Why Trade Desk Crashed 40% Despite a Q2 Sales Beat

Key Points

• Trade Desk shares just had one of their worst days on record, reacting to the company's Q2 earnings.
• Why did shares absolutely tank, despite the firm posting a beat on revenue and in-line guidance?
• Updated analyst price targets signal as much as +80% upside ahead, while others see +15% downside.

True to form, advertising technology stock The Trade Desk NASDAQ: TTD saw huge volatility after its latest earnings release. This time, it wasn’t for the better. Early morning trading on Aug. 8 saw shares down 39% after the results.

The stock took a big step back after shares gained nearly 19% following its Q1 2025 earnings release.

Since posting Q1 earnings, shares gained around 47% through the Aug. 7 close. The market’s reaction to The Trade Desk’s latest earnings shows that investors deemed such a significant gain unjustified.

Let’s dive into the firm’s results to understand what’s driving markets to wipe out billions in value in TTD shares.

Market and Wall Street Expectations for The Trade Desk’s Q2 Show Big Disconnect

In Q2, The Trade Desk posted revenue of $694 million for a growth rate of 19%. This was better than the $686 million and the 17.3% growth rate that Wall Street expected. The firm’s adjusted earnings per share (EPS) came in at 41 cents, one cent lower than estimated.

Overall, adjusted EPS increased by 5% compared to Wall Street projections of 7.7%. The company’s Q3 guidance of $717 million, or 14% growth, was in line with estimates.

Still, the company’s revenue growth and Q3 guidance indicate a significant deceleration in growth versus prior quarters. The company saw revenue growth of 26% in Q2 2024.

Going into that, released shares were trading at a very similar level as they were going into the Q2 2025 release of around $88. With growth coming in 700 basis points lower in Q2 2025, markets could not justify the stock’s valuation, leading to the massive sell-off.

This comes even though the 19% growth was technically above Wall Street estimates. Still, the precipitous rise in The Trade Desk’s stock price over the last few months meant that the true expectations were much higher than Wall Street estimates.

Walled Gardens Punch The Trade Desk in the Mouth

The company’s loss of market share to advertising giants like Meta Platforms NASDAQ: META adds further disappointment to its results. 

This is demonstrated by the fact that in Q2, Meta’s advertising revenue grew by nearly 22%, outpacing The Trade Desk’s growth. Meta is an example of a “Walled Garden." The company controls all of the content and data in its ecosystem and the tools used to buy ads on it.

This gives the company control over its advertising ecosystem's supply and demand; marketers can only buy ads (demand) shown alongside Meta’s content (supply).

This contrasts with The Trade Desk’s open-internet business model. The Trade Desk doesn’t have its own content (supply). Instead, its platform looks at content owned by third parties, such as podcasts posted on Spotify Technology’s NYSE: SPOT app.

Then, it matches those who want to buy ads with the content that will allow those ads to perform best.

Overall, one of the fundamental battles The Trade Desk is fighting is whether its or the Walled Garden model will win out long-term. The Trade Desk’s slower growth relative to Meta indicates that its open-internet model lost out in Q2. This creates elevated uncertainty over whether the open-internet model will prevail over time.

However, there is reason to believe that The Trade Desk’s model can win over time. A key factor driving Meta’s robust growth is its use of artificial intelligence (AI) to improve the performance of ads on its platform. 

The Trade Desk also leverages AI, but argues that Meta can implement the technology more easily in the short term because it controls its ecosystem. Meanwhile, The Trade Desk is trying to implement AI across a vast internet landscape with a complete variety of data sets and types of content.

The company says this approach is more difficult to implement in the short term but will have a greater long-term payoff.

Massive Price Target Ranges Show TTD Is a High-Risk, High-Reward Stock

The vast range of Wall Street price targets on The Trade Desk shows intense debate between the Walled Gardens and the open internet model.

BMO’s updated target sits at $98, while Moffett Nathanson’s is less than half that at $45.

One signals approximately 83% upside in The Trade Desk shares, while the other signals additional downside of 16%.

Overall, The Trade Desk is a highly volatile stock with a stark range of opinions surrounding it.

It is the epitome of a stock that requires huge conviction in its business model and a willingness to ride the roller coaster long-term.