The Trade Desk (NASDAQ:TTD) is going into its first quarter earnings report with a cautious outlook from Jefferies, with analysts warning that further estimate reductions may be ahead despite the potential for a near-term revenue beat.
The analysts expect Q1 revenue to come in roughly in line with company guidance, implying around 10% year-over-year growth.
As in prior quarters, a modest beat of 1% to 2% is considered possible, supported by relatively resilient advertising demand during the period. However, Jefferies does not see this as a meaningful catalyst for the stock.
Looking beyond the first quarter, the firm expressed skepticism about consensus expectations for the rest of the year. Q2 revenue projections, currently around 12% growth year over year, are viewed as achievable but lacking clear upside potential. Jefferies noted that even with a slight first-quarter beat, implied sequential growth into Q2 would already sit at the upper end of historical ranges, leaving limited room for positive surprises.
The more significant concern lies in the second half of the year. Current Street estimates call for revenue growth of approximately 13% in the third quarter and 15% in the fourth quarter. Jefferies argued that these assumptions may be overly optimistic, pointing out that they require a notable acceleration in gross advertising spend compared with recent trends.
With fiscal 2025 gross spend growth around 10%, achieving 13% revenue growth in 2026 would likely depend on either faster spend growth or stable-to-improving take rates—both of which the firm finds difficult to confidently project.
Additional uncertainty stems from evolving industry dynamics. Increased scrutiny around platform fees, highlighted by recent agency developments, could pressure take rates or lead to reduced advertiser spending. Competitive pressures are also intensifying, particularly from large technology platforms and emerging AI-driven advertising tools, which may begin to capture experimental budgets.
Jefferies also highlighted structural concerns, including management turnover and questions around valuation support given stock-based compensation levels. While some investors have pointed to potential tailwinds, such as easier comparisons in certain advertising verticals or political ad spending, the firm remains cautious about the durability and scale of these factors.
The firm maintained a ‘Hold’ rating and $22 price target on The Trade Desk, which traded at $23 on Thursday afternoon.
The company is expected to report its Q1 earnings on May 14.