The Trade Desk (NASDAQ:TTD) shares plunged more than 27% in premarket trading on Friday after the digital advertising company reported second-quarter results and issued third-quarter guidance that missed Wall Street expectations by a wide margin. The disappointing update prompted several brokerages to downgrade the stock and sharply reduce their price targets.
Revenue and Outlook Miss Market Expectations
The company reported second-quarter revenue of $715.1 million, an increase of 3% from a year earlier. However, the result fell short of analysts’ forecasts of approximately $752 million to $753 million and also missed management’s previous guidance of at least $750 million.
Adjusted EBITDA totalled $241.3 million, below the consensus estimate of around $265 million.
The outlook proved even more disappointing. For the third quarter, The Trade Desk forecast revenue of at least $650 million and adjusted EBITDA of approximately $160 million, well below Wall Street expectations of roughly $807 million and $339 million, respectively.
The revenue guidance also implies a year-over-year decline of approximately 12%, marking what would be the company’s first annual revenue contraction outside the pandemic period.
Brokerages Cut Ratings Following Results
Raymond James downgraded The Trade Desk to Underperform from Market Perform, citing “a below-expectations 2Q and a sharply negative 3Q outlook, as macro conditions and buyers showing preferences for lower-cost media combined to drive down spend to the TTD platform.”
The brokerage added that the third-quarter outlook represents “its first-ever non-pandemic y/y decline in revenue” and said it has “a hard time justifying” the stock’s valuation premium relative to other advertising technology companies.
Baird also lowered its recommendation to Neutral from Outperform.
Analysts described the earnings release by saying, “the 2Q print was just awful, plainly said.” The firm added that while it had previously believed the valuation had become more attractive, “clearly there is even more uncertainty here.”
Baird reduced its price target to $9 from $27.
Management Changes and Client Weakness Raise Concerns
Truist Securities downgraded the shares to Hold from Buy and cut its price target to $16 from $35.
The brokerage pointed to a combination of weaker macroeconomic conditions and company-specific execution challenges, highlighting reduced advertising spending from consumer packaged goods and automotive clients, including Procter & Gamble.
Truist also noted “heightened management turnover” following the appointment of a new Chief Financial Officer, Chief Operating Officer, Chief Marketing Officer, Chief Commercial Officer and Chief Business Development Officer.
The firm believes “4Q growth will be diminished by the same issues, keeping growth negative through mid 2027.”
Guggenheim Sees Structural Challenges
Guggenheim also downgraded The Trade Desk to Neutral from Buy while reducing its price target to $12 from $25.
The brokerage said the company has “swung from an ~10pp premium in 3Q24 to a ~15pp discount in 2Q26 in quarterly ad growth rate vs. peers,” suggesting the slowdown reflects structural issues rather than a temporary cyclical downturn.
Guggenheim also cited “continued leadership turnover, agency conflict and product inconsistency” and said Chief Executive Jeff Green’s comments regarding the company’s recovery “feels even further detached from the results.”
The combination of disappointing earnings, significantly weaker guidance and a series of analyst downgrades fuelled heavy selling in The Trade Desk shares ahead of the opening bell.
The Trade Desk stock price
