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There's no sugarcoating it: The Trade Desk (NASDAQ:TTD) has lost much of its luster over the past 18 months. When the company reported its Q4 results in early 2025, investors were taken aback. The Trade Desk had fallen short of its own forecast, marking the first time in 33 consecutive quarters the company missed the mark. It's been largely downhill ever since. The stock had lost 90% of its value, plagued by decelerating revenue growth and falling profits. Despite management's best efforts to right the ship, there was little in the way of good news. Until today, that is.
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Anticipation ahead of The Trade Desk's financial report and word that one of the company's co-founders was rejoining the fold sparked a rebound, and the release of The Trade Desk's results further fanned the flames. Investors let out a collective cheer.
The Trade Desk's third-quarter results went a long way toward assuring investors that the company has turned a corner. Revenue declined 0.5% to $736 million. The bottom line held up better than expected, though adjusted EBITDA declined 16% to $266 million, driving adjusted earnings per share (EPS) down nearly 27% to $0.33.
While that might not seem like a reason to celebrate, consider this: Management's outlook was for revenue of $650 million and adjusted EBITDA of $160 million, so the results cleared both hurdles with ease.
Even Wall Street was caught off guard, as analysts' consensus estimates were calling for revenue of $651.4 million and adjusted EPS of $0.25, so The Trade Desk sailed past expectations with room to spare.
The Trade Desk also maintained its history of strong customer retention, which remained above 95% during the quarter, a track record that goes back more than a decade.
CEO Jeff Green noted that "Q3 represented meaningful progress with results well ahead of our expectations entering the quarter." He went on to say that, while there's still more work to do, the company is "moving with greater urgency" to right the ship.
The better-than-expected results come on the heels of another important announcement. Last week, The Trade Desk announced the return of co-founder and former chief technology officer (CTO) Dave Pickles, who stepped down in 2023.
Pickles and Green co-founded The Trade Desk in 2009 after working together at the digital ad exchange AdECN, where Pickles and his team built the entire ad exchange in less than seven months. The company was ultimately acquired by Microsoft in 2007.
As the creator and architect of The Trade Desk's adtech system, Pickles knows the platform better than anyone, according to Green. That deep knowledge and expertise help explain why the stock jumped more than 15% on Monday, giving investors hope that his skills will help facilitate The Trade Desk's recovery.
Beyond the quarter's financial results, investors were pleased with The Trade Desk's vision for the future. For the upcoming fourth quarter, management's outlook called for revenue of at least $755 million and adjusted EBITDA of $280 million. While that will mark sequential gains, it would still represent year-over-year declines of 11% and 30%, respectively.
For context, analysts' consensus estimates called for Q4 revenue of $691 million, so The Trade Desk's guidance was still significantly ahead of Wall Street's predictions.
As a longtime shareholder, I'm cautiously optimistic. While I'm glad to see The Trade Desk making meaningful progress, the real test will be whether the company can maintain its upward trajectory. I personally will want to see another quarter or two of results headed in the right direction before I cue up the victory march.
Even after Monday's rally, The Trade Desk stock is selling for just 15 times earnings. While that's an intriguing valuation, I think the company still has more to prove before I would add any shares.
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Danny Vena, CPA has positions in Microsoft and The Trade Desk. The Motley Fool has positions in and recommends Microsoft and The Trade Desk. The Motley Fool has a disclosure policy.
The Trade Desk Stock is Suddenly on Fire. Here's Why. was originally published by The Motley Fool
