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The Trade Desk (TTD) is under heavy pressure after disappointing with its Q2 report last night, reinforcing concerns over its ongoing growth deceleration. Revenue increased just 3% yr/yr to $715 mln, falling short of expectations and TTD's prior guidance of at least $750 mln, while its Q3 revenue guidance of at least $650 mln was well below expectations. The guidance implies a roughly 12% yr/yr decline, which would mark TTD's first quarterly revenue decline since Q2 2020.

• Shortfall: TTD attributed the weakness to macro pressure and execution shortfalls. Consumer packaged goods and autos, which together represent around 25% of its business, are facing significant macro pressures, with some advertisers reducing budgets or shifting toward lower-cost media and buying methods, amplifying competitive concerns.
• Customers: TTD pushed back against broader weakness, noting strength in financial services, parts of technology and pharma. The majority of its top 100 accounts are growing double digits, while advertisers outside its top 500 are growing more than 50% YTD, providing some green shoots among smaller and challenger brands.
• Regions: The U.S. represented approximately 83% of Q2 revenue, limiting the impact of strong international growth. EMEA and APAC each grew nearly 30% YTD, with CTV revenue increasing more than 50% yr/yr in both regions during Q2, while China grew more than 100% YTD.
• Profitability: The sharp revenue slowdown is also pressuring profitability. Adjusted EBITDA declined 11% yr/yr to $241 mln in Q2, with adjusted EBITDA margin contracting roughly 500 bps to 34%. Q3 adjusted EBITDA guidance of approximately $160 mln implies a nearly 50% yr/yr decline and an adjusted EBITDA margin of roughly 25%.
• Outlook: TTD said visibility is somewhat more limited than in recent history and Q3 assumes no meaningful improvement in the operating environment. Management stressed the guide is neither conservative nor aggressive, but grounded in current trends, while it works to improve execution through Zuma, Audience Unlimited and new measurement tools.

Briefing.com Analyst Insight

This was a challenging quarter for TTD that increases concerns that the pressures it is facing are becoming more persistent rather than simply a temporary macro-driven slowdown. Revenue posted its weakest yr/yr growth rate in several years, while Q3 guidance implying its first yr/yr decline since Q2 2020 exacerbates those concerns. While management pushed back against broader weakness, TTD's outsized exposure to CPG and auto advertisers means softness among a relatively small number of large customers can have a meaningful impact. At the same time, execution shortfalls and a shift by some advertisers toward cheaper buying alternatives add to competitive concerns, including against Amazon and Google. Longer term, TTD continues to deepen relationships with major advertisers through joint business plans, which are structured around longer-term customer alignment and viewed by management as a leading indicator, with revenue tied to these partnerships growing much faster than the broader business. Zuma, Audience Unlimited and new measurement tools could also help improve execution and better demonstrate TTD's value to advertisers. Still, with visibility more limited and Q3 guidance grounded in current trends, the near-term setup remains challenging and TTD will need to show that these initiatives can support a meaningful improvement in growth.