Trade Desk (NASDAQ:TTD) Exceeds Q3 Expectations, Stock Soars

Jabin Bastian /
2021/11/08 7:42 am EST
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Advertising software maker The Trade Desk (NASDAQ:TTD) announced better-than-expected results in the Q3 FY2021 quarter, with revenue up 39.3% year on year to $301 million. On the other hand, guidance for the next quarter missed analyst expectations with revenues guided to $388 million, or 0.54% below analyst estimates. Trade Desk made a GAAP profit of $59.3 million, improving on its profit of $41.2 million, in the same quarter last year.

Is now the time to buy Trade Desk? Access our full analysis of the earnings results here, it's free.

Trade Desk (TTD) Q3 FY2021 Highlights:

  • Revenue: $301 million vs analyst estimates of $283.9 million (6.04% beat)
  • EPS (non-GAAP): $0.18 vs analyst estimates of $0.15 (19.9% beat)
  • Revenue guidance for Q4 2021 is $388 million at the midpoint, below analyst estimates of $390.1 million
  • Free cash flow of $103.2 million, up from $3.37 million in previous quarter
  • Gross Margin (GAAP): 82.2%, up from 79.2% same quarter last year

“We again delivered outstanding performance in the third quarter. Revenue growth of 39% significantly outpaced worldwide programmatic advertising growth. The world’s leading brands and agencies are increasingly using our platform to apply data-driven strategies to drive precision and value across their campaigns,” said Jeff Green, founder and CEO of The Trade Desk.

Founded by former Microsoft engineers Jeff Green and Dave Pickles, The Trade Desk (NASDAQ:TTD) offers cloud-based software that uses data to help advertisers better plan, place and target their online ads.

The digital advertising market is large, growing and becoming more diverse, both in terms of audiences and media. This as a result drives a growing need to automate and optimize ad placements, which Trade Desk is well positioned to benefit from.

Sales Growth

As you can see below, Trade Desk's revenue growth has been exceptional over the last year, growing from quarterly revenue of $216.1 million, to $301 million.

Trade Desk Total Revenue

And unsurprisingly, this was another great quarter for Trade Desk with revenue up an absolutely stunning 39.3% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $21.1 million in Q3, compared to $60.1 million in Q2 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 24.9% over the next twelve months, although estimates are likely to change post earnings.

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What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Trade Desk's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 82.2% in Q3.

Trade Desk Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.82 left to spend on developing new products, marketing & sales and the general administrative overhead. Trending up over the last year this is a great gross margin, that allows companies like Trade Desk to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Trade Desk's Q3 Results

Sporting a market capitalization of $32.8 billion, more than $798.6 million in cash and with positive free cash flow over the last twelve months, we're confident that Trade Desk has the resources it needs to pursue a high growth business strategy.

We enjoyed seeing Trade Desk’s impressive revenue growth this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 9.64% on the results and currently trades at $75.16 per share.

Should you invest in Trade Desk right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.