Jefferies issued a note on Thursday advising caution on Trade Desk ahead of the company’s first-quarter earnings. The firm warned that consensus revenue expectations for the second half of 2026 look "overly aggressive," and suggested that additional estimate cuts may be needed.
Analyst James Heaney highlighted the magnitude of the current Street forecasts, noting they imply a gross spend acceleration of roughly 300 basis points to 13% year-on-year in 2026 - a pace Jefferies described as "tough to underwrite" given that full-year 2025 gross spend expanded by only about 10%.
On near-term results, Jefferies' internal model projects Q1 revenue roughly in line with company guidance, reflecting about 10% year-on-year growth. The note recognizes, however, that a modest beat of 1-2% is possible if broader ad market resilience continues.
Despite that potential for a small upside in Q1, Jefferies flagged limited room for positive surprises relative to Street estimates for Q2, which currently assume 12% growth. The firm also warned that recent scrutiny around fees following holdco and Publicis-related headlines increases the risk of near-term pullbacks in gross spend and compression of take rates.
Looking beyond the spring quarter, Jefferies said Street Q3 revenue assumptions imply roughly 8% sequential quarter-on-quarter growth - a level of sequential acceleration Trade Desk has not produced since 2021, according to the note.
Jefferies outlined a set of structural concerns that temper its outlook. The firm mentioned ongoing competition from Amazon, the possibility that AI-native platforms could attract experimental advertising budgets, recent management turnover, and elevated stock-based compensation as factors weighing on valuation.
The analyst team also expressed skepticism about the potential impact of an OpenAI partnership, saying they are "skeptical that an OpenAI partnership would be material" to Trade Desk's forward results.
Summing up their position, Heaney wrote, "While sentiment is washed out, we're not prepared to call a bottom. No model changes, reiterate Hold and $22 PT."
Context for investors
- Jefferies expects Q1 to land near guidance with about 10% year-on-year revenue growth, though a modest beat is possible.
- The firm believes Street expectations for the latter half of 2026 are aggressive, implying a large acceleration in gross advertiser spend that Jefferies finds hard to justify.
- Near-term risks include fee scrutiny and take-rate pressure following recent industry headlines.