The Trade Desk Stock Drops 37% as Revenue Growth Slows

The Trade Desk's stock fell 37.1% in August due to disappointing earnings and slowing revenue growth. Despite a high price-to-sales ratio of 10, investors are concerned about the company's ability to maintain its growth rate. The Trade Desk's revenue growth slowed to 19% YoY in Q2, down from 26% YoY in the same period last year. The company's high valuation and failure to see significant expansion of its net income margin are also causing concern.

The Trade Desk's (NASDAQ: TTD) stock experienced a sharp decline of 37.1% in August, according to data from S&P Global Market Intelligence, as the company reported disappointing earnings and slowing revenue growth. As of September 3, 2025, The Trade Desk has fallen by 55% year-to-date, marking its worst price drawdown ever [1].

In its second-quarter earnings report, The Trade Desk posted 19% year-over-year (YoY) revenue growth, with sales hitting $694 million and net income of $90 million. While this growth is substantial, it represents a slowdown from the 26% YoY growth reported in the same period last year [1]. The company's guidance for the third quarter indicates a further slowdown, with expected revenue growth of 14% YoY to $717 million [1].

The Trade Desk's high price-to-sales (P/S) ratio of 10, despite the recent drop, remains significantly above the S&P 500 index average of 3.2. The company's gross margin is high at around 80%, but it has yet to see significant expansion of its net income margin [1]. The high P/S ratio suggests that investors are expecting rapid growth or sky-high bottom-line margins, neither of which are currently evident [1].

Investors are also concerned about The Trade Desk's competitive positioning. The company faces challenges from Amazon's DSP and the rise of generative AI, which could pose a threat to its business model [2]. Additionally, The Trade Desk's exposure to large brands and agencies has been impacted by spending headwinds and tariffs [2].

Despite these challenges, The Trade Desk remains optimistic about its international opportunities and the untapped potential of connected TV (CTV). The company continues to sign multi-year joint business plans (JBPs) with leading agencies and brands, and its AI-powered media buying platform, Kokai, is showing strong performance [2].

In conclusion, The Trade Desk's stock decline can be attributed to its slowing revenue growth, high valuation, and competitive concerns. While the company's fundamentals remain strong, investors should be cautious about the stock's potential for rapid growth or significant margin expansion.

References:
[1] https://finance.yahoo.com/news/why-trade-desk-stock-slumped-190126708.html
[2] https://seekingalpha.com/article/4818767-the-trade-desk-attractive-entry-point-despite-competition-concerns