The Trade Desk Stock Plummets 30% as AppLovin Surges—What Went Wrong?

The Trade Desk’s stock dropped over 30% after missing revenue expectations, while rival AppLovin surged over 20% on strong earnings. CEO Jeff Green attributed the shortfall to execution missteps, including the slower-than-expected rollout of its AI-powered Kokai platform. Despite challenges, The Trade Desk is expanding into connected TV and audio advertising, with plans to transition all clients to Kokai by the end of 2025.

CONTENTS:

• BigBear.ai Lands Another Major Defense Contract
• The Trade Desk Faces Challenges in AI-Powered Advertising Rollout

The Trade Desk Stock Plummets 30% as AppLovin Surges—What Went Wrong?

The Trade Desk (NASDAQ: TTD) experienced a sharp decline on Thursday, with its stock dropping more than 30%. Meanwhile, rival adtech company AppLovin (NASDAQ: APP) surged over 20% following an impressive fourth-quarter earnings report, surpassing The Trade Desk in market capitalization.

A Rare Earnings Miss
The Trade Desk’s fourth-quarter results fell short of expectations, marking a rare miss for the company. Revenue grew 22% to $741 million but missed both analyst estimates of $759.6 million and the company’s own guidance. CEO Jeff Green acknowledged the shortfall, emphasizing that while missing Wall Street’s projections was not his primary concern, failing to meet the company’s own targets was a breach of investor trust.

Previously, The Trade Desk had forecasted at least $756 million in revenue and $363 million in adjusted EBITDA for Q4. However, it reported just $350 million in adjusted EBITDA. On a positive note, adjusted earnings per share rose from $0.41 to $0.59, slightly beating analyst expectations of $0.57.

Execution Issues, Not Competition
Companies can underperform for various reasons, including weak demand, macroeconomic challenges, or competition. However, Green attributed the disappointing results to execution issues rather than external factors.

He pointed to several internal challenges, including the slower-than-expected rollout of Kokai, its AI-driven platform designed to replace Solimar. The company also underwent its largest-ever reorganization in December, which may have disrupted operations. Additionally, strategic decisions focused on long-term growth over short-term revenue may have contributed to the miss. Despite these setbacks, management remains committed to transitioning all customers to Kokai within the year.

BigBear.ai Lands Another Major Defense Contract

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The Trade Desk Faces Challenges in AI-Powered Advertising Rollout

The Trade Desk reported a 22% year-over-year revenue increase to $741 million in Q4, but the company fell short of its internal target of at least $756 million. This marked its first revenue miss in eight years as a publicly traded firm, causing its stock to drop ahead of the long holiday weekend.

Slower-Than-Expected Kokai Rollout

CEO Jeff Green attributed the shortfall to a series of execution missteps, acknowledging that the rollout of Kokai—The Trade Desk’s AI-powered platform—has been slower than expected. The company is aiming to transition all clients from its legacy Solimar platform to Kokai by the end of 2025. While a majority have already made the switch, the pace of adoption has lagged behind initial expectations.

Green explained that the delay was partly intentional, as the company prioritized understanding customer needs over rushing adoption for short-term revenue gains. The Trade Desk also underwent its largest-ever internal reorganization in December to improve operational efficiency and better define roles within the company.

AI Growing Pains and Market Shifts

Kokai’s rollout challenges reflect broader difficulties in AI adoption within marketing, where real-world implementation often lags behind industry hype. Despite this, The Trade Desk sees potential opportunities ahead, particularly as competitors like Google shift focus toward generative AI and cloud computing, possibly pulling back from open-web advertising.

Green expressed confidence that “one way or another, Google is going to exit the open internet,” which could create new openings for The Trade Desk.

Expanding Into CTV and Audio Advertising

Beyond AI-driven advertising, The Trade Desk is pushing into connected TV (CTV) and audio advertising. CTV, which includes platforms like streaming services, was its largest and fastest-growing segment in Q4, accounting for nearly half of its business.

The company is also investing in new ventures like Ventura, a content-agnostic smart TV operating system introduced in November, designed to compete with established players like Roku and Amazon Fire TV. Additionally, its acquisition of metadata startup Sincera, expected to close in Q1, will further support its expansion into emerging ad markets.