Should You Buy The Trade Desk After Its 68% Slump in 2025?

The Trade Desk shares have plummeted nearly 80% from their all-time high after a roughly 70% decline in 2025 and an additional ~16% drop to start 2026, driven by slowing growth and intensifying competition from Amazon. Amazon Ads generated $17.7 billion in Q3 (up 24% YoY) while The Trade Desk grew revenue 18% in Q3 and reported $2.8 billion on a trailing-12-month basis; the stock's forward P/E compressed from north of 50x to about 15x versus the S&P 500 at 22.2x. The piece frames the weakness as a potential value buying opportunity but flags execution and competitive risk that could keep the valuation depressed.

Analysis

Market structure: Amazon (AMZN) is the clear winner — its $17.7bn-quarter ad engine (Q3 +24% YoY) offers higher-intent placements and vertical integration that compresses demand for open-web DSPs like The Trade Desk (TTD). TTD’s revenue base (~$2.8bn TTM; Q3 growth ~18%) is still growing but faces a two-way pressure: advertisers reallocating spend to retail/search and margin compression as TTD competes on price and measurement parity. Expect market-share shifts of several hundred bps over 12–24 months toward platforms owning first-party commerce data, re-pricing growth multiples from growth-premium to value multiples (TTD now ~15x forward vs S&P 22x).

Risk assessment: Tail risks include accelerated privacy regulation or antitrust action against Amazon (6–18 months) that could restore open-web demand, or conversely a macro ad recession (GDP contraction/ ad budgets down 5–10%) that further squeezes DSPs. Short-term (days–weeks) price moves will be volatility-driven around earnings/ ad-revenue prints; medium-term (quarters) fundamental re-rating depends on TTD’s share stabilization (>15% YoY revenue needed to avoid further multiple compression). Hidden dependency: advertiser measurement/attribution standards (third-party IDs, clean rooms) could flip bargaining power quickly if TTD proves superior measurement.

Trade implications: Direct: establish a tactical, staggered long in TTD (2–3% portfolio) only if next two quarters show revenue decline <5% QoQ and gross margins stabilize; use protective puts below a 30% downside threshold. Pair trade: long AMZN (1–2%) vs short TTD (equal notional) for 6–12 months to capture ad-share divergence; rebalance on quarterly ad prints. Options: implement 9–12 month TTD call spreads (buy long-dated 30–40Δ, sell 60–70Δ) sized to cap max loss to ~50% of notional, and buy 3-month puts as near-term crash protection.

Contrarian angles: Consensus may underweight TTD’s CTV/ programmatic strengths and identity graph partnerships — if TTD stabilizes share losses and posts 15–20% revenue growth with margin recovery, multiple could re-expand to 18–20x in 12–24 months (20–40% upside). The market may be over-discounting network effects; however, the asymmetric risk is real: continued share loss or advertiser migration to closed ecosystems could mean permanent impairment. Watch for two catalysts that flip the trade: (1) Amazon ad growth slowing to <15% YoY for two consecutive quarters or (2) TTD winning a major measurement/partnership (Google/PMPs) that restores advertiser confidence within 6–9 months.

Key Decisions for Investors

• Consider establishing a staggered long position in TTD equal to 2–3% of portfolio over 3 months (scale in on any >10% pullbacks); set a hard stop at a 30% drawdown from entry and trim to half if forward revenue growth falls below 10% YoY on two consecutive quarters.
• Implement a 6–12 month pair trade: go long AMZN (1–2% portfolio) and short TTD (equal notional); target capturing ad-share reallocation; close if AMZN ad growth decelerates to <15% YoY for two quarters or if TTD re-rates above 18x forward earnings.
• Buy a 9–12 month TTD call spread (buy ~30–40Δ, sell ~60–70Δ) sized so max loss is ~50% of notional and simultaneously buy a 3-month put (~10–20Δ) as tail protection; this keeps upside exposure while limiting immediate downside risk ahead of earnings.
• Reduce exposure to pure-play/independent adtech names by 25–50% and redeploy into platform owners with first-party data (AMZN, selected retail media names) over the next 3 months, monitoring advertiser share metrics each quarter as the trigger for further rotation.