The late-year correction was brutal for most technology stocks, and The Trade Desk (NASDAQ:TTD) was no different, losing more than a quarter of its value in the final three months of 2018. Even after that drubbing, however, the stock ended the year up 154%. What's supporting those impressive gains? The company has consistently exceeded both its own forecasts and investor expectations for both revenue and earnings per share while carving out a niche for itself in the fast-growing area of programmatic advertising.

The Trade Desk is scheduled to release the financial results of its recently completed fourth quarter after the market close on Thursday, Feb. 21. Let's recap the company's third-quarter report and look at the paradigm shift that's occurring in digital advertising to see what it reveals about The Trade Desk's prospects when the company reports earnings.

Two hands touching a digital globe showing various consumer advertising touch-points.

Image source: Getty Images.

Becoming a broken record

For the third quarter, The Trade Desk reported record revenue of $118.8 million, up 50% year over year, again surpassing both its own forecast and analysts' consensus estimates. The company also reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $36.6 million, which climbed 31% compared with the prior-year quarter and ahead of management's guidance of $33 million. Profits also beat expectations, with adjusted earnings per share of $0.65, up 86% year over year, and soaring past the forecast for $0.50. The Trade Desk continued its robust customer retention, which has exceeded 95% for 19 successive quarters.

The results from a number of The Trade Desk's key channels were truly mind-boggling and suggest that its growth streak will continue. Mobile ads (in-app, video, and web) rose 65% year over year and accounted for 46% of gross spending by advertisers -- the highest percentage the company has ever reported. Ad revenue from connected TVs soared 1,000% year over year -- after posting growth that more than doubled in the second quarter. The audio segment jumped 192% year over year, while mobile video climbed 98% and mobile in-app grew 90%.

Check out the latest The Trade Desk earnings call transcript.

A once-in-a-generation opportunity

So what's providing the tailwind for The Trade Desk's impressive returns? The overall changes that are occurring in digital advertising.

The total global advertising market is expected to be in the neighborhood of $700 billion for 2018 once the final numbers have been crunched -- and could top $1 trillion within the next decade. Digital advertising now comprises about half of that growing market, and programmatic is the fastest-growing segment of the digital ad market -- expected to have increased 21% in 2018.

The Trade Desk continues to grow at the expense of its competitors, growing revenue 54% through the first nine months of 2018 -- more than two and a half times the rate of the programmatic market. This growth was driven by the company's artificial intelligence-fueled process that automates the buying, placement, and optimization of advertising for its customers. The Trade Desk is ahead of the curve, as more and more ads move to apps, streaming music, and online video.

The recent gains by ad-supported streaming video providers like Roku (NASDAQ:ROKU) and Hulu, which will soon be controlled by Disney (NYSE:DIS), help illustrate this point and show why the tailwinds will likely continue for The Trade Desk.

In early January, Roku released preliminary results for its fourth quarter, showing solid growth in two important user metrics. The streaming provider grew its active accounts by an estimated 27 million, up 40% year over year. Its users were spending more time on the site, as the number of hours of streaming video watched on the platform grew to about 7.3 billion.

A connected TV showing the Roku landing page, with various programs available for viewing.

Image source: Roku.

Hulu's reported similarly impressive gains. The streamer said it added 8 million new subscribers last year, up 48% year over year, while revenue from ad sales topped $1.5 billion, up 45% and a record for Hulu.

Why does this matter? The Trade Desk helps place the advertising that appears on platforms like Roku and Hulu, as well as many others. As consumer behavior shifts to streaming music and video, as well as heavier app use, the opportunity for The Trade Desk continues to grow.

What to expect from the fourth quarter

The Trade Desk has been remarkably consistent in exceeding its own forecast, and there isn't any reason to believe that will change. For the fourth quarter, the company forecast revenue of $147 million and adjusted EBITDA of $53 million, which -- if achieved -- would represent year-over-year growth of 43% and 34%, respectively.

While we don't want to get caught up in Wall Street's practice of short-term thinking, looking at its expectations can provide context regarding the overall sentiment for a company. Analysts' consensus estimates were calling for revenue of $147.71 million, slightly higher than management's forecast, while expecting earnings per share of $0.80, up 48% compared to the prior-year quarter.

With the company's history of conservative guidance and its significant and growing opportunity as a backdrop, The Trade Desk could soar if its impressive performance continues.