LiveRamp Q3 FY26 Results Confirm Efficiency Gains Amid Persistent Growth Deceleration

What happened

LiveRamp reported Q3 FY26 revenue growth of 9% year-over-year, matching the high-single-digit trajectory highlighted in the DeepValue report and showcasing operational discipline. The company emphasized record quarterly operating margin and operating cash flow, which aligns with its ongoing cost-reduction efforts and margin expansion targets. Share repurchases totaled $119 million fiscal year-to-date, reflecting aggressive capital allocation but partially offset by persistent stock-based compensation dilution. However, beneath these headline numbers, the DeepValue report underscores that ARR growth has slowed to 7% and subscription net retention remains at 102%, signaling no improvement in underlying demand or customer expansion. While the quarter reinforces LiveRamp's profitability and cash generation, it fails to address the critical need for ARR re-acceleration or net retention uplift to drive meaningful upside.

Implication

LiveRamp's Q3 results demonstrate sustained margin expansion and cash flow generation, supporting the base scenario of 8-10% annual revenue growth and low-20s non-GAAP operating margins. However, without ARR growth accelerating toward 10% and subscription net retention rising above 102%, the stock's valuation remains capped near the $32 trim level, limiting near-term upside. The share buybacks provide modest per-share support, but heavy equity dilution from stock-based compensation mitigates their impact, as noted in the report. Regulatory risks and competitive pressures from hyperscalers continue to threaten higher-growth marketplace revenue, adding downside risk if adoption slows. Therefore, investors are better off waiting for evidence of bookings momentum or a pullback to the $20 attractive entry point before increasing exposure.

Thesis delta

The Q3 results affirm LiveRamp's execution on cost efficiency and cash flow, aligning with the base scenario but not triggering the growth acceleration criteria needed to upgrade the rating. No shift in the investment thesis is warranted, as the key thresholds for ARR growth (≥10%) and net retention (≥105%) remain unmet. The 'WAIT' rating persists, emphasizing patience for clearer growth signals or a more attractive valuation.