Why Is The Trade Desk (TTD) Down 9.2% Since Last Earnings Report?

It has been about a month since the last earnings report for The Trade Desk (TTD). Shares have lost about 9.2% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is The Trade Desk due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for The Trade Desk before we dive into how investors and analysts have reacted as of late.

Key Highlights

• Revenue: $847 million in Q4, up 14% year over year; up 19% excluding political advertising. Revenues beat the Zacks Consensus Estimate by 0.6%.
• EPS: Adjusted diluted EPS was 59 cents, in line with the Zacks Consensus Estimate; GAAP diluted EPS was 39 cents.
• Profitability: Adjusted EBITDA of $400 million, nearly 47% margin in Q4 FY2025.
• Operating expenses: $590 million in Q4, up 8% year over year; excluding stock-based compensation, operating expenses were $478 million, up 15% year over year.
• Cash generation: Operating cash flow of $312 million and free cash flow of $282 million in Q4.
• Balance sheet: Approximately $1.3 billion in cash, cash equivalents and short-term investments at quarter end; no debt.
• Capital returns: Repurchased $423 million of shares in Q4; authorization increased to $500 million, inclusive of remaining capacity.

Revenue drivers and vertical mix

Top-line growth in the fourth quarter of 2025 benefited from continued strength in CTV and audio. Management highlighted that CTV outgrew the company average through 2025 and again in the fourth quarter, even while lapping elevated political spend in the prior year. Audio represented about 6% of business in the quarter and was the fastest-growing channel year over year. On the flip side, CPG and, to a lesser extent, auto remained the softest verticals entering the fourth quarter and into the early first quarter of 2026, reflecting tariff uncertainty, uneven volumes, and consumer cost-of-living pressures that began in mid-2025. Offsets came from medical/health, technology, and business and finance verticals, where spending expanded solidly.

Channel and geographic mix

Video, which includes CTV, represented roughly 50% of fourth quarter activity and continued to accrete to the mix. Mobile was approximately 30% of the share and display was a low double-digit percentage. The United States comprised 84% of revenue, with international at 16%. Growth in EMEA and APAC outpaced North America, consistent with the company's investment focus in those regions.

Margins, expenses, and operating discipline

Fourth quarter adjusted EBITDA margin was about 47%, underscoring strong unit economics amid ongoing reinvestment. Operating expenses rose 8% year over year, or 15% excluding stock-based compensation, reflecting increased platform operations and continued product innovation. Management reiterated that headcount growth remained below revenue growth for the third straight year in 2025, supporting operating discipline. Days sales outstanding were nearly 100 days and days’ payable outstanding were under 85 days, consistent with recent periods.

Cash flow, liquidity, and capital deployment

Cash generation remained robust with $312 million in operating cash flow and $282 million in free cash flow. Liquidity stood at about $1.3 billion in cash, cash equivalents and short-term investments at the quarter-end, and the company reported no debt. Share repurchases totaled $423 million in the fourth quarter, and the authorization was increased to $500 million, inclusive of remaining capacity, with plans to continue opportunistic buybacks and offset employee stock dilution.

Management commentary

Management characterized the fourth quarter as a solid finish to 2025, with reported revenue growth of 14% year over year, or nearly 19% excluding political. Across 2025, revenue growth decelerated from 25% in the first quarter to 19% in the second quarter, 18% in the third quarter, and 14% in the fourth quarter on a reported basis, as CPG and auto headwinds intensified through the year. Even so, full-year revenue reached $2.9 billion (up 18% year over year) on roughly $13.4 billion of spend, and adjusted EBITDA expanded in line with revenue growth. CTV remained one of the fastest-growing channels, and international momentum in EMEA and APAC continued to outstrip North America.

Near-term outlook and 2026 investment posture

For the first quarter of 2026, management guided to revenue of at least $678 million (up 10% year over year) and adjusted EBITDA of approximately $195 million. The first quarter margin profile is expected to reflect timing related to infrastructure spend as the company completes its transition to owned data centers. For 2026, the adjusted EBITDA margin percentage is expected to be approximately in line with 2025, with 2026 framed as a disciplined investment year focused on AI capabilities and infrastructure. Headcount growth is planned to remain below revenue growth.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -17.59% due to these changes.

VGM Scores

Currently, The Trade Desk has a average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock has a grade of B on the value side, putting it in the top 40% for value investors.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, The Trade Desk has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

The Trade Desk is part of the Zacks Internet - Services industry. Over the past month, Akamai Technologies (AKAM), a stock from the same industry, has gained 17.4%. The company reported its results for the quarter ended December 2025 more than a month ago.

Akamai Technologies reported revenues of $1.09 billion in the last reported quarter, representing a year-over-year change of +7.4%. EPS of $1.84 for the same period compares with $1.66 a year ago.

For the current quarter, Akamai Technologies is expected to post earnings of $1.64 per share, indicating a change of -3.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Akamai Technologies. Also, the stock has a VGM Score of D.

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This article originally published on Zacks Investment Research (zacks.com).

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