Trade Desk Silences Critics; Recovery Looks Poised to Continue

Key Points

• Trade Desk saw one of the worst post-earnings drops in February after releasing Q4 2024 results. Shares fell by over 30% in one day.
• However, shares are now up massively from their 2025 lows, with Q1 updates changing the narrative on this name.
• The stock remains down big from highs. Its Kokia product and trends in connected TV put it on a strong long-term path to recovery.

After posting what was likely its worst earnings report ever in Q4 2024, Trade Desk NASDAQ: TTD roared back with a vengeance in Q1 2025. The communication services company’s final report for 2024 saw it miss internal expectations on revenue for the first time in 33 quarters. Overall, it was the first time Trade Desk missed these expectations for its entire life as a public company. Being an occurrence markets had never seen, Trade Desk’s shares plummeted 33% in one day after the report.

However, the company did not turn this disappointment into a pattern in Q1. Shares popped nearly 19% after the company’s latest release on May 8. As of the May 22 close, Trade Desk has recovered 64% since the 52-week low the stock eventually hit in early April.

So, what was so great about Trade Desk’s most recent quarter, and can the recovery in this stock continue? The stock is still trading at nearly half of its all-time high reached in November 2024, indicating that significant further upside could be in play.

TTD: Business Breakdown and Q4 Struggles 

For those who may be unfamiliar, Trade Desk is an advertising technology (AdTech) company. Essentially, its software helps advertisers manage their marketing campaigns. It uses AI to match these advertisers with the optimal place to display their ads, helping these advertisers maximize the return on their ad spending.

It does this by analyzing massive amounts of data to target potential customers who are most likely to buy a company’s product.

Within the advertising ecosystem, Trade Desk largely focuses on connected TV (CTV), also known as streaming. However, the company's platform is omnichannel. This lets advertisers connect with potential customers through different media types. The company shows its presence in these areas by partnering with both Netflix NASDAQ: NFLX and Spotify Technology NYSE: SPOT.

The main problem for Trade Desk in Q4 came from the company’s rollout of its next-generation ad tech platform, Kokai. In Q4, the company focused on fixing Kokai's structural issues. This slowed down the platform's adoption during the quarter. This is what ultimately caused the company to miss its forecasts.

However, the opposite was the case in Q1.

Trade Desk’s Kokai Flips the Script

In Q1, Trade Desk crushed estimates both on the top and bottom line. The company’s revenue growth came in at 25%, greatly exceeding the just 17% growth Wall Street forecasted. Adjusted earnings per share (EPS) also grew by 27%, while Wall Street was looking for it to drop by almost 4%.

The increase of 82 basis points to 34% in Trade Desk’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin aided this. Wall Street predicted the figure would fall to less than 26%. The company’s full-year revenue and EBITDA guidance also came in solidly ahead of expectations.

Much of this success was due to an accelerated adoption of Kokai in Q1. The company noted that about two-thirds of its customers had transitioned to Kokai, which was “ahead of schedule." As it said in Q4, Trade Desk expects all its customers to transition to Kokai by the end of 2025.

Trade Desk also shared very important metrics on how Kokai is driving improved client results. Compared to its previous platform, Solimar, the cost of clients acquiring a new customer dropped by 20%. Additionally, the cost to reach a unique person with an ad dropped by over 42%. Kokai also used 30% more data points when evaluating how well an ad might perform.

Overall, all of these metrics show how Kokai is helping maximize return on ad spending, making clients much more likely to use it. Customer satisfaction is ultimately demonstrated by the fact that the company’s retention rate remained above 95%, as it has for 11 straight years.

TTD Can Benefit Big Long Term as CTV Spending Looks to Overtake Traditional

Overall, the successful outcomes that Trade Desk is driving for marketers are very hard to deny. Additionally, the shift in ad spend away from traditional TV to CTV still has a long way to go. eMarketer finds that just $29 billion in ad spending went to CTV in 2024, versus nearly $60 billion for traditional TV. That is less than a 33% share for CTV. They expect this gap to continue narrowing. This is a big long-term tailwind that Trade Desk can benefit greatly from. Due to these factors, Trade Desk looks poised to continue down the road of long-term success.