What happened
Shares of The Trade Desk (TTD 0.52%) were soaring in August after the adtech platform posted better-than-expected results in its third-quarter earnings report. The stock jumped as The Trade Desk overcame some negativity around the digital advertising industry after a series of weak quarterly results from the social media sector generally and Google parent Alphabet in particular.
According to data from S&P Global Market Intelligence, the stock finished the month up 39%. As you can see from the chart below, the bulk of The Trade Desk's gains came after it reported earnings on August 9.
So what
The Trade Desk, which provides a demand-side platform (DSP) for brands to allocate advertising spending and manage campaigns, posted strong gains in the first week of August as optimism about a "soft landing" for the economy buoyed this and other high-growth tech stocks. A strong July jobs report and solid earnings results seemed to give stocks a boost, benefiting The Trade Desk and the cyclical advertising industry.
In its own earnings report, The Trade Desk did not disappoint. The stock jumped 36% on August 10 as the company put to rest any concern that the slowdown in the digital advertising industry had impacted it.
Revenue in the quarter rose 35% year over year to $377 million, beating estimates at $365.3 million, and profitability remained strong, with adjusted EBITDA increasing 21% to $139 million, giving an EBITDA margin of 37%. On the bottom line, adjusted earnings per share increased from $0.18 to $0.20, though that was just shy of estimates at $0.21.
The Trade Desk also said that customer retention in the quarter was above 95%, as it's been for the last eight years, a sign the company continues to delight customers.
CEO Jeff Green said, "We delivered outstanding performance in the second quarter, growing 35% versus a year ago, significantly outpacing worldwide programmatic advertising growth. More of the world's leading brands are signing major new or expanded long-term agreements with The Trade Desk." He added, "This trend also gives us confidence that we will continue to gain market share in any market environment."
The stock pulled back over the duration of the month as growth stocks largely fell on renewed concerns about rising interest rates and a recession.
Now what
The Trade Desk's guidance was also strong. For the third quarter, the company called for revenue of at least $385 million, or at least 36% growth over last year's Q3, and $140 million in adjusted EBITDA.
Though The Trade Desk has given up some of its post-earnings gains, its Q2 performance and guidance, as well as its history of profitability, make the adtech stock a good bet to continue to outperform the market over the long term.
