The Trade desk: opportunity or a trap

You may or may not have seen it, but The Trade Desk (TTD) released its earnings yesterday.

The stock crashed by about 30% after the market and it's down even more after multiple downgrades from analysts today. It's now trading at $54

I know this creates uncertainty and that's why I wanted to be fast with this analysis. Because I know you want to know: What really happened here? Is it an opportunity or a trap?

Let's have a quick look at the numbers first.

The Numbers

Revenue: +19% YoY to $694M, a beat by $8M

Operating Margin: 17% (+1pp YoY)

Adjusted EBITDA: $271M, 39% margin (-2pp YoY but +1pp vs. guidance)

Non-GAAP EPS: $0.41, a beat by $0.01

Customer Retention: >95% for 11 consecutive years

Channel Mix: CTV 47.5%, Mobile 35%, Display 12.5%, Audio 5%

Geographic Split: North America 86%, International 14%

Operating Cash Flow: $165M (+103% YoY), FCF $117M (+106% YoY)

Cash Position: $1.7B with no long-term debt

Guidance: Q3 revenue "at least" $717M (+14% YoY); Adj EBITDA ~$277M

The Trade Desk delivered a solid quarter with a beat on revenue and EPS. While the beats were small, they were still beats. But the stock cratered 30% in after-hours trading, as we saw, and it continued to drop further today. This was not a repeat of their Q4 2024 quarter, though. Then the company missed its own guidance and Jeff Green plainly said they messed up. This was a fundamentally solid quarter that beat both revenue, EPS and EBITDA expectations, albeit slightly. There were good reasons for that. 

While some point at the guidance as the culprit ('just 14%), I want to point out that the guidance still beats the consensus. Just a little bit, again, but still. Don't forget that 2024 was an election year and that The Trade Desk usually sees mid-single-digit extra revenue from elections, often combined with slightly higher margins.