Story Stocks^®

The Trade Desk (TTD +9%) is trading nicely higher following its Q2 earnings beat last night. This operator of a cloud-based online advertising-buying platform beat on EPS. Revenue also grew at a healthy clip, up 25.9% yr/yr to $584.6 mln, which was better than expected but the upside was a bit smaller than the prior two quarters. TTD also guided Q3 revs above analyst expectations.

• A key theme on the call was continued growth in its CTV segment. CTV growth accelerated in 1H24 relative to 2H23. TTD said that CTV, by a wide margin, led its growth again during the quarter. The company continued to gain market share in Q2 as more advertisers sought greater efficiency and measurable results, particularly in CTV and retail media.
• During the quarter, TTD says it benefited from a relatively stable digital advertising environment, supported by both agencies and brands. Also, TTD's growing access to premium inventory, including major events like the Olympics for the first time through NBCU, as well as gaining access to platforms like Roku and Netflix, also help ensure long-term success. Quickly on margins, TTD reported robust Q2 adjusted EBITDA of $242 mln, a 41% margin. TTD is guiding for another 40+% result in Q3.
• TTD saw a strong performance in the majority of its verticals, particularly in home and garden, food and drink, and shopping. Family relationship and healthy living verticals were both below average. TTD continues to see healthy trends across its verticals. Geographically, North America represented about 88% of TTD's sales in Q2 with international at 12%. TTD expects to capture additional market share internationally going forward.
• TTD cited an industry report that showcases the massive shift over the last four years in terms of where consumers are spending their digital time. It used to be that consumers spend about 60% of their time within walled gardens, and 40% on the open Internet. However, TTD says that trend has completely reversed since the pandemic. Consumers now spend more time on premium open Internet channels such as CTV and digital audio, significantly more time than they spend on social media. Companies like Spotify, Netflix, Disney, Warner Bros. Discovery have fundamentally changed the way that consumers behave.

Overall, this was another good quarter for The Trade Desk, led by its CTV segment. TTD cites key growth drivers such as CTV, retail media, international expansion, a strong identity strategy, and a major product upgrade with Kokai as why it remains confident and optimistic about its future. Even though TTD has had more impressive quarters, we think investors are pleased with its Q2 results given the weak results we saw from related names, like MGNI, PINS, SNAP.