Trade Desk's Steep Stock Decline Highlights Adjusted Growth and Persistent Risks

What happened

Trade Desk's stock has plummeted 71.6% from its all-time high, marking the sharpest decline since its 2016 IPO as investor sentiment soured amid growth concerns and market volatility. While reported revenue growth appears at 17%, an adjustment for last year's political spending reveals a stronger 22% underlying rate, suggesting the business may be healthier than headline numbers imply. Initial problems with the AI-driven Kokai platform rollout have been addressed, but this fix comes after potential disruptions to client trust and competitive positioning. The DeepValue report underscores ongoing challenges, including heavy stock-based compensation, vulnerability to economic cycles, fierce competition from walled gardens like Google and Meta, and regulatory threats to identity solutions such as UID2. Despite posting solid Q3 2025 results with revenue up to $739.4 million and improved profitability, the stock's valuation compression reflects deep-seated skepticism about Trade Desk's ability to sustain high growth amid these headwinds.

Implication

The higher adjusted revenue growth of 22% indicates Trade Desk's core operations remain robust, offering a potential value opportunity if the stock's decline has overcorrected relative to fundamentals. However, the Kokai platform resolution should be viewed critically, as any future technical failures could quickly erode recent gains and client confidence in a fast-evolving ad-tech landscape. Regulatory developments, particularly around privacy laws and real-time bidding mechanisms, pose a significant threat; adverse rulings could severely restrict growth drivers like UID2 and impact the company's long-term trajectory. The heavy reliance on stock-based compensation and aggressive buybacks, while aimed at offsetting dilution, may misalign capital allocation with shareholder interests and signal underlying governance concerns. Thus, while the current valuation might appear attractive, a prudent approach requires monitoring for clearer signs that Trade Desk can navigate its complex risk environment and deliver consistent, sustainable performance.

Thesis delta

The article's revelation of higher adjusted revenue growth and resolved Kokai problems slightly bolsters the case for Trade Desk's operational resilience, potentially narrowing the margin of safety needed for investment. However, the stark stock price decline underscores persistent market fears about macro sensitivity and regulatory overhang, aligning with the DeepValue report's risk factors and maintaining the thesis as a tempered possible buy with significant caveats.