After Earnings, Trade Desk's Stock Tumbles. Are Investors Being Too Harsh?

After a sharp 56% rally over the past three months, Trade Desk Inc. (NASDAQ: TTD) is now facing a steep reversal. The advertising technology leader’s latest earnings report beat expectations, but guidance and leadership changes have investors hitting the brakes.

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Shares plunged 27.4% in after-hours trading on Thursday a drop that, if it carries into Friday’s regular session, would mark the company’s second-largest single-day loss in history.

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This kind of post-earnings volatility isn’t new for Trade Desk. In recent quarters, the stock has seen double-digit swings, climbing 18.6% after Q1 results in March but plummeting 33% following the December-quarter report.

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While the company’s Q2 results were solid, Wall Street seems disappointed by its Q3 outlook. Trade Desk projected revenue of at least $717 million for the September quarter, just a hair above analysts’ consensus of $716 million. Given the stock’s recent run-up, many market watchers were likely hoping for a more aggressive forecast.

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On the profitability front, management guided for $277 million in adjusted EBITDA, in line with analyst expectations. The absence of an earnings beat in guidance paired with slowing growth may have amplified the market’s negative response.

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Adding another layer of uncertainty, Trade Desk announced that long-time CFO Laura Schenkein will step down after over a decade in senior finance roles at the company. She will remain as a non-executive officer through 2025 to support the transition to her successor, Alex Kayyal, effective August 21.

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Kayyal, already a Trade Desk board member, brings significant experience from leading venture operations at Salesforce Inc. (NYSE: CRM). While leadership changes are common in growing companies, CFO departures can sometimes be interpreted by the market as a potential red flag, especially when paired with cautious guidance.

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Despite the sell-off, Q2 results showed strength. Trade Desk reported $694 million in revenue, topping the $686 million consensus and marking a 19% year-over-year increase. That growth rate, however, was slower than the 25% growth posted in the prior quarter.

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Adjusted EBITDA for the June quarter came in at $271 million, comfortably beating Wall Street’s $261 million forecast.

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CEO Jeff Green struck an optimistic tone on the earnings call, highlighting the company’s position in Connected TV (CTV) as a key driver for future growth.

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“I could not be more excited about our position in CTV, and the size of the growth opportunity for us in the years ahead,” Green said. “With our leadership in CTV, as well as in retail media, digital audio, identity, measurement, and data, we are winning more business with both new and existing customers.”

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Another recent milestone for Trade Desk is its inclusion in the S&P 500 index, which took effect in July. Joining the benchmark index not only raises the company’s profile but also often leads to increased institutional ownership as index funds adjust their holdings.

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Trade Desk’s latest quarter offered a mix of positives and caution flags. On one hand, revenue and earnings exceeded expectations, and management continues to emphasize long-term opportunities in connected TV, retail media, and other high-growth digital ad segments.

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On the other, the slightly conservative Q3 guidance, slowing growth rate, and CFO transition have sparked a sharp short-term reaction in the stock. For long-term investors, this pullback may present a potential buying opportunity if they believe in the company’s strategic positioning and market leadership.

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Given Trade Desk’s history of post-earnings volatility, the coming sessions will be key to determining whether this is a short-lived sell-off or the start of a deeper correction.

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