Investors have been having a tough time with the Nasdaq Composite (^IXIC 1.14%) lately. After blockbuster performance in 2020, the growth stock-laden benchmark has often missed out on market rallies elsewhere. On Monday, for instance, the Nasdaq fell 1.25% as of noon EDT, even as some other market indexes rocketed higher to new all-time records.

The Nasdaq has often suffered when important companies have given investors bad news. That was the case on Monday morning, as shareholders in The Trade Desk (TTD -1.80%) reacted negatively to the programmatic advertising specialist's latest financial report. Below, we'll look at what The Trade Desk said and why it helped pull fellow ad company Magnite (MGNI 1.75%) and the entire Nasdaq lower.

Notebook, paper clips, glasses, and pen in hand pointing to words Programmatic Advertising

Image source: Getty Images.

Here's what sent The Trade Desk stock falling

Shares of The Trade Desk were down more than 20% Monday morning. The company's first-quarter earnings report didn't give investors the reassurances they wanted, and even some other favorable moves didn't get the reaction some had hoped to see.

The Trade Desk's first-quarter results had plenty of positives on their face. Revenue climbed 37% compared to the year-earlier quarter, with that growth rate accelerating slightly from where it was 12 months ago. Adjusted net income climbed more than 60% year over year, resulting in earnings of $1.41 per share on an adjusted basis. The Trade Desk kept customer retention rates high at over 95%.

Moreover, The Trade Desk sees a bright future. Second-quarter guidance for sales of $259 million to $262 million was above what most investors had expected. The company even announced a 10-for-1 stock split to become effective next month, which expresses confidence and typically gets a positive reaction from shareholders.

Yet investors didn't seem to appreciate co-founder/CEO Jeff Green's assessment of the results, which he ascribed largely to the success of connected TV. The Trade Desk has become a leader in programmatic ads, but the stock's downward move shows that strong results simply aren't enough in this environment.

Big gains, big drops

Other players in the ad space also took big hits. Magnite, which has a similar focus on programmatic advertising but takes it from the sell-side angle rather than The Trade Desk's buy-side emphasis, saw its stock drop 15%. The smaller PubMatic took a 10% hit.

Dealing with volatility is hard, especially when the net impact is favorable overall. The Trade Desk's stock is up 67% over the past year and has jumped tenfold since mid-2018. Any longtime shareholder would be ecstatic about that kind of return for a stock -- except that just a few months ago, it was much larger. The shares are down 45% from their highs late last year.

The same is true of Magnite. The stock has lost half its value since early February. But it's still up 377% over the past year and 1,270% since May 2018.

In the long run, great companies will see their share prices rise. But that doesn't mean there won't be some big disconnects in the short run along the way. That's what's happening with The Trade Desk and Magnite today, and programmatic advertising isn't the only industry in the Nasdaq that could see similar trends play out now and for months to come.