Trade Desk Inc. experienced a significant drop of up to 31% in extended trading on Thursday, triggered by a less-than-expected revenue forecast for the current quarter. This raised concerns about the overall health of the advertising market. Social media giants Meta Platforms Inc., Snap Inc., and Pinterest Inc., which heavily rely on advertising sales, also witnessed declines in response to Trade Desk’s outlook.
Trade Desk Inc. faced a sharp decline of up to 31% in extended trading on Thursday after the digital advertising platform provided a weaker-than-expected revenue forecast for the current quarter. This raised concerns and sent a warning signal about the overall health of the advertising market. Social media giants Meta Platforms Inc., Snap Inc., and Pinterest Inc., which heavily depend on advertising sales, also experienced declines in response to Trade Desk’s outlook.
According to a statement from Trade Desk, revenue in the quarter ending in December is expected to be at least $580 million. However, analysts, on average, had projected $610 million, according to data compiled by Bloomberg. The stock fell to as low as $52.74 after closing at $76.81, marking a stark contrast to its 71% gain earlier this year.
Trade Desk serves as an advertising technology alternative to services provided by major companies like Alphabet Inc.’s Google, Meta, and Amazon.com Inc. The platform collaborates with some of the world’s largest advertisers and brands, including Warner Bros Discovery Inc., Walmart Inc., and NBCUniversal.
Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near noted in a research note that the forecast suggests “economic pressures may be weighing on the advertising market, and revenue-growth reacceleration that’s modelled for 2024 may be premature.”
During a conference call after the forecast release, Trade Desk’s CEO Jeff Green mentioned that the company began observing a reduction in spending starting in October, particularly from industries such as the auto sector and consumer electronics, specifically around cell phones and media and entertainment. Green pointed out that strikes, such as those in the U.S. auto industry, have recently impacted these industries. However, he noted that spend has stabilized beginning this month.
Analysts at Evercore highlighted “brand spend weakness” attributed to the Israel-Hamas war and “caution among brand advertisers and agencies around ad spend during that time.”
The digital advertising market initially appeared poised for a rebound after Meta, Snap, and Pinterest surpassed revenue expectations in the recent quarter. However, Meta’s shares slid when executives warned of soft advertiser spending, expressing uncertainty about the revenue outlook for 2024.
The Trade Desk’s weaker forecast underscores potential challenges in the advertising sector, raising questions about the timing of projected revenue growth in the coming years.
