The Trade Desk TTD recently reported first-quarter 2026 results with the bottom line coming in short of expectations. Adjusted earnings per share (EPS) of 28 cents missed the Zacks Consensus Estimate by 12.5%. The bottom line also compared unfavorably with 33 cents posted in the prior-year quarter.
However, revenues were up 12% to $688.9 million, topping management guidance (of at least $678 million) and the Zacks Consensus Estimate (by 1.4%).
The Trade Desk Price, Consensus and EPS Surprise
The Trade Desk price-consensus-eps-surprise-chart | The Trade Desk Quote
The stock fell sharply after the earnings announcement on May 8, but stabilized at the end of the session. Since reporting earnings after market close on May 7, the stock has slipped 8.4% and closed yesterday’s session at $21.52.
Investor concern remains as The Trade Desk continues to navigate numerous headwinds, including intense competition in the ad space and a volatile macro environment. Revenue growth has been slowing compared with previous quarters.
The important question for investors now is, should they retain TTD stock or make an exit? Let’s do a deep dive to understand what to do with TTD stock after its first-quarter earnings report.
The Bull Case for TTD
The Trade Desk’s strategy revolves around the open Internet, which is where price discovery and competition exist, and it continues to expect the open Internet to gain share relative to closed advertising ecosystems. TTD operates a leading demand-side platform (“DSP”) that helps advertisers focus on data-driven ads. The company stressed that the ad market is worth $1 trillion TAM and that, eventually, most ad dollars will become data-driven.
Increasing digital spending in CTV, particularly for premium content and live sports, is a key growth driver. In the first quarter, video — which includes CTV — represented a low-50s percentage of the total business and continues to grow as a share of the channel mix. The shift from linear TV to CTV is still in early stages, providing a long runway for growth.
Beyond CTV, retail media has emerged as one of the fastest-growing areas in the digital advertising space. TTD highlighted that the retailers in its data marketplace now represent over 80% of sales from top U.S. retailers, compared with Amazon’s AMZN roughly 15% share.
Further, products like Audience Unlimited are demonstrating strong performance by increasing campaign performance and, at the same time, reducing manual effort in the audience selection process, noted TTD.
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The integration of AI across operations bodes well. TTD expanded its AI portfolio through the launch of Koa Agents, an AI-powered agentic capabilities with Stagwell as the partner, and OpenTTD, a unified login and analytics platform.
Further, explosive growth in Joint Business Plans (“JBP”) bodes well. In the first quarter, the company reported a 55% increase in JBP count, with new deal spend (excluding renewals) rising 40% year over year. It signed some 45 deals in March alone.
Management remains highly optimistic regarding its international business. The company noted strong momentum across EMEA and APAC, reflecting multi-year investments in those regions. International business currently represents roughly 18% of total revenues, a clear opportunity for long-term growth.
Strong cash position provides ample flexibility for growth investments while maintaining shareholder returns. TTD generated $392 million in operating cash flow and $276 million in free cash flow in the first quarter. It ended the quarter with $1.4 billion in cash, cash equivalents and short-term investments. The company returned capital via $164 million worth of share repurchases, supporting shareholder value.
The Bear Case for TTD
Digital advertising spending is prone to macroeconomic fluctuations. If macro headwinds worsen, revenue growth may face pressure due to reduced programmatic demand. TTD highlighted ongoing pressure in key verticals such as Food & Drink and Home & Garden as CPG brands face geopolitical tensions, inflation and consumer softness. While automotive remains strong, it is also impacted by tariffs.
Cautious spending by large enterprise advertisers has been affecting the revenue growth rate. While first-quarter revenues were up 12%, the second-quarter revenues are expected to increase in single digits. For the second quarter, revenues are expected to be $750 million, indicating just 8% growth from the prior-year quarter.
Further, the competitive environment is intensifying. Walled gardens like Meta Platforms, Apple, Alphabet GOOGL and Amazon offer fierce competition in this space as they control their inventory and first-party user data, allowing for highly targeted ad campaigns. While CTV remains a strong revenue driver, this market is also increasingly becoming competitive as smaller players like Magnite and PubMatic PUBM intensify their efforts. AMZN’s expanding DSP business is giving tough competition to TTD, especially in this space.
Though TTD is focusing on geographic expansion, executing well across disparate markets can be complex and risky. Regulatory and privacy-related changes like the deprecation of cookies and tightening data privacy laws like Europe’s GDPR also pose ongoing challenges.
TTD is focused on embedding AI across the portfolio, which will further raise capex and operational costs. Rising expenses coupled with investments could compress margins if revenue growth slows. In the last reported quarter, total operating costs (excluding stock-based compensation) surged 18% year over year to $513 million. Expenses soared due to continued investments in enhancing platform capabilities, particularly in more AI-powered tools.
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The company expects adjusted EBITDA margins in 2026 to remain in line with 2025, as it continues investing in AI capabilities, product innovation and go-to-market infrastructure.
TTD Stock Disappoints
TTD stock has been in the red for quite some time now. Year to date, the share price has tanked 43.3%, while the losses over the past year stand at 72.5%. The Zacks Internet Services is up 20.8% year to date, while one-year gains stand at 123.5%.
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In comparison, GOOGL, PUBM and AMZN’s shares are up 24.1%, 11.4% and 16.5%, respectively, year to date.
What to Make of TTD’s Discounted Valuation?
In terms of forward price/earnings, TTD’s shares are trading at 9.97X, way lower than the Internet Services industry’s ratio of 26.43X. This valuation compression appears to reflect near-term concerns, including macroeconomic uncertainty, softer ad spend in certain verticals and revenue growth slowdown.
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AMZN, PUBM and GOOGL trade at 29.05X, 17.1X and 26.92X, respectively.
What to Do With TTD Post Q1?
The Trade Desk's long-term growth story is driven by tailwinds in programmatic advertising, CTV, AI and retail media. However, near-term headwinds are concerning.
Given the balanced risk-reward profile, existing investors may retain the stock. New investors would be better off waiting for a favorable entry point.
At present, TTD carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).