly from our front. What we are really focused on is what percentage of our new code can we generate and make generally available to our clients? We have gone from what was 75%-90% in the first quarter of this year to the second quarter of this year. That puts us in a massive competitive advantage. As our competitors are trying to catch up to where we were one year, two years ago, we are already moving to where they will not be able to get for many, many years.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I think our no-code architecture has allowed us to do that.

[Callie Valenti, Analyst at Goldman Sachs]

Awesome. Thank you so much.

[Operator]

We'll take our next question from Terry Tillman with Truist Securities.

[Luc Radice, Analyst at Truist Securities]

Hi, this is Luc Radice on for Terry. Thanks for taking my question. To start, considering the big strategic win with Gap, how is RFP activity and what are you seeing in terms of large MarTech replacement cycles potentially aiding revenue and business in the second half for helping enhance visibility into 2027?

[Chris Greiner, CFO at Zeta Global]

Hey, thanks for the question. Just real quick, RFP activity is very strong. You heard about the pipeline stats that we shared. That's built into the greater than 60% year-over-year pipeline growth. I think it also speaks to how the average contract value in the pipeline is up because more of it is RFPs. I'll turn it quickly to David to talk about broadly what's driving that environment.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Yeah. We are right in the middle of what looks to be a marketing cloud replacement cycle. Gap was a perfect example. Gap had been with one vendor, Salesforce, for quite some time. There were three other vendors that we displaced in addition to Salesforce to become the system of record inside of Gap. When you look at these very large organizations, they don't want to use four, five, six different vendors, including a software provider, a professional services firm, activation platforms, data, CDP, all separate. These very large enterprises want next generation technology. Today, we are the only marketing cloud that has data and AI as native foundational to the application layer.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

As other entities have to step out of their platform through API integration to use AI and then to get to the data sources and then back to the AI and then back to the platform, that latency destroys return on marketing spend. Our foundational platform can answer in a millisecond what other platforms can't answer at all, to be quite frank. We're actually seeing RFP velocity go up, and we're seeing closing go up as we saw in this quarter. We have a record pipeline right now. It's by far the largest we've ever had. I think we're very well positioned for where the market is and where it's going.

[Luc Radice, Analyst at Truist Securities]

Great to hear. If I could sneak one more in. Given the increased adoption with Athena and AI-enabled workflows, can you help us think about the puts and takes on gross margin performance in the back half of 2026? Thank you.

[Chris Greiner, CFO at Zeta Global]

The gross margin performance in the back half of the year is largely dependent upon mix. We talked about how the second quarter came in where we expected, given where the direct mix was in the quarter of 72%. Where that efficiency plays in, by the way, not just in R&D, but also across G&A and in sales and marketing as well, is we saw in the second quarter, and we expect to continue to see very strong unit economics on our expense to revenue ratios. That showed up in very strong adjusted EBIT margin. We're continuing to see efficiencies in CapEx, which then obviously flowed through the higher free cash flow, and then the good work on dilution and on stock-based compensation generated the very positive GAAP net income.

[Luc Radice, Analyst at Truist Securities]

Awesome. Great to hear. Thank you.

[Operator]

We'll go next to Jack Nichols with KeyBanc Capital Markets.

[Jack Nichols, Analyst at KeyBanc Capital Markets]

Hey, guys. Thank you for taking the question. David, maybe to start with you, how are you thinking about the opportunity for Athena's heavy users today post-Foundry infrastructure pivot? What does that mean for these heavy users on the new platform? What's the biggest risk in the coming months during the transition with the move to Foundry?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

To be clear, the transition's done. It's seamless to our clients. We re-architected the Data Cloud on top of it and adopted their ontology. It is a massive benefit, to answer your question. When you look at Athena, at the top of our tech stack is now going to be Athena powered by OpenAI. She will then interact with the Zeta platform in addition to the Data Cloud. Every time the Zeta platform and the Data Cloud access data, it'll now be inside of Palantir's architecture, which moves extremely faster than the architecture we were working on before. We'll be able to answer more questions smarter and faster. We'll be able to onboard new clients' data faster and with better orientation, which will allow for higher levels of intelligence faster.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

As you know, the longer a client has worked with us traditionally, the smarter the platform has gotten, the faster the return on investment. With Athena and Foundry, we're seeing that happen faster. Instead of taking years of managing questions, it can now take days to get to the same level of return on marketing spend and the same intelligence that used to take us years. That, I think, is going to drive much faster adoption. Once again, heavy users had a 400 basis point higher net retention rate than our other clients for Athena today. I think you're going to see that number continue to evolve.

[Jack Nichols, Analyst at KeyBanc Capital Markets]

That makes a ton of sense. Thank you. Maybe for Chris, what kind of usage trends of Athena are baked into the super scaled ARPU growth to achieve the organic guide?

[Chris Greiner, CFO at Zeta Global]

What we have line of sight to. That, by the way, same is said for the partnership agreements. We talk about the multiple layers of conservatism. What we built in the guidance is what we signed already. We're not leaning into anything on a go-get perspective on either AI adoption or newly signed partner agreements that are still yet to be closed in the pipeline.

[Jack Nichols, Analyst at KeyBanc Capital Markets]

Awesome. Thank you.

[Operator]

Up next is Matt Bullock with Bank of America.

[Matt Bullock, Analyst at Bank of America]

Great. Thanks. I appreciate you taking the question. I was hoping you could maybe put a finer point on what's working well in terms of driving improvements in sales rep productivity. Can you help us think about the outlook for quota-carrying rep headcount for the remainder of the year to address the pipeline you talked about? Thank you.

[Chris Greiner, CFO at Zeta Global]

Yeah. First off, One Zeta continues to be gaining speed. We launched One Zeta, call it 15-ish plus months ago, and we're starting to really see the benefit of our sellers attach more channels and more meaningfully, more use cases into their deals. We talk about pipeline creation per rep being up around 100%. Also, we're, call it six months now from acquiring Marigold. All the hard work on the integration has been done, both within the G&A sales marketing R&D structure. Now we're starting to see the benefits of the cross-sell and the up-sell activity, namely really around their loyalty products and selling Zeta's acquire and grow use cases in.

[Chris Greiner, CFO at Zeta Global]

I feel like we're at a place where we've got the right tenure of reps, meaning the right balance between those who are in their first 12 months, 12-24 months, and greater than 24 months, where the type of productivity we're seeing now can really continue to go throughout the year.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I also think our hyper-focusing by vertical, by salesperson, has really unlocked a massive opportunity. That was sort of an aha moment for us, Matt, where we start to see when we bring in people who have industry expertise in a vertical and they sell, their productivity goes through the roof.

[Matt Bullock, Analyst at Bank of America]

Got it. Thank you very much.

[Operator]

We'll go next to Richard Baldry with Roth Capital Partners.

[Richard Baldry, Analyst at Roth Capital Partners]

Thanks. You talk about in the generative engine optimization side, do you think that's helping you win client wallet share, or is that as dollars really sort of moving from one channel to another?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

We never did search engine optimization, it's 100% upside to us, Rich. The other thing we're finding is that new clients are really excited about that. We're one of the very few companies that has an API integration into Claude, ChatGPT, and Gemini. We're able to help across all of those platforms in real-time through one GEO user interface. We're able to serve the marketing, obviously, into Gemini and into OpenAI as a subset of that. You're able to really move the flywheel in a way that I don't think others are able to do. I think new customers see that as a quote, "shiny new thing," and think it's very exciting. We're seeing existing customers adopt it as a part of their marketing strategy.

[Richard Baldry, Analyst at Roth Capital Partners]

Actually, if you think about how fast-moving those generative engine corporations are that you're partnering with, and Palantir itself is a different use case, how fast that company's moving, you've really grown without adding a lot of headcount in recent years. Do you think there's a point in which to try to keep up to those opportunities, you need to add a bit more to the headcount to support the fast growth in those areas?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

We're just not seeing that right now, Rich. We're seeing productivity in the company go up at a rate that I didn't think possible. Not only are we seeing, as I said, 89.6%, call it 90% of our new code generated. We did a really interesting deal this quarter where we signed one of the first sort of ubiquitous enterprise agreements with OpenAI, where all of our global employees now have access to all of OpenAI's products. Not only are we doing that, we're doing it in a way where the use cost for everybody is baked in. We've got a use cost for everybody. If power users go over a certain amount of token usage, the platform actually refers to their manager to approve additional token utilization. I think as we're building productivity tools like that, we're seeing sales productivity explode.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

At the same time, we're seeing total AI cost for the company internally, well under 1% of revenue. We think that's something that's going to continue. I spend a lot of time on this, as you know. I think we'll add headcount. I think we'll add headcount at a slower pace than we grow revenue. We'll continue to grow EBITDA and free cash flow at a much faster rate than we're growing revenue, if that makes sense.

[Chris Greiner, CFO at Zeta Global]

Yeah, David, exactly. We've actually added headcount, just grown revenue much faster. Even though that AI-based usage is up across the company, unit costs for that AI are down almost 40%.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

That's because of the relationships we've been able to negotiate.

[Richard Baldry, Analyst at Roth Capital Partners]

Congrats on a great quarter.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Thanks, Rich. Once again, I'm so proud of the team.

[Operator]

We'll move next to Scott Berg with Needham.

[Scott Berg, Analyst at Needham]

Hi, everyone. Nice quarter. I'll skip the 17 Palantir questions and move to something a little different, I guess.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

You're kidding, Scott. You don't want to talk about Palantir?

[Scott Berg, Analyst at Needham]

Oh, I do. We'll speak on plenty coming up pretty soon, I'm sure, David. My question's on your expansion opportunity, especially within your super scaled customers. The slide in your deck, in your presentation deck in the quarter, I thought was kind of interesting that you've been range-bound on the ARPU for your super scaled customers over the last seven quarters. It's kind of bounced around from $1.6 million-$1.8 million, pretty just back and forth.

[Scott Berg, Analyst at Needham]

We know you guys are doing a good job of expanding with some of your customers. I'm just trying to better understand that dynamic, I guess. Are some of your new customers maybe coming in with a slightly lower ARPU on that super scale level to just kind of balance that out? Maybe the metric's not reflecting some maybe numbers or some expansion deals that we're maybe expecting in the back half of the year?

[Chris Greiner, CFO at Zeta Global]

It's more the latter. I'll go quick just so we can get other questions in. There's a slide eight in our earnings supplemental. What's masking that, Scott, is that as new pilots and proof of concepts become super scaled, so they cross that $1 million threshold, they are still a distance from where our more mature, those super scaled customers that have been on the platform, call it two, three, four years, that have an ARPU that is four, five, six times greater than those that are in their early part of the journey. What you'll see on the slide is the average size in terms of ARPU of a customer who's been on the platform less than 12 months is $700,000, as opposed to those that have been on the platform four more years, that's now approaching $4 million per.

[Chris Greiner, CFO at Zeta Global]

We're actually seeing those super scaled customers get bigger, become a bigger and bigger part of our overall revenue, and have a greater and greater share of our net revenue retention.

[Scott Berg, Analyst at Needham]

Thanks for taking the question. I'll jump in the queue.

[Operator]

We'll go next to Clark Wright with D.A. Davidson.

[Clark Wright, Analyst at D.A. Davidson]

Awesome. Thank you. It was great to see better than expected organic growth results this quarter. How much of this growth is coming from continued success with agencies versus your direct enterprise sales motion?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I think it's really well spread out, Clark. We continue to see the agency business at approximately 20% of revenue. We continue to see direct to enterprise at approximately 80% of revenue. We haven't seen that skew meaningfully. We're seeing meaningful and organic growth across both those components.

[Clark Wright, Analyst at D.A. Davidson]

Awesome. Helpful. There was a sequential step down in direct platform revenue from 75%-72%. What caused that this quarter, and is that something we should expect going forward to be at that level?

[Chris Greiner, CFO at Zeta Global]

I was just about to add to David's answer. What drove that was new sales and expansions with agencies. In fact, just within this quarter, since we closed and within the timing of this earnings call, we closed and expanded with another very large holdco. As you probably know, Clark, those newer agency signings tend to begin with social.

[Chris Greiner, CFO at Zeta Global]

Social, a channel, grew very rapidly in the quarter again and drove the integrated platform revenue mix to be higher, as a byproduct of that, the direct platform mix to be at 72%. It was where we expected based upon how we saw the pipeline, it's driven by very strong agency adoption of social as the initial channel.

[Clark Wright, Analyst at D.A. Davidson]

Got it. Thank you.

[Operator]

We'll go next to Naved Khan with B. Riley Securities. Your line is open.

[Ethan Waddell, Analyst at B. Riley Securities]

Hi there. This is Ethan Waddell calling in for Naved. Thanks for taking my questions. To start, it's great to see that you've had really strong uptake with Athena since making it generally available, but it sounds like the costs haven't scaled at the same pace as usage. As usage does continue to scale, how should we maybe think about the way that cost scales? Are token costs passed directly onto customers, or does usage become a cost of revenue consideration?

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

No, I would tell you that we've done an agreement with OpenAI where we have a tremendous amount of visibility into our cost, and in this particular product, it's not focused on token utilization. It's focused on a sort of a license for the product that is fully embedded into Athena. I feel very comfortable that we will be able to continue to keep our total AI cost well under 1% of our revenue, while simultaneously growing revenues at obviously substantially faster paces than that, Ethan.

[Ethan Waddell, Analyst at B. Riley Securities]

Understood. That's really helpful to hear. Then separately, eight of your top 10 industries grew over 20%. Can you maybe speak to how those areas are pacing so far in June and July?

[Chris Greiner, CFO at Zeta Global]

First of all, the performance within our quarter in 2Q was pretty linear, and I would expect third quarter to be the same way. I don't want to get into projecting third quarter, but what I can tell you is the momentum that they have. We talked about within eight of the 10, and by the way, one of those two that didn't grow over 20 was advocacy, and that obviously has a lot of tailwinds going into the second half of the year. I'd expect that to be one of those greater than 20s next quarter. There were several of our industries that actually accelerated in their growth from a trailing 12-month basis ending the first quarter where we ended in June. Those were consumer retail, financial services, automotive, and healthcare. All industries with obviously a lot of marketing spend behind them.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Obviously, we wouldn't have raised the quarter by $10 million if we didn't think we had a lot of visibility into the quarter, Ethan. As Chris said, we don't want to comment on one month, but nothing that happened in July would lead us to believe that we shouldn't have raised the quarter and the year as much as we did, or we would not have done that, if that makes sense.

[Ethan Waddell, Analyst at B. Riley Securities]

Understood. Yeah, that's really helpful. Thank you for the color, and congrats on the strong results.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Thank you so much.

[Operator]

That concludes our Q&A session today. I'll turn the conference back to David Steinberg for closing remarks.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

I just wanted to close on how incredibly proud I am of the Zeta team to be able to continue to execute 20 for 20. 20 quarters as a public company, 20 quarters beating and raising. To continue to execute over that period of time with that level of excellence, to continue to see accelerated sales growth, to be able to do partnerships with three of the world's most important companies within just a few months. If you had told me a few years ago that we would've been in a position to announce partnerships like OpenAI, Palantir, and Snowflake, I would've been blown away by that alone. That shows what's happened to Zeta as a brand because none of them would've trusted us if they didn't trust our brand and they didn't trust our business.

[David Steinberg, Co-Founder, Chairman, and CEO at Zeta Global]

Thank you again to all of our Zeta people, to all of our clients, and especially to our partners. We appreciate everything that you guys are doing for us and with us as a company. Have a nice day, everybody.

[Operator]

That concludes today's call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Trey Campbell, SVP of Investor Relations
• David Steinberg, Co-Founder, Chairman, and CEO
• Chris Greiner, CFO

Analysts

• Jason Kreyer, Analyst at Craig-Hallum
• Matt Swanson, Analyst at RBC Capital Markets
• DJ Hynes, Analyst at Canaccord
• Jake Hallac, Analyst at Citi
• Elizabeth Porter, Analyst at Morgan Stanley
• Arjun Bhatia, Analyst at William Blair
• Callie Valenti, Analyst at Goldman Sachs
• Luc Radice, Analyst at Truist Securities
• Jack Nichols, Analyst at KeyBanc Capital Markets
• Matt Bullock, Analyst at Bank of America
• Richard Baldry, Analyst at Roth Capital Partners
• Scott Berg, Analyst at Needham
• Clark Wright, Analyst at D.A. Davidson
• Ethan Waddell, Analyst at B. Riley Securities