What Happened:

Shares of advertising data platform LiveRamp (NYSE:RAMP) jumped 11.1% in the morning session after the company provided improved preliminary revenue and operating income for the third quarter of fiscal year 2024. For Q3'2024, LiveRamp is anticipating approximately $174 million in revenue, a 10% year on year increase, surpassing the previous expectation of $165 million. The improved outlook was attributed to robust performances in both Subscription and Marketplace & Other revenue segments. Operating income is projected to reach around $15 million, surpassing the expected $8 million, while Non-GAAP operating income is anticipated to be $36 million, compared to the prior estimate of $29 million. 

Separately, LiveRamp disclosed its acquisition of Habu, a data clean room software provider, in a deal valued at about $200 million in cash and stock. This move aims to enhance LiveRamp's ability to facilitate secure data connections across diverse systems while adhering to privacy and governance protocols. LiveRamp expects the acquisition and revenue synergies to contribute approximately $18 million in revenue for the fiscal year 2025. However, the company doesn't expect the deal to significantly impact fiscal 2024 revenue and non-GAAP operating income.

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What is the market telling us:

LiveRamp's shares are not very volatile than the market average and over the last year have had only 11 moves greater than 5%. 

The biggest move we wrote about over the last year was 2 months ago, when the stock gained 14.3% on the news that the company reported third-quarter results that beat on key line items like revenue, adjusted operating profit, and adjusted EPS. We were also impressed by LiveRamp's strong gross margin improvement this quarter and its increase in net revenue retention. The company cited a stronger-than-expected digital advertising market and a stable selling environment as tailwinds. This is despite some companies saying that the digital advertising backdrop is a bit shaky due to macro and geopolitical uncertainty. The major positive is that guidance was strong and full year guidance, in particular, was raised across the board. 

On the other hand, direct subscription customers (a number that decreased year on year) fell below expectations, and the company continued to observe an average deal cycle that remained about a quarter longer than the levels observed in the previous year. Zooming out, we think this was a great quarter, showing that the company is staying on track.

LiveRamp is up 10.3% since the beginning of the year. Investors who bought $1,000 worth of LiveRamp's shares 5 years ago would now be looking at an investment worth $951.20.

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