Two Growth Stocks for the Next Decade: Assessing Scalability and Market Capture

The investment case for both companies rests on their positioning within powerful, long-term shifts that are expanding the total addressable market. For The Trade Desk, the trend is the relentless, secular growth of digital advertising, where programmatic buying is not just replacing traditional methods but also expanding the overall market. As advertisers seek to reach audiences beyond the walled gardens of tech giants, the demand for independent platforms like The Trade Desk's has surged. This isn't a cyclical bounce; it's a fundamental displacement that is broadening the TAM. The company's role as the largest independent demand-side platform (DSP) places it at the center of this expansion, with its next-generation AI platform and focus on connected TV (CTV) directly fueling its projected double-digit revenue growth.

Reddit's thesis is more nuanced but equally compelling. It is pivoting from a social network to a critical infrastructure for the AI era, monetizing its unique human-generated data. The platform's structure as a global discussion forum creates a vast, real-time repository of behavioral signals and community insights-precisely the kind of high-quality, contextual data that powers large language models. This pivot opens a new, high-margin revenue stream through data licensing partnerships with giants like Google and OpenAI. More broadly, Reddit is redesigning its platform to become a "search-decision hub," aiming to capture user intent before it leaves for traditional search engines. This dual strategy-licensing data and capturing search traffic-creates a flywheel where stronger engagement fuels richer datasets, which in turn attracts more AI partnerships and enhances the platform's utility.

The scalability of these models differs materially. The Trade Desk's path is a classic scaling play within an established, growing market. Its platform can be deployed globally with relatively low marginal cost, and its high gross margins indicate a capital-light model. Reddit's scalability is tied to its data moat and platform evolution. Its growth is less about simply adding users and more about deepening the value extracted from each user's engagement, whether through AI training data or premium ad products. While The Trade Desk's TAM is defined by the digital ad market's expansion, Reddit's TAM is defined by the convergence of social media, search, and AI training data-a market that is still being defined but is projected to be enormous. Both are positioned to capture significant share, but The Trade Desk's growth is more linear and predictable, while Reddit's potential is more exponential, hinging on its successful execution in the AI data and search arenas.

Scalability and Execution: From Growth to Dominance

The path from strong growth to market dominance hinges on a company's ability to scale efficiently and execute its strategy. Both The Trade Desk and Reddit have demonstrated impressive execution, but their scalability models are fundamentally different, reflecting their distinct positions in the market.

The Trade Desk's model is a classic platform play, built for high-gross-margin scalability. Its dominance as the largest independent demand-side platform (DSP) gives it a powerful network effect. The company is systematically expanding its ecosystem to lock in advertisers and increase stickiness. Its Unified ID 2.0 solution provides a privacy-compliant alternative to third-party cookies, while its Solimar platform and Ventura smart TV OS create integrated tools for planning, bidding, and measurement. This ecosystem approach, powered by its proprietary AI, allows The Trade Desk to serve a growing digital ad market with relatively low marginal cost. The evidence supports this: the company operates with a gross margin of 78.81%, indicating a capital-light, scalable model. Its projected double-digit revenue growth is backed by a clear execution plan focused on connected TV and international expansion, justifying its premium valuation.

Reddit's scalability is a different beast, tied to its data moat and user engagement flywheel. The company's recent results show explosive growth, with fourth-quarter revenue up 70% year-over-year and full-year revenue surging 69%. This isn't just top-line expansion; it's a sign of deepening monetization. The company's gross margin of 91.9% is exceptional, showing how efficiently it converts engagement into profit. Management's confidence is underscored by the $1 billion share repurchase authorization announced earlier this week. Yet, the path to its next major milestone-reaching $1 billion in quarterly revenue-requires sustained execution. This depends on successfully monetizing its unique data for AI training and capturing user intent as a search-decision hub, a pivot that is still unfolding.

The bottom line is that both companies have proven their execution chops. The Trade Desk scales through platform dominance and ecosystem integration, while Reddit scales through data leverage and engagement. For the growth investor, the key is recognizing that scalability isn't one-size-fits-all. The Trade Desk's model offers a predictable, high-margin path within an expanding market. Reddit's model offers a potentially more exponential path, but its success is more contingent on the successful commercialization of its AI data partnerships and platform redesign. Both are positioned to capture significant share, but their routes to dominance are defined by their unique business models.

Financial Impact and Valuation

The explosive growth narratives for both companies are translating directly into financial strength, but their paths to profitability and valuation support are distinct. For the growth investor, the key is to see which financial metrics best justify the premium each stock commands.

Reddit's financial profile is a standout in its ability to scale with exceptional profitability. Its fourth-quarter results showed revenue grew 70% year-over-year to $726 million, with net income of $252 million, representing 35% of revenue. This isn't just high growth; it's high-margin growth. The company's gross margin of 91.9% indicates that nearly every dollar of new revenue flows directly to the bottom line. This financial muscle is what allows Reddit to fund its ambitious pivot-its $1 billion share repurchase program announced earlier this week is a clear signal of confidence in its cash-generating ability. The valuation premium here is rooted in this powerful profitability flywheel: as it captures more AI training data and search traffic, the high-margin model ensures that growth is not just top-line but also deeply accretive to earnings.

The Trade Desk's financial story is one of robust, scalable growth within a dominant market position. While its profitability is strong, its valuation is more directly tied to its growth trajectory and ecosystem expansion. The company is expected to see revenue and adjusted EBITDA grow by 18% and 16%, respectively, for 2025, with growth rates holding steady at 16% for 2026. Its enterprise value of $16.4 billion trades at a reasonable 12 times this year's adjusted EBITDA. The premium here is justified by its gross margin of 78.81% and its role as the largest independent DSP, which provides a durable network effect. The valuation reflects confidence that its expanding ecosystem-powered by AI and connected TV-will continue to capture a growing share of the digital ad market.

The bottom line is that both companies are demonstrating financial strength that supports their long-term growth. Reddit's valuation is supported by its exceptional, scalable profitability as it monetizes its data moat. The Trade Desk's valuation is supported by its market leadership and the predictable, high-margin growth of its ecosystem. For an investor with a decade-long horizon, the choice hinges on which driver-exponential data monetization or dominant platform scaling-appears more compelling and sustainable.

Catalysts, Risks, and What to Watch

For both growth stories, the path from current momentum to decade-long dominance will be defined by specific catalysts and a looming, ever-present risk. The near-term milestones are clear, but the ultimate validation depends on execution against a backdrop of heightened volatility.

For Reddit, the key catalysts are its global expansion and the rollout of its AI-driven ad platform. The company is actively building the infrastructure for international growth, with machine translation now available in 30 languages to drive its global expansion. More critically, the company is testing new monetization tools. The automated campaign platform for advertisers is in early testing, planned for a 2026 rollout, which could significantly scale its ad business. Complementing this is the revamped, ML-powered onboarding flow aimed at personalizing the first user experience, a crucial step for converting new sign-ups. Success here will demonstrate the scalability of its high-margin model beyond its core user base.

The Trade Desk's catalysts are more focused on its core platform execution. Its growth hinges on the continued expansion of connected TV and international markets. The company's ecosystem-powered by its proprietary AI and integrated tools like Unified ID 2.0 and Ventura smart TV OS-is designed to capture a growing share of the digital ad market. The key execution milestones are the successful deployment of these tools and the penetration of new geographic regions. Any stumble in this ecosystem rollout or a slowdown in the digital ad market would directly challenge its projected double-digit growth trajectory.

The overarching risk for all growth stocks, including these two, is increased volatility. History shows these names are not immune to sharp pullbacks. The contrast is stark: while the S&P 500 Growth index climbed 21.4% last year, it fell 30% for the year in 2022. This volatility is a direct consequence of their premium valuations and dependence on sustained high growth. For investors, the lesson is that outperformance is not guaranteed. The risk is not just from macroeconomic factors like inflation or supply chain issues, but from any signal that the growth trajectory is decelerating or that the competitive moat is eroding.

The bottom line is that the investment case for both companies is forward-looking. For Reddit, watch for the 2026 launch of its AI ad platform and the tangible results of its global expansion. For The Trade Desk, monitor the execution of its connected TV and international growth plans. In both cases, the ultimate test will be whether they can navigate periods of market turbulence while continuing to scale their unique models. The high margins and explosive growth are compelling, but the path to dominance is paved with execution milestones and the constant shadow of volatility.