Down 65% This Year, Is The Trade Desk Stock a Buy?

The Trade Desk's (NASDAQ: TTD) brutal sell-off in 2025 has been hard to miss. Shares of the programmatic advertising company are down roughly 65% so far this year, giving the stock a disastrous five-year performance in which it has nearly been cut in half. This compares to the S&P 500's nearly doubling during this period (including dividends).

The company operates a valuable platform that enables brands to purchase digital ads across the "open internet," or advertising inventory outside of "walled gardens" such as Meta Platforms' Facebook and Instagram. In addition to ads across internet properties, this includes the fast-growing and lucrative connected TV, retail media, and podcast space.

Yet, growth has cooled as competition from tech giants has intensified, and the growth stock still trades at a lofty valuation -- which may leave investors wondering what to do. Let's dive in and see.

Image source: Getty Images.

Growth has cooled

The Trade Desk's third-quarter revenue rose 18% year over year to $739 million. That is solid in isolation, but it marked a clear slowdown from 27% revenue growth in the third quarter of 2024. Additionally, it's slower than the 22% year-over-year growth the company delivered in the first half of 2025.

Part of the story is a tough comparison. The company benefited from heavy political advertising in the third quarter of 2024, which created a high bar for 2025. Management said that if you back out political spending from the year-ago period, third-quarter 2025 revenue would have grown about 22% year over year.

By contrast, Meta Platforms grew revenue 26% year over year in its own third quarter of 2025, off a much larger base. Meta benefits from apps for social media and messaging and from commerce and messaging tools layered on top of that user base.

Still, The Trade Desk is a great business. Just look at profitability. In Q3, The Trade Desk delivered a 16% net income margin and an impressive 43% adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Additionally, the business remains a cash cow, generating substantial free cash flow. Free cash flow in the third quarter totaled $155 million.

Additionally, management says AI (artificial intelligence) is helping its business. "As AI transforms the advertising ecosystem, customers globally are relying on The Trade Desk to enable objective, data-rich buying across channels and partners, to drive real-world outcomes for their businesses," CEO Jeff Green said in the third-quarter 2025 earnings release.

That focus on data and objectivity matters as marketers look for alternatives to closed ecosystems like Meta's. The challenge, however, is that the growth profile no longer looks the way it did -- and investors are calling into question the stock's valuation.

Premium valuation and real risks

Despite the sell-off, the stock still does not look cheap relative to its current growth. The stock has a price-to-earnings ratio of 45. Meta's is 26. This means investors are paying a materially higher multiple for slower growth and a smaller platform.

Making matters worse, guidance points to more deceleration. The company expects at least $840 million of revenue in the fourth quarter of 2025, which implies year-over-year growth of about 13% compared with the $741 million it generated in the fourth quarter of 2024. Management tends to guide conservatively, but even a modest beat would still leave fourth-quarter growth well below the 22% rate it posted a year earlier.

Of course, management emphasized in its fourth-quarter release that if you exclude politics-related ad spend on its platform in the fourth quarter of 2024, the forecast's implied growth rate is about 18.5%.

The business model also carries real strategic risk. The Trade Desk does not own social networks, search portals, or large e-commerce sites. It operates as an independent demand-side platform, sitting between advertisers and a wide range of publishers across the open internet. That independence lets the company claim it is more objective than platforms that sell their own ad inventory, and many brands value that position.

Yet, this also means The Trade Desk relies on inventory and data controlled by others, while integrated players like Amazon combine shopping data, streaming video, and ad tools inside a single ecosystem.

Investors can take some comfort from the company's strong balance sheet and its willingness to return cash. The Trade Desk generated substantial operating cash flow in the third quarter and used $310 million to repurchase stock, with another $500 million in buyback authorization recently added. But buybacks create value over time only if the underlying growth and competitive position stay healthy.

For aggressive investors who believe in the long-term shift of ad budgets toward the open internet, today's lower share price may look tempting. The company still has high customer retention, attractive margins, and a product roadmap that leans heavily on AI and identity tools.

But investors may not want to rush to buy, given The Trade Desk stock's lofty valuation. With a price-to-earnings multiple far higher than Meta's, there's simply very little breathing room.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and The Trade Desk. The Motley Fool has a disclosure policy.