Zeta Global Holdings Corp. (ZETA) Earnings Call Transcript & Summary

Hi, everyone. This is Ron Josey talking. I can't be on camera today for some technical reasons. But with us today, I've always liked to have with us David Steinberg, the Co-Founder and CEO of Zeta Global; and CFO, Chris Greiner. David, Chris have joined us, and we've got some very interesting conversation to hear as Zeta evolves more to an infrastructure AI platform. I believe everyone should have the disclosures on in front of them, if you don't already for me at least, please feel free to e-mail me directly or let me know. But David, Chris, thank you for joining. Always appreciate talking with you all.

Ron, thank you so much for having us. This is obviously very, very big news for us, and we were so glad that you had the availability to help us.

So absolutely. And again, I wish I were on camera, but let me start off. I believe Zeta is in entering the quiet period, I can't really comment on 2Q trends. So no financial update today. And the goal of today is really just how Zeta is evolving into an infrastructure layer. So with that, David, obviously, we've had a lot of good track records of earnings, and we'll table that for a few weeks. But when we talk about what's going on at Zeta and when we all met really about 1.5 weeks ago in Cannes, it was about...

It was very hot there, Ron.

It was very hot. Indeed. Well, when we met 1.5 weeks ago, I believe Zeta just announced -- you just announced your partnership with Palantir. What I wanted to do is the first question is, my goodness, we've seen Athena launch in March. We've seen partnerships with OpenAI, Snowflake, now Palantir and the pending integration of Foundry, a lot is going on, on Zeta. So maybe level set us in terms of how Zeta is transforming itself into being that AI infrastructure platform. And what exactly does that mean? And then as we go through here, I have a ton of questions about the partnerships, about where Zeta is going, but maybe bigger picture, just talk to us about the evolution of Zeta and how really 2026 has changed everything.

Yes, Madison, let's go to the what's changed slide, which I think is very helpful. If you think about just the last few months, we've announced a multi-tier -- multiple partnerships with OpenAI. We took Athena generally available, both for enterprise and then agency. We announced a major growth to our Snowflake partnership and then the biggest thing we've done to date, which is Palantir. I said OpenAI was the biggest thing to date when we did that, but Palantir now usurps that. The reality is none of this was an accident. We've been building towards being an infrastructure/business intelligence platform for quite some time. As I've shared with you in the past, Ron, I've always thought of us as a business intelligence platform that started focusing on marketing because the total addressable market was so high. But with the combination of the launch of Athena and then Palantir, and I think there's been some confusion, which is one of the things we wanted to say, we should have Palantir fully integrated for Phase 1 and have all of our existing clients on the Data Cloud moved over to the Foundry platform, I would say within 30 days of today, maximum maybe 40, 45. So we've been working on this for quite some time behind the scenes. And a lot of people were thinking this was going to be late this year or early next year. It will be done, not only will we have Palantir fully integrated in the next 30 to 45 days, we'll have at least one joint launch enterprise client from their side this quarter is what we believe and very possibly more. But when we do move the Data Cloud over to Foundry, which will happen in the next -- fully integrated in the next 30 to 40 days, all of our clients will then have access to the Foundry platform. Once we have that as our bottom layer infrastructure, moving from our 3 main use cases, which is customer acquisition, customer retention and customer monetization to what will now be our fourth official use case, which we're calling the Zeta Business Intelligence or engine. So ZBI, a new one for me to remember. I should remember it, I sort of came up with it. But the ZBI is going to change the way business intelligence works. So today, according to IBIS, business intelligence is a $35 billion addressable market in the United States alone on a yearly basis. Today, the way business intelligence works is the software ingests old data from the past, I call it rearview mirror data. It then puts it into a format that a bunch of data scientists can ingest and look at and try to make decisioning going forward. By layering the Zeta Marketing Cloud and the trillions of signals that we're ingesting, we're now going to be able to forecast business intelligence changes with substantially greater accuracy in the future. So we think we're going to completely change the game in the business intelligence space by using our Data Cloud plus our clients' data in the same consumer data platform that we're currently utilizing, but literally inside of Foundry, which will allow us to gain access to all of our clients' data in real time and allow for real-time decisioning and real-time business intelligence. So when you think about the 4 big things that have changed over the last year that have led to this announcement and this evolution, it starts with OpenAI, then you have Athena, then you had Snowflake. And then, of course, you have Palantir, which will have fully up and integrated in the next 30 to 40 days.

So David, that's a lot. First of all, it's pretty exciting to see. So let me try to break this down a little bit more. When we were together in Cannes maybe a week ago, 1.5 weeks ago or so, we talked about the transition happening. The 30 to 45 days, that seems a lot faster than what we and many others were thinking. So you've been working on this for a while. I just want to make sure I understood that correctly. So Phase 1, all clients moved over to 30 to 45 days. Did I hear that right?

Yes, all our existing clients that are using the Data Cloud will move over to Foundry in the next 30 to 40 days. It will be seamless to them. They won't even know what's happening. What they'll see is 2 things right away. One, intelligence will speed up. And two, we think this will drive to a substantially higher return on marketing spend right away. We're already seeing with clients that have adopted Athena a substantially higher return on marketing spend, and we think that the addition of Foundry is going to accelerate that. We have one client that is now over 1,400% in return on marketing spend. This is real world, real examples. Chris is going to get into it in a bit, but we're going to be building an AI scorecard. We're not prepared to roll it out today. But we're looking -- Madison, would you go to the compatible slide? Now the compatible slide, the slide of the other companies that are AI infrastructure companies that trade publicly, correct. So if you look at this slide, you can look at the cohort of companies that we believe we should now be compared to. And you can look at the metrics that correlate to us and these companies. And in all cases, we're either 1, 2 or 3 as it relates to Rule of 40, we're at 48, whereas it relates to net retention rate, we're at 120%. And the one that's really exciting is free cash flow yield of 5%, with, I believe, the average being 2%. So you can look across the board, our company is already achieving the rules that are necessary to be an AI infrastructure platform. But when you think about the real benefits of this and you look at Palantir plus OpenAI plus Snowflake plus Athena, we think the first big move is going to be a meaningful increment in return on marketing spend while we're simultaneously rolling the ZBI out to all of our existing enterprise clients. It opens up a new sales track into the CTO, CIO or CEO in addition to the CMO. It opens up an incremental $35 billion revenue opportunity. But I would say even more importantly than that, it's going to embed us even more deeply into our enterprises, Ron.

And that's actually a key point that I was going to ask a little bit later on, but you talked, David, about expanding the TAM, the $35 billion, now being able to sell the CIO and CTO. So you have really 3 different owners potentially within the organization as you now for those 4 different solutions, acquisition, retention, monetization and the ZBI. So talk to us about the go-to-market approach in terms of how Zeta is positioned today now that in about a month, 1.5 months, we'll be on Foundry, things will go a lot faster. You talked about latency. And now we're also talking to CIOs and CTOs. I'd love to hear the approach here because it is a newer part of the organization. How do you get the introductions? Is a CMO doing this on a nice -- on a warm introduction? Talk to us more about that process.

Well, first of all, we -- most of the big deals we close, we have CEO relationship, and we end up going through the CTO or CIO's office. So we already know all of these people because when the CMO brings in a new component to the tech stack, the CMO brings us to the CIO or the CTO. And often, I know the CEO and/or we're able to build a relationship with them and come in that way. What I would tell you is that the sort of sales motion on this should be very similar in that we've already been doing this for a number of our clients. We have one great use case recently where a very large hotel client of ours wanted to figure out where to put their next 500 hotels. So we pulled all of their most loyal customers. We looked at every one of their credit card transactions in geographies that they did not have a hotel against their 4 main competitors, how many room nights were they consuming at their main competitors. We then drew a circumference or 5-mile concentric circle around that area, and that was where they decided to put their next 500 hotels. We then -- as they've opened a couple of those, they bought a couple, quite frankly, in those areas. They're still building the ones that they're building. They used us to launch the marketing to do conquesting to move their loyal clients away from their competitors in the geographies that they open locations. The other big thing we're looking at, Ron, is inventory management and what organizations are going to manufacture next versus what should be discontinued, how should inventory be shifted on a geographic basis based on where people are. All these different things are natural workflows in the ZBI coming out of the existing relationship in the consumer data platform.

And so that's actually a good segue into the new ZBI because when you talked, David, that example with hotels, that is now going into business strategy. That is now directly touching revenue as opposed to through the marketing side. And so one of the things that I always find fascinating at Zeta is just your current Data Cloud, I think it's 535 million consented individuals across trillions of signals results to real people. And so one of the things you said when we were just starting to talk here is just the Data Cloud in the Foundry, but then also working with client information to put everything together. So talk to us a little bit more just around the opportunity with Zeta's Data Cloud into the Foundry, but also leveraging the data that the clients have because that proprietary, that 1P and 3P data is really a significant differentiator from others, I would imagine.

Yes. I think our Data Cloud is our biggest differentiator and our biggest moat as a company. I mean if you look at the other 3 or 4 companies in the world that have a comparable or larger data set, they're all worth over $1 trillion. So when you look at this data, by putting it on top of Foundry, it's going to speed everything up and allow throughput of data outside of just marketing data. So now we'll be able to get all of their business data put into Foundry and into the Data Cloud as a subset into the consumer data platform. So what I simply like to talk about is how Foundry is a game-changing foundation for our new skyscraper that we're building. It's sort of the foundation that will allow us to go higher and allow us to expand out, whereas in the past, we've been very sort of -- I don't want to say pigeonholed, but we've been very thought of as a marketing platform for obvious reasons. The vast majority of our revenue came out of marketing. And marketing is going to continue to be an incredibly important application for Zeta for many, many years to come and probably forever, right? But at the end of the day, the ability to get even stickier, I shudder to say stickier because I want to reiterate, last year, our net retention rate was already 120%. But as we think about how do we get stickier inside an organization and how do we drive incremental revenue and margin inside a customer, we've always looked at it as how do we solve our clients' biggest problems. And by adding Foundry on top of -- the Data Cloud on top of Foundry with Athena on top of the Data Cloud, you'll now be able to, in a very conversational way, ask Athena how to solve your biggest business problems. How do I turn my inventory more quickly? How do I shift inventory for specific products or services to markets that they need to go to? What new products should I be developing? What new products should I not be developing? Where can I go get the world's best employees to help work for my company as I try to evolve my organization? All of these are questions that the ZBI will answer with Athena.

And that again opens up to more organizations and use cases. I want to ask about the data and Athena, but before we do, let's make sure we're on the same page on Athena for those on the webcast. We launched in March. I think we had a pretty large client win here recently. But maybe, David, just step back for a second and tell us how Athena's capabilities enable the ZBI or the Zeta business intelligence layer so that you can obviously build that skyscraper on top of Foundry. So I would love to hear more about what Athena does, what you've seen thus far, and then we can get into examples.

Yes. So I would start by saying that Athena is meant to break down the friction between the human and the platform. So as I sort of talk about, I don't want to get too theoretical here, but for 400-and-some-odd thousand years, humans have been communicating via voice. It wasn't until the 1950s that we created the keyboard. Today, the average enterprise uses between 5% and 10% of the enterprise software they license just because they don't understand the feature sets, they don't have to use them. Most of our clients know how to fly a really good Cessna, and we've given them a stealth fighter. So by going to Athena, you can ask Athena in a purely conversational way, how to solve your problems. Athena, I'd like to create 2 million incremental customers this quarter, and I'd like to do it while lowering my marketing cost by an average of 7%. How would you recommend I do that? And instead of the individual at that enterprise having to navigate 20 or 30 screens to do that, Athena does it for you, changes the screen to just give you your answer. It's going to do the same thing with business intelligence. You'll be able to ask Athena, how do I solve my biggest business problems and Athena will change the UI in front of you to give you the answers. And to me, sort of this intelligence AI infrastructure, which is really what we've built is the differentiator in Zeta. And I think a lot of that's gotten lost over the conversation about marketing or not marketing. To me, marketing is a very large and necessary component of very large enterprises. We've grown our business now for many years in a row. We're on a 4-year compounded organic growth rate of greater than 30% over the last 4 years. And there have been ups and downs in that period, but yet we've still grown through them because we continue to take massive market share from our competitors. Back to the large win, if you jump to the slide that has the -- we start with what's changed, which are the 4 things that have changed, which is OpenAI, Athena, Snowflake and Palantir. Now let's talk about what proves it. That's -- now let's go to the prove it slide. Thank you. So if you think -- we started with OpenAI as a technology partner, then they awarded us a meaningful component of their marketing serving business. We started with Palantir. We moved very, very quickly. We have a 7-year joint go-to-market with Palantir. And when Elias, who's one of the best partners I've ever worked with, Elias Davis was on Alex Karp's personal team, and we really worked with Alex and his guys, Zach and Luke, to really get that deal over the finish line. He was -- when he was interviewed and he was asked about the term of the agreement, he said the contract is 7 years, but we expect to work with Zeta forever. We feel the exact same way. And then, of course, to win a client like the Gap, which was a massive Salesforce shop, they use Salesforce for pretty much everything. We displaced 4 vendors in there. Salesforce was one of them and then Braze was another, and then there were a couple of others that were in there. And they made us the system of record. I would tell you, it's an interesting story because over the last 8 years, we've probably bid the Gap RFP at least 2 prior times and came in second both times. We came into this one, quite frankly, with a bit of trepidation because these RFPs for enterprises of this size and scale are very complex. There are a lot of work. They take a lot of people's focus for a number of months. But they said, listen, we're open to meaningful change, and you really should bid it. So we came in. We were, I don't know, 3/4 of the way through the RFP process, and we demoed Athena for them, and they were like blown away. And I am 100% confident that Athena was the reason we went very quickly from this very long RFP process to them saying, okay, send us pricing, which is a very, very good buy sign. We then ended up closing with them. We're happy to partner with Sapient, who we work with regularly. And to become the system of record at Gap. But it all came down to the Data Cloud plus Athena was really what changed the game for us with the Gap. And once again, what changed? Three new major partnerships and then a new game-changing product launch. What proves it, companies like OpenAI, Palantir and Gap trusting us as either their major partners or their vendors of choice. These are deals that even 4 or 5 years ago, we probably could not have closed as a company because we were not in a position to do that. And I will tell you, I'm looking at the road map, and I'm looking -- we have -- we've built an entire forward deploy engineering team now that is sitting inside the Gap. We have Palantir people helping us there. We have OpenAI people helping us there. All these forward deployed engineers are working together. We've got a room of forward deployed engineers with OpenAI. We've got a room of them with Palantir. We've got rooms of them with Gap. And I'm very, very excited about sort of this evolution of the business and have gotten a real chance to spend a lot of time with the Palantir people in particular. And it's from the absolute top to everybody I've met with, they are just absolute rock stars. It's been an incredible partnership for us as we embark on this with them.

And as a system of record, this is and -- forgive me with this question, but is this a system of record for acquisition, customer retention, monetization and ZBI? Or is this something you can envision?

So today, it's a contract that's very focused on CRM and very focused on monetization. But we're already working on major projects on the other things. And I expect to expand out from what we're working on today. But once again, to be named the system of record was a big thing for us for a company of this size and scale. And we always want to think of ourselves as the challenger because I think that keeps you a little more hungry, Ron. But the truth is we're really becoming the leader in this category. If you look at the Forrester report, you look at the wins, you look at 50-plus percent growth in Q1, 29-plus percent organic growth in the first quarter of 2026. You're really seeing us take meaningful market share from our competitors. And as we expand into business intelligence, we expect to be able to do that there as well.

Sure. Maybe -- I've got maybe one other question for you on Palantir. We can go probably another hours on the Palantir partnership. I want to get Chris on this, too. So David, first to you, you mentioned the cross-sell and go-to-market. I wanted to hear a little bit more about when you've got Athena plus Palantir, I wanted to talk to us a little bit more about the broader cross-sell and joint go-to-market approach for both companies, Zeta and Palantir and Palantir and the customer base there.

So once Foundry is live with the Data Cloud, which, as I said, should be in the next 30, worst case, 40 days, any existing Palantir enterprise customer will be able to just turn this on. There's a few exceptions for very highly regulated industries that we've sort of made a decision together. We're going to sort of not start with, and we're not starting with government for a whole host of reasons. We're starting -- but I would say the vast, vast majority of their enterprise clients are -- we're already opening discussions. We've already made meaningful headway with a number of clients. And I would expect to have at least one of their clients turned on this quarter, in addition to having the full integration done probably by the end of July or very early August. It's just once again that Palantir is an organization that really puts their money where their mouths are. And one of the things Alex is really focused on and the things that he and I have chatted about is how he wants to take the best technology possible and help his clients solve their biggest problems and help them save the most money in their organizations. They didn't really have a marketing solution until they decided to partner with us. So I think that from a pipeline perspective, you're going to see a meaningful uplift in the pipeline as you see Palantir come online. The truth is the first few deals I'm doing myself with very senior guys over there and women over there because I want to build the sales motion personally. But these deals are so large in nature that doing the first few myself, so I can really build the sales motion and then start to bring others into it, I think will accelerate things, and I'm very excited about where we are.

That's great to hear with that insight and color. And then, Chris, I think we've talked about $100 million ARR at some point. Help us a little bit more on the road map. This is part of the Palantir partnership, of course. How do you think about that $100 million? How should we think about that $100 million now that we actually have a great foresight or at least a vision for 30 to 45 days going live here?

Yes. I think the best way to think about it is kind of really zooming out and you think about our long-term model and the visibility that we have into it. So the short answer is this adds to our confidence that we can get there early. When we rolled out our first long-term model, Zeta 2025, which was get to $1 billion in revenue, we got there a year early. And we built the current model with the same foundations of conservatism and reliance on our own organic selling and new channels that we introduce in new use cases, as David just talked about with Zeta Business Intelligence. So I think this is just one of many levers. We've given ourselves ample room in our model for this to scale and grow and perfect the go-to-market model. But we think of it really as just more upside and the ability to get there faster.

And -- again, Ron, I just want to say we've already fully budgeted for all the expense in this contract for this year and the out years. We've moved money from other vendors to Palantir, and it's going to be -- this should really be additive to operating margins in the years to come.

And that's the -- I think you and I, we've spoken about this as being cost neutral in '26 and potentially op savings in '27. Is that a fair comment?

I think it will help us continue to drive down our percentage of operating expenses in sales and marketing to revenue, which we've done now, I think, 4 or 5 years in a row. And I think that's a trend that will continue. Chris, do you want to add to that?

No, I think you're right, David, you said it well.

Perfect. So we'll come back to Palantir in a second. I want to make sure we get to all these partnerships because this is what has changed the game a little bit here in '26. Talk to us about the OpenAI partnership. I think it spans both product, I think voice capability for Athena, advertising and others. And so I would love to hear more about the partnership with OpenAI and how the team over at Zeta is leveraging GPT to build Athena or to come to go to market faster.

So it's interesting. We just did a third deal with OpenAI this past week where we started using OpenAI for all of our employees instead of Copilot, which was a big move for us. We've been a Microsoft shop for quite some time, which, listen, even furthers the partnership. But what I would say is it started because we were looking for the world's best voice engine. We had years ago bought -- built a product called ZOE, Zeta operating engine, I think, that was our first evolution into voice. And it was like being on an old walkie-talkie, Ron, you'd say, ZOE, how would I do this? Stop. And you'd sort of go in and out. Clients who use ZOE spent -- correct me if I'm wrong, between 300% and 350% more on the platform.

Yes, between 200% and 350%, yes.

So they're spending meaningfully more in utilization fees on the platform. And we said voice is really the future. How do we solve that? And for us, there's no better partner in voice activation than OpenAI. We do use a bunch of the other models. We partner with Claude. We partner with Gemini and OpenAI, and we use Cursor and so on and so forth. But the reality is that we felt like OpenAI had the best voice interface. I do want to be clear also to clear something up. We never use any large language model to see any data in our Data Cloud. Our entire Data Cloud operates on our own proprietary models that we've been building since 2017. But I would tell you the vast majority of what we do from an AI perspective, and we think the future of business-based AI is inference-based artificial intelligence. And large language models are obviously very, very important. But you don't need to ingest the entire Internet to figure out if somebody is going to buy -- get a new credit card, buy a car, churn off a wireless platform, right? We need 30, 40, 50 really good, really fast pieces of information that we're able to do with individual agents that are looking at all of this trillions of times. But when we wanted to build a voice UI, we didn't have the capacity to do it in the time frame in which we wanted to roll out Athena. So OpenAI started as our partner. We use their voice engine. It gets smarter about the individual using it, whether they're at an enterprise or an agent. It begins to understand their inferences and get to know them so it can better navigate the Zeta marketing platform. Whenever Athena does a data pull or is creating information or changing the UI, it's on our models and our platform. So that's where it started. And that went really, really well. In fact, I think we were one of the first enterprise applications to go live with OpenAI. And they were shocked when we went generally available on time. They were like, wait, you actually did this in the exact date. We did it 8 days early. But you did this before you actually committed to doing it, that really got their attention, and we had already been talking a bit about helping them on the advertising side. I think one of the things that also is not understood is how powerful our GEO platform has become. -- so many of our clients want GEO. And GEO in its heart is a ZBI product. It's an intelligence layer product for business intelligence, where it's helping enterprises to be better recognized inside of the large language models. And our platform integrates into OpenAI, Claude, Gemini, really every large language model. We're also getting meaningful data out of the API that makes our platform much, much smarter and starts the flywheel there. So that was sort of Phase 2 was getting into the advertising space with them. And then this past week, we just made ChatGPT available to all of our global employees and we're sunsetting Copilot as a part of that. So we felt like it was the right thing to do. We've got our people in the room with them all day. We wanted to make sure we were working together to support each other's businesses, and we think it's going to be a very powerful lift for our employees.

I mean, I think voice as a new interface is a very interesting concept. And I want to make sure I heard the impact from those clients that use ZOE. If you could just repeat maybe the benefits on the platform. And then I wanted to maybe get a picture -- a question, David, bigger picture. Do you think voice is ultimately the best complement to the UI going forward? Is it possible that people use voice more than keyboards over time? Two questions. One is ZOE, and then the voice.

Let me start with your second question first. I think that, once again, enterprises and the individuals who work there just want their problem solved. Whether they use a keyboard or they speak to the platform, they're just trying to get to a solution, whether it's around customer acquisition, retention, monetization or business intelligence, okay? The easiest way to do that is to speak to it. But one of the interesting things I don't know if everybody knows about Athena is you can just as easily go into the Athena chat box and type your question. You don't have to use the voice. The thing about Athena is getting to the answer and utilizing all of the available data sets in the Data Cloud, all of the intelligence in the platform to drive the best results in any of the 4 use cases we focus on, right? So some clients like to type into Athena the exact same things that other clients like to say. It's just what I think they're used to. It also, I think, depends if you're sitting with other people around you, it could be inconvenient to have to speak to it, whereas if you're alone in an office, it's much easier to speak to it. So we want to make sure that it was convenient. But to answer your question, I think solving complex problems and allowing enterprise individuals to use up to 100% of the feature set and the data sets inside of our enterprise software platform is the real key to in our 3 marketing use cases, getting to the highest return on marketing spend. And as I said, we've already got clients north of 1,400% return on marketing spend who have adopted Athena. And then as it relates to the ability to put it into a chat box, you can do that or you can speak to it. Well, I'm sorry, what was your other question, Ron, I apologize.

Just maybe Chris can repeat the customers, the clients that use ZOE spend, was it 300% more or 3x more? I missed -- I want to make everybody hears that on the webcast.

Yes, it was between 200% and 350% more for those customers in the first generation of Athena when they leveraged automation.

200% to 350% more. And so now we're in next iteration. That's perfect. And so maybe I want to take a step back here. I do want to get into longer-term goals. But maybe, David, if I could take a step back, and this is a year where we've had the partnerships with OpenAI with Palantir with Snowflake, the launch of Athena, newer business models launching. If we take a step back and...