Q2 2025 Trade Desk Inc Earnings Call
Greetings, welcome to the trade desk, second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note. This conference is being recorded, I will now turn the conference over to your host.
Chris Toth, you may begin.
Thank you operator. Hello and good afternoon to everyone, welcome to the trade desk, second quarter 2025 earnings conference. Call on the call today our CEO and co-founder Jeff Green and Chief Financial Officer. Laura shank Kine, a copy of our earnings press release is available on our website in the investor relations section at the trade desk.com. Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements, these statements are subject to risk and uncertainty and reflect our views and assumptions as of the date. Such statements are made actual results. May Vary sign.
Significantly and we expressly disclaim any obligations to update the forward-looking statements made today if any of our beliefs or assumptions proved incorrect actual Financial results could differ materially from our projections or those implied by these forward-looking statements for a detailed discussion of risks, including the most recent economic volatility caused by tariffs. Please refer to the risk factors, mentioned in our press release and our most recent SCC filings in addition to our gaap financial results. We present supplemental non-gaap financial data, a Reconciliation of the gaap to non-gaap measures is available in our earnings press release. We believe that presenting these non-gaap measures alongside. Our Gap results offers a more comprehensive view of the company's operational. Performance with that. I will now turn the call over to CEO and co-founder Jeff Green Jeff.
Thanks, Chris and good afternoon everyone. Thank you for joining us today.
As you've seen from our press release, we again posted strong growth. In the second quarter, our Revenue grew about 19% compared with Q2 last year and we continue to outpace the digital advertising Market driven by The Innovation and value. We deliver to our clients every day.
CTB continues to be our fastest growing Channel. With no signs of slowing down Partners like Disney. Nbcu Walmart, Roku LG Netflix and many others are deepening. Their relationships with us around the growing decision, programmatic opportunity in CTV, which delivers the most effective and highest return on ad spend compared to insertion order or programmatic guaranteed buying
With leading agencies and brands. In fact, the number of live jvp's is at an all-time high, and we continue to see spend under jbp significantly outpace the rest of our business.
What's even more encouraging is the strength of our jbp Pipeline with nearly 100 jbp in progress. Many of them in the late stages of development and while many of our jvp's are signed directly with Brands, we are working hand in hand with their agencies. Almost in every case.
To bring these Partnerships to life. It is not an either or
I want to start by giving you an update on our business, but I also want to take the time to describe our vision and where we're heading.
We see clearly, what is on the horizon for our space and we're convinced where the best position company in adtech to accelerate our growth in 2026.
But it is important. We share the opportunity. We see because we think aligning our vision and efforts with our team, our clients, our partners, and our investors will maximize our ability to capture the unprecedented and unique opportunity in front of us.
So, first an update on the business?
There are several key areas of progress to highlight here. First, we are delivering on kokai. Our most significant platform upgrade to date and 1. That represents a new frontier in digital advertising Trading.
Kokai gives advertisers unprecedented power to drive precision and relevance in everything. They do all powered by the industry's most advanced AI technology, COA.
We have injected AI into so many parts of the system that clients that have adopted kokai have seen. Tremendous performance improvements Samsung was able to drive a 43% Improvement in reaching its target audience, for an omni Channel campaign in Europe.
Rewards saw a 73% Improvement in cost per acquisition for campaigns in Asia, using kokai. In the aggregate, we are seeing more than a 20 point Improvement across key, kpis for a campaigns, running in kokai.
what's even more encouraging is that clients who have transitioned the majority of their spend on kokai are increasing their overall, spend on the trade desk by more than 20% faster than those who have not
This is precisely what we believed was possible. When we launched kokai, advertisers are getting meaningfully better Returns on their ad dollars and they are doubling down on the open internet and on us as a result.
Around 3/4 of all clients spend is now running through kokai and we expect all of our clients to be using kokai by the end of this year.
Second, we are trying to create the most efficient supply chain possible for digital advertising, and we are seeing great progress with open path. Open path. Allows Publishers to directly integrate with the trade desk if they choose to and it enables Publishers to see more clearly, how much our clients are willing to pay for their ad Impressions and it gives our clients a direct line of sight into what they are buying.
And today a material amount of spend on our platform is now flowing through open path and it is doing exactly what we expected.
Open path. Is both a canary in the coal. Mine and a stocking horse.
We don't expect a 100% of spend to flow through open path, but we do expect it to 1 way or another make the supply chain better and more efficient.
And the benefits have been exceptional, not just for our clients but for the Publishers too, by providing our clients with clearer signal, they have more confidence in what they're buying.
And they're typically willing to buy more.
We have a long-standing partnership with News Corp. For example, the New York Post has been one of the pioneers of OpenPath, and they've seen a 97% boost in their programmatic display revenue. As a result,
Also in the journalism field. Hearst newspapers have adopted open path and has seen a 4X Improvement in their fill rate. Since deploying it as Amanda Gomez SVP of Revenue operations, and add technology at the New York Post said, and I quote, the New York Post is always striving for ways to simplify our connection to advertisers to help fill our ad, spots more efficiently and transparently. We partnered with the trade desk to test, open paths to help achieve this goal with great success over the past year ultimately helping to fuel programmatic Revenue growth,
By the trade desk to get into the supply side of digital advertising. We're not getting into the yield management business.
Our clients are exclusively the buyers.
Open Path is simply an effort to improve the quality of the supply chain for everyone in the ecosystem.
Key to our supply chain work is our sincera acquisition earlier. This year, we have already made a tremendous amount of supply chain data available to the ecosystem for free via opens in Sarah.
There anyone can log in and see the quality of advertising on thousands of publisher sites. Since launching open sincere, just a few weeks ago, we've already had many Publishers, contact us to say, they didn't realize some of the quality dynamics of the ad experience on their own destinations and they are improving those ad experiences as a result.
But as important as he opens and Sarah is I'm even more excited to embed the full scope of sincera data across our platform as 1 of the most important metadata sources and signals for the way that we value individual Impressions and work on behalf of the buyers.
For instance, we might see the same ad impression from hundreds of Supply paths.
We don't want to burden our clients with figuring out which 1 is best and it is not efficient to manage that challenge by defaulting to Deals. Instead kokai does that work for our clients leveraging Ai and data from sources like sincera. So advertisers can obsess about buying the right impression rather than the delivery mechanism.
But I do want to talk about deals for a second.
1 additional Innovation that will help accelerate. Our supply chain work is deal desk.
It is 1 of the major final pieces of kokai and it is in beta now,
Deal desk, leverages AI, especially AI forecasting to reshape how we think about deals, between advertisers and Publishers and intermediaries such as ssps. It helps advertisers and Publishers understand how deals are performing how they are pacing whether the right impressions are being delivered and so on. But perhaps just as important when deals are underperforming, deal desk will help those deals. Get back on track and it will showcase open market and premium internet alternatives.
We are seeing very strong appetite for deal desk. Across both advertisers and Publishers everyone recognized the limitation of deals and wants Innovation that can help improve them.
Disney is 1 of the first Publishers to lean in to deal desk. Jamie power, at the Walt Disney Company has said several times over the past couple years that they intend to shift 75% of their ad Revenue to biddable programmatic by 2027.
I'm thrilled that our Innovation will help them achieve this goal and she said when talking about deal desk and I quote as more buyers shift toward biddable activation we're focused on ensuring they have the tools access and flexibility, they need to drive results. Our relationship with the trade desk, reflects our commitment to meeting advertisers where they are.
And evolving how we transact to deliver greater efficiency and performance close quote.
The third area, I'd like to focus on is work. We've been doing to advance objectivity in everything we do and across the adtech ecosystem.
If the Google antitrust trial taught us one thing, it's that big tech walled garden advertising platforms have a vested interest in guiding spend to their owned and operated media.
So, with Google, it's YouTube with Amazon, its Prime video and of course they can make it seem really cheap from a platform perspective because they make up that cost and much more on the other side of the transaction, because they own the media.
But if you want to reach your audience with objectivity and with no thumb on the scale across the best of the internet, you're more likely to come to the trade desk.
We're seeing more and more clients, understand the importance of objectivity and the power of the premium open internet to reach their target audience as precisely and cost efficiently as possible.
Live sports is a great case study. It's where advertisers get to act with precision and objectivity in reaching Their audience where they are most engaged a few years ago. Just after the pandemic I was on an industry panel in New York City where many of my peers on stage, made the argument that live sports would be the Lynch pin that keeps viewers on linear TV for years to come.
Streaming TV and represent 1 of the most valuable pillars of the open internet.
And we continue to innovate with our partners to bring the full value of live sports to our clients.
1 of the promises of Life, squirts in a biddable. CTV environment is that advertisers can Target key moments like overtime in an NBA game or the PKS at the end of a soccer game?
when the audience is most leaned in,
Well, now we will be offering this capability with new tooling, and kokai and Partnerships with companies such as Disney Sky TV. And Omnicom, which we announced at can a few weeks ago
Another major pillar of objectivity on the open internet is the ability to measure business outcomes of marketing campaigns with precision.
Kokai already has the industry's most advanced retail media Marketplace.
But we've recently launched expanded Partnerships with leaders, such as instacart and okado to provide even more granular data on actual consumer purchases. So advertisers can measure with even greater precision,
Again, objectivity is a major factor here unlike others in the market. Our goal is to drive the use of retail data across as many Advertiser campaigns as possible. We do not compete with retailers and only an independent objective partner like us can truly help advertisers unlock this opportunity.
In Q2 a record amount of spend was influenced by retail data, both on our platform and on the Walmart, DSP, as more Shopper marketing budgets flow into programmatic.
And forth. I just like to reiterate that underpinning all of our success. This year is a strong focus on operational rigor. This includes strengthening our leadership team. As you know, the vet kundra joined us as our coo in March. I'm also pleased to announce here that Alex kaiel will be joining as our new CFO. You may know, Alex, as he's on our board, but his relationship with this company. Spans over a decade initially as an early investor in 2014.
He's also been a leader in the digital space for more than 2 decades.
I'm thrilled that he's
a team as I believe there are few in our industry.
Who have Alex's experience and strategic mindset in finance in a way that incense and drives growth for the organization.
This shift has been made possible by Laura Schenkein working with Alex to facilitate this transition.
She will remain in the seat until August 21st and then stay on the team through the end of the year.
I have worked with Laura for more than a decade and I have nothing but tremendous, respect and admiration for her work and her expertise. We wouldn't be here without her contribution to this point. Laura's contribution and passion will live in the trade desk for the entire future of its existence. I love that we join the S&P 500 during her last full quarter. What a milestone and what a note to end on
We are also enhancing the board of directors and I couldn't be more excited to announce that Omar Tawakal will also be joining the board.
Over the years, Omar has been 1 of the real innovators in adtech, whether it was founding blue chi in 2007 or more. Recently, founding Rembrandt 1 of the leaders in Creative AI in advertising. I look forward to his innovators Vision as a part of our board work.
In addition to strengthening our leadership team, we have improved the structure and Clarity of our go to market organization, particularly in how our media Traders account management and Business Development teams work together.
This ensures that our clients experience, the full power of our platform with clear roles and responsibilities across our teams.
lastly, I think this is a unique and important moment to remind our investors our clients, our partners and the rest of our industry about our mission, our vision and our Collective opportunity,
Global advertising is a trillion dollar industry today, and that Tam is all up for grabs.
Additionally, AI is changing everything and creating new opportunities.
quality, AI requires quality data and to trust, AI driven buying long-term requires objectivity
A black box that just sells owned and operated media will struggle far beyond what ad networks have struggled with for decades. Our vision is to Define clearly the category of a DSP.
Database decisioning and measurement is at the core of our offering.
Some have mistakenly thought our Ambitions were about display. Some have mistakenly thought, our Ambitions were only about CTV or branding budgets. Our goal is to buy the entire open internet objectively for buyers, big and small.
We've started with the biggest and we served them. Well we think we've done the best job in the history of adtech of aligning. Our interests with Buyers this enables them to trust us with their data.
On that topic, 1 of the biggest flaws with walled Gardens is that they measure their own performance. We believe it is in the best interest of every retailer including Amazon.
To have the measurement of the open internet based on something more auditable, more independent and more transparent.
That what happens today?
We partnered already with hundreds of retailers around the world to measure in this more objective way. Our retail Partnerships play a very significant role in making it so that the premium open internet gets the first dollar of budget and not the last dollar.
There are a tremendous number of inefficiencies in the open internet. Supply chains for both media and data and we have big plans to change those.
AI is currently changing the world. It has also changed the world of advertising and media. Buying, there are so many specific tasks where AI can massively level up the status quo.
What is an impression Worth to a specific brand? What is the price that this auction is likely to clear at
what is the best supply chain to maximize transparency and minimize unnecessary costs.
These applications of AI are already in our product.
KOA is what powers coa's forecasting, which is predicting the reach and performance of a campaign. But for a single dollar is spent
Distributed to AI is foundational in kokai.
And this is only the beginning.
there are many tasks where agents can improve performance in part because there are always on
as you consider the power of AI in these specific applications, you can see how winning the trust of buyers is so critical.
It is a buyer's market. And as a result, premium inventory matters more than ever.
Again, our value ad isn't that we merely have access to the best of the internet which is what we refer to. As the Big 5, these Big 5 are the best of TV, the best of movies, the best of music, The Best of Journalism, and the best of sports.
Currently consumers, spend most of their time on these Big 5.
But most of the money goes to search and social. It is our aim to make the open internet. The Lion Share of spend and the highest efficacy ad spend in digital
As I've said for over a decade, the lines between brand and performance are artificial and will go away over time. Everything is performance but some performance is optimized for awareness and top of the funnel outcomes and others are pointed at the bottom of the funnel outcomes. Nevertheless. Everything that can be Quantified will be and most spend will be pointed at outcomes.
Before I wrap up, I want to take a moment to speak to the proposed extension of our dual class share structure which was included in our most recent proxy filing. There will be plenty of opportunities to engage in more detail in the weeks ahead but I think it's important to provide some perspective. Now on why the board is making this recommendation.
From the day, the trade desk was founded. We believe that long-term thinking is our greatest advantage.
The vision that we described is a long-term Northstar that we think about in nearly every major decision. We make dual class, helps maintain that, long-term Northstar orientation.
When we went public in 2016, we chose a dual class structure because we knew building something transformative, something that could truly redefine. The open internet would require conviction patience and freedom from the short-term pressures, that weigh on public companies or are the 1-s. Fits-all approach, often promoted by some governance analysts and major proxy advisory firms. Our belief has proven correct. Since then, we've grown from below a 1 billion dollar market cap to about 40 billion dollars today and included in the S&P 500
but instead positioned us to lead for years to come.
We're now at another inflection point.
The digital advertising landscape is evolving, rapidly.
With ongoing regulatory scrutiny of Walled Gardens. The rise of AI, and growing demand for transparency and Independence.
We believe the next decade will be pivotal in determining the winners and losers in our space. And that staying true. To our long-term vision is more important now than ever. This proposed extension isn't about entrenchment,
It's about ensuring that the founder-led strategy that got us here can continue to guide us forward. We deeply value the trust our shareholders have placed in us.
And we remain committed to earning that every day and for the long term.
Let me wrap up by bringing some of these points together. We continue to earn a growing share of the total advertising pie. That momentum is a direct result of the innovation and the execution we're delivering week in and week out, and the value our clients consistently realize by working with us.
About 3 quarters of our spend is using the co High platform. It is the best platform we have ever shipped. And we're confident, it will buy better than every other platform pointed at the open internet.
We have always prioritized helping Brands find their target audience, with precision and relevance across the breadth of the open internet. The trade desk, empowers brands with the tools to control and own their own future. We do that by prioritizing objectivity in everything we do. And with a Relentless focus on driving a clean transparent and competitive Marketplace. I believe it's these principles and the performance, they ultimately drive that attract Major Brands to our platform, and it's our dedication to those principles. That's keeping them here.
All of this positions, the trade desk.
To lead through what we believe will be another defining period of growth.
We're building right now for this next chapter, not just for this year. But for the long term future of the open internet AI is yet another Force separating, the great platforms from the weak ones we've proven time. And again, that our alignment with advertisers, our focus on Innovation and our commitment to transparency and objectivity sets us apart. And with the upgrades we've made across our company, our platform, and our partnership.
I'm more confident than ever that. The trade desk will continue to capture more than our fair share of this growing Market with that. I'll hand it over to Laura to walk through the financials.
Thank you, Jeff for the kind words and good afternoon. Everyone.
I've been at the trades since 2014 and I'm proud of what we've accomplished together from our early days as a startup to going public to joining. The S&P 500
It's been an honor to work alongside and as part of the leadership team.
There were and are so many talented people across this company.
I've also truly valued the relationships and conversations, I've had with many of you in the investment community over the years.
As I transition to a new challenge, I leave knowing the company is in a strong position for the future.
Our Finance and Accounting teams are as capable and energized as ever, and I'm committed to supporting a smooth transition for Alex, as he steps into the CFO role.
I met Alex in 2014 when Hermes was 1 of the company's earliest investors.
He is respected and I have confidence in him as he takes on this new role.
With that, let's move on to our results.
We delivered, a strong second quarter with revenue of 694 million, representing 19% year-over-year growth.
Excluding political spend related to the US elections last year, Revenue, increased around 20% year-over-year.
During the quarter, we continue to build momentum across our key growth areas, as advertisers increasingly value, the efficiency and measurable results of their media Investments.
Growth was particularly strong within CTV and Retail media fueled by the continued shift into decision channels for buying TV and the rapid adoption of retail media across verticals and regions.
With over 70% of spend. Now, on kokai, we continue to see strong results from the new platform.
We look forward to completing the kokai transition and continue to innovate on behalf of the industry and our clients.
With the strong Topline performance in Q2, we generated a proximately 271 million in adjusted ibitta or about 39% of Revenue.
From a scale Channel perspective, CTV let our growth again during the quarter in Q2 video which includes CTV represented, a high 40s. Percentage share of our business and continues to grow as a percentage of our mix.
Geographically. North America represented about 86% of spend and international representative about 14% of spend for the quarter, we're pleased that International growth once again, outpaced North America, as we continue to execute our growth Playbook globally led by CTV,
we remain optimistic that our business outside North America will continue to be a strong contributor to our overall growth throughout the remainder of this year. And in the years to come
in terms of verticals that represent at least 1% of our spend, we saw double digit growth in the majority of our verticals with particularly strong growth in technology and Computing, and medical health.
Home and guarded and style and fashion were below average.
We continue to see significant opportunities for us to gain share in all of the verticals. We serve.
Turning now to expenses.
Q2 operating expenses, excluding stock-based compensation or 448 million up 23% from a year ago.
During the quarter, we continue to make investments in our team and platform, particularly in areas like platform operations as the AI, and machine learning tools, embedded in kokai, continue to drive greater campaign performance.
Income tax expense was $43 million in the second quarter, driven primarily by our profitability and stock-based awards.
Adjusting that income for the quarter, was 203 million or 41 cents per diluted share.
Net cash provided by operating activities. Was 165 million and free cash flow was 117 million in Q2.
Dso's exiting the quarter were 91 days up. 1 Day from a year ago. Dpos were 77 days up 2 days from a year ago.
We ended the quarter with a strong cash and liquidity position. Our balance sheet had about 1.7 billion in cash, cash, equivalents and short-term Investments at the end of the quarter.
In Q2, we use 261 million of cash to repurchase our class, a common stock via our share repurchase program.
Given our strong balance sheet and consistent cash flow generation. We plan to continue opportunistic. Share repurchases while also offsetting dilution from Employee Stock issuances.
Turning to our Outlook. Assuming the macro environment remains stable and we don't see disruptions from large Global Brands which make up a significant portion of our business due to tariff uncertainty. We expect Q3 Revenue to be at least 717 million reflecting 14% year-over-year growth
Excluding the benefit of us political ad spending Q3 of 2024 or estimated growth rate. In Q3 of this year would be approximately 18% on a year-over-year basis.
We estimate adjusted ebita for Q3 to be approximately 277 million.
In closing, we are pleased with our strong performance in Q2 and throughout the first half of the year.
The opportunity ahead has never been more compelling. We're operating in a large and expanding Market supported by a business model, that consistently delivers strong, Topline growth solid profitability and healthy cash flow.
I remain confident and optimistic, as we look to the second half of this year and Beyond,
That concludes our prepared remarks. And with that operator, let's open up the call for questions.
Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2. If you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keys 1 moment, please while we pull for questions.
Once again, please press star 1, if you have a question or a comment, the first question comes from sham PTO with Sig, please proceed.
Hey guys. Hey Jeff. Uh congrats on another solid quarter. I just had 1 question.
as we look into the back half of this year, and into next year,
What gives you the most confidence as you think about how the digital ad environment is evolving and how you're positioned to lead through it?
Uh, thanks for the kind words first. Uh, sham and appreciate the question. Uh, so
um,
Honestly, I have never been more excited about the position. We're at we're in, as we head into the second half of the year, but especially as we look into 2026,
From a macro standpoint, some of the world's largest brands are absolutely facing pressure and some amount of uncertainty.
Uh, some have to respond more than others to tariffs.
Many are managing inflation worries and the related pricing that comes with that.
and there are a number of macro issues that I hear about, but
And it delivers results.
Third, advertisers are more performance driven and deliberate with their spend than ever before and that plays directly into our strengths.
Fourth, and this goes unsaid way too much in trade press, and I don't believe it's fully acknowledged in all the industry press, as well as in things that are even peripheral to that. And that is that the supply-demand imbalance is more in our favor than it has ever been before.
Fifth and and we have understated this to date. But I believe that we talk about this uh uh a lot more in in our prepared remarks. This time, we sit on top of 1 of the most underappreciated data assets on the internet and frankly in the world.
And given that we do in 30 seconds as many transactions as visa and MasterCard do in a year if you add them together.
And that quality data is now feeding an AI engine. That helps the biggest buyers in the world, sort out, the most complex, supply chain they've ever faced in advertising,
That means our data plus AI creates, an amazing opportunity for us for the open internet. And for the biggest brands in the world,
And then 6, which is somewhat related to that supply and demand imbalance, that I mentioned consumers, spend more of their time in the premium open internet than they do inside of Walt Gardens.
And premium advertising performs better.
And yet more ad spend goes to Walt Gardens.
To me this represents a huge opportunity as 1 employee said recently, who joined our company. Something to the effect of I joined trade desk from Facebook because I believe TTD. And the opening internet had a bigger Tam than Facebook has an obviously, a lot more unrealized upside.
And I believe all of that stuff put together is the reason why we continue to take share. You can see that in the CTV upfront this year. Many advertisers, you could even say most advertisers
Prioritize flexibility over full year commitments and that is a benefit to us and to the open internet.
CTB remains our biggest opportunity and we continue to see to see amazing momentum in CTV.
But we're also seeing great Traction in retail media and our joint business plans, have more jbp standard negotiation than we've ever had before and the spend within those jbp is actually growing significantly faster than the overall spend on our platform.
As you know, internally, we're leveling up not just in our product, but across the company. People, process, product, and systems, as well as the coordination between product and engineering, have improved dramatically. That's accelerating the innovation and product velocity to unprecedented levels.
We expect all clients to be using kokai by the end of the year and deal desk continues to gain traction.
With VC joining this, our coo we're also doubling down on operational rigor by strengthening senior leadership and improving go to market discipline.
On the supply chain. We're driving efficiency across the ecosystem with Innovations, like open path, and our integration of sincera.
As Google continues to pull away from the open internet.
That creates a vacuum, which we're stepping into.
Stepping back. It's more of a buyer's market than it's ever been before large Publishers, need Partners like the trade desk to win and as Google and Facebook have largely abandoned the open internet.
The trade desk is the largest source of third-party demand for many Publishers around the world.
so there is some uncertainty out there for some large Brands, but when I look at the trends,
a product, some of which we've shared publicly, but some of which we have not,
Our Partnerships are Pipeline and our leadership team.
I could not be more excited about where we're headed as we close out this year and especially as we look ahead to 2026.
Thanks, Sean.
Okay, the next question comes from facili Keras.
Please proceed.
You're up facility.
Your line is live.
To say it seems to be having technical difficulties. Yep. Let's just go to the next caller.
Okay, the next question comes from Yousef, squali with truist Securities. Please proceed.
DSP and Prime video ad inventory from from your Vantage Point. How are you? Evaluating the evolving competitive landscape and I guess more specifically have there been any meaningful changes in how Amazon has shown up competitively in the market.
Yeah, thanks for the question. Uh, honestly, I was hoping somebody would ask this question because it's perhaps uh 1 of them that I'm most excited to talk about.
So, first and foremost, our strategy has not changed. We give marketers the power and the tools to own and control their own future, and we want them to do that. With, of course, the things that have gotten us here which is full transparency, objectivity and access to the entire internet in my opinion. That is the only way to get large clients to come on your platform and stay there for the long term.
That. And that's why it's always been our focus and it's why we've constantly and consistently 1. The trust of the world's largest brands,
We have long said that W Gardens whether it's Amazon or Google are best suited to buy their own inventory with their own data.
But they're biased makes it hard for them to buy across the open internet, in a truly objective way.
So when you look at it from that perspective, or from a certain perspective, the point of view, Amazon is not a competitor, and Google really isn't much of a competitor anymore either.
We're trying to buy the open internet leveraging technology that values media objectively. We don't have any media.
And we don't grade our own homework.
In my opinion and to me all the data suggests that we're right on this despite their their mixed messages. They are not trying to buy the open internet objectively they can't.
They have way too much Prime Video supply to sell to ever honestly pitch large brands to objectively. Buy the open internet.
They push sponsored listings, most and Prime video after that.
Neither of those compete with us, which is why I say that we're not really trying to compete with Amazon.
When they argue that their DSP, which is not even their top advertising priority, let alone the core of their business.
When they argue that, that's objective to the biggest world. To the biggest advertisers in the world. I believe they weaken the rest of their advertising pitch and they weaken the strength of their AWS pitch.
A scaled independent DSP. Like the trade desk becomes essential as we help advertisers buy across everything and we have to do that without conflict and without compromise.
It is my understanding that Amazon nearly doubled the supply of Prime video inventory in the recent months.
That creates a number of conflicts. And in my opinion, it further weakens their already shaky arguments about objectivity.
But if that weren't enough Amazon already competes with many of the world's biggest advertisers in categories, like retail cpg and Cloud, which makes it difficult for those Brands to fully trust them as a partner.
And when you add in concerns around trust, especially Data, Trust with AWS. It becomes even more challenging for Amazon to credibly position itself as a neutral or even a higher bar objective platform.
We're already seeing the shift. As Major Brands have been reallocating spend toward the trade desk for years precisely because of our independence and objectivity
So to be clear if you insist on calling Amazon, a competitor, we compete with a tiny division of Amazon. We don't compete with amazon.com or retail, we certainly don't compete with AWS.
We compete with whatever small amount of spend goes to the Amazon DSP that isn't spent on Amazon-owned and operated.
I think Amazon is more of a potential partner onestly than it is a long-term competitor. If Amazon opens Prime video to external demand, which I believe they should, we believe we'd be an amazing partner to drive demand to them and it wouldn't it wouldn't surprise us if that were to eventually be the the course that they choose to take.
But to sum up while we watch them closely and we know exactly what they're doing. We are playing in a very different sandbox.
Ours is focused on decision media, Precision identity and outcomes.
They are still primarily focused on pre-negotiated deals, that lack an open identity solution like uid 2.
None of their strategic decisions or Investments suggest that they're trying to buy the open internet objectively or even that. That is a priority.
I'm very optimistic about where we're headed, especially as the overall Tam continues to grow.
And that's why we're focused on that. Thank you so much for the question.
Thank you.
Next question is from facility kav with cannibal research facility. Please proceed.
Hi, can you hear me now? Yes.
Welcome to the call. I apologize for what happened before. Um, so Jeff, you work with nearly all of the world's biggest advertisers, and Lauren's prepared remarks mentioned the uncertainty because of the tariff situation. We also heard names like P&G, Kimberly-Clark, Ford, and Volkswagen talk about this uncertainty on their earnings call. So my question is, how do you see that dynamic playing out in terms of ad spend in the remainder of the year? And how are you factoring that into your Q3 guidance?
Um, would appreciate call on this. Thank you.
In your question because I think it exemplifies some of the pressures and some of the companies that are facing pressure. Uh, if we look at how the last year has progressed
uh, 24 was relatively stable, uh, though you could see signs of volatility beneath the surface
Particularly against the backdrop of what seems like a long time ago, but was a fairly contentious election cycle.
Uh, that pressure intensified in q1.
With growing concerns among the largest brands and agencies, which of course make up the vast majority of our business.
In Q2 starting, right? At the beginning of April. Some of the biggest brands particularly in sectors like Auto and cpg, which are of course meaningful categories for us. And for the Fortune 500
They began to experience even greater volatility but since then Deans have stabilized, I think it's important to know.
That things are more business as usual. However, the impact of tariffs and related policies on these businesses is very real, and you've heard that in earnings calls, if you listen at all.
There is an important point that we haven't made enough. I think in our prepared remarks, and I, I don't know that this is fully appreciated about the difference between us and many other businesses in digital advertising.
Most others rely heavily on SMBs. Our platform is largely concentrated on the large global advertisers.
So, we see the effects that are directly impacting them.
So I would argue that this is a short-term negative, which, by the way, the fact that we concentrate on the large ones is not generally a negative. It is almost always a positive. But just in this moment, it's negative because of how uniquely they're being affected by tariffs and related policies.
But the reason I am so bullish is that in volatile environments.
These things have historically accelerated the move to programmatic precisely because it comes with control agility and performance when advertisers become more deliberate and performance-driven programmatic is at its very best. That's the very best that we can offer to them and that's when we're doing our best work for them.
So because programmatic, which really is just a fancy word for fast-paced and data driven is measurable because it's measurable
It allows us to win share.
So we also see some Tailwinds that I think are important to point out the number of joint business plans. We have with major advertisers continues to increase in the spend under those JPS is growing significantly faster than the overall spend on our platform.
Agility and flexibility matter more than ever; objectivity matters more than ever. And that's been especially evident in the CTV upfront, where many advertisers are opting for flexible commitments over full-year deals. That shift continues to play into our strengths.
So while I'm mindful that, there are some macro backdrop and there is a lot of pressure on some of the biggest brands in the world.
We are confident that our combination of programmatic.
And our position in the market puts us in the very best spot heading into the second half of this year and, of course, into 2026. So, thank you so much for the question.
Thank you.
Up next is Justin Patterson with KeyBank. Please proceed.
Thank you so much. Just a really appreciate the question. I I mentioned that I was excited about the Amazon question, uh, because it was 1 of the things that I was most excited to talk about the 1 that I was most hoping for though, is honestly this question, uh uh because there is nothing that I'm more excited about in our business, both in the short term and in the long term.
Than I am all the product that we're shipping now, and especially the foundation that we've laid in Kokai for the innovation that can be built on top of it.
So and that is largely connected to AI, uh, and I am just so excited about what we're seeing already in the results that have come from Ai and what that means for our future. Again, finally utilizing what I think has been 1 of the most underappreciated data assets on the entire internet,
So uh first of all, the the progress in the last few months has been amazing, the iteration on client feedback, has been really rapid and the release is, especially over the last month have made kokai truly the best adtech platform ever pointed at the open internet.
The Kokai, of course, is the most significant platform upgrade in our company's history. It really marks, what I think, is a new frontier.
In programmatic advertising, in part, just because of the advent of AI and what's possible?
We've injected AI into so many areas in our platform like in forecasting, in campaign optimization in Supply path, optimization in predictive clearing. And in all of those places, it is already paying off.
So to just give you a sense of some of the impact clients who've adopted kokai are already seeing dramatic performance improvements.
Uh Samsung saw a 403% increase in its ability to reach Target audiences for an omni Channel campaign in Europe. Cash rewards in Asia. Reported a 73% Improvement in cost per acquisition and across the board. Kokai campaigns. Are outperforming Legacy ones by more than 20 points on kpis.
But even more telling are the clients who have shifted the majority of their spend to kokai because they're increasing their total spend on the platform more than 20% faster than those who haven't. So those that lean in and try it, see results and then they accelerate their businesses.
Today about 3/4 of spend is already flowing through kokai. So the vast majority of our clients are already on it and we expect full adoption, uh, of all of our clients and other words, all of our clients will use it before the end of the year and we're just getting started when it comes to AI. We've developed a system of distributed AI that comes with checks and balances which allows Innovation to happen in parallel from a number of different.
Different teams all at once.
Uh, which makes me really excited about our pace of innovation, honestly. There's not a single topic that I can talk about today that I am more excited about than our pace of innovation.
But as we look ahead, we're building toward an even more, uh, uh, AI driven world. If you will, where there's agentic use cases, where intelligent agents can monitor, adjust and optimize campaigns in a more effective and more real-time way, like, 1 of the great advantages of AI is that it's always on.
Uh, and of course, uh, we look at at doing this in a way that is a little bit different than others in the advertising space where we're trying to do that in conjunction or in cooperation with agencies and those uh, that buy from brands.
Right now, I'm also extremely excited about Deal Desk, which we started rolling out this quarter. It's currently in beta and represents one of the final pieces of Kokai. It uses AI, especially in forecasting, to rethink how deals between advertisers, publishers, and the intermediaries between them could work or should work. That Deal Desk can evaluate pacing, delivery performance, really everything, and rescue underperforming deals by surfacing open market or premium alternatives.
We're seeing strong interest, by the way, from both advertisers and publishers.
And I'm especially excited that Disney is among the early adopters for this. Um, I think that denotes.
an amazing vote of confidence, but it's also uh, showing that
The challenges facing the programmatic ecosystem today.
Coke is driving real performance gains.
And the AI underneath it is power and both near term results and long term innovation.
Our teams are shipping faster and more efficiently than ever and because of that I'm really excited about what that unlocks this year and especially as we head into next year and continue to layer and innovate on top of what we've been building all year long I'm really proud of what our engineering and product teams have done and they have worked very hard this year and I believe.
It's laid the foundation for a much brighter future for the trade desk.
I along with all the other shareholders I'm Super Grateful for their work. So thank you so much.
Thanks, Jonathan.
Next question comes from Mark Mahaney with Evercore. Please proceed.
Okay. Thanks, I want to run by you two questions first you talked about this 20 point improvement across Cape.
T. K P is for campaigns running in Coke Cai is that really there's is there a snowball element to that is that something that you. Just go from zero to 20 or this is something that builds over time I talk about that.
The cohort is Asia or whatever how long it takes to get to that 20 point improvement and do you think it goes higher than that and then Laura that one segment. The two segments you called out as underperforming home and garden style and fashion I think that's 10% to 15% of your revenue something like that any color on why you think that segment maybe underperforming. Thank you very much.
Yes, absolutely Mark first thanks for the question, let me just open with the first part and then I'll hand, it off to Laura So.
As it relates to the 20% improvement let me let me answer the last part of your question first which is that.
I believe that that is merely scratching the surface of what is possible over time so.
Unlock that AI.
Can bring to campaign optimization is really just beginning.
Whether that is slow or fast largely depends on how campaigns are strength of constrained today.
So.
While there is more supply than there is demand there is often a bunch of settings on any individual campaign that make us. So it really can select from all of the options that are the very best to help that perform.
So essentially what we're creating is a dialogue between man and machine to make it easier for people to see what is constraining.
Their campaign.
And what would be the unlock.
Just simply give us your money and step away from the keyboard the biggest advertisers in the world would never operate that way.
So in order for us to help them on their future we have to enable that dialogue, which is of course more complicated than just saying give us your money and we will take care of everything from there. So.
So with that that approach, sometimes the 20%. If you will can be found in immediately and sometimes it just takes a little bit of a ramp it depends on how well they optimize their campaigns to date and that somewhat manual way that many of them do so.
There are much more unlocks than just what we've seen so far.
Just need to continue to engage with them and it's very quickly becoming the tools are not the bottleneck.
What we've been working so hard to build its actually the understanding the engagement.
Feedback the reporting the new way of engaging which takes some time to learn.
Yeah.
Is increasingly the bottleneck to them realizing that 20% plus.
Plus as opposed to underlying there. So thanks for the question or your response to the second point, Yeah, Hey, Mark Thanks for the question.
The categories that I mentioned I believe the first of them, assuming garden and I would just say for home and garden, It's just more seasonal and that number moves on that's only about around eight ish percent of the business.
Recall correctly, the second category I mentioned with style and fashion, which is about half of that 4% of the business. There just always some categories about the corporate rate and some below and those were the two by that highlighted in the midst of the call.
Okay. Thank you and congrats Laura on a great track record 34 out of 35.
It's amazing so congrats wishing you all the best.
Thanks Mark.
Thanks Martin.
Our next question is from Jessica Reif Ehrlich with Bank of America. Please proceed.
Thank you, Jeff if I can make a passionate arguments to be opened in internet.
It seems like it's.
Losing share when you look at the growth rate of walled gardens, including meta Amazon Google.
Big companies.
How do you envision the share shifts.
Do what you described how do you envision share shifts in walled gardens versus the open internet over the next few years.
Is it just that CTV and become media are just growing slower than walled gardens.
I guess, specifically you talk about taking share.
Who are you taking share from is it are there.
Or is it is it from the Wildcards.
Thank you so much for the question.
I'm really excited to answer this because I think you represent a lot of people in asking the question and I think this is one of the most important while I was excited to talk about Amazon and some of the other things that this might be the most important question for us to ask her to answer today. So.
So first of all it is true that consumers spend more of their time on the premium open Internet and if you think about this from your own perspective, I'll just speak for myself, rather than everybody else, but.
I spend a lot of time.
Inside of premium connected TV I spend a lot of time.
Inside of Spotify in premium audio and same with movies and.
I grew up playing sports I like watching sports a lot when I think about that.
And then you add journalism to that I think about those big pod that we described and the amount of time that's spent there.
As well as where all the purchasing power is.
And then I think about my interactions with Youtube for instance, where I'd go there just like that nearly everybody else does.
But what I'm consuming content and Theres adds there on hovering over it to skip it.
It's a very different engagement that I have with the rest.
The premium open Internet performed way better it's way better for the biggest brands to be associated with it.
So you can look at like the amazing performance that Facebook put up this quarter and say well our data gaming chair and I do think theyre doing very well and I do think they fully understand that of course.
AI represents an opportunity to optimize in some ways. They do have an easier assignment in that they have a nearly unlimited amounts of supply as people continue to spend time on Instagram and they can optimize their supply chain and interact with smbs and improve their margins that I believe that those things together.
Because they're they are optimizing an ecosystem that they control that that is very good for them and thats why they've done well in the short term. It is a much easier short term assignment to ingest AI into one destination or two destinations in Facebook and Instagram than it is to create better supply chain for the entire internet.
And because we are doing that among the most premium parts of the open Internet is naturally takes a little bit longer.
But it also comes with way more upside.
So.
If you look at this long term, where do you do consumer spend most of their time, where what are what is the content that they love the most where do those with purchasing tower spend most of their time.
And where is the best for the biggest brands in the world to affiliate.
You get way more bank brands in that and that Big five if you will than you do.
And you're scrolling.
Instagram.
And so as a result of that just very real phenomenon.
I believe it's only a matter of time.
For the majority of spend is on the open internet and not inside of walled gardens, it's simply because they have an easier job.
And also because they've taken the easy path. If you will as it relates to measurement, which is.
It is easier to grade your own homework and not rely on anybody else to do so.
But as we try to make it so that we're ensuring that we're actually selling them that we're in this for the long haul. It takes a lot more work to coordinate among hundreds or even thousands of companies to make the very best supply chain.
But great markets do they always overtime work out the inefficiencies those that navigate.
Somewhat convoluted supply chain to make it an efficient supply chain I think of what Amazon has done in the retail business and there's a lot of ways. That's what we're trying to do to the media side of the business. So that is a long haul just like it has been for Amazon to do inside of retail, but they have changed everything by doing what they do well.
We are doing I believe the exact same thing to the media side of the open Internet. So.
Really appreciate the question because I'm not sure that there was a better way to give US a forum for why we believe we win long term, but I think it's really important to understand that we're playing a very different game at a long game.
And that AI changes everything and that does create a big advantage for us, but it's not as easy to realize in a quarter or two is it would be if we control the whole supply chain.
Thanks, Jessica and John we have time for one more.
Okay. Your next question comes from Matt Swanson with RBC capital markets. Matt. Please proceed.
Yeah. Thank you so much for making time point me in taking this last question.
Jeff we've touched a lot you guys, obviously have an enviable position in the enterprise in terms of your customer base, but when we think about kind of like the usability of Cotai and then the established space. The SMB for performance dollars and then kind of this emerging SMB market in CTV.
Does the usability and AI features of Cotai and make that a more attractive market for you to go after over time.
Thank you very much for the question.
This is one thing that I don't think we were able to talk about it enough in the prepared remarks, so, especially in light of a question that I just answered I think.
A very fitting sort of follow on to that question.
So we've been very clear with our strategy.
10 years ago, when we went public.
We made the decision to essentially just be open about some of the key components of our strategy.
Honestly I was a little reluctant to do that at first which maybe it would be better if we don't tell the world our strategy.
But I actually think it served us very well and has helped to bring along many of our most devoted clients and partners.
So for at least the foreseeable future, we will keep doing that.
And.
I get that as preface to answer your question, which is.
We uniquely started.
With the sort of fat had enough of long tail, we started with the biggest advertisers in the world and we have the belief that if we could win the trust and do well.
The biggest brands in the world that it would make it easier for us to do that with.
Midsize and smaller.
Incidentally I think the acronym SMB small and mid sized business only.
Useful in the sense that it it makes it digestible, but mid size are as different if not more different than small than the large yards for men or to the small. So there are at least three categories, but if you just look at it as there is essentially just like a ski slope, where you start with the very largest which are.
Very big and they spend a lot of money and then just go down to those very small we are working our way down that slope.
And we have ambition to service all of it.
Recognize the servicing and the vessels are very different than servicing the <unk> that we focus on today, but we also know that if you as you figure out how to serve them well and theyre very tough critics. They have very high demands. If you figure out a service them well then you can use those same tools.
Of course, you get rid of all that.
Questions in the dials that you get to the.
So the large ones and even the visibility.
And simply just perform for them, but taking out reports and taken out styles is a lot easier than starting with nothing as it relates to control that you can get to large buyers and then trying to add it on afterwards.
So.
But it is absolutely in our ambitions and is where we're heading.
But it is not our focus right now because if you look at how much of the Tam is made up of the Els, it's almost half of it.
No.
Cause theyre so much Tam there, we just want to continue to support them and help them grow and think Thats a critical part of the future and especially if you look at how much of CTV has been made up by those in the past.
And we will likely represent represented the lion's share for as far as we can see into the future.
That becomes a great place for us to continue to grow a horsepower as we can see in the future. So while that this is a part of our ambition I don't believe that we have to go Chase Adams our assets in order for us to grow for the foreseeable future.
Just simply need to execute among the clients that we already have and continue to expand.
Thanks, Matt and John can you close out the call. Thank you.
Absolutely. Thank you.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Yeah.
Yeah.