What Happened?
Shares of digital advertising platform The Trade Desk (NASDAQ: TTD) fell 7.4% in the afternoon session after the company's strong third-quarter results and upbeat guidance were overshadowed by concerns about rising capital expenditures.
The digital advertising platform beat Wall Street’s expectations, reporting a 17.7% year-over-year revenue increase to $739.4 million. The company also issued a better-than-expected revenue forecast of $840 million for the upcoming fourth quarter. However, investors appeared to focus on a significant increase in capital intensity. The Trade Desk's capital expenditures hit $70 million in the quarter, a sharp acceleration from the $110 million spent during the entire first half of the year. This jump in spending likely raised questions about future profitability and cash flow, outweighing positive news like a newly authorized $500 million share repurchase program.
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What Is The Market Telling Us
The Trade Desk’s shares are very volatile and have had 28 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock gained 2.5% on the news that blockbuster quarterly results from tech titans Apple and Amazon boosted investor confidence, supported by impressive earnings from key cloud and crypto leaders, Cloudflare and Coinbase.
Amazon's shares surged after reporting that its cloud computing division, Amazon Web Services (AWS), saw revenue jump 20% year-over-year to $33 billion. This accelerated growth is largely attributed to the high demand for computing power required for artificial intelligence applications. Apple also contributed to the positive sentiment, topping its own quarterly estimates and forecasting a record-breaking holiday quarter. The strong performance from these industry leaders has lifted the broader market. Impressive results from key cloud and crypto leaders, Cloudflare and Coinbase strongly supported the broader tech momentum. Cloudflare reported a "beat and raise" quarter with revenue soaring 30.7% year-over-year to $562 million and billings jumping nearly 40%, signaling strong future growth. Its non-GAAP operating margin expanded to 15.3%, and Free Cash Flow grew by nearly 60%, confirming management's efficient execution, leading the company to raise its full-year EPS guidance. Concurrently, Coinbase's third-quarter results also significantly topped estimates, driven by better-than-expected trading revenue and the increasing adoption of its stablecoin, USDC. The company reported $1.87 billion in revenue and an adjusted EPS of $1.44, while its strategic acquisition of Deribit advanced its "Everything Exchange" vision, resulting in over $840 billion in derivatives trading volume and aggressive expansion across the crypto market.
The Trade Desk is down 63.7% since the beginning of the year, and at $42.71 per share, it is trading 69.4% below its 52-week high of $139.51 from December 2024. Investors who bought $1,000 worth of The Trade Desk’s shares 5 years ago would now be looking at an investment worth $560.98.
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