The Trade Desk (NASDAQ:TTD) saw impressive momentum during the first three quarters of 2018. And now the company's just-reported fourth-quarter results show that the programmatic digital ad-buying platform was able to keep this up in the final quarter of the year. Not only did the company's fourth-quarter results crush expectations, but they marked an acceleration in The Trade Desk's growth.

It was "a groundbreaking year for The Trade Desk," said CEO Jeff Green in a statement to the media this week. 

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Accelerating growth

After the company reported third-quarter year-over-year revenue growth of 50% (down from 54% revenue growth in Q2), it only seemed natural to expect a further deceleration in the uncanny revenue growth rates in Q4. This is why it wasn't surprising when management guided for fourth-quarter revenue of $147 million, implying 43% year-over-year growth.

On average, analysts expected fourth-quarter revenue of about $147.8 million. But those estimates were far too low. Even the analyst with the highest estimate for fourth-quarter revenue -- $150.8 million -- undershot significantly. The Trade Desk reported fourth-quarter revenue of $160.5 million. This was up 56% year over year, marking a meaningful acceleration over the company's third-quarter revenue growth rate.

The Trade Desk also saw a huge jump in profitability. Net income for the period was $39.4 million, up from $16.8 million in the year-ago quarter. On a per-share basis, it earned $0.84, up from $0.38 in the same period last year. Non-GAAP earnings per share soared 102% year over year to $1.09, obliterating analysts' average forecast for non-GAAP earnings per share of $0.80.

Analysts are underestimating The Trade Desk's tailwinds

As I argued last August, analysts seem to be underestimating The Trade Desk, not fully appreciating the company's enormous opportunities. In the third-quarter earnings release, management had said customer spend on mobile ads on its platform grew 65% year over year. In addition, its smaller but faster-growing channels, audio and connected TV, saw spend increase 192% and more than tenfold year over year, respectively. When considering this momentum and the company's recent major refresh of its entire ad-buying platform, the meaningful deceleration analysts' were expecting didn't add up. The tailwinds are just too significant.

Sure enough, these same catalysts helped deliver more strong year-over-year growth in Q4.

  • Mobile spend increased 69%
  • Connected TV soared 525%
  • Audio grew 230%

The strong finish to the year meant The Trade Desk distanced itself even further from competition in the programmatic ad-buying space. Gross spend on the company's platform increased 51% during the year, outpacing an estimated 22% increase in total real-time-bidding programmatic advertising spend globally.

Check out the latest The Trade Desk earnings call transcript.

For the full year of 2019, The Trade Desk guided for revenue of "at least $637 million," representing 33% year-over-year growth. Analysts, of course, had lower expectations; the consensus forecast was for 2019 revenue of $617 million.

Notably, this time last year The Trade Desk guided for full-year 2018 revenue of at least $403 million. But actual revenue for the year was $477.3 million. My guess is that The Trade Desk's actual 2019 revenue will once again easily exceed management's target.

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