DoubleVerify (DV)

Digital media measurement and analytics provider DoubleVerify (NYSE:DV) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 21.3% year on year to $189 million. Guidance for next quarter’s revenue was better than expected at $190 million at the midpoint, 1.9% above analysts’ estimates. Its GAAP profit of $0.05 per share was in line with analysts’ consensus estimates.

Company Overview

When Oren Netzer saw a digital ad for US-based Target while sitting in his Tel Aviv apartment, he knew there was an unsolved problem, so he started DoubleVerify (NYSE:DV), a provider of advertising solutions to businesses that helps with ad verification, fraud prevention, and brand safety.

The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, DoubleVerify’s sales grew at a decent 21.8% compounded annual growth rate over the last three years. Its growth was slightly above the average software company and shows its offerings resonate with customers.

This quarter, DoubleVerify reported robust year-on-year revenue growth of 21.3%, and its $189 million of revenue topped Wall Street estimates by 4.5%. Company management is currently guiding for a 12.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 8.4% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and suggests its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

DoubleVerify is extremely efficient at acquiring new customers, and its CAC payback period checked in at 4.8 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give DoubleVerify more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

What makes the software-as-a-service model so attractive is that once the software is developed, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

DoubleVerify’s gross margin is one of the highest in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an elite 82.1% gross margin over the last year. That means DoubleVerify only paid its providers $17.90 for every $100 in revenue.

This quarter, DoubleVerify’s gross profit margin was 82.5%, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

DoubleVerify’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 11.9% over the last year. This profitability was top-notch for a software business, showing it’s an well-run company with an efficient cost structure. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, DoubleVerify’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q2, DoubleVerify generated an operating margin profit margin of 7.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

DoubleVerify has shown robust cash profitability, driven by its attractive business model and cost-effective customer acquisition strategy that enable it to invest in new products and services rather than sales and marketing. The company’s free cash flow margin averaged 21% over the last year, quite impressive for a software business.

DoubleVerify’s free cash flow clocked in at $40.09 million in Q2, equivalent to a 21.2% margin. This result was good as its margin was 2.8 percentage points higher than in the same quarter last year. We hope the company can build on this trend.

Over the next year, analysts’ consensus estimates show they’re expecting DoubleVerify’s free cash flow margin of 21% for the last 12 months to remain the same.

Companies with more cash than debt have lower bankruptcy risk.

DoubleVerify is a profitable, well-capitalized company with $216.8 million of cash and $103.6 million of debt on its balance sheet. This $113.2 million net cash position is 4.5% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing DoubleVerify beat analysts’ revenue and EBITDA expectations this quarter. We also liked that guidance was largely ahead of Wall Street's estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $15.60 immediately after reporting.

Updated: November 6, 2025 at 9:30 PM EST

When considering an investment in DoubleVerify, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

There are definitely a lot of things to like about DoubleVerify. To kick things off, its revenue growth was strong over the last five years. And while its operating margin hasn't moved over the last year, its efficient sales strategy allows it to target and onboard new users at scale. On top of that, its admirable gross margin indicates excellent unit economics.

DoubleVerify’s price-to-sales ratio based on the next 12 months is 2.3x. Looking at the software space right now, DoubleVerify trades at a compelling valuation. For those confident in the business and its management team, this is a good time to invest.

Wall Street analysts have a consensus one-year price target of $18.50 on the company (compared to the current share price of $11.12), implying they see 66.4% upside in buying DoubleVerify in the short term.