TTD Stock Slips 28% Despite Steady Q2 Growth; Find Out Why

The Trade Desk showed continued strength in its second quarter. Revenue climbed to $694 million, a solid 19% increase YoY. The company reported non-GAAP EPS of $0.41 per share, slightly beating expectations. Customer retention remained exceptionally high at over 95% for the 11th straight year. Yet, the stock plunged around 28% in after hours trading as per Google Finance, stunned by cautious forward guidance, leadership changes, and modest momentum in the digital ad market.

With this blog let’s deep dive into what worked, what triggered the sell-off, and what lies ahead for the TTD stock.

Key Financial Highlights from TTD’s Q2 Report

Source: TTD Q2 FY2025 Earnings Report

The Trade Desk reported a solid Q2 FY25, with revenue climbing 19% YoY to $694 million as advertisers continued to shift budgets toward programmatic channels. GAAP net income rose 5.9% to $90 million, while non-GAAP EPS improved 5.3% to $0.41. Non-GAAP earnings exclude certain one-time costs or non-cash expenses, such as stock-based compensation, giving a clearer view of the company’s core operating performance compared to GAAP figures, which follow strict accounting rules and include all such items. The company maintained a customer retention rate above 95%, reflecting strong platform stickiness. However, profitability saw mild pressure, with adjusted EBITDA margin down 200 bps to 39% and net income margin slipping to 13%, partly due to increased investment in AI-driven ad tools and global expansion initiatives.

What Spooked TTD Investors? Why the Weak Guidance?

While the CEO Jeff Green sounds optimistic when he said in the press release; “Q2 was a strong quarter for The Trade Desk, with revenue growing to $694 million, up 19% YoY, as we continue to outpace the digital advertising market. The first half of 2025 has been defined by meaningful innovation across our platform. Kokai is helping advertisers drive better results by integrating more data into every decision, using AI as a co-pilot, and unlocking the full potential of first-party data”. 

But the investors remain skeptical because of:

• Cautious Q3 Guidance: The Trade Desk forecasted revenue of at least $717 million and adjusted EBITDA around $277 million, both in line with expectations, yet offering no significant upside outlook despite good quarters.
• Timing Noise from CFO Announcement: Alex Kayyal as the next CFO and the transition timeline left some investors unsure of strategic continuity.
• Unrealistic Market Expectations: The stock had climbed a lot in recent weeks after joining the S&P 500, pricing in a strong turnaround. When Q3 guidance did not exceed forecast, the reaction was swift. 

TTD’s Playbook Still Has Winning Pages

Despite the sell-off, there are reasons for cautious optimism:

• Growing Kokai Adoption: About 70% of client spend now flows through Kokai, the AI-powered media-buying engine. Advertisers observed remarkable efficiency gains campaigns running on Kokai.
• Operational Innovation: The firm launched OpenSincera and Deal Desk for supply chain transparency and deal analytics. Its privacy-first identity system, Unified ID 2.0, and described supply path, OpenPath, continue to gain traction through partnerships with entities like AppsFlyer and Bell Media. 
• Share Buybacks: The company repurchased $261 million in stock during Q2, with $375 million remaining authorized.
• Rock-Solid Retention: Keeping over 95% of clients for eleven years demonstrates the strength of the platform’s value proposition.
• AI and CTV Leadership: With around 70% of spend on Kokai and continued leadership in connected television, The Trade Desk has positioned itself at the crossroads of data and innovation.
• Product Ecosystem Expansion: Integrations with Visa, Instacart, Snowflake, Zepto, NIQ, and infrastructure tools like Deal Desk position the platform strongly in both retail media and ad transparency.
• Executive Team Deepens: New leadership brings strong tech and investment pedigree. Omar Tawakol and Alex Kayyal reinforce execution and strategic oversight.

What Investors Should Track Going Forward

• Q3 Performance vs Guidance: The classic under-promise, over-deliver situation. If TTD can deliver above the Q3 guidance, the investor trust could be rebuilt.
• Full Kokai Rollout: Hitting 100 % adoption by year-end would validate AI efficiency arguments.
• Stability Through Transition: Execution during the CFO shift will be closely tracked to build confidence.
• Retention of Innovation Edge: Whether OpenPath, unified IDs, and AI tools will sustain differentiation will be interesting to see.
• Macro Factors: Ad budgets, tariff impacts, and competitive shifts in retail media remain as key risks.

The Trade Desk delivered a sturdy quarter of revenue growth, new sales tools, and strong client loyalty. The sharp stock drop came from future outlook, not past execution. While the company navigates softer ad spend in certain categories, growth in connected TV and international markets is helping offset pressure. Margins remained healthy despite higher operating expenses linked to platform investments. Management’s focus on expanding data partnerships and enhancing AI-driven ad tools suggests a commitment to strengthening its competitive position in the evolving digital advertising landscape.

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