Financials and Estimates

The three-year record and what is expected next

Over FY2023–FY2025 The Trade Desk turned 49% revenue growth into a near-tripling of operating profit, lifting operating margin from 10.3% to 20.3% [1]. In the first quarter of FY2026 that operating leverage stalled: revenue rose 12% and adjusted EBITDA fell 1% [2]. Consensus now models roughly 10% revenue growth in each of FY2026 and FY2027, and management's own full-year margin commitment requires the second half to do what the first half did not.

What the last three years show

The income statement over FY2023–FY2025 is a study in operating leverage. Revenue compounded at 22.0% a year while total operating expenses grew at 15.0%, so the expense base fell from 89.7% of revenue to 79.7% and operating income nearly tripled [3].

Sources: FY2025 Form 10-K, Consolidated Statements of Operations [4]; Adjusted EBITDA reconciliation for FY2024–FY2025 [5], FY2023 derived on the company's stated definition from reported net income, depreciation, stock compensation, interest income and tax [6].

Three features of that table matter more than the totals.

The leverage came from general and administrative, not from the platform. General and administrative expense was $520.3 million in FY2023 and $518.5 million in FY2025 — flat in dollars while revenue grew 49%, so it fell from 26.7% to 17.9% of revenue [7]. The company attributes the FY2025 decline chiefly to a $61 million reduction in the CEO Performance Option charge under graded-vesting attribution, partly offset by higher legal and professional fees [8]. That option was fully expensed by the first quarter of 2026, which is the subject of Cash and Share Count; the point here is that roughly nine percentage points of the ten-point margin gain came from a line whose decline was driven by that charge, which will not recur.

Platform operations moved the other way. The cost of actually running the bidding infrastructure rose from 18.8% of revenue in FY2023 to 21.4% in FY2025, driven by a $123 million increase in hosting costs for query volume, feature use by its technical teams, and new data centres [9]. In the first quarter of FY2026 it reached 26% of revenue [10].

The tax line is not stable. The effective rate was 33.2% in FY2023, 22.5% in FY2024 and 32.7% in FY2025 [11]. The swing is largely the tax effect of employee equity awards, and it now runs against the company: in the first quarter of FY2026 the rate was 49.3% because vesting awards produced tax detriments rather than the benefits recorded a year earlier [12]. The restricted shares that vested in the quarter carried a weighted-average grant-date value of $66.07, and the 15.5 million still unvested at March 31, 2026 carried $52.57, against a $17.29 share price [13]. The detriment is a function of the drawdown itself and persists while that gap does.

Cash followed earnings across the three years. Operating cash flow went $598 million, $739 million, $993 million; free cash flow on the company's own definition — operating cash flow less purchases of property and equipment and capitalised software — went $543 million, $632 million, $783 million [14]. Capital expenditure quadrupled over the same span, from $47 million to $197 million; what that buys, and how stock compensation and the buyback change the per-share arithmetic, is the subject of Cash and Share Count.

The balance sheet is the one part of the record that has not deteriorated. At March 31, 2026 the company held $878 million of cash and $528 million of short-term investments against no drawn debt, with $445 million available under an undrawn revolving facility and $2.0 billion of working capital [15] [16]. Total liabilities of $3.28 billion are almost entirely accounts payable to media suppliers ($2.63 billion), matched by $3.32 billion of receivables from advertisers [17]. There is no maturity wall, no covenant to breach and no refinancing to negotiate.

Where the operating leverage went

The clearest way to see the change is the incremental margin — what each additional dollar of revenue added to profit.

Source: derived from reported revenue, operating income and Adjusted EBITDA, FY2023–FY2025 Form 10-K [18] [19] and Q1 FY2026 Form 10-Q [20] [21].

In FY2024, 48 cents of every incremental revenue dollar reached adjusted EBITDA. In FY2025, 41 cents. In the first quarter of FY2026, revenue rose $72.8 million and adjusted EBITDA fell $1.8 million — an incremental margin of negative 2.5% [22]. The adjusted EBITDA margin fell from 33.7% to 29.9% year over year, and net income fell 21% on revenue that grew 12% [23] [24].

Management's account is that operating expenses excluding stock compensation rose 18% against 12% revenue growth, "particularly in areas like platform operations as we optimize our platform infrastructure and implement more AI-powered tools" [25]. The first quarter is also seasonally the weakest: adjusted EBITDA margin ran about 34% in the first quarter of FY2025 and about 47% in the fourth [26] [27]. Seasonality explains the level; it does not explain a 380 basis-point year-over-year decline in the same quarter.

Guidance against delivery

The company does not guide to a full year of revenue. It guides one quarter at a time, always as a floor — "at least" a stated figure — plus, since the fourth quarter of FY2025, an annual adjusted EBITDA margin commitment [28]. Nine consecutive quarters of that floor can be checked against what arrived.

Sources: quarterly revenue guidance from the Q4 FY2023 [29], Q1 FY2024 [30], Q2 FY2024 [31], Q3 FY2024 [32], Q4 FY2024 [33], Q1 FY2025 [34], Q2 FY2025 [35], Q3 FY2025 [36] and Q4 FY2025 [37] calls; reported quarterly revenue from the Form 10-Q series and, for fourth quarters, derived as the full year less the first three quarters [38].

Eight of the nine quarters cleared the floor, by a median of 1.7%. The exception was the fourth quarter of FY2024: guided to at least $756 million, delivered $741 million, and described on the call as the first shortfall "in our 8.5 years as a public company, excluding the first quarter of 2020" [39] [40]. What followed was a reset in how the floor is set: the very next guide, for the first quarter of FY2025, was cleared by 7.1%, and the adjusted EBITDA guide of approximately $145 million for that quarter produced $208 million — 43% above [41] [42].

Every adjusted EBITDA guide since has also been beaten: approximately $259 million guided and $271 million delivered in the second quarter of FY2025, $277 million and $317 million in the third, $375 million and $400 million in the fourth, $195 million and $206 million in the first quarter of FY2026 [43] [44] [45] [46] [47]. The practical reading of the second-quarter FY2026 guide of at least $750 million is therefore not 8.1% growth but something closer to 10%: applying the post-reset median beat of 1.7% gives roughly $763 million against $694 million a year earlier [48].

The 2026 margin commitment

On the first-quarter FY2026 call the company committed to a "full-year 2026 adjusted EBITDA margin percentage to be at least 40%, approximately in line with 2025" [49]. FY2025 came in at 41.3% [50] [51], so "at least 40%" already contains a step down of about 130 basis points, and the two phrases are only consistent at one decimal place of rounding.

The arithmetic of getting there is tight. The first half of FY2026 is now largely known: $689 million of reported revenue plus a $750 million floor, and $206 million of reported adjusted EBITDA plus a $260 million guide — a 32.4% first-half margin against 36.6% a year earlier [52] [53] [54] [55]. On consensus revenue of $3.18 billion for the year, the remaining half carries about $1.74 billion of revenue and, to reach a 40% full-year margin, needs $805 million of adjusted EBITDA — a 46.3% second-half margin.

Source: derived from reported and guided figures — Q1 FY2026 Form 10-Q [56], Q1–Q4 FY2025 and Q1 FY2026 earnings calls [57] [58] [59] [60] [61] [62]; FY2026 revenue on consensus estimates.

The second half of FY2025 delivered 45.2%. So the commitment asks the second half of FY2026 to expand its margin by roughly 110 basis points year over year, immediately after a first half that contracted by 420. Repeating last year's second-half margin exactly puts the full year at 39.4% — below the floor. Adding the guidance-beat pattern back in, with the second quarter clearing its EBITDA guide by the 5.7% it managed in the first, brings the year to 39.9%. On the evidence available, "at least 40%" is achievable and has essentially no cushion in it.

Two things could widen that cushion, and both are visible in the record. Headcount growth is planned to stay below revenue growth for the remainder of the year, a discipline the company also applied in 2025 [63]; and revenue above the consensus line lifts the margin denominator and numerator together, since the incremental cost of an additional impression is largely hosting.

What the estimates say

Consensus has settled on a business that grows at roughly the rate it is currently guiding, rather than one that reaccelerates or one that breaks.

Sources: FY2025 revenue per the Form 10-K [64]; forward figures are consensus estimates as of late July 2026, no filing source.

Two features of the consensus set deserve attention.

The reset is recent and it has held. Consensus adjusted EPS for FY2026 stood at $2.07 ninety days before the reference date and at $1.85 now, a cut of 10.6%; FY2027 fell from $2.40 to $2.15, a cut of 10.5%. Almost the entire move happened between the ninety-day and sixty-day marks — the window containing the May 7, 2026 first-quarter report — and the average has moved less than 0.2% in the month since.

Source: consensus adjusted earnings estimates and their 30-, 60- and 90-day prior vintages, as of late July 2026; no filing source.

The dispersion is one-sided at the far end. For FY2026 the revenue range is narrow — a $3.05 billion low against a $3.21 billion high across 35 estimates, because three of four quarters are already guided or reported. For FY2027 the range opens to $2.63 billion low against $3.80 billion high across 36 estimates. The low is not a slow-growth case: at $2.63 billion, FY2027 revenue would be 9.2% below the $2.90 billion the company reported in FY2025. At least one analyst covering the name models absolute revenue decline two years out. The adjusted EPS range for FY2027 is narrower in relative terms, $1.79 to $2.58.

The published sell-side stance is a split with a long tail of caution: 2 strong buy and 11 buy against 18 hold, 4 sell and 1 strong sell, with an average target of $24.32 — 40.7% above the $17.29 price. A target 41% above the market, published by the same body of analysts that cut its FY2026 earnings estimate by 10.6% in May, is better read as the output of a model than as a forecast of where the shares trade.

Forward multiples

At $17.29 on 471.0 million shares the equity is $8.14 billion; net of $1.41 billion of cash and short-term investments with no drawn debt, the enterprise is $6.74 billion [65]. Against management's own FY2026 commitment — 40% of consensus revenue, or $1.27 billion of adjusted EBITDA — that is 5.3 times. Against consensus adjusted earnings the shares trade at 9.3 times FY2026 and 8.1 times FY2027.

Sources: net cash and share count from the Q1 FY2026 Form 10-Q [66]; adjusted EBITDA on the company's FY2026 margin commitment [67] applied to consensus revenue; earnings multiples on consensus adjusted EPS; price of $17.29 at July 24, 2026.

Those multiples carry a definitional warning. The consensus $1.85 is an adjusted number that excludes stock compensation; the statutory result is materially lower. In the first quarter of FY2026 the company reported $0.28 of adjusted diluted earnings against $0.08 on a GAAP basis — a gap of $0.20 a share in a single quarter [68]. Carrying that per-share gap across four quarters puts the FY2026 consensus at roughly $1.05 of GAAP earnings, or about 16 times the price rather than 9. The gap is an illustration, not a forecast: it moves with the tax treatment of vesting awards, which is exactly the line that swung the first-quarter effective rate to 49.3% [69]. The full ladder from adjusted to statutory to post-compensation cash is worked through in Cash and Share Count.

The read

The three-year record and the forward set point in opposite directions, and the pivot between them is narrow enough to date. Through FY2025 the company converted growth into profit at 41 to 48 cents on the incremental dollar and lifted operating margin ten points; in the first quarter of FY2026 the incremental margin was negative, and roughly nine of those ten points of margin gain traced to a general and administrative line held flat by an executive option charge that has now been fully expensed. What consensus and the company now describe is not a business in decline but a business growing near 10% with a margin that has stopped rising — priced at 5.3 times its own committed FY2026 adjusted EBITDA, with $1.41 billion of net cash, no debt and no maturity to refinance.

The strongest fact against reading the first quarter as an inflection is the guidance record itself: eight of nine revenue floors cleared and five consecutive adjusted EBITDA guides beaten by between 4.6% and 43%, which argues the second-quarter $750 million floor and the $260 million EBITDA guide are set to be exceeded, and that the second-half margin the 40% commitment requires is a number management already has line of sight to. The strongest fact for reading it as an inflection is that the cost line moving against the margin is platform operations — the hosting and data-centre cost of running the bidding platform — which rose from 18.8% of revenue in FY2023 to 26% in the first quarter of FY2026 and is tied to query volume rather than to a discretionary budget.

Two observable items would settle it inside two reporting cycles. The second-quarter adjusted EBITDA margin: at or above 34.7% on revenue above $750 million, the first quarter reads as timing; materially below, the leverage reversal is structural. And whether the "at least 40%" language survives the second-quarter call intact — a downgrade to "approximately 40%" or its removal would say more than any single quarter's number, because it is the only annual commitment management has made.