By Trade Desk’s stock (NASDAQ: TTD) took a big hit on Friday, dropping 38% after the company released its second-quarter results and offered cautious guidance for the third quarter.
While the numbers slightly beat Wall Street’s expectations, investors were rattled by the more conservative outlook and news of a key executive leaving the firm.
On Thursday, Trade Desk reported earnings of 41 cents per share, right in line with what analysts expected. Revenue came in at $694 million, up 19% from a year ago and a bit above estimates of around $685 million.
The company also kept a healthy adjusted EBITDA margin of 39%, showing solid profitability.
Customer retention stayed strong at over 95%, and adoption of its AI-powered Kokai platform continued to grow, with about two-thirds of customers now using it, offering better efficiency and lower costs per conversion and acquisition.
Trade Desk stock: What triggered the sell-off?
Even though the earnings numbers looked decent, Trade Desk’s cautious outlook for next quarter weighed on investors.
They’re expecting about $717 million in revenue and $277 million in adjusted EBITDA, numbers that are close to what analysts predicted but don’t show the strong growth people were hoping for.
That softer forecast has some folks worried about how broader economic issues might hit digital ad spending and whether Trade Desk can keep growing at the pace it has been.
To make things worse, Trade Desk said their CFO, Laura Schenkein, who’s been with the company for ten years, is stepping down. Alex Kayyal will take over on August 21.
The combination of her departure and the cautious outlook shook investor confidence and helped push the stock down even further.
Investor mood took another hit over the hurdles Trade Desk is facing as it tries to grow in retail media and international markets.
Sure, their AI-powered tools help boost efficiency, but Wall Street was hoping for clearer signs of faster revenue growth and stronger momentum, and the company didn’t deliver on that during its earnings call.
Analysts display confidence in fundamentals
Analysts say the sharp drop in Trade Desk’s stock reflects worries about slowing growth in key areas like connected TV advertising, plus the challenge of staying profitable as costs rise and economic uncertainties hang over the market.
While the company’s financials and operating metrics remain solid, its valuation was already on the high side compared to peers, so when growth forecasts softened, the stock felt the pressure.
That said, some analysts still see opportunity at these lower prices. They point to Trade Desk’s strong fundamentals, ongoing AI innovation, and leadership in programmatic advertising as reasons to believe in a potential multi-year rebound.
But in the short term, they expect more ups and downs as investors adjust to the shifting outlook and the change in leadership.
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