It depends on the image type you use as a watermark.
GIFs or some species of PNG cannot be embedded to PDF “as is” and has to be converted to PDF native image format which is in fact a gzipped sequence of pixel color values. The PDF image format requires significantly more space for storing pictures (comparing to GIF, PNG etc).
Try to use JPEGs (even with high quality settings) as watermarks.
Sorry for the confusing hint. My fault. Even if you use JPEG, it still adds a transparency info for watermarking and converts the image to a gzipped sequence of pixel colors (which can result the image data become huge if the image dimensions are big).
Would it be a solution for you to define page background image instead of a watermark? There is setPageBackgroundImageUrl() API call for that.
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