The Trade Desk Stock

Greetings. Welcome to The Trade Desk, Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Chris Toth. You may begin.

Thank you, operator. Hello, and good afternoon to everyone. Welcome to The Trade Desk Second Quarter 2026 Earnings Conference Call. On the call today are CEO and Co-Founder, Jeff Green; and our new Chief Financial Officer, Nate Olmstead. A copy of our earnings press release is available on our website in the Investor Relations section at thetradedesk.com. Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risks and uncertainties and reflect our views and assumptions as of the date such statements are made.

Actual results may vary significantly, and we expressly disclaim any obligations to update the forward-looking statements made today. If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. For a detailed discussion of risks, please refer to the risk factors mentioned in our press release and our most recent SEC filings. In addition to our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures is available in our earnings press release and investor presentation. We believe that presenting these non-GAAP measures alongside our GAAP results offers a more comprehensive view of the company's operational performance.

With that, I will now turn the call over to CEO and Co-Founder, Jeff Green. Jeff?

Thanks, and good afternoon, everyone. Thank you for joining us. I want to start by sharing some of the same perspectives that I've shared with our team over the past several weeks. Next month, we will celebrate 10 years as a public company. Over that time, we have grown revenue at roughly a 34% CAGR. Our annual net income has increased 20x, and our team has grown from just over 400 people at the time of our IPO to thousands.

Over the last 16 years, The Trade Desk has made a number of industry-changing accomplishments. Yet throughout that entire time, we have always tried to learn as much from our mistakes as we do from our successes. We spend a lot of time at Trade Desk reviewing the pivotal decisions that we've made over the years, understanding what worked and what didn't and how we can become a better company. As we continue to map out plans to grow our position and improve our revenue growth, we reflect on what we have learned from past quarters and especially from this last one. Our revenue growth is below our expectations and below the standard we hold ourselves to.

These numbers are not a reflection of our company or the long-term opportunity in front of us. We underperformed our own expectations for two main reasons. First, the macro conditions have made it more difficult for some of the world's largest brands to grow. Of course, this is bigger than advertising and it's bigger than our company. In this economic environment, there are pressures on lower income consumers. As a result, some affected advertisers have become more focused on buying cheap media rather than the best media.

Secondly, we didn't execute as well as we could have, which I'll elaborate on in just a minute. But first, let's start with the macro. We continue to see a unique blend of macro pressures on several categories of advertising. Of course, our business is very unique among the large advertising-focused platforms. Our business is largely a sophisticated buying platform for the biggest brands and advertisers. Almost all of the spend on our platform comes from large Fortune 500 companies and their brands.

Over the long term, our focus on large advertisers is both a strength and a moat. We have partnered with the biggest, most resilient and most loved brands in the world. Nevertheless, some of them are experiencing difficult times right now. All of our customers are operating in a fundamentally different environment than they were even a year ago. CPGs and FMCGs are experiencing unique pressures. These categories were once the biggest in advertising, and they are still one of the biggest.

P&G has described the environment as volatile and challenging and recently stated on their earnings call, "We anticipate continued pressure from commodity and related costs to the crisis in the Middle East. If the conflict eases and oil comes down, trade lanes open up, that will help. If it goes the other way, it will hurt." CPGs and autos are 2 of the sectors of the economy that are most overrepresented on our platform. Around 25% of our business is generated by those 2 categories alone. Autos and CPG have both been set back by tariffs and oil prices. General Motors described a multibillion-dollar impact from tariffs in addition to plans to onshore production to avoid future tariff risk.

Both of these categories of advertisers almost unanimously have described a change in the macro where the consumer wealth bifurcation is creating a squeeze on their customers that is highly uneven consumer behavior, where the high-income consumers are doing well and the lower income consumers are not. For CPGs, this is causing change across everything from packaging to advertising allocation, promotion strategy and, of course, go-to-market. This uneven consumer pressure is impacting autos remarkably.

Both Ford and General Motors highlighted in recent earnings report the growing dependence of auto sales on affluent consumers and industry research from Oxford Economics shows earners in the top 20% of households currently represent more than 50% of new vehicle sales. Both categories are having to create new approaches to advertising. In some cases, budgets have been temporarily reduced as they formulate new plans to go to market. In other cases, some brands are falling prey to low-cost, low decisioning methods like programmatic guaranteed and fixed price.

Doing so essentially means buyers will give away their decisioning in a great buyer's market to the sellers in exchange for lower cost of transactions. This approach is often deliberately shortsighted. Still, we continue to see the growing market leaders in every category optimized for business outcomes, not simply the lowest cost buying platform or the lowest cost media. It is important not to overstate the impact of these dynamics on our business. While these are affecting some of our largest categories and clients, most of our clients are performing well and growing.

In fact, many categories are experiencing secular tailwinds. Financial services, some parts of technology and pharma are growing well and thriving. And we are seeing most of the leading brands in those categories deepen their partnerships with us. One of the leading indicators we watch most closely is our joint business plans or JBPs. We had JBPs with 217 clients as of Q2, representing 38% growth year-over-year. Most importantly, revenue under JBPs grew at a rate of 6x higher than overall revenue. JBPs are much more than commercial agreements. They create a structured framework for brands, their agencies and The Trade Desk to plan, innovate and measure success together.

These partnerships grow faster than the rest of our business because they're built on long-term alignment rather than just individual campaigns. Additionally, the majority of our top 100 accounts are growing double digits year-over-year. Outside of our top 500 advertisers, the remainder are growing over 50% year-over-year, year-to-date, which represents green shoots from smaller up-and-coming and challenger brands.

Our EMEA and APAC regions both have grown almost 30% year-to-date. China is growing over 100% year-to-date. Some of our clients are experiencing headwinds, but the majority are growing. Even in CPGs and autos, about half of them are growing very well with us, even if they are all experiencing cyclical pressures. While there are unique macro pressures, we are very focused on the things that we can control, and we continue to grow our customer base, including high growth among midsized businesses and agencies.

Starting with our product, I'm extremely excited about our road map and the innovations we are building to make media buying better. We say all the time that every product we ship has to be better for our clients, has to be better for us and our shareholders, and it has to be better for the ecosystem. Through that lens, let me share a few of our plans, starting with the products that we are pointing at what might be the biggest problem in our industry, measurement.

Real brand building, which is required for categories like autos and CPGs cannot thrive while measurement standards are broken. As long as last click and last view are the standard of measurement, brands will struggle to understand what drives their growth and the most premium parts of the open Internet will always look expensive and ineffective. Our new measurement framework, which is currently in alpha is designed to more fairly assign value across the entire customer journey, giving marketers greater confidence in where the advertising is creating incremental business results, whether that's in the top of the funnel or at the bottom.

This is not a problem we can tackle alone, which is why we're working in close partnership with some of the largest media companies, the largest measurement companies and the largest data companies to bring it to life. Secondly, we are ramping up Audience Unlimited. Audience Unlimited dramatically simplifies how marketers discover and activate third-party data. Instead of navigating millions of segments and manually analyzing potential impact, marketers leverage AI models with their own proprietary data to select data.

Our new pricing approach with this product makes it so that price becomes a nonissue. We are essentially doing to data what Spotify has done to music. We are creating an all-you-can-eat system that makes it easier to apply more data for a simple subscription percentage. As Audience Unlimited moves to open beta, we are seeing very encouraging results. In a recent campaign, a global advertiser used Audience Unlimited to reach incremental households more efficiently. Compared with a prior campaign, the advertiser reduced its cost per unique household and also reduced its data CPM.

Both reductions were more than 25%, demonstrating the potential of AU to improve efficiency as we roll this out to new customers. Lastly, on the product front, later this month, we will launch a significant upgrade focused on platform usability. We're calling this version [ Zuma ]. We are enhancing navigation, streamlining workflows and troubleshooting and delivering a more intuitive user experience from end to end.

This upgrade improves workflow efficiency, leverages even more AI, enhances design and improves the dialogue between human and machine. We are listening to our clients and responding with innovative upgrades at a faster pace than we have been in years. Ultimately, with success in measurement and Audience Unlimited and [ Zuma's ] upgrades, it will be easier to demonstrate the value of decision buying, which directly drives revenue growth. Furthermore, we will win more hearts and minds among CMOs in the upper ranks of the largest advertisers and agencies.

This is how we help create universal understanding at every level of our clients' company about the difference between buying based on price and buying based on value. Some of our competitors, big and small, have been focused on producing products for programmatic guaranteed, fixed price transactions and simple deals with approaches that do not leverage buyer decision. Some are even wrapping these in agentic technologies.

They argue that their cheap fee will compensate for their lack of objectivity and their decisions that favor publishers rather than the buyer who is footing the bill. These approaches look more like ad networks of 2006 than reflect the progress that our industry has made in the last 20 years. Decision buying and programmatic guaranteed are fundamentally different products. Programmatic guaranteed can solve for certainty, simplicity and upfront price, but decision buying optimizes for the highest business outcomes utilizing data, measurement and real-time optimization.

We are focused on the latter. The encouraging part is that periods like these create opportunities for change. The world's most sophisticated marketers don't simply look for lower prices. They become more deliberate and they ask better questions. They demand better measurement. They focus on outcomes rather than inputs. And when marketers become more data-driven, The Trade Desk creates even more value for our customers, which are the biggest brands and the biggest agencies in the world.

The success of our platform is in our control, and we are in the lead. We have the most premium and sophisticated buying platform in the space. Our goal isn't simply to support media execution. It's to continue being a strategic business partner to the world's leading marketers. Lastly, we brought in a number of new leaders to help take this company to the next level. leaders like Vivek Kundra, our COO; Nate Olmstead, our CFO; Kristi Argyilan, our Chief Commercial Officer; Ron Lamprecht, our Chief Business Development Officer; Sarah Gavin, our CMO; or Vinny Rinaldi, our VP of Client Strategy and Growth.

We've also added some amazing industry leaders to our Board. We have enhanced dramatically our company's leadership in the last few quarters, especially this last one. These leaders have built and scaled organizations much larger than ours. They bring operational discipline, fresh perspectives and deep experience partnering with senior business leaders around the world. Just as importantly, they bring a willingness to challenge assumptions, including my own.

But building a better company doesn't stop with our executive team. Over the past year, we have also invested heavily in strengthening the leaders throughout our commercial organization. We've recruited hundreds of experienced general managers, vice presidents and customer-facing leaders who know how to build strategic relationships with the world's largest brands and agencies. That reflects an important evolution in how we go to market as marketing decisions increasingly move higher up in the organizations, at times even into the C-suite and executive ranks of global advertisers.

And of course, we have to meet our customers where those decisions are being made. Before I conclude, I want to spend a minute talking about why I remain so excited about the opportunity in front of us. Today, we estimate the global advertising market approaches $1 trillion annually. Even after everything we've accomplished, we believe we participate in only about 1% of that opportunity. What makes me most excited isn't simply the size of the market or the TAM that remains. It's how the market itself is changing.

For years, search has largely been defined by a single dominant platform. That is beginning to change as LLMs reshape how consumers discover information, we expect a much more competitive landscape to emerge. Just as connected TV expanded opportunity by creating more premium inventory and more choice, AI has the potential to expand the addressable market for digital advertising by creating entirely new surfaces for marketers to engage consumers and give more competition to market share that was once lost in traditional search marketing.

AI is creating exponentially more data, more choices and of course, more complexity. In the new AI world, our decisioning capabilities are better than ever. They're fueled by AI and objective decisioning is even more valuable. Brands don't need another platform trying to sell them media. They need a platform that can evaluate the millions of opportunities available every second on the Internet and objectively help them make better decisions. That's exactly what we've been building since the day we founded The Trade Desk.

Our objectivity also makes us a better partner. As more of our competitors prioritize their own owned and operated inventory, our independence becomes even more valuable to advertisers, publishers, retailers and technology partners alike in the long term. That's one of the reasons why our partnerships continue to deepen. Today, we work with many of the world's leading media companies, including Disney, Netflix, NBCUniversal, FOX, Paramount, Spotify and News Corp.

We also partner with the infrastructure of the open Internet through companies like Snowflake, Databricks, LiveRamp and Hightouch, helping brands activate their data wherever it creates the most value. For most of them, we are among, if not the largest, programmatic partner. We got to this place by minimizing the conflict of interest and creating clear, mutually beneficial partnerships. The same is true in retail media. Participating retailers on our platform now represent more than 80% of U.S. retail sales.

This includes our recently renewed partnership with Walmart, the largest retailer in the world. We believe our objectivity uniquely positions us to help retailers collaborate with brands in ways that vertically integrated competitors simply cannot. We are also seeing this modernization play out globally. Our investments across Europe and APAC and other major international markets are creating new opportunities as global brands increasingly adopt data-driven decisioned advertising.

Most importantly, our customers are telling us that this strategy is working. General Mills is a great example. They recently ran a campaign for its Nature Valley brand in the U.K. They were interested in pairing retail data and real-time optimizations to measure the impact on sales and return on ad spend. The campaign used retail data from Tesco, Sainsbury's and Ocado as well as in-flight Koa AI optimizations, predictive clearing and cross-device targeting.

Over 4 months, the campaign drove a 5x uplift in sales, a 92% lower CPM compared with the benchmark and a 2x ROAS improvement versus without using retail data. This is a great example of a leading global brand embracing AI and decisioning to drive more outcomes for their business. When I think about everything that we've discussed today, that's ultimately what gives me confidence. The market opportunity is expanding. Our competitive advantages are becoming more relevant.

Our partnerships are becoming deeper and our customers are increasingly choose to build their brands for the long term using our platform. In a market with more pressures, objectivity matters more. Let me conclude by saying this. While we have some near-term challenges, my conviction about The Trade Desk has never been stronger. Our team, our business model and our partners keep getting better for the opportunity ahead. Digital advertising continues to gain share globally.

Connected TV continues to shape the largest media market in the world. Retail media continues to mature and expand. AI will create entirely new ways for marketers to use data and drive growth. And as advertising becomes more measurable, more open and more data-driven, the value we deliver becomes even greater. None of that changes today's results, but it enforces my confidence that we're focusing on the right opportunities and making the right long-term investments.

Over the rest of the year and into 2027, we're going to be more disciplined than ever about where we invest. We'll focus our resources on a small number of high-priority growth initiatives where we believe we can create the greatest long-term value for our clients and our shareholders. That means some teams will continue to grow while others will not. Every investment we make will be measured against a simple question, does it strengthen our ability to serve our customers and drive long-term growth?

If the answer is yes, we'll invest aggressively. If not, we'll reduce those resources to higher impact opportunities. Over the coming quarters, you'll see these priorities reflected in how we execute. You'll see us continue to make our platform easier to use while expanding its capability through agentic workflows. You'll see Audience Unlimited and our measurement framework help advertisers connect more of their spending to business outcomes.

And you will see our commercial strategy mature as deeper relationships and joint business plans with the world's largest brands and agencies translate into stronger, more durable growth. With that, I'm very pleased to introduce our new CFO, Nate Olmstead. Nate joined us last month and brings with him extensive experience as a finance leader from his career at Penguin Solutions, Logitech and Hewlett Packard Enterprise. I could not be more excited to have him on our team and for you all to get to know him. With that, over to Nate.

Thank you, Jeff, and good afternoon, everyone. I'm excited to be joining The Trade Desk. While I'm still early in the process of learning the business, part of what attracted me to The Trade Desk was its large market opportunity, its reputation for innovation and its long track record of helping advertisers achieve better business outcomes.

As CFO, my focus is straightforward, ensuring we invest behind our highest priority opportunities, allocate capital with discipline and build the operational rigor needed to scale effectively. With that, on to our results. In Q2, we delivered revenue of $715 million, up 3% year-over-year. We generated $241 million of adjusted EBITDA during the quarter, representing a 34% margin. CTV and audio exhibited double-digit growth once again in Q2. Video, which includes CTV, represented a low 50s percent share of our business in Q2. Mobile represented a high 20s percent share of the business during the quarter, while display represented a low double-digit share.

Audio represented around 7% of the business and grew year-over-year at a higher rate than any other channel as it has for the past 4 quarters. Geographically, the United States represented approximately 83% of our revenue in Q2 and international represented approximately 17%. Our strong momentum in both EMEA and APAC reflects the investments made in these regions over the last several years, and we delivered over 50% CTV growth year-over-year in each region during Q2.

Among verticals that represent at least 1% of our business, we saw strong growth in medical, health, automotive and travel. We continue to see pressure in the food and drink and home and garden sectors as CPG brands navigate geopolitical uncertainty, consumer softness and input cost inflation. Automotive remains an area of strength overall, though we believe this business could be growing faster absent the impact of increased tariffs on the industry.

We also benefited from political spending related to the U.S. midterm elections during Q2. Q2 operating expenses were $613 million, up 6% from a year ago. Excluding stock-based compensation, Q2 operating expenses were $504 million, up 12% from a year ago. The increase in Q2 was driven primarily by platform operations as we optimize platform infrastructure, implement more AI-powered tools on our platform and continue to evolve our various decisioning and data offerings.

Over the past 2 years, we've transitioned critical workloads from third-party public cloud environments to owned data centers. This has strengthened our platform infrastructure, reduced our reliance on external cloud providers and provides us with greater flexibility to support AI and machine learning workloads. While this transition creates an increase in platform operations expense in 2026, it positions us to benefit from greater efficiency and operating leverage over time.

Income tax expense was $49 million in the second quarter, driven primarily by our pretax profitability and the impact of stock-based awards. Net income for the quarter was $64 million or $0.14 per diluted share or about 9% of revenue. Adjusted net income for the quarter was $158 million or $0.34 per diluted share.

Net cash provided by operating activities was $154 million and free cash flow was $136 million in Q2. We ended the quarter with a strong cash and liquidity position. Our balance sheet had about $1.5 billion in cash, cash equivalents and short-term investments at the end of the quarter. In Q2, we used $78 million of cash to repurchase our Class A common stock via our share repurchase program. At the end of Q2, we had $269 million remaining on our program authorization.

Turning to our outlook for the third quarter. For Q3, we expect revenue to be at least $650 million. We estimate adjusted EBITDA for Q3 to be approximately $160 million. Before I wrap up, I'd like to provide additional context on how we are thinking about our investment priorities for the remainder of 2026.

Looking ahead, we'll continue investing with conviction in our highest priority opportunities while building a more disciplined and scalable operating model. By improving how we operate, we can move faster and create additional financial capacity to reinvest in those opportunities. We believe that combination of focused investment and improved execution will position The Trade Desk to deliver stronger, more durable growth and improved profitability. We look forward to updating you on our progress.

That concludes our prepared remarks. Operator, please open up the call for questions.

[Operator Instructions] And our first question comes from Shyam Patil with SIG.

Jeff, you described well the factors that you're seeing put pressure on the business from macro, pricing pressure, your own execution. If we shift to thinking about the remainder of this year, what are the top 2 or 3 priorities that you guys have to stabilize the business?

Thanks for the question, Shyam. So let me just first acknowledge that what we've shared in terms of our performance as well as our guide is below our expectations, and we don't think a reflection of the long-term potential. And I do worry that I -- that we don't want to overstate that while there are a couple of pockets that are under some amount of pressure, overall, the business is growing and overall, the -- every division or every sector that we represent of the economy, most of them are doing very well.

And of course, we can't control the macro, but we're overall very positive. So in terms of the things that we can control and the things that I'm most excited about and that we have to get right in order to do well going forward.

First, we have to upgrade Kokai. And we'll -- as I mentioned, we'll launch [ Zuma ] later this month. And this represents substantial platform usability upgrades and helps us get the best out of AI, which we've already added. Second, we just want to continue to innovate in some of our key products, and this is definitely not all of them, but some of them that we're most excited about and most focused on are our product and measurement, which just helps the biggest brands in the world see where incremental business outcomes are truly coming from.

This will help us ascribe much better credit for what we're actually producing, which are, in most cases, dramatically understated today. We'll also ramp up Audience Unlimited. This has been in just early phases, but the early results have been remarkable. And to get that in the hands of a lot more customers, we think we'll just spin their flywheels even faster. Measurement will spin everyone's flywheel faster on the platform.

Audience Unlimited will do the same, and both of them are just in the hands of very few customers today, and the results are extremely positive. We're also -- we've also been introducing the concept of enterprise Kokai, where we have some massive growth rates with companies who negotiate the features upfront and then use every one of our products. We sometimes do this through JBPs, where, as you might recall from our prepared remarks, we have signed over 200 JBPs through Q2, which represents 38% year-over-year growth.

But JBPs grow at least this year at a rate 6x higher than overall revenue growth, which I just think might be the most bullish number that we can share and have shared today is that as we continue to double down on JBPs and getting closer to our partners and developing plans to grow well into the future that we see just a tremendous opportunity. To that end, we have a team that's just dedicated to growth, which, in some cases, is actually winning back customers that we've lost at some point.

That team has grown their book of business over 250% year-over-year and is the fastest-growing individual team in our business development team. And of course, of the top 100 accounts, the majority of them are actually growing in double digits, again, just underscoring that most parts of our business are in a very healthy place. And then the last thing, and I can't overstate the importance of this.

We have added an amazing number of industry leaders to our leadership team. And most of them have been here a very short period of time. And so we, of course, are giving them the room to get things up to speed and to continue to help accelerate our growth. But in order for us to get back to growth, we, of course, need to help them get back up to speed. And I look at that as important of any -- it is as important as any of the initiatives that I've talked about today. So we believe that all of these together, regardless of the macro environment, will position us to be even stronger and get back to more durable growth when the conditions change. Thanks for the question, Shyam.

The next question comes from Matt Swanson with RBC.

Jeff, I wanted to get your thoughts on something maybe a little more high level, kind of an existential question that I think is top of mind for a lot of investors right now in the age of AI. So I mean, as AI is kind of reshaping the digital advertising landscape, can you just give us some insight on kind of what gives you confidence in the DSP business model as we know it, remaining relevant over the next several years? Or what needs to happen to stay relevant?

Yes. I really appreciate this question. I think this is actually a very important theme for us to be talking about. So in order to talk about AI, let me just remind you of the backdrop. So first of all, supply outpaces demand by more than ever. So it is the ultimate buyer's market. And -- but in order to take advantage of that buyer's market, you have to compare every ad opportunity to all the others and of course, that is an amazing job for AI because we're looking at 20 million ad opportunities every single second.

This decisioning, and it is very important to understand that the job of a DSP, like what actually is a DSP in order to -- to answer your question, we, of course, have to be super clear on what we're even talking about. But a DSP is a platform built to decide which of those impressions you buy and which you don't. And of course, that is enhanced by AI. And that's why we've been investing in AI for years.

So I wouldn't say that the DSP model, if you will, is going to be disrupted by AI. It is AI. And what's really important is as we enter into the new phase, and this is part of the reason why we spend so much time talking about objectivity is that you have to get the biggest brands in the world to trust you with their data and then reassure them that you are going to preserve their data so that their insights from buying are put to use for them and exclusively for them.

And most of the biggest platforms in the world are not doing that. They are asking the biggest brands in the world to give them their data and then they use that for all of their clients and especially their competitors. So we view this -- the injection of AI is not a question or not a disruption, but in fact, the very essence of what it means to be a DSP. That said, I just want to also add that I think Agentic, is one of the biggest opportunities that advertising will ever see.

It is a huge opportunity for us. We are already seeing massive advantage from it. Some are using Agentic to just build yesterday's business model all over again, if you will. They're building ad networks out of agentic like technologies. That's not going to work because it doesn't leverage the very best of decisioning, which is what a DSP does.

So not only do I not think AI will disrupt the DSP model, if you will, or will there be DSPs, the only winners left will be people that leverage or platforms that leverage AI to lead them into the next chapter of this race. Thanks for the question.

The next question comes from Vasily Karasyov with Cannonball Research.

My question is for Nate. Given the outlook for Q3, which I think also means that weakness will persist into Q4, at least as well, how should we now think about your long-term profitability framework, how you approach that side of the business given the revenue trajectory? And what's your philosophy in terms of investment internally? Would appreciate your thoughts on this.

Yes, sure. Thank you for the question. Listen, I think we have a very long-term focus and continue to see great opportunity to drive long-term growth and profitability. I think in terms of the investment philosophy, as mentioned in the prepared remarks, we're going to invest with conviction in areas where we see attractive returns.

I think importantly, we will be equally disciplined everywhere else. So we'll apply a lot of rigor to how we evaluate investments and then allocate resources. And I think if we do that well, we believe that we can drive stronger long-term growth and profitability. So stay tuned as this work progresses, we'll keep you updated on our long-term profitability framework and overall operating objectives.

Next question comes from Justin Patterson with KeyBanc.

Great. Jeff, I know you don't disclose take rate, but I'm curious how your pricing philosophy is changing in response to brand advertiser needs in the environment. As we look at stabilizing the business, how are you thinking about the right level of pricing and take rate from here?

You bet. Thanks for the question, Justin. So first, in order to answer this, I just need to give you a little bit of history. And I'll just start with the very first time we brought all of our employees together when we had them spread across continents for the first time. I remember one of the primary presentations that we gave to our own employees was it is not our goal to be the cheapest platform. It is our goal to be the best.

That has definitely been our mantra for more than the last decade. If you look at us as a publicly traded company and you just scrutinize the take rate more or less over the last decade, the take rate has gone up 5 of the 10 years and it's gone down 5 of the 10 years. And the reason why it stayed within a few points of that middle line, if you will, is because we started by saying everything about our product has to earn its keep. It has to earn its keep on both a relative basis and absolute basis, meaning -- and the absolute being the starting point, meaning that we need to make certain that if our product costs 10% it better add at least 10% more value than if it wasn't in the middle.

And in fact, the more obvious you can make that mathematically, obviously, the better it is for us to go win customers. We've done extremely well over the last 16 years with that approach. That said, we've always looked at this as if we can grow faster or win more business by changing that price or changing the approach, we'll always look at it and always consider it. But we tried to do it in a way that it didn't make it too volatile because we always knew that we could lean on the fact that we were adding more value than we ever cost or extract.

So we remain really confident in our business model and in our pricing philosophy. We have, of course, the opportunity to continue to improve on our platform. But I will say that over the years, even though the take rate has stayed mostly the same, we've introduced new products all along the way like Next Wave, Solimar, Kokai. We've added tons of AI capabilities over recent years.

The price has not changed much since we introduced things like UID2 and OpenPath. All of those have created efficiencies and enhancements for our customers that we think ultimately add to the consumer surplus that we provide to our customers all the time. So we'll always be looking at it, always be looking for opportunities for us to grow and look for ways for us to simplify, where I do think is the biggest opportunity is for us to simplify the way that we price. But I don't think that the net number has to change dramatically because we're extremely confident that we're adding more value than we cost. Thanks for the question, Justin.

The next question comes from Youssef Squali with Truist.

Jeff, there seems to be somewhat of a disconnect between the opportunity as you presented in terms of growth across the various modalities and at least the short-term guide, which I think implies about 12% decline year-on-year for Q3. And I'm assuming that will probably sustain itself into Q4.

Is there a way to kind of parse out the impact of what you control versus what you cannot? I think in your prepared remarks, you talked about 2 areas. One is macro, the other is execution. So any way to kind of help us maybe quantify both to kind of see what you can turn around even if the macro continues? And just very quickly, maybe just provide us an update on the status of your relationship with some of the big agencies, maybe the Publicis in particular.

Yes. So a lot to unpack in all those. So let me just parse between first, the things that we can control and the things that we can't. Obviously, we can control the things that we ship and the product that we put in market, and we, of course, can control the team. We spent a lot of time already on this call talking about how we've enhanced both. We've enhanced both our product and our team.

And then, of course, we can look at all the ways that we're executing all the operations, all the things that we do internally, how we allocate resources and just scrutinize all of it and make sure it's all pointed in the right direction and pointed towards growth. That we're doing every single day with a higher degree of rigor than we ever have before. On the macro, of course, there are some places where there are just amazing secular tailwinds. There are parts of technology that have amazing tailwinds.

Some of our pharma clients who have GLPs, they're all doing really well. There are a whole bunch of parts of the economy that are doing really well. And in fact, I would say most of them are. We made references to things that are affected by whatever amount of bifurcation is happening inside of the economy where lower income consumers are under some amount of pressure. And we definitely see in some of the brands that are targeted at products that are more toward that part of the market, where they're also seeing some pressures, not just in the CPGs, where, of course, that shows up, but -- and not just in the autos where some of that shows up as well.

But in some of the other categories, that also shows up a little bit. But overall, those are doing very well. Of course, the macro isn't in our control. But because we're growing in so many other areas, we're extremely confident that we're focused on the right things. As it relates to your question about the agencies, I was actually hoping that this would come up because I think it's really important to note. We built this business on our relationship with the agencies. They've been a phenomenal partner to us over the years.

All of them have been critical to our success. They're all in periods of transition right now. But overall, our partnership has been phenomenal with each of them, and that includes Publicis. They've been an important partner for us for over a decade. Of course, there were some public disputes about what was essentially a negotiation but that's behind us. And we have -- we've spent a lot of time on this call already talking about our Joint Business Plans.

It's really important to me that I explain or express that Joint Business Plans with brands and strong agency partnership are not mutually exclusive. In fact, many of our brand JBPs are developed in collaboration with their agencies. So when we talk about that being one of the most bullish things that we're doing, that's in part because of better integration inside of the agencies and better partnerships. And then lastly, as it relates to the agencies, one of the things that we're doing together in many cases is working on white label products of both Audience Unlimited as well as agentic AI products.

So when I put those in the road map as well, things that we can do with them to leverage their data assets as well as improve decisioning for them using agentic AI where they find efficiencies. And of course, we do too, and enhanced decisioning along the way. We didn't really have time in the prepared remarks to talk extensively about some of those investments and some of the advancements that we're making in agentic with our agency partnerships, but it's yet another reason to be really bullish about the future.

It's going to take some time for those to pay off in meaningful ways, but that's part of the reason why we're being so deliberate about our own discipline as well as where we make investments. Thanks for the question.

The next question comes from Tim Nollen with SSR.

Jeff, you've had a lot of announcements about some management additions over the last year really, but especially even in the last month or so. And you mentioned this a bit in the prepared remarks. I wonder if you could give us a bit more color into what some of these people can bring to The Trade Desk. Some of these are high-profile names from some high-profile companies. Just wondering kind of what skills do they bring, what capabilities and how might they be able to affect some change at The Trade Desk.

You bet. So it's actually hard to answer this question partly because there are so many people, and they all have such different backgrounds and different expertise. And I also -- I feel like I'm trying to recognize so many people that we've added that we don't have enough time to actually talk about all of them and why I'm excited I'm nervous about leaving somebody out. But let me just talk about a couple of them that we've added of late that are directly impacting our go-to-market approach.

So the first is Kristi, who joined us as Chief Commercial Officer. She really is leading, among other things, our data partnerships. She has a long history of having worked in building some of the very first retail media networks. She most recently was running all of advertising at Uber, managing a go-to-market team that's almost the same size as ours overall. Our org size here is much smaller, focused on the data partnerships because of how that will enhance Audience Unlimited, how that will enhance our measurement product.

And those 2 things together, we look at as game changers. So does she. That's part of the reason why she's here. I talked about Ron in the prepared remarks, who also joins as a C-level in business development. Many of the conversations that we're having today are at much senior levels. And I talked about a minute ago, enterprise Kokai and selling that in at higher levels of the organization so that we get much longer adoption as well as much deeper integration into some of the biggest brands and biggest companies in the world.

We need a greater ability to talk at the most senior levels of the org as well as to think about new deal structures. Ron had a role that was bigger than advertising at Amazon, where he did that very thing, looking at all the assets across Amazon, how can we create a more holistic partnership framework that are often custom I think Ron is one of the best in the world at this, and I'm super excited to have him on board.

And then I'll just highlight one other, Vinny Rinaldi, who was the VP of Customer Experience at Hershey's and now joins us to do something very similar with Ron, which is Vinny might be one of the best advocates in the world for why people should buy the premium Internet. He was an advocate both at the agency that he worked at before as well as at Hershey's about not pursuing cheap reach. And he did a lot of analysis while he was leading media buying at Hershey's to show that cheap reach wasn't worth it, that user-generated content, while it appears to be on sale, actually doesn't even move the needle for brands like Hershey's.

And because he's understood that and has been promoting the pursuit of premium and better measurement as an alternative to simple measurement and cheap reach, we are -- we've positioned him with a role to help us talk to the biggest brands in the world and do the very same things that he's done inside of brands himself. So those are a couple of the examples.

Again, I feel bad for the number of people that I've left off of that, but those are the sorts of people that we're adding with the task at hand that we are extremely confident will change the game. It's quite important to recognize that, of course, in the numbers, especially in the forecast, we're trying to create room for them to get up to speed and make a meaningful contribution, and we're extremely confident that they will. Thank you.

Next question comes from Dan Salmon with New Street Research.

Okay. I have one for Jeff and then one for Nate. Jeff, can you just talk a little bit more about why you're confident that as you laid out an independent premium platform focused on objective decisioning that's really at the heart of your business, why that can continue to win market share when you've got walled gardens combining exclusive live sports inventory like what Amazon has with their DSP or bring really simple programmatic guaranteed style transaction with low pricing like what, say, Google's new Buyer Direct program looks like.

Why does that independent premium platform continue to win share? And then just for Nate, can you maybe just provide a little bit more context around the assumptions in your Q3 outlook and just a little bit more on your overall guidance philosophy?

You bet. I appreciate the direct question. Let me just give, as always, just a little bit of context before I just get very direct. There will be many winners. There have to be. Otherwise, this whole ecosystem that we've created that is actually not that dissimilar from the stock market in structure. There's some massive differences in fungibility and probability of winning. But in terms of structure, it's fairly similar.

And an auction with only one bidder isn't an auction. So it's quite important that we have a number of players and the fact that there are only a few of us that have reached meaningful scale is part of why we're so excited because there's a ton of TAM ahead and there's not that many players in the ecosystem. That said, we have, by far, the highest market share in the programmatic space, especially as we're looking at the open Internet.

So it's just really important to remember that we're way ahead of our other competitors, especially when it comes to buying the open Internet. Because if you want to say, well, yes, but Google buys a lot of YouTube, I would say, well, I would hope so. And Amazon buys a lot of Amazon Prime and sponsored listings, well, I would hope so. They're the only place where you can buy them. So of course, they do. But at the end of the day, the reason why I believe why this model works is because, number one, in an AI-fueled world, you have to fuel those AI models with first-party data and you have to have the trust of the biggest advertisers in the world.

You will not get that if you are not objective and not representing their interest and protecting their data for the long haul. I also think that this comes down to an issue of math, and there's 2 parts of this that are really important to understand. A lot of times in the press, and this is trade press as well as even in Wall Street, there's, I think, a misunderstanding about the effect of platform rates, especially given that where most of our competitors make all their money is by bundling it with the media. So it's not platform rate versus platform rate.

So it becomes really important to aggregate that and say, because you can wrongly conclude if Trade Desk charges, let's say, 8% and our competitor charges 4%, then The Trade Desk has to be twice as good. But if you look at it as no, when you add that to the media, Trade Desk buys an impression for $1.08 and they buy a piece of media for $1.04, where the underlying media in both cases cost $1, did we buy a piece of media that was better for that brand?

And that comparison at $1.08 versus $1.04 is meaningfully different. And then there's also the math that comes down to how they decide how to make money when you have something like YouTube, where their cost of goods sold is almost 0, and if they get $1, they can spend it on YouTube and keep the whole dollar or they can spend it on Disney+ and they keep $0.10. Well, of course, it would be better for Google or Amazon to buy their owned and operated inventory.

That's what they do because they make more money that way. None of these companies are in the community service business, if you will. They're not giving things away. So when things come out as free, they are not really free. They're just moving the cost somewhere else. So we're extremely confident that objectivity matters more today than it did yesterday, and it will matter more tomorrow.

In an AI world, the premium on trust is going up, not down. People are looking for partners that they can trust. And I think you're going to see over time, more and more of a separation between those that align their interest with their clients and those that don't. It doesn't mean that those companies can't have great products. It doesn't mean that they won't have an ancillary business. But at the core, they are selling owned and operated inventory.

Both of them make most of their money from their owned and operated inventory. I don't think any of us foresee that changing in any dramatic way in the future. We do believe that decisioning, especially when, unlike the stock market where if you buy stocks at random, you can still often do pretty well. If you buy media at random, you will get your a** kicked every single time.

So it becomes quite important that the decisioning engine that we have to help our customers, the biggest brands and biggest agencies in the world make decisions, that we give them the tools that leverage the objectivity that protect their data, that leverage AI to make the very best decisions possible and then also give them measurement and audience insights that make it so that they are truly proving the incrementality.

It's that last piece where I think we've missed a little bit in the last few years. And that's part of the reason why we're so excited about the products ahead. So we're quite bullish on our future despite the fact that we need a little bit of time to get some of our leaders and some of our products up to speed. But the future is very bright for us and the opportunity ahead. Thank you.

Dan, it's Nate. Just quickly on the guidance and the philosophy. So really no change in the approach to guidance. It's very data-driven. And I would say it just reflects the trends that we see in the business today. I would probably add that visibility is somewhat more limited than it has been in recent history.

And given that, we're not assuming any meaningful improvement in the environment during the quarter. In general, we don't think that guidance should really be considered conservative or aggressive. The goal really is to be credible and I think grounded in the data. So we'll call it like we see it, and then we'll go execute with a lot of rigor and a lot of discipline.

Our final question comes from Jason Helfstein with Oppenheimer.

I'll try to ask 2. I mean, is there -- when you think about the business change from 1Q to 2Q now to the 3Q guide, is there a way to unpack it and kind of be like this is what we think kind of like the macro/auto/CPG impact. This might be the, let's say, impact from maybe some risks with certain agencies or something like that was like we call like temporary.

And then is there a third bucket of, I don't know, what we -- like other related issues and maybe it's some of the things you alluded to with clients kind of making poor buying decisions, but ultimately could be convinced to see a lot of your way. So I don't know, just maybe help folks kind of break it down. And then I guess, the other question is when you think, I don't know, 2 or 3 years from now, could we be thinking about this is a -- I don't know, a smaller organization that relies a lot more on automation tools to kind of accomplish the goals?

Thanks for the question, Jason. So I'm actually really glad that you've asked this question because it can help paint the picture of sort of where we're seeing opportunity and where we're seeing some pressures. What we've tried to really highlight is that most of our customers and most of our business is doing very well. I do think you can say we have some customer concentration. And by the nature of the fact that we service the top 500 advertisers in the world, it already has some concentration, if you will.

And the fact that we're adding so much to the growth team, which includes some middle market as well as some of the brands that we've been winning back, it just underlines that we're winning in almost everywhere, in almost every category. But there are a handful of businesses, often large, that are under pressure. And sometimes, when you're under pressure, you try to pursue something that is cheaper, you try to cut costs. You try to do things that can get you through that. In some of those cases, they recognize that they're making decisions that don't help them in the long term.

So that's part of the reason why we tried to highlight and give so many numbers about the different categories of business and then highlight some of the categories is to just make sure that we were isolating those that were struggling from those that are doing really well. And we highlight that just because, obviously, our results are lower than we wanted them to be, and our guide is lower than we wanted to be. So we just spend a little bit more time talking about the problem, but we don't want anyone to walk away from this thinking there is a systemic problem.

This is more a cyclical issue with a handful of customers, and it's not hard to look at their earnings and see that they've had some challenges. So we tried to highlight that. But it's really important that the bigger takeaways are that we signed over 200 JBPs through Q2, and that represents 38% growth year-over-year. That -- the JBP growth rate is 6x higher than overall revenue. The majority of our top 100 accounts are growing double digits.

CTV and audio grew double digits once again in Q2. Audio actually became our fastest-growing channel and now represents over 7% of our business. And we just continue to expand our partnership with Spotify, which we're extremely excited about. I don't think we gave enough word count to the fact that EMEA and APAC have both grown at almost 30% year-to-date. So both of them have done really phenomenal, where in recent years, that hasn't been the case. So the fact that those are now paying off is amazing.

And the fact that the second largest market in China is now growing over 100% year-to-date for us is fantastic. And then, of course, we had over 50% CTV growth year-over-year in both EMEA and APAC, where historically, those were mostly mobile-first markets and to see CTV doing so well in each of those markets, it's just underscoring that we've made the right investments. So there are green shoots all over the place, but there are a few large customers that are under pressure.

We've tried to highlight that, but please don't walk away from this thinking that that's affecting everyone. It's actually just a couple of them. And then overall, we have most of our departments, most of our business, most of our customers and most of our geographies doing really well with the brightest future being in things like CTV, inside of audio, in our retail partnerships, in our data partnerships.

And when you fuel that or when you funnel that into our measurement product and our Audience Unlimited product, we think that there's a way to really accelerate that flywheel. And if you get rid of just a little bit of some of those macro pressures, a lot of things change. The last thing that I just think is really important to underline and answer to your question is we have an unbelievable leadership team. Most of them are new.

And so we're just trying to give them enough runway to get up to speed and really make a substantial contribution. And we're convinced that they can and they will. So I'm really excited to see what we can all do together and excited for the next chapter. And while days like today hurt, they're going to make the comeback story even more exciting and more impressive. Thank you.

Thank you. This concludes the question-and-answer session. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the Trade Desk, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Chris Toth.

Thank you, operator. Hello, and good afternoon to everyone. Welcome to The Trade Desk First Quarter 2026 Earnings Conference Call. On the call today are CEO and Co-Founder, Jeff Green, and our Interim Chief Financial Officer and Chief Accounting Officer, Tahnil Davis.

A copy of our earnings press release is available on our website in the Investor Relations section at thetradedesk.com. Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risks and uncertainties and reflect our views and assumptions as of the date such statements are made. Actual results may vary significantly, and we expressly disclaim any obligation to update the forward-looking statements made today.

If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. For a detailed discussion of risks, please refer to the risk factors mentioned in our press release and our most recent SEC filings.

In addition to our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures is available in our earnings press release and investor presentation. We believe that presenting these non-GAAP measures, alongside our GAAP results offers a more comprehensive view of the company's operational performance.

With that, I'll now turn the call over to CEO and Co-Founder, Jeff Green. Jeff?

Thanks, Chris, and good afternoon, everyone. Thank you for joining us. As you've seen from our press release, we delivered a solid quarter once again. This fall, we will celebrate our 10-year anniversary as a publicly traded company. Similar to the last 10 years, we remain solidly profitable. The core of our business remains resilient, and I'm proud of our team and their dedication to supporting our clients, especially in what continues to be a dynamic macro environment for large brand advertisers.

We remain as confident as ever in the long-term opportunity for our business and for programmatic advertising as a whole. The business model we established when we founded the company is the same, in part because it is more proven than ever. Advertising is over $1 trillion TAM, and it's growing. At end state, we continue to believe most, if not all, of those ad dollars will be data-driven. We are convinced that the lion's share of the market will belong to a scaled, objective and independent platform. By that standard, we are the company in the best position to win.

The expanding TAM continues to grow as we predicted, but there are some new areas of growth that have caused the TAM to grow even faster than predicted, like Retail Media and the chat bots and AI search engines. Linear television moving to CTV is still at the early stages alongside with the rapid growth of retail media and over time, the emergence of new high-intent search-like opportunities as AI reshapes legacy search. We believe these trends are big opportunities for The Trade Desk and reinforce the long-term opportunity for our business.

Today, I've organized our prepared remarks into 3 topics: first, the state of the macro environment. Second, the state of the global advertising market and our place in it. And third, the innovation on our platform and in our company to upgrade and scale our business. The macro environment has certainly become more complex in 2026. Geopolitical tensions have increased. All advertisers and agencies are navigating a rapidly evolving landscape. Global economic pressures, wars and tariffs have created an environment that is harder for some brands and some brand categories to grow. Still, this environment also creates lots of opportunity for change and upgrade.

The most sophisticated brands in the world are using these moments to get more deliberate and more data-driven. When marketers get more data driven, the Trade Desk tends to add more value and as a result grow. Many brands and agencies are using this moment to work with us to upgrade long-standing problems in digital advertising. Common examples include bad measurement methodologies and an over reliance on cost cutting.

Outside the United States is growing much faster, both in advertising and at The Trade Desk. Our choice to invest in nearly all of the major markets around the world is proving to be wise in moments like this. We are aware of the trends and the opportunity and are positioned well to benefit from this. So switching gears from the macroeconomic environment, the global advertising market. The macro conditions plus AI innovations are making the global advertising ecosystem as dynamic and changing as ever.

Because of TPD, we often set the pace of change, we are in the best position to benefit from this current environment. In 2025, the advertising ecosystem globally added more supply than perhaps any year previously. It is probably the most lopsided market in advertising history, with multiples more supply than demand. This supply-demand imbalance creates the biggest buyers market in the history of advertising.

Buyers have the option to be selective, but they need to leverage data and great real-time technology to know what they are buying. Premium advertisers and premium publishers often have been odd for most of the Internet history. But at this moment, both are heavily invested in making the supply chain and market dynamics of the premium open Internet successful. In this buyer's market, some publishers are mistakenly copying the Facebook and YouTube while guarding business model. For most of them, it has a couple of years and then it is a scale ceiling. The walled garden strategy only works when a publisher is massive and a must-have on a media plan.

Most marketers now have a clear definition of the open Internet that includes media beyond the browser finally. The best of movies, TV, sports and all live events, journalism and music are all the anchor tenants of the open Internet. As a result of this dynamic, the open Internet is thriving and evolving very fast. We are convinced that the evolution and changes being made in the open Internet today will make it soon become a place where consistently an advertiser's first dollar is spent, not the walled garden leftovers.

Once the open Internet consistently gets the first dollar, most of the walled gardens will open up their inventory and join the open Internet. I view this as inedible, and I'm optimistic that the changes being made in our space. Currently, there are a few dozen companies on both the buy side and the sell side of media and advertising that define the future. Let's talk about a couple of the sell-side companies first. Some of these premium publishers or content owners include Spotify, NBCU, Disney and Netflix. These companies are shaping the future and are part of the reason why the open Internet is thriving today. They influence the pace and design of the open Internet.

Disney has one of the largest ad businesses of any publisher in CTV. They have learned in recent years the benefits of biddable, programmatic, low ad loads and a close direct relationship with The Trade Desk. The Trade Desk and Disney both have business models that benefit from the supply chains of the open Internet getting more efficient. They have made clear that their growth and higher CPMs will come from better data, more relevant ads and less waste. Venable and marketplaces are the only way to get the best of all premium inventory, but especially sports inventory. This is a great setup for both of us.

Switching to audio. By the end of this year, Spotify is likely to have the largest and arguably most successful subscription program in the world. They have provided amazing consumer surplus. However, just over 10% of Spotify's revenue has come from apps. They need a variety of ads, a scale of ad, a quality of ads that only a very large open market can provide. I still believe that audio, including Pandora than others, represent the most on sale part of the on Internet.

When I consider the gap between time spent and ad budgets, I see substantial upside for these companies and the Trade Desk. We've seen these gaps many times before, and they always get filled. I'm very bullish on the ad opportunities for Spotify and audio. NBCU, including free wheel is leaning into initiatives that improve supply chains, CTV price discovery and better signals for advertisers to spend against.

NBCU has institutionally embraced that better signals and better options will move more dollars to CTV. We exceeded our own spend stretch goal for NBC at the Winter Olympics, providing yet another case study on the power of the open Internet and the benefits of decisioning for both buyers and sellers on the most premium content in the world, including on the most premium live events in the world.

Last but not least, on the content side, Netflix continues to model how rolling out and an experience methodically preserves the user experience and attract advertisers. We continue to make technological enhancements to our partnership that enable better advertising efficacy. Our partnership with Netflix is a source of optimism for us, but also for the open Internet. Biddable and premium are inseparably connected. By this standard, we're also optimistic that the LLM and AI search engines like ChatGPT, perplexity and Gemini will eventually unlock more inventory in the future. Because highly detailed prompts can create a willingness to see even video ads and higher levels of engagement that is way beyond what legacy search and keywords could provide. We're optimistic that over time, the TAM that was once locked up by search will be unlocked by a more premium and more competitive environment.

The walled garden strategy has only worked at scale when advertisers are chasing cheap reach and willing to buy large amounts of user-generated content like Instagram, TikTok and YouTube. None of those attributes apply to the chatbot and AI search engines. Also, the Wall garden playbook only works when grading one's own homework is tolerated by advertisers, which is a good segue to the next trend in the state of the state of advertising, and I placed this topic between buy-side and sell-side commentaries because it impacts both buyers and sellers.

In the current state of the market, both buyers and sellers agree that measurement is broken. This is such a great setup for the open Internet because most measurement companies and media mix modelers, aka MMM have mostly relied on last touch and last view attribution models. This tradition is bad for everyone, except for bottom of the funnel, wall gardens. I've never seen more discussion in the history of our space. about how broken these methods are to measure.

The resolving commitment for the industry is higher than ever, partially because fixing open Internet measurement is required for many AI-backed initiatives to work. The state of measurement is bad for branded. It is bad for premium at all top of the funnel add inventory like CTV and audio. Improving measurement is required to unlock the next phase of growth for the open Internet and the thousands of companies that are working on it today.

Now to discuss the state of the state on the Bison. Most of today's leaders in marketing for the biggest brands are looking at this moment as an opportunity to upgrade their entire marketing operation, both tech and people. Both advertisers and publishers have a growing understanding and vision for the open Internet. They are investing in and leveraging AI tools like [indiscernible]. They are using and protecting their own data and leaning into the objective media buying platform at Trade Desk to make advertising dollars more effective and better distributed throughout the entire funnel.

While a small number of brands have responded to the pressures at this moment by focusing on reducing costs, reducing media budgets and doubling down on cheap reach. There are trends among the most forward-thinking CMOs and marketing leaders that are very positive for The Trade Desk. These are the leaders helping to shape the future of advertising. The best CMOs in the world are focused on the question, how do I grow? Not how do I cut costs? Of course, they want to avoid waste. But they know that quality and cheap tend to have very little overlap. They also know often by experience, that cost-cutting doesn't fuel growth. One leader in programmatic at a top 20 brand said it best. He said that his brand has become convinced that the most expensive ads are often the best value and highest performing.

He elaborated that chasing [indiscernible] is one of the biggest landmines a CMO or digital marketer can pursue. We are also seeing the shift toward more effective creative. Advertising is about connecting and making people feel something. Most of digital advertising history has been about touches led by bad measurement. That's changing. Great marketers know that to be remembered in the sea of ads and the battle for attention, you have to create an emotional connection. Our memories as human beings are anchored on our emotions. So when one marketer shared with me that 95% of their social ads are seen for less than 2 seconds, I was not surprised to learn that their focus was now on enhancing strong connections with consumers via CTV and audio ads.

Another common theme is strong dialogue across the C-suite. Many CEOs and CFOs know little to nothing about the complex and esoteric world of programmatic advertising. Great CMOs and marketing leaders are consistently thinking about how to share the difficult concepts of programmatic without just viewing 3-letter acronyms and industry jargon. The strength of great brands can be assessed by how well the dialogue is going with the CMO and the rest of the C-suite.

At the same time, most great marketing leaders have a good relationship with their agencies. Very few global brands can do all their own media buying. They depend on agencies. Most great marketers have JVPs or MSAs directly with their buying platform, but they also have clear models of engagement with their agency partners. The best outcomes happen when brands, agencies and DSPs are all aligned and winning together.

Measurement is also top of mind for nearly every marketer I speak to. They realize that measurement and goals have to change. I recently met with 1 CMO to a top 20 global brand, and she opened our meeting by acknowledging that all global marketers, including her team have been through a lot in the last few years. but you quickly oriented the meeting on leveraging data, making holistic decisions and thinking about the lifetime value of every customer. I learned a lot from her, but my favorite takeaway from the meeting was when she said, racing to the bottom of the funnel is racing to the bottom of your business. That mindset is what is driving the shift toward more data-driven decisions.

AI is another area where leading marketers are leaning in. They are not avoiding this use, and they aren't simply hyping it in the abstract. They are looking for low-hanging fruit on the AI tree today. That said, they know that there are no quick fixes and that AI is a race but it is a long race. They know that quality data matters more in an AI world than ever before, and they know that they have to protect it and activate it.

An example of this is we announced the first of many partnerships with one of the up-and-coming large agencies, Stagwell. Our partnership is to leverage Agentic AI to create, edit and modify campaigns. After these basics will move to Agentic optimizations. Great marketing teams are agile and active.

Relatedly, we recently had partnership discussions with a smaller AI-first company. While we've been partners for years, we're looking to expand that. And they shared a few things with us that I want to share today. One is that TV is the only company that gives them enough data from their buying to power their future? We're working together to further ensure they are getting all that they need to train their models while protecting the data of brands and consumers. The other thing that they reminded us of was a quote from one of the greatest F1 drivers of all time. who said, "You cannot overtake 15 cars in sunny weather, but you can when it's raining, which is a good segue to the next point.

Many marketers are also using this moment, this moment of change to gain share. CPGs and to a lesser degree, autos have some headwinds. The macro environment is more difficult for some in these 2 categories, but the state of measurement is a headwind for all brand builders. However, the track conditions are the same for everyone. Now is the moment to compete and to pull ahead, whether it is rain or any other unexpected events in the race, there are moments in every race where the standings will change.

Between the macros, the state of measurement and AI, this is 1 of those moments. And new leaders can emerge. There is also a growing recognition that ads are not fungible, you can't just take any collection of ads from a deal and make it perform. Ad selected at random will lose every time. programmatic and digital ads tend to cost more. So choosing them wisely is the only way to win. Finding both for buying sheet fixed price deals that essentially allow sellers and publishers to offload the leftovers, don't earn their keep. Brands that are growing are considering millions of ads a second and selecting the best suited for their brand. They are not outsourcing decisioning to sellers, publishers or the platform offering the cheapest platform rate.

We are seeing these behaviors translate directly into business. March was our biggest month on record for JVP signings. We signed 45 JVPs in March alone. For Q1, our total JVP count grew 55% year-over-year. And excluding renewals, new JVP deal spend grew 40% year-over-year during the quarter. To highlight one of these deals, our pharma team recently went head-to-head against Amazon for one of the largest pharmaceutical advertisers in the world. lowered by seemingly lower rates, this brand shifted some investment to PG on Amazon last year.

Over the past 9 months, our team delivered consistent partnership and focused on driving real business outcomes for the client. In Q1, our team won back the business and signed a JVP for 2026 that will increase their spend on our platform by 114% year-over-year. So stepping back, all of this reinforces a final point. Objectivity matters more than ever. In the best buyers market in history, it is important that your DSP does not own inventory. At The Trade Desk, our differentiation is that we operate on the open Internet, and we are objective. We don't own media. We don't have conflicting incentives.

The technology we've built is all informed by our objectivity. And our objective position allows our AI models to evaluate every opportunity on its merits across the entire ecosystem and optimize purely for each advertiser's goal.

So on to our third topic, innovating and upgrading The Trade Desk. We'll spend a lot more time in coming quarters talking about our upgrades to the product and the company. But suffice to say, we are extremely focused on improving the inputs that feed our objective AI-fueled advertising machine for buyers. Those enhancements include improving measurement, improving data ribbon decisioning, improving data and price discovery of data itself and making our supply chain to inventory and data more efficient.

Over the last 5 years or so, we have created the world's largest and richest marketplace of retail data. Combined, we believe the retailers in our data marketplace represent more than 80% of sales from top U.S. retailers. Compare that to Amazon, who represents less than 15% of U.S. retail spend. This is a huge advantage for us. For example, a leading travel brand recently ran a test to evaluate campaign performance with and without activating our new product, Audience Unlimited. The results across all KPIs were fantastic.

Audience Unlimited delivered 30% lower CPMs on media, 38% lower data cost and 75% more efficient CPA and a 2.7x increase in conversion rate compared to the control group. Most importantly, Audience Unlimited increased campaign performance while simultaneously reducing manual effort in the audience selection process.

We are also beginning to unlock on-site [indiscernible] media. Sponsored listings are among the most powerful and effective advertising formats on the Internet and are even more powerful when part of an omnichannel strategy. We've begun integrating with partners like Cody and even more recently, Dollar General, and we expect more retailers to enable programmatic access to sponsored listings in 2026. We were also recently chosen by Lyft app to power their off-site rider experience or mobility media as Lyft calls it.

This is a good example of how media teams are increasingly turning to The Trade Desk, not just for access but for the ability to bring together first-party data, measurement and cross-channel execution. This allows platforms like Lyft to take more relevant ad experiences to their users, even when they're not actively taking a lift while helping advertisers better understand and optimize performance campaigns across channels.

Of course, our objectivity is critical in all of this. Retail Media and Audience Unlimited are both part of a much bigger effort we are undertaking to reform objective measurement. For years, digital advertising has relied too heavily on last touch or last-click attribution. This often over credits the lower funnel or retargeting impressions while undervaluing the awareness and consideration strategies that actually create demand in the first place. You have to plant seeds, water them and then harvest them.

Last Touch ignores how consumers really behave today, especially across channels like CTV and audio where influence happens well before any final action. As a result, marketers end up optimizing for what's easiest to measure and not what actually drives brand recognition, loyalty and incremental growth. Over the last few months, we've had deeper conversations with our partners and clients around new approaches to measurement and attribution.

As we look ahead, our focus is very clear. We are committed to continuing to execute for our clients, helping them navigate an increasingly complex environment and deliver measurable outcomes. We see the premium Internet more aligned than ever. Premium advertisers and premium publishers want a more efficient supply chain for the open Internet. The Trade Desk is leading this work, but we are far from alone in these efforts. We will continue to invest in the areas that matter most of the future of the open Internet, including AI-driven decisioning, retail media, CTV and identity and we will continue to strengthen our platform and our organization so that we can scale with discipline and sustain our leadership position for many years to come.

We recognize that at this moment, where the macro is more uncertain, and we are evolving parts of our business require clarity, accountability and strong execution. These are areas where we have a proven track record, and we are committed to continuing to earn the trust of our investors, our partners and our customers.

I've said before that trust is one of the most important assets we have. It's not something we take likely, and it is something we work to earn and maintain every single day. Our conviction in the long-term opportunity has not changed. If anything, it has strengthened.

Advertisers are demanding more transparency, more performance and more control, and we believe we are uniquely positioned to lead that effort with our objective platform, our scale data and our AI-driven decisioning that helps our clients grow and own their future. The role of data in AI and advertising is increasing, and the need for objective outcome-driven platforms has never been greater. We believe all of those trends are working in our favor. And importantly, we believe we are still early in this opportunity. As a result, our best days are ahead of us. Thank you.

And with that, I will hand it over to Tahnil to cover the financials.

Thank you, Jeff, and good afternoon, everyone. Our team remains disciplined and focused on our shared vision for programmatic advertising and the open Internet. CTV growth remained strong, fueled by the continued shift away from linear TV and expanding decision inventory at the world's largest publishers. Advertisers are increasingly using retail data from our marketplace to tie ad spend to real-world sales. Our independence and objectivity continue to be key differentiators, especially in this AI-powered era of advertising as brands seek trusted results-driven partners.

The start of 2026 has brought unique challenges, including geopolitical uncertainty that our clients are currently navigating. As we navigate these dynamics in the near term, we remain focused on the long-term opportunity. Few companies are in the fortunate position to operate with a $1 trillion addressable market with a strong balance sheet and cash generation and durable differentiation as an objective, unbiased platform. With this opportunity in mind, we will continue to innovate through disciplined investments in our business, positioning ourselves to create value for advertisers and help our clients grow their businesses.

With that, on to our results. In Q1, we delivered revenue of $689 million, representing 12% year-over-year growth. We generated $206 million of adjusted EBITDA during the quarter, representing a 30% margin. Our growth in Q1 was driven by strong trends across CTV and audio. Video, which includes CTV represented a low 50s percent of our business in Q1 and continues to grow as a percentage of our channel mix.

Mobile represented a high 20% share of the business during the quarter, while display represented a low double-digit share. Audio represented around 6% of the business and grew year-over-year at a rate higher than any of the channel in Q1. Geographically, the United States represented approximately 82% of our revenue in Q1 and international represented approximately 18%. Our strong momentum in both EMEA and APAC reflects the investments we have made in these regions over the last several years as well as momentum in CTV across these markets.

Among verticals that represent at least 1% of our business, we saw particularly strong growth in medical health, automotive and events. We continue to see some pressure in the home and garden and food and drink sectors as CPG brands navigate geopolitical uncertainty, consumer softness and input cost inflation. Automotive remains an area of strength overall, though we believe this business could be growing faster absent the impact of increased tariffs on the industry.

Q1 operating expenses were $622 million, up 11% from a year ago. Excluding stock-based compensation, Q1 operating expenses were $513 million, up 18% from a year ago. During the quarter, we continued to make investments in our team and platform, particularly in areas like platform operations as we optimize our platform infrastructure and implement more AI-powered tools in our platform.

Income tax expense was $39 million in the first quarter, driven primarily by our profitability and the impact of stock-based awards. Net income for the quarter was $40 million or $0.08 per diluted share or about 6% of revenue. Adjusted net income for the quarter was $134 million or $0.28 per diluted share. Net cash provided by operating activities was $392 million, and free cash flow was $276 million in Q1.

We ended the quarter with a strong cash and liquidity position. Our balance sheet had about $1.4 billion in cash, cash equivalents and short-term investments at the end of the quarter. In Q1, we used $164 million of cash to repurchase our Class A common stock via our share repurchase program. Given our strong balance sheet and consistent cash flow generation, we plan to continue opportunistic share repurchases while also offsetting dilution from employee stock issuances.

Turning to our outlook for the second quarter. For Q2, we expect revenue to be at least $750 million. We estimate adjusted EBITDA for Q2 to be approximately $260 million. In terms of our operating plan for the remainder of 2026, we continue to expect head count growth to remain below revenue growth, reflecting our focus on productivity and operating leverage. We plan to be deliberate and prioritizing investments that directly support revenue growth and AI-driven innovation.

Taken together, we continue to expect our full year 2026 adjusted EBITDA margin percentage to be at least 40%, approximately in line with 2025. Looking ahead, we remain the leading independent platform in a rapidly growing industry, delivering profitable growth and innovation with strong execution across key initiatives such as CTV, retail media, Agentic-AI, supply path optimization and growth outside of the U.S., we remain confident in our ability to capitalize on the significant opportunities ahead of us.

That concludes our prepared remarks. Operator, please open up the call for questions.

[Operator Instructions] The first question comes from Shyam Patil with Susquehanna.

Jeff, I had a couple of questions. First one, can you provide some comments on the Publicis discussions? And then second, can you talk about the factors that you see driving the decel in your 2Q outlook?

Thanks, Shyam. I appreciate the question. And I appreciate you asking about Publicis, although I have less to say about that than I do the second part of your question. But I am really glad to be able to address it head on. There's been a lot said about conflict and often it's framed in the most conflict rich language that press can provide. And I think that's been over dramatized. And I'm hopeful that we're nearing the end of this public discussion. So I'm hopeful that our discussion today puts an end to it. .

But I will say that since 2018, we've done billions of dollars of business with Publicis through the agreement that we have and we continue to have great dialogue with Publicis about the next chapter of our partnership. Our negotiations are ongoing. It's probably not prudent for me to say more about it in this forum. So I'll just leave it at that on Publicis.

As it relates to the factors that are driving deceleration as you put it in Q2. First, I just want to say that we feel really good about the long-term structural drivers of our business and the future of the open internet. I hope you could hear that conviction in our prepared remarks. Secondly, I just want to remind everybody that we are uniquely one of the few large companies that are focused on being a buying platform for large companies. So most of our revenue comes from Fortune 500 companies and their brands and of course, they respond differently to macro factors than smaller companies or local businesses, especially when the headwinds are macro and global in nature.

As to the specifics, some of the fast-growing verticals, we believe would be growing even faster if they were absent the current macro uncertainty, whether there's geopolitical instability, there's tariffs, they're broader consumer pressures that are impacting growth. So what gives me confidence really is that nearly every major brand we speak with is focused on the right question right now, which is how do we get back to growth as a brand. So it's actually in that context that I'm so positive, it's the reason you could hear that positivity in our prepared remarks because I think we're in a position now to build a much bigger business than we've ever been before and that all of the things that we're seeing across the landscape, including the pressures are actually opportunities.

And when I look at all the things that are teed up for us nicely, First of all, the discussion around measurement right now is the best thing that could be teamed up, a very bright future for the open Internet, let alone The Trade Desk. You look at all the progress that we've made in retail data, as we highlighted, we partnered with more retailers than we haven't in the sense that a greater percentage of retailers are now partners that are not. We talked a lot about our Agentic partnership with Stagwell. And of course, there's many others to come. We really do see that the future of The Trade Desk is to be a bit of a hub for all the innovation on the open Internet, including the especially inside of Agentic AI.

We're seeing more cooperation from the biggest publishers in the world as they are highly in tune with the fact that they need higher CPMs that come from biddable and there's not really any way out for them in terms of raising prices or adding to the ad load the much better path for them that doesn't result in subscribers going away is to actually make their ad environment more effective. That's true for Disney, Spotify, Paramount, NBC, Fox, Netflix and hundreds of others.

Of course, we're also seeing great partnership discussions with our operating system for CTV called Ventura. I expect that you'll hear more about that in the years to come. We've talked about our new product Audience Unlimited. We talked about so much about the discussions that the industry itself is having on measurement. But overall, I would just highlight that I view all of these pressures as opportunities. And so while there are clearly near-term headwinds and a cloudier macro environment, we continue to believe that the long-term opportunity for our business remains extremely strong. Thanks for the question, Shyam.

Next question is from Vasily Karasyov with Cannonball Research.

Jeff, there was a very interestingly time piece in the industry press today before you reported Adweek announced that your Chief Strategy Officer, Samantha Jacobson, is leaving the company to join OpenAI, so now that it's public, I was wondering if you could share the details around this event.

Thanks for the question, and I agree with you that this was interestingly timed. But I'll just confirm what the article asserted, which is that Samantha is taking a role in OpenAI. On a personal level, I'm excited for her and I'm extremely confident in her abilities to have an impact there, just like cheat here. I'll also say you on a personal level that working with Samantha has been one of the highlights of my career. And I'm glad on some level that it isn't over. She's smart and humble, and she's just generally amazing, and I'm really sad to hear go in her time full-term role, but she is not leaving us fully as you may know, she's on our Board of Directors. She'll stay on our Board of Directors, and will continue to give a strategic advice and guidance.

She has asked me to share that she's a strong believer in The Trade Desk and our mission and continues to invest in ensuring that we are successful. Obviously, our passion for the open Internet is big and it continues. I'll also highlight, which is something that has not been highlighted enough publicly is that we've quietly been assembling a very strong team of meaningfully the senior leaders who will bring deep operational experience and are aligned where the company is going. And despite some of the noise that you read in ad tech headlines. We have a team that really understands where this industry is heading and understands how to take the position that we're in and help this company become a bigger company than we've ever been before.

We're extremely optimistic about the future in large part because of our recent recruiting efforts and that continues today. Some of my -- the source of my biggest optimism is actually the team that we've assembled and the things that we have in the pipeline. Thanks for the question.

Next question comes from Matt Swanson with RBC.

Great. Jeff, maybe kind of expanding on your answer to the first question on the Q2 sell. There's obviously been a lot of noise, both macro and Trade Desk specific lately. When thinking about the cyclical and secular variables that impact your business, how do you think about revenue reacceleration? And kind of which aspects of it are in your control?

Yes. Thank you for the question. I actually really like the way you framed it because those are words that I think are just important to underline. Because it's important to separate what's cyclical from what structural. The structural drivers of our business are extremely strong. And we think that the opportunity for the open Internet is better than it's ever been before. And so reacceleration isn't really about reinventing ourselves, it's about executing against the larger and expanding opportunity. .

And of course, there's -- as we highlighted before there's a number of macro effects, but it's in these macro effects where the pressures actually helped the industry evolve in a healthy way. And that is what is happening right now, even though it doesn't show up in results today. So while all of that's true, the macro does matter, too. So when conditions stabilize, I think that provides a natural tailwind that isn't there right now.

But again, when I look at things like Audience Unlimited, advancements in measurement, TTV adoption and the continued expansion of the retail data partnerships and of course, all the innovations that we've injected into our platform and to our partnerships brought to you via various forms of AI and maybe Agentic being the one I'm the most excited about. There's just so much opportunity ahead for us in the open Internet. So that we know we can improve our growth, but I feel very good about where we are as a business. In the near term, this is about execution. And we believe that we're really well positioned as all of these factors come together. Thanks for the question.

Next is Justin Patterson with KeyBanc.

Great. I'm curious to hear more about investment priorities against that 40% EBITDA margin target. Obviously, revenue and margins are both off to a softer start in the first half. So I'm curious how we should think about the levers to achieve that target?

Yes. I'll just first say that 2026 is a really important year of disciplined reinvestment, but I'll ask Tahnil to go first, and then I'll wrap up.

Yes. As a company, we have always been very disciplined around hiring and reinvestment in the business. 2026 is a year of disciplined reinvestment for us. We expect our full year adjusted EBITDA margin percentage to be at least 4%, approximately in line with last year. We again expect head count growth to remain below revenue growth, reflecting continued operating discipline and increasing productivity across our business. At the same time, we will continue investing in areas where we see the highest long-term ROI, particularly around platform innovation, AI, retail, media and measurement. .

One advantage of our model is that we generate strong cash flow and can maintain significant flexibility in how we pace our investments and expenses, which allows us to maintain those high levels of profitability. So our focus is clear, maintain strong profitability, invest for ROI is the highest and continue positioning the business for greater leverage over the long term.

And I'll just add that maintaining strong profitability has always been a part of our culture here at The Trade Desk even when we are a much smaller company. In fact, I was very obsessed when I founded the company of raising the profitability. It was my view that that's how we could own our future, but it's also how we could establish a culture that was extremely disciplined. And I believe that focusing on profitability and maintaining that profitability was not critical to us owning our own future, but also developing the company values that we wanted to have.

So we've spent a lot of years developing a very durable business model that throws off a lot of cash every single year. And we think this is especially important during periods of cyclical pressure like the one that we're in to make certain that we renew our commitment to that and maintain 2026 as a year of disciplined reinvestment because we believe that this will define the company for many years to come. Thank you.

The next question comes from Mark Zgutowicz with Benchmark.

Jeff, just maybe specifically on 2Q. I'm just curious if there's any agency-related weakness outside of macro that might account for that deceleration. Obviously, the industry or at least industry expectations for digital and video growth are above 8% this year, and we all know that those projections are not often right. But just given that it's pointing to below industry growth number. Just curious if there's any onetime related or maybe 1 to 2 quarter related items in there. And then I think you guys started talking about CPG and auto in 3Q of last year being weak. And I'm just curious if we start to see potentially easier comps there in the third quarter, fourth quarter of this year?

Yes. Well, thanks for the question. As it relates to agencies, and I imagine you're partly asking because of the way that I opened on the questions around Publicis, which we've received just so many on that. I'll just say at a high level, there's not really anything incremental to add on the agency front beyond what I covered earlier as it relates to Q2 guide or anything else related.

As it relates to to CPGs and autos. Yes, I do think that, that's true. Of course, if you go through a year without with continued pressure on specific categories that you then start to create easy comps for them. However, I don't think this is a more impressive part of the narrative isn't the EBIT comps. It's actually the amount of discipline that those companies are starting to implement or have implemented in that year where they are just thinking about brand building, thinking about media buying in more sophisticated ways. In some ways, having a really does force companies to get disciplined and think about what do they have to change.

I've never seen the biggest brands in the world more focused on growth than they are right now. And that's not by mistake. It's not disconnected from the fact that many of them are under pressure. So this creates a great moment -- a great opportunity for us to pass 15 cars, if you will.

The next question comes from Youssef Squali with Truist Securities.

Okay. Great. Jeff, you talked in your prepared remarks about LLM, AI search and the opportunity there. Could you maybe flesh that out a little bit for us. What are the gating factors to kind of make to start making that a reality and have it start impacting kind of the P&L. How do you see your role within that ecosystem? And where are you in your conversations with the obvious key players there?

Yes. I can't won't speak publicly to the discussions that we're in with the key players. But I will talk about the opportunity. A lot has been discussed about the amount of CapEx that have gone into these companies and the amazing products that they've all created. I believe they're in a very similar position to Netflix in the way that we talked about them 5 to 10 years ago when I started asserting that they would eventually have to show ads, even at times when Netflix was saying they weren't going to show ads. .

I made that assertion in part because I knew how expensive their content was and the LLM, chat search companies have a very similar delever. They have very expensive content. I think some people have wrongly assumed that their monetization will look like legacy search. And legacy search was born when the average search query was less than 2 words. No good AI prompt is 2 words or less. They're much more detailed and when you have many sentences and are asking a very specific question or prompt, obviously, the answer often is much more valuable as well to the user.

So it's not unreasonable to think that many of the LLMs are going to try to get as much ad monetization as possible. If you look at it as there's a subscription which is quite expensive and that either needs to be offset or substituted by an ad experience that is extremely profitable and that extremely profitable ad experience can't just be keyword-based or like legacy search. And in fact, in order to make the most amount of money might, in some cases, need to include video, but if there's a lot of compute cost that goes into that answer, it probably is somewhat correlated to the value of the response to the user which might make it easier to put on the other side of the video.

In both of those cases, I do believe that it can unlock a greater amount of TAM for the LLMs in the sense that they can participate in top of the funnel activity and bottom of the funnel activity, which is different than what search has done and especially in a world where there's more discussion about measurement, I believe this way of thinking about it is the right way before the LLMs to be thinking about their future. I do think that unlocks TAM for us that we previously a decade ago, said was not likely to change inside of search. So I think this represents a tremendous opportunity for us.

But to put a finer point on this one, I think it also represents a tremendous opportunity for the open Internet because in some forms, I've said before that I think the future of the open Internet is, in some ways, a bigger conversation than just the Internet in that we're talking more and more about the tug of war between open systems and closed systems. In the tiny corner of advertising, we have to talk about that as walled gardens versus the open Internet.

But if we look at it bigger and think of it more as open systems versus closed systems, I think you're going to see more and more open systems just because that's the only way to get sort of participation you need for market dynamics to really do their thing and you source demand and competition that you never could in a closed system. So I think this creates just a tremendous opportunity for us and for them and I'm quite optimistic about the future here, but we are in the first inning. There's no question. The debate is what part of the first inning. It's probably a couple of pitches in MAX. Thanks for the question.

Next question comes from Tim Nollen with SSR.

Jeff, you made a reference to Trade Desk being something of a hub in this emerging marketplace. And I'm wondering, as the supply path is consolidating or shortening order return you want to use for. Does it make sense for The Trade Desk to remain a fully independent DSP. Since you have the means to go straight to publishers now, is there a scenario where maybe it makes sense to build supply-side services as well. And you didn't really talk about OpenTTD, I don't think on this call, we have in the past. I wonder if that maybe is setting up something like that.

Awesome. Thank you. Yes, I appreciate you referencing OpenTTD, too because that is the hub that I'm speaking of, and I do believe is the place where more and more innovation can take place. So I mentioned in the prepared remarks that there was 1 AI-first company that commented that they really couldn't run their business if we weren't in the ecosystem. And that's largely because about a decade ago, Google made the decision to stop sharing a level of logs or log-level data. And it's actually in those insights, in that grain where a whole bunch of companies can build. .

And of course, in order to be an AI company, you need a lot of data and you need a lot of quality data. So because The Trade Desk has historically always said to the biggest brands and to their agents, we want you to keep your data. We want to make certain that we protect it. That's different than most of the big platforms who are asking brands and agencies to surrender their data and to pool their data with their other customers. So we say all the time internally, things like data leakage are exponentially more expensive in a world of AI.

Coming to the second part of your question, which was about should The Trade Desk get into the supply side, the reason we have not isn't because we couldn't technologically. It isn't because it wouldn't further shorten the supply chain. It's because we don't want to create the conflict of interest of saying to one group of customers, we want you to get the lowest CPM possible. We're looking for value. And then going straight from advertisers to publishers saying, we want to give you the highest CPM possible and then trying to serve 2 masters. This is the flaw of every ad network business model, which, by the way, hundreds of companies are trying to replicate the flaws of the Ad Network business model that we disproved 20 years ago in a lot of Agentic business models today. So like this is a lesson that unfortunately not have learned.

That said, there are hundreds of publishers who want to do their own yield management. And many companies in CTV are doing their own yield management. They're doing their -- they built their own tech to do this. And we plug into that tech directly. This is the reason we built Open Path in the first place was to plug into companies like that who want to do their own yield management. So we will absolutely look for that opportunity. But as it relates to going all the way to the sell side to do the yield management for them, we'll never do that.

Now that said, we will continue to build more tools to facilitate that. We'll make it easier for others to do. If we can tee up a number of other AI companies to do that, we will. And I do think that there's tons of opportunity for efficiencies to be cleaned. I do think the inefficiencies of the supply chain of programmatic are one of the biggest bottlenecks to the open Internet itself growing, and that's something we're incredibly focused on fixing for the betterment of the entire ecosystem. That is one of the reasons why moments like this where there are macro headwinds that we're very focused on making those changes because now is the moment where you can. And that's also part of the reason why 2026 is a year of disciplined reinvestment for us.

The next question comes from Jessica Reif Ehrlich with Bank of America.

Jeff, you said earlier in the call in your prepared remarks, you mentioned the partnership with Sage. And it just seems like you wouldn't have brought that up as it wasn't important. So I know it's early days, but when do you think Agentic trading will become the dominant dynamic in programmatic media? And how will The Trade Desk be impacted by this?

Thanks. Yes. First, I'd like the way you were investing because it gives me an opportunity to just correct it just a little bit because I do think there is often a mindset of if your company is older than 5 years old and you think that you'll be impacted by AI instead of leading it. We fundamentally believe that we'll lead the Agentic revolution. I do believe that that word is not overstating it on programmatic advertising.

I've said on a number of stages in our industry recently that I don't think there is an industry in the world that is better suited to be upgraded from Agentic AI than programmatic advertising. So I do think programmatic will benefit tremendously from Agentic. I do think AI, in general, is changing the world. and we are still in the very early phases of that.

What that will look like, though, is a little bit different than the way I think you're hearing most companies in our space talk about Agentic AI. They -- most companies that are focused on Agentic in our space are just talking about plugging into these tiny pools of inventory, one advertiser connects to one publisher and -- in doing so, you more or less create another ad network where you have hundreds of thousands of ad networks because of the combination of one advertiser to one publisher and agents talking to each other and it gets rid of the opportunity for you to look at everything at once and then make holistic decisions and compare all of those. That's part of the reason also in the prepared remarks that we talked about why it's so important to look at all of the QPS that we do and to maintain decisioning so that you can look at those currently 20 million [indiscernible] opportunities every single second, and then choose carefully the 300 or 400 that the biggest brands in the world should be buying.

So Agentic will facilitate that. One of the things that our industry has been hurt by is that when a campaign needs to move from $500,000 to $1 million, you can immediately be faced with thousands of potential ways to expand your campaign. In order to even execute the buy, you need to change your frequency caps. How many times per day do you show the ad or your targeting parameters, I need to show it to a new group of users than what I was before at 500,000.

There are so many variables in terms of new ways that you could spend that incremental money that you're faced with an overwhelming number of decisions. One simple way to explain Agentic AI is that it's a layer on top of the API that can reason or said simply, an API that can reason while simultaneously creating productivity. So what we started with Stagwell is the ability to create and edit campaigns in the most basic form.

That will, of course, evolve into optimization -- but the Agentic layer can help reason with -- if you're expanding the campaign, there's a whole bunch of ways to do it. Let's talk about the ways that we can help you do that optimally. And Agenti, I think, can help that process that has been overwhelming for users for really the inception of digital advertising or since the inception of digital advertising. So it represents an opportunity to scale and be more productive and more effective that I'm not sure we would have gotten there nearly as fast without the rise of Agenti. So I'm just super excited about what that represents for our space. Jessica, thanks for the question.

And our final question comes from Jason Helfstein with Oppenheimer.

Just want to follow up on that and then have a quick yes or no question. So Jeff, this is the non- yes or no question. Is the path to Agentic more about solving the technology or getting the right kind of commercial terms with the Agentic platforms or both? So feel free to -- however detail you want to get in that. And then the kind of the yes or no question, do the record JVP signings in March have anything to do with the kind of previously discussed agency disagreements?

So I think on your first question, if I understand it correctly, the opportunity for Agentic is really to make optimizations and campaigns perform better. I think the optimization questions, which are much more about the variables and how you engage in the transaction are more of the issue being solved than the commercial terms, so to speak. So I think there will be a lot of frameworks that are decided beforehand, and then we'll repeat that using agents, millions, billions, even trillions of time subsequently. As it relates to the JVPs, I can't really comment on whether it's relevant or not, any of it agency discussions that we've had. But we're optimistic about the continued agency discussions that we are [indiscernible].

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Hello, everybody. Thank you for coming. My name is Matt Cost from the Morgan Stanley U.S. Internet team. Thrilled to be joined by Jeff Green, the Chairman, CEO and Co-Founder of Trade Desk. Thank you for being here.

Delighted to be here. Thanks for having us.

Of course. So quickly run through disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your MS sales representative.

With that, maybe let's just start with the big picture here. Over the past 12 months, you've kind of described 2025 as a recalibration year for Trade Desk and 2026 is a disciplined reinvestment year. So as you step back, where is Trade Desk in your long-term growth trajectory?

Yes. So of course, you always have to start with the TAM. So we always remind people that we have a $1 trillion TAM and that most of that is centered in the top 1,000 advertisers, if you will. And that over the 15 years that we've been a company and -- just over 15 years and the 10 years that we've been a public company, we have really serviced the S&P 500 or the Fortune 500 brands.

It's not uncommon to have sort of a Navy SEAL team go out and win that business and service that business. And as you get to sometimes something like a $3 billion revenue business that you have to recalibrate to build a machine. And what we've done in 2025 is recalibrate to essentially take especially our go-to-market team, spread them out so that they're assigned to every individual account. Of course, during our time as a company, there's also been some pressures on ad agencies and the way that dollars flow is different. The way that decisions are made is different. And so in the same way that the market is moving, so is our business move to be something bigger. And we need to build that into a scalable machine to go from $3 billion to $10 billion, and that required some recalibration. So that's what we've been doing in 2025.

Great. You've described how spend across CPG and auto has been more measured recently in categories like tech and pharma are stronger. How should investors think about the causes of the vertical mix and demand trends that you're seeing? And are they more cyclical? Or are there things that are changing structurally?

Yes. It's almost all cyclical. I would say that many CPGs and autos were not comfortable saying that tariffs and political pressures slowed down their business in 2025. And there were a fair number of headwinds, but there are also -- 2025 was also a year where we added more supply to the advertising ecosystem than in any year in the past. And by doing both of those things, essentially having the headwinds and pressures on their business to the brands that have really built their brands from traditional advertising and especially television advertising.

And it's really important to remember, as much as everybody would like to just have the end of the funnel where people type in, buy Mercedes-Benz and then buy a Mercedes-Benz without any ads that had to happen before that, no one has ever done that, that didn't first see an ad. There was a reason somebody typed that in. And that ads and brands are built with emotion, a connection to human beings. And television and radio ads do a much better job of that than little black and blue characters that only come after the real advertising has done its work.

So those brands that are facing headwinds have often had dilemmas like, I have to reserve hundreds of millions of dollars to make certain that tariffs don't affect my business. And then I have to convince and -- one CPG said to us, we had to convince the White House that we couldn't get these products in the United States. And then in that environment, how do we do more with less.

And so 2025 was them figuring out how to do more with less, how to measure, how to make certain that you give some credit to the top of the funnel, if not the majority to the top of the funnel, that is being taken by people almost exclusively at the bottom of the funnel and build the engines in a digital world. And at the same time, when the supply is exceeding the demand, that does make it a buyer's market. That is very good for us and for the biggest brands in the world, but you have to parse through all the new supply assigned value to all of it in order to make it as effective as they'd like to.

And that's what we've done very well from them, but in an environment where they're just counting pennies and trying to be cost conscious. Part of the reason why in our earnings, we highlighted CPG and auto as those categories that have been sort of affected the most is it's the first time that we've ever itemized one of the -- two of the 11 sectors of the economy as sort of standouts.

Because if you were to extract those, our business would be doing as well as it's ever done with all the other categories, which is part of the reason why we call it out because we just wanted to point out that this is something that is cyclical in nature. This is not a structural issue, particularly with us. This is something that is cyclical to our clients that we're helping them weather, helping them get to a better environment so that we can, of course, help them get back to brand building, which is the only reason why brands like Coca-Cola and Nike and others have endured so long. They're the best in the world at creating brands.

You've made some significant organizational changes over the past year. So I wonder, as you look at the impact that, that's having, what is your assessment of the ability to translate that into stronger execution? And then how is it positioning the business for renewed momentum?

Yes. So it goes back to that sort of Navy SEAL-like approach that I was describing before. So when you're a smaller company, the way that you're scaling is you get a few -- a dozen people that are really good at doing deals. And then even when you have hundreds of other go-to-market team members, they're mostly executing after those deals are done. But as you grow from partnerships with Fortune 500 companies that are instead of measured in $10 million or even $50 million, but instead hundreds of millions of dollars and in some cases, billions of dollars, the decision-makers spread out in those organizations.

It's not just one media buyer. It's their boss, their boss' boss. And in fact, in many of these businesses, some of the biggest businesses in the world, our relationships go from the CEO all the way to the bottom. In order to service brands like that, you have to spread out. This has to be a system. And so while we had some of the best dealmakers in the history of our space, and we also had a pitch that is centered around objectivity, we don't own any inventory. We're not biasing towards our own, whether that's YouTube or whether that's Amazon Prime Video or whether that's Facebook inventory, we're not biasing towards our own. We're trying to help you objectively buy what is in the best interest of you.

That pitch is super compelling. However, we have to make it at every level of the organization. So what we needed to do in our go-to-market is spread out. And we needed to assign the right number of people to agencies, right number of people to brands, assign them to every individual brand from the middle, bottom, top make certain that we hold each of them accountable where sometimes the decision-making is shifting because slowly over the last 10 years, it shifted from media buyers, in some cases, to the CFO, who knows nothing about the complicated world of esoteric advertising or programmatic advertising.

And so in that environment, we've had to spread out, get clear roles and responsibilities, and it is working. In fact, our JBP pipeline is the biggest that it has ever been. But it takes some time to spread out, get new roles and responsibilities, new people on board, help them acclimate to a very complicated business, which -- that complexity over the long run is a moat. It is an amazing moat to our business, but it does take some time to transform, and we're laser-focused on taking it from that $3 billion in revenue to $10 billion, and that needs a new sort of organizational structure.

And given that the decision-making is more distributed, it sounds like inside of your advertiser customers than it's been in the past. I guess, is there -- it's not quite the same as the funnel, but how do you know where it's working if you have these different touch points across the company? I mean, you could imagine something like is there a bottom of funnel sales rep at Trade Desk who's taking credit for the work of others. How do you account for those multiple touch points in this more distributed way of going to market?

That's a really great and nuanced question. I don't know that I've ever been asked before from people outside of our company. There is a lot of work to make certain that everybody is earning their keep. And it is by measuring both the activity, but of course, the output. And so we're an amazing machine now. And because we're a data-driven company in everything that we do, I mean, at the core of our value proposition is, of course, that decisioning. And that decisioning is basically like the simple way of explaining the evolution of advertising for the last 50 years is that it used to be a spray and pray methodology where you called and asked what the rate card was to now a data science-driven ecosystem where while inventory can be added easily in a digital environment, so can decisioning about what works, what's likely to work so that you can fine-tune exactly where you spend all of your money.

Because that's in our DNA. That's how we got here. We're data-driven people. We're applying that exact same rigor to all the people that are servicing those companies to make certain that everyone is earning their keep as we spread out. So the harder part was actually creating the roles and responsibilities than it is to create the data and the accountability. It's more of a cultural shift because we've been so mission-driven, so vision-driven in what we do that adding the mathematical rigor to our own operations, to our teams to apply that with their passion and their vision has been the transformation that we've been through in the last year, and it's working.

Fascinating. Maybe shifting over to AI, a lot in there. But if we look out a couple of years into the future and these tools continue to proliferate, what ways will the ad industry look different? And in what ways will Trade Desk operate differently?

Yes. So AI is such an amazing opportunity for The Trade Desk and for the programmatic ecosystem and for the open Internet. And I want to just frame a little bit the challenge and the opportunity because agentic has become such a buzzword that we often say, agentic is going to change everything, and we don't need websites anymore. I think there's an interesting exercise to think about, okay, agentic will book all my travel from now on.

So if you go to an LLM and you say, book a ticket, then it says back, what airline and then you answer the question, then you say, what day, what time? And you go through a series of dialogue that you basically just went through the web form on Expedia. And in fact, at the end of that agentic experience, you do that like 10 times, and you're like, you know what would really help this is if I had a visual. And now you just rebuilt the UI for Expedia. So for doing simple tasks like that, agentic is, in my view, not an upgrade.

Now in our world, we have this really complicated thing. Like if you were to talk to our UI designers, they would describe their problem for the last 15 years as being, if you want to take a campaign from $500,000 to $1 million, you have to change something in your settings in order to enable more budget -- in order to spend more. And you could say, "Oh, let's change the frequency cap from showing 2 ads every 24 hours to showing 4 ads every 24 hours." Or you could expand your site list and said, instead of just showing on Hulu, let's add Netflix to the equation, let's also add other parts of Disney to the equation or let's add some Spotify ads or you could say, instead of just showing the first ad in the commercial break, let's show the fourth.

There are literally thousands and in fact, millions of permutations of changes you can make to make that change. And so if you think of agentic AI, if you want to simplify it, to an API or a UI that can reason with you, not just give you options like in our Expedia case, but actually reason with you. Because there are so many possibilities, agentic can change all of the ways that decisions are made.

So what we've been enabling for the last 15 years is people to make those decisions, and we try to give them as much data as possible to make informed decisions. That data has been really overwhelming. So now sitting between our UI, which was really hard to give them all the data we wanted to and the user who couldn't keep all that data present in their minds now can have AI as an aid to help them in the middle of them and can reason with them and give them those options. We can make recommendations way more easily in an agentic AI environment, which is why we've recalibrated our entire system to inject AI throughout the whole thing.

So our business is more conducive to AI than almost any other software business that I know of. For instance, we look at 20 million ad opportunities every single second. We essentially have to make decisions in 10 milliseconds based on massive data sets from the past. And any brand, even the biggest in the world are only going to buy a few hundreds of those 20 million. How do you make those decisions in such a really rapid time as effectively as possible? I don't know that there's a better job for AI than that one.

If you then say, okay, well, now I know what I want to buy, but there's many paths to get there, meaning I could buy it through this reseller, I could buy it through this seller, this one has this markup, this one has this user identified. There's a whole bunch of different ways to get to that same thing, again, creating millions of permutations that we have milliseconds to choose between. Again, an amazing assignment for AI.

We've gone through every aspect of the way that we make decisions for our users. We've broken them into pieces in an infrastructure we call distributed AI. And we basically boil them down to individual tasks so that we're not trying to boil the ocean with any of these, but individual tasks with a single question and an entire team trying to inject AI into it. And then there's inputs and outputs to every module of the system so that we can check each other's work because every AI system has a garbage in, garbage out problem.

What if you're wrong? What if you make a bad decision based on bad data, how will you know? When Gemini or ChatGPT give you the wrong answer, you often make a bad decision and don't even know it. What we're trying to do is prevent any of that happening when we're repeating this process again and again by having all those checks and balances and all that distribution. So I take a minute to sort of detour and go into the details a bit on the AI simply to just underline how -- what a significant driver of our business AI has already been and will be for as far as we can see into the future.

Got it. Maybe shifting over to the streaming ecosystem for a minute. So obviously, CTV and video broadly has been a major driver of growth for Trade Desk for years. As more premium inventory becomes decisioned and authenticated, how is your transaction mix evolving? And what is the next phase of CTV ad monetization look like?

Yes. So still the minority of CTV ads are transacted programmatically. And of those that are transacted programmatically, often the decisioning is very low or very weak. And so you're seeing -- especially because of that surge in supply in 2025, that surge has made it so that it's not really possible to go get more revenue by just throwing more tags in the commercial break. And so now showing ad 1 of 2 was the norm of 2023 and now showing ad 1 of 4 or 5 is the norm of 2025.

And we've reached the point where you can't really add to it without affecting subscribers, without affecting ad efficacy. It has some negative effect. And so what all of them are doing are saying, "Hey, I'm too worried about any decisions that would negatively impact one of those things. So instead, I've got to figure out how to turn a $10 CPM into a $12 CPM or a $20 CPM or a $30 CPM." And the only way to do that is to enable decisioning for companies like us and the advertisers that we represent.

So by making it biddable, by making it so that we have some metadata to make decisions. And incidentally, the data that we're looking for to make decisions is typically the advertisers' own data. So for instance, we don't -- we're not asking Netflix to send us all of their data. Instead, we just want to make it so that we can use our data as we make the decisions and the advertisers that we represent.

So more and more, they're all moving towards a biddable environment where they're enabling this metadata, where they're being more reassuring about exactly what we're buying. We want them to describe well what they're selling because there are so many companies that are not premium, that are trying to pretend to be premium by obfuscating. And the only way for the premium to distinguish itself is to be very clear in what it describes, including like how many ads are in the commercial break.

This is one thing that Netflix has done very well. They've kept the ad load light so that it is a premium and they've gotten premium prices as a result. Now to leverage that premium price or that premium environment optimally, I think it's best for them to make it biddable and to create competition. And I think they're on their way to that.

So talking about retail media for a minute. So as that landscape continues to mature, how do you see it evolving as agentic commerce develops? And how does Audience Unlimited expand the monetization surface for retail data?

Yes. So I think maybe the single biggest opportunity that we're looking at to elevate our business in 2026 is all related to retail. And that's related to retail data and the effect that, that can have on measurement. And those 2 things are just sort of creating energy like electrons chasing each other, just creates tremendous energy for us to transform not just our business and not just the open Internet, but really all of advertising.

And the reason why I believe retail media and retail data in particular, transforms that is that you do want that data to be used to figure out who to target. So if you're saying this group of people is 25x more likely to buy the product in the store, of course, you want to advertise to those. You want to invest in those expensive impressions in order to buy them. And then if you do buy them, you will measure it using that same conversion data that informed you to go target them in the first time, and then it creates this virtuous cycle.

What's happened in many platforms like a Facebook or Google is that they have been taking credit for everything that happens up funnel, and that's because of the absence of this retail data. Now many of the retailers have been trying to monetize that data by joining it with their own ad network by creating an ad network and selling some inventory with it. The challenge with that is you mark up the media so much that you're only going to get a sliver.

So the average CPG who would otherwise -- who is spending billions of dollars, they will only buy a $10 million buy when they're turning a $5 million media buy into a $10 million simply because of layering on that data. So what our pitch to the retailers around the world, and we've aggregated a double-digit percentage of all the retailers in terms of transaction data around the world.

By aggregating all of that data, we make it possible for them to get out of that -- to break that $10 million ceiling and instead layer the data on the billions of dollars that these CPGs are spending across all of it. So what Audience Unlimited is, is a product that we offer to the biggest brands in the world, including and maybe especially CPGs and auto, who will then -- we've done to third-party data, especially retail, what Spotify did to music, which is make it so that instead of buying one by one and making it hard to find, we make it so that you have all you can eat. And as soon as you have all you can eat, then you're in the business of creating discovery. Again, just like what Spotify has done. Like if you think of the UIs when everybody was selling at $0.99 a song, it was much less about discovery and more about just putting things on the shelf.

In a data world where there's data segments that are -- just there's just billions and billions of data segments, it becomes hard to scroll and click through all of that. So we finally reached a place where the data ecosystem can be what Spotify has done to music and make it so that all the friction goes away. I believe for the first time, we'll have price discovery in the third-party data ecosystem at scale. And that will transform our business. It will transform these retailers' business.

It will make it easier for them to compete with Amazon. It will also make it so that in cases where we are competing with Amazon, all these retailers pulling together, obviously, are in part doing that to compete with Amazon. It makes it very clear where people are buying and producing results. And so I think we've created a way to accelerate our business in Audience Unlimited and the measurement products that will come out of it.

Maybe sticking with the theme of competition. I think you said for a long time that you believe the end state would be 5 to 10 scaled global ad platforms with room for really scaled one independent DSP. So I guess how is the competitive environment evolving relative to that expectation that you've articulated historically?

So probably the part of it that I've been the most wrong about is the 5 to 10 part so far, where there have really been fewer than that. And it's largely because that walled garden strategy of trying to essentially take credit for the bottom of the funnel as well as to use really low-cost inventory where the cost of goods sold is almost 0, typically user-generated content.

To say, because I touch the consumer with regularity, I sold all of your products. That's, in a way, what the largest success stories in advertising for destinations. And I say destinations, The Trade Desk is not a destination. You don't advertise on thetradedesk.com, but you do on Instagram or Facebook or YouTube. But for the destinations that have had the most success in advertising, they have essentially unlimited inventory and have taken credit for all of that.

At times, in order to attract more dollars, they've said, "Hey, and we'll also buy the rest of the Internet." And not surprisingly, it's not a priority to any of those businesses. So I've been surprised by how long some of them stayed in the game. Like Facebook got out relatively quickly. Google is retreating some now, like they're less of a competitor than they were a few years ago. Amazon has just kind of gotten started in that. And honestly, I think they have more conflict than any of the other 2 as well as the advertising DNA is not the same as those other 2 companies.

So I've been surprised by how few other companies have joined the space. But I stand by all the things I said before, which is it will be less than 10 and that the independent will get the lion's share because objectivity matters more today than it did yesterday, and it will matter even more tomorrow. And as we add more supply and more conflict of interest and more competition in the world in general, the need for an objective partner to help you buy effectively is going up, not down.

And so we've always been playing the long game, trying to win trust, maintain trust over the long run, and we continue to do that. We are unapologetically premium in the sense that we are not trying to build the cheapest platform. We are trying to build the best, and we make certain that every single feature earns it keep. It adds more value than it costs. And we measure that very carefully to make certain that we are always providing obvious excess or consumer surplus to the people on the other side of the platform.

So the conflict of interest you're referring to, I guess, it really is a function of the existence of this vast amount of walled garden inventory out there on the Internet as opposed to open web. And obviously, you, Trade Desk have been champions of open web for a long time. As you see that walled garden inventory continue to grow, how do you see the competition between advertising in open web and advertising in that walled garden inventory evolving going forward?

Yes. So one thing that I think is just important to define, sometimes I've learned over time that when you hear the term open Internet or open web, that listeners have different definitions of what those terms are. So many of you hear open Internet or open web and you think about the ads that appear in a browser. And that facilitates a very different debate because I think everybody who is here would agree that there is going to be slightly less, maybe a lot less inventory in the browsing Internet because of the ChatGPTs and Geminis of the world, although part of Gemini's success comes from a browser, so they may not want all of that to happen.

But if you look at our business, only about 10% of our business is display advertising, which takes place on those websites. Almost all of our business is focused on that premium. Like I said, we're unapologetically premium. The parts of advertising that are really effective are the parts that connect you to emotion and to memory.

Like every one of us here could give a jingle that you heard in a commercial 30 years ago, assuming you're at least 30 years old or at least 35 years old, to remember a product from long ago because of the way that it made you feel. So what we're trying to do is help the biggest advertisers in the world connect and that with consumers so that they will feel something so that they can remember that and, of course, come back and buy the product. And that's what we're trying to enable.

I'm incredibly flattered that you think I might not be 30. So today, your client base really consists of the largest brands in the world. How do you think about the opportunity for growth within that current segment of the market versus the opportunity for growth down market by creating an offering for maybe small- and medium-sized advertisers?

Yes. We approach the advertising business differently than nearly everyone else did, which was most of them started with the smaller businesses and have kind of worked their way up. And we recognize that it is a very robust sort of strong fat head and a very, very long tail. So if you were to draw the 50% mark in terms of dollars, it's probably somewhere between 600 and 700. So in other words, the 700th largest advertiser is the 50% mark, where $0.5 trillion is spent to the left and $0.5 trillion is spent to the right.

And so by having so much concentration there, we have always said we want to focus on that head because that is the part that cares most about objectivity. That's where the conflict of interest from all the walled gardens come into play. And their strengths have been built from the offerings that they've given to consumers. That's why they've climbed from the end all the way towards the top. But they still make all their money off of the long tail.

So we always set out to design a business that can make money off of the biggest advertisers in the world. We knew that it would have to have a different margin profile. We'd have to think about cost of goods sold differently than they do. And we would also have to recognize that we have to get to scale. And as a result, we have to have a meaningful portion of their wallet. And that means to build tremendous amount of trust and align our interest with them.

So we think we are more -- are better equipped to win a dollar from those sophisticated brands than any other company in the world in advertising. And so of course, that's going to be the core. But we also recognize that our value proposition appeals to the midsized businesses. And that, of course, can appeal to small businesses. So we've always said, we'll start with the head and we'll work our way down, exactly the opposite direction of the way that most of the others have, which is to start small and work their way up.

But as an investor, I think that's incredibly reassuring, because the biggest, most sophisticated, most scrutinizing companies have stuck with us for a very long time. And if we can win them over and perform well for them, it's much easier for us to simplify and do something similar for the midsized businesses, which are -- honestly, the Ms and the Ls have more in common than the Ss and the Ms, but we still say SMB because I'm sure some consultant made up the acronym. But we absolutely recognize the value in continuing down the -- that distribution, and we'll continue to keep marching our way down. But we don't want to lose sight of where that nearly 50% of the entire TAM is concentrated.

I want to close with one kind of overarching question. But before I get there, I do want to touch on the supply chain. How would you grade the efficiency of the ad supply chain in open Internet today? And what are the steps needed to improve it from here?

So if I were to give it a grade, I would say it's a C-. The open Internet is competing with walled gardens. Walled gardens has less valuable, almost infinite supply. And that really less valuable inventory has still managed to do well in part because, one, it's nearly infinite and two, because the supply chain is really tight. In the open Internet, there's a lot of incentive for people to make it inefficient or exploit it.

It's like if there's a factory producing a product on the other side of the world and then you're shipping it here, it can touch 19 companies between it, all of those represent an opportunity for tax or markup and in some cases, obfuscation. But in a digital world, you're also not bound by the same rules of physics. You can send it around the world 15 times, and there's lots of ways to mark it up.

So we're one of the only companies in the world that is obsessed with making that supply chain as efficient as possible. So on one hand, it's kind of disappointing that it's a C-. On the other hand, that's really encouraging because there's lots of efficiencies yet to be gleaned from it. We have to develop closer relationships, not just the relationships themselves, but supply chain, the pipes between us and the supply.

So I'm sure you'll hear more about that from the next speaker in Netflix, where as they grow in the advertising ecosystem and in the business, they will build more of the tools on their side, and we will plug in more and more directly as time goes on. And that will have an incredible improvement or an efficiency gain for the ecosystem in those supply chains where instead of having 19 hops that go around the world again and again and again, you'll just see that truncate because it's better for the advertiser and it's better for those that are adding value to the ecosystem.

So we made tremendous strides in 2025. We made more progress in 2025 than all the rest of the years of our existence put together and improving the supply chain. But the exploits were also growing at the same time because the supply-demand imbalance was so great, they have to exploit in order to even maintain revenue at all. So that created a tremendous both opportunity and challenge for us. We continue to win and make progress on it, but it is a tremendous opportunity for us to continue to do it because the competitive environment that is the open Internet will always be better than a walled garden in efficacy because of the benefits of competition, but also because everything premium sits outside of a walled garden. That's where all of the best of sports, that's where the best of movies and television and music and news, all of that exists in the open Internet.

Got it. And then just in the final moment, based on your conversations with investors, what do you believe is the most underappreciated opportunity and then potentially challenge for you to execute on due to AI?

Yes, the most undervalued opportunity is the massive data set that we sit on top of as well as the trust that we have developed with advertisers over the years in order for us to build this amazing AI learning engine. So of course, we've already been developing that. Of course, it's already in production. We already use that. But every AI company is dependent on being fed data. Like that -- in a lot of ways, that's more valuable than the AI technology itself is the data that it's feeding. And those 2 things have to work together.

So in order for somebody to build what we've built with the biggest brands in the world, I think the long pole is actually not the technology, but actually the trust that you build and then the iteration that you build with that trust. So in other words, you get the data asset, you learn from it, you adjust. And you do that again and again and again. We've been doing that for 15 years. And the trust that we have built and the learnings that we have create a massive advantage.

And the complexity of our ecosystem and the complexity of our technology also is an advantage in a world where the data asset is dramatically undervalued that we have. And when I say the data asset, I don't just mean the first-party data that advertisers share, when you listen to essentially the entire open Internet. We're listening to 20 million ads a second. You're learning from every one of those. That learning and that scale, which, by the way, that pays for all the learning and listening is paid for by all the revenue that we're producing in order to do that without massive expense, you have to have entered this game more than a decade ago. So that advantage is something that I don't think is fully appreciated, like how strong, how wide, how deep the moat is around our business is something I think very few understand.

Jeff, thank you so much.

Thank you.

Greetings. Welcome to The Trade Desk Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Chris Toth. You may begin.

Thank you, operator. Hello and good afternoon, everyone. Welcome to The Trade Desk Fourth Quarter 2025 Earnings Conference Call.

On the call today are CEO and Co-Founder, Jeff Green, and Interim Chief Financial Officer and Chief Accounting Officer, Tahnil Davis.

A copy of our earnings press release is available on our website in the Investor Relations section at thetradedesk.com.

Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risks and uncertainties and reflect our views and assumptions as of the date such statements are made. Actual results may vary significantly, and we expressly disclaim any obligation to update the forward-looking statements made today. If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. For a detailed discussion of risks, please refer to the risk factors mentioned in our press release, and our most recent SEC filings.

In addition to our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures is available in our earnings press release. We believe that presenting these non-GAAP measures, alongside our GAAP results offers a more comprehensive view of the company's operational performance. With that, I will now turn the call over to CEO and Co-Founder, Jeff Green. Jeff?

Thank you, Chris, and thank you, everyone, for joining us. Q4 was a solid quarter for The Trade Desk. When Q4 2025 as compared to Q4 2024, revenue grew approximately 19% year-over-year when excluding political. On an absolute basis, not adjusting for the irregular nature of political spend, revenue grew 14% Q4 over Q4. This quarter capped off a year in which we grew revenue to record levels. We maintained strong profitability margins as we scale and continue to invest in innovation that we believe will define the next decade of digital advertising.

I'm proud of how our teams executed in 2025, especially against a volatile and uncertain backdrop, all while delivering the industry's most advanced media buying platform. I want to spend the bulk of today's report talking about three things: First, the state of the macro environment and the global advertising market. As you know, we serve most of the world's largest advertisers because the vast majority of the S&P 500 are our clients, we have a unique vantage point into the global economy through branding, brand growth and advertising spend.

2025 was fantastic for tech spend for travel spend, for pharma spend and for communication spend. Actually, despite a greater degree of macro uncertainty and most S&P 500 companies trying to determine what changes the evolving AI-fueled world and the geopolitical issues mean for them. Most categories had a very good year.

One of the clearest themes in our data and from our conversations with clients was a sustained weakness among some large Consumer Packaged Goods companies, CPG as well as some Global Auto companies. Together, these verticals represent over 1/4 of our business. But in these two categories, all global companies have levels of uncertainty that we haven't seen for most of the last 15 years. They all had tough choices to make in 2025. Most still have tough choices ahead.

I do want to be clear that some Autos and CPGs have done very well in this environment. Especially those that have focused on growth, value, objectivity and impact. But some have had to respond to the impact of those macro pressures and instead just focus on reducing costs. In other cases, some companies have shrunk branding spend and focus on cost cutting instead of focusing on growing. When these companies are excluded from our year-over-year comparison. Our business in the open Internet is doing much better than the averages alone would suggest.

Beginning in Q2 2025, CPG and auto companies began navigating the mix of category headwinds such as tariff uncertainty and uneven volumes, in addition to persistent inflationary pressures as more consumers deal with cost of living challenges, and those trends have continued into the beginning of this year.

On their own earnings call, several global brands have talked about pulling back on advertising budgets driven by the month-to-month volatility caused by these macro forces. In the CPG sector, just last week at [ CAGNY ], many of the large global brands spoke about consumer pressure, slower volume recovery and ongoing input cost volatility, reinforcing what we are seeing in our data. I highlight the differences in verticals to provide a clearer view of our long-term opportunity and not to misunderstand unique moments of macro headwinds with the long-term prospects of our business. Without that double-click, it's harder to understand why I'm so confident in our long-term opportunity.

We estimate that more supply was added to the global market than in any year before. This macro trend is something that we predicted and is a huge validation to our business model. When there is more supply than demand, it is a buyer's market. This puts our clients in an incredibly powerful position. This makes the objectivity we have by not owning inventory, much more valuable than ever. It has always been one of our greatest strategic assets, but it is even more valuable now than ever.

For the advertisers that prioritize decisioning, by using data to find the most relevant and valuable impressions across all channels. They've never had a better. They have more choice than ever, and this, of course, plays into The Trade Desk strengths.

Let me give you a couple of examples of how the supply demand imbalance has helped us. One of the world's leading appliance manufacturers recently ran a test between The Trade Desk and the Amazon [ DSP ], focusing on CTV ad performance in one of their most important markets. They found that with The Trade Desk, they were able to reach 70% more unique households because we gave them access to a much wider range of relevant touch points with those consumers. With The Trade Desk, they were able to reach those consumers at 30% lower total cost, so a significantly better reach for meaningfully lower cost. And the kicker is The Trade Desk platform performed 6x better in terms of delivering their campaign goals. All of this happened because we provided the client with objective decisioning across the open Internet.

We didn't prioritize our own impressions because we don't own any. We were able to help the client find the ad impressions that were most likely to lead to conversions. And while CPG and Auto companies remain challenged starting this year, we are encouraged by how many of those same global brands are talking about more objective decision-making.

In my own discussions with many of them, there is growing skepticism of the cheap reach dynamics of walled garden platforms. Increasingly, they realize that cheap reach does not drive growth. [ Vinny Rinaldi ], a VP at Hershey's and one of the most forward-thinking CPG advertising leaders address this head on. He's been pointing at this problem in our space for years in what he calls the fallacy of cheap reach.

But recently, you put a finer point on it when he said, "for the past 15 years, marketing success was measured by one dominant pursuit, cheap reach. The advertising industry became enamored with scale over substance, equating impressions with effectiveness. This outdated approach creates a false sense of efficiency, masking the true ineffectiveness of these buys. Today, growth is no longer driven by how many people you reach but by how meaningfully you engage them, effective reach transcends sheer volume. It's about leveraging creative storytelling to deliver meaningful messages to the right audience in the right context. At precisely the right time". I couldn't have written a better description of the difference between The Trade Desk and the open Internet and walled gardens. I'm excited to be working with [ Vinny ] and other forward-thinking CPG leaders on how to execute on that disparity with objective decision-making, new approaches to measurement and our growing retail marketplace.

This is a good transition to our second topic today, the innovations that we're investing in and why. Of course, we should start with AI. AI is changing nearly every industry in the world, directly or indirectly. We agree with the view that the advent of AI is an unprecedented generational shift and we will change the world in ways similar to how we did when the Internet itself emerged. This is why we launched [ CoA ] in 2018. And let me explain why we expect to continue to invest in AI.

First, almost 100% of our clients are running through Kokai today. We think Kokai is the most advanced AI fuel buying platform ever pointed at the open internet. Kokai broke advertising into the basic elements of an advertising campaign and enabled every unique function in the valuation process to be enhanced with AI, from identity probabilities to valuing impressions to predicting performance to forecasting spend to predicting the right clearing price to detecting option manipulation or even fraud to generating creatives to supply path optimization or to even surfacing insights that could once easily be buried in a mountain of data. Kokai and AI enhanced and upgraded nearly every part of [ Solar ].

Secondly, developing writing code and even building is getting easier as enterprise AI tools continue to grow and evolve. Perhaps the most obvious of AI's features is that it is a productivity enhancer. As one example, every engineer at CTV is using AI tools to write and/or test code. We've injected AI tools across the company and productivity is going up.

Third, think of The Trade Desk's proprietary AI and The Trade Desk's unique objectivity as an unprecedented power combo. We think our business model is more conducive and will benefit more from AI than any of our competitors.

Every scaled competitor we have is first and foremost selling their owned and operated inventory, [ Ono ]. We don't have [ Ono ], we have aligned our interest with buyers and that is even more valuable in the AI-fueled ecosystem. AI makes it easier to make better decisions for advertisers and match the best ad opportunities. Valuable data, like advertisers' first-party data is way more valuable in an AI world. Retail data is more valuable in an AI world. The buying platform with the most objectivity and the most trust is the one most likely to create the most scale and win the most market share.

At The Trade Desk, we have built the industry's most advanced, trusted and objective data set, which is based on factors like these. 20 million ad opportunities every second, each with thousands of data variables and each valued objectively. Our clients valuable first-party data, which they trust us with that we will never jeopardize the industry's most scaled data marketplace, including most of the world's leading retailers, close integrations with thousands of suppliers and publishers across channels.

In short, we are trying to make millions of complicated decisions every second based on massive data sets. This assignment can obviously be enhanced with AI. That's why we are investing in it and have been for years. But an AI company in the advertising space must have the data and the objectivity to make any sizable scaled and sustainable progress. Advertisers are becoming more selective with their data. We predict this will continue. Trust matters more than ever in an AI fueled world. And AI companies without access to scaled quality data or amazing levels of trust will not last long.

The global digital advertising marketplace is highly complex with limitless levers and seemingly an infinite number of possible permutations for every campaign. AI will continue to play a growing role in this fast-evolving global advertising market.

Let me put an even finer point on this. There is an emerging narrative that AI will compress software value or disintermediate platforms altogether. That might be true for some SaaS businesses, especially those that deal in generic process or low-grade data. However, for platforms that have earned the trust of their clients and partners and have a mass data that is scale, unique, refined and actionable, they are in the perfect position to leverage advances in AI to add more value. But to be very clear, this complexity of the global advertising market is not a weakness for The Trade Desk. It is a moat, and it is exactly that kind of environment where Agenetic AI can add meaningful value not by replacing platforms, but by enhancing decision-making within them. What used to be exposed through static APIs can now be expressed through systems that can reason, adapt and optimize toward outcomes.

We are convinced that Agentic AI will ultimately accrete the most value to companies that already have deep customer trust that have scale, refined and objective data sets and that prioritize objectivity, not by companies with limited data, hoping an AI framework becomes their business model. In that sense, Agent AI is an evolution of outcome-based platforms not a shortcut around them.

We have spent years building The Trade Desk around trust, objectivity and measurable outcomes while maintaining strict controls around data ownership and advertiser control. That foundation is critical for Agentic workflows to become more useful and more widely adopted.

I think this is a great transition point to talk about another innovation that is in early phases that we expect to pay massive returns in the future. It's our new product, Audience Unlimited.

Audience Unlimited is one of our biggest innovations ever. This will change the usage and value of the data marketplace for both buyers and sellers and we think that agencies, advertisers, data providers and retailers will all benefit from this innovation, and it is essential in this new AI fueled world. There has been massive underutilization to third-party data and retail data, in particular, since the advent of programmatic about 20 years ago. I have argued that the data marketplace is anemic for one primary reason. There is no price discovery for data.

The cost has really been complicated for marketers. So generally, they don't use it. We can see though that the value is obvious, especially leveraging AI. And using the flat cost structure, Audience Unlimited helps advertisers use a wider range of the most relevant data to any given campaign for an all-in cost where value and impact is clearly understood. This innovation wasn't possible before advances in AI, particularly Agentic AI in this case, which allows us to surface the right data segment at the right moment.

Of course, Audience Unlimited is completely optional. Clients can use it or continue to buy third-party data a la carte. We are already seeing very positive results with early adopters, and I'm excited for more advertisers to get access as this year progresses.

Relatedly, in Retail Media, the spend on our platform that was influenced by retail data reached record levels in 2025. Over the last 5 years or so, we have launched partnerships with retailers around the world. And together, we have created the world's largest and richest marketplace of retail data. Combined, we believe the retailers in our data marketplace represent more than half of global retail sales.

The vast majority of our retail partners are sending data via UID2, and we are building strong diversification across categories, from big box and grocery to delivery, travel and many other retail categories.

Cheerios ran a display campaign in the U.K. recently using retail data for audience targeting on Kokai. They saw 88% more conversions and 7x better CPA. Now Nestle plans to activate retail data across most of their future campaigns, including audio and other channels. And retail data is just one piece of the puzzle. The Audience Unlimited rollout is part of a much bigger effort to perform measurement and enable our partners to use more Agentic as well.

But we'll be talking more throughout this year about two new innovative frameworks. One is a measurement framework and the other is an Agentic AI framework for our partners. In 2026, you will see us continue to close the gap between media dollars and real business outcomes like sales, lifetime value and brand health. We are strengthening the value we are delivering to clients and reinforcing our position in an increasingly Agentic world, including with CPGs who are among the most eager to embrace new open Internet measurement models.

With advanced AI already distributed across Kokai, our ability to deliver more value to our clients through better performance has never been greater. I want to share one more innovation built on Kokai, and that's Deal Desk.

Complexity has brought many advertisers to seek out one-to-one deals as a means of simplifying supply chains, much like they used to in a nondigital world. But in that process, some buyers have inadvertently given up buy-side decisioning power, especially in CTV. They have also given rise to inefficient supply chains or inadvertent oxygen to some bad players that a more efficient supply chain would not allow for. Deals can be a way to leverage size and get a better deal. But measuring the deal's outcomes becomes very important. It is easier to do a bad deal than ever, especially when pursuing cheap cost.

Historically, 90% of [ deal IDs ] never scaled either because they were set up poorly, hard to troubleshoot or simply didn't perform. Deal Desk centralizes the way buyers create, manage and analyze their deals. It uses AI to forecast how a deal is likely to perform relative to the open market and then highlights where things may go off track.

Early results are encouraging. So far, deals that are set up and managed through Deal Desk are performing meaningfully better than those managed the legacy way. More suppliers are signing up for deal desk every week. Deal Desk is in early stages, but it is rolling out around the world.

Most recently, the two biggest [ SSPs ] in Germany announced that they are integrating with it. CTV continues to be a strong driver of overall growth and remains one of our fastest-growing channels. The largest content owners in the world are leaning further into programmatic and decision buying. The shift from traditional insertion orders and programmatic guaranteed toward true biddable CTV continues to accelerate, particularly in live sports and premium episodic content.

The last innovation area that I'd like to talk about is simplification, specifically simplification across the platform. The complexity of our ecosystem is a moat for The Trade Desk. But that doesn't mean that we have to hand the complexity back to our user. At The Trade Desk, we are making huge efforts to simplify the supply chain, to simplify measurement, to simplify our U.S. and even simplify the way that we build. We don't compromise the power of our platform or our values on transparency. By simplifying our bills, we will make it easier to compare our results and our products to walled gardens.

For example, the VP of Strategy at a large agency noted, and I quote, even though a large commerce walled garden may trump at 1% or no fees, at the end of the day, the effective [ CPM ] that we pay is higher than comparable campaigns on The Trade Desk. We're paying more to get less functional reporting, and we are spending a lot more on data than we would have on the comparable Trade Desk campaign.

Our goal is not nor has ever been cheap reach, which ultimately slows growth because it is ineffective. As more marketers come to terms with the limitations of cheap reach, they just need simple ways to explain around our organizations and especially to the CEOs and CFOs of their organizations, why expensive impressions are often the best. Efficacy is not a problem for the open Internet simplicity currently is.

Our efforts and simplification are already working. IKEA, for example, is using Kokai to get a more intelligent perspective on how their ads perform across all channels. Thanks to Kokai AI fuel omnichannel optimization, they saw cost per acquisition decreased by 17%. And while also gaining valuable new insights on the effectiveness of different channel activations at different stages of the customer journey.

Another example, [ Best Western ] saw their booking rate double when using Kokai to target live sports opportunities, thanks to an 89% improvement in incremental reach with Kokai. Of course, in order for our clients to take full advantage of all of this innovation we've been talking about at scale, we need to continue to upgrade how we operate. With over 3,500 employees and serving thousands of brands, what worked for many years, particularly in our go-to-market organization needed to evolve in order for us to scale our business from about $3 billion in revenue to $10 billion in revenue and beyond.

Over the last year, we have made significant upgrades to how we operate as a company, many of which are relevant to large global advertisers in categories like CPG, but also across all industries. Even though we have not harvested most of those seeds, we are seeing green shoots and are extremely confident that we've made the right moves to scale and improve this business.

We reorganized our go-to-market model around a brand-first more integrated coverage approach. That means Unified teams are now responsible for both business development and spend activation with clear accountability for results. We increased the number of advertisers where we have direct relationships, and we eliminated overlapping coverage between advertiser and agency teams. That makes us a more strategic unified partner for the biggest brands in the world, while still advocating and aligning our business closely with our agency partners.

Joint Business Plans or JBP are a good example of how this shows up in the numbers. Exiting 2025, JBPs accounted for well over half of our business, and our JBP pipeline has more than doubled over the past year.

For our largest advertisers and their agencies, JBP create shared goals, clear accountability and a multiyear innovation road map. As a result of our organizational upgrades, our teams are working with more clarity and data than ever. This allows us to spot opportunities earlier, lean in where we see momentum and adjust course when needed. It also means that when CPG or Auto spends a couple of quarters on its back foot. We can both support those clients through the turbulence while also allocating time and resources towards areas where budgets are growing faster.

Finally, I'd like to zoom out and provide a little more perspective. For as long as we've been public, which is around 10 years now, there's been a narrative that our margin or take rate must compress because other platforms offer lower upfront prices for nondecision, nondata-driven buying. In reality, those business models deliver less value overall. Their business model is focused on selling [ O&O ]. Walled gardens can more than make up for the lower fee on supply side as they mark up and prioritize their owned and operated inventory.

2025 was a year of meaningful change at The Trade Desk. We upgraded our leadership team. We reorganized how we go to market. We sharpened our operating discipline, we shipped the most impactful product release in our history and made important strides in CTV retail media and improving the overall supply chain of the open Internet.

At the same time, we navigated a challenging environment in the CPG and automotive categories while still delivering strong growth and profitability. As we enter 2026, our focus is very clear. We will continue to drive performance and innovation through Kokai and our AI road map.

I don't think there's any company in our industry that is better positioned to take advantage of advances in AI, we will deepen our relationships with the world's largest advertisers and agencies through more rigorous account planning, joint business plans and sector-based expertise. We will push forward the structural shifts happening in CTV, retail media and cleaner supply chains. And we will do all of that while staying true to the principles that have guided us since the beginning. Objectivity, better business outcomes and alignment with the interest of advertisers.

So bottom line, AI enhances the power of choice, and it is best used by the trusted and the objective. The open Internet should get the first dollar and not the last and the best days of The Trade Desk are ahead of us. I want to thank our employees, our clients and our partners for their trust and support throughout 2025, and I am as confident as I have ever been in the opportunity in front of us and in our ability to capture it. With that, I will hand it over to Tahnil to walk through the financials, and then we'll open up the call for questions.

Thank you, Jeff, and good afternoon, everyone. Before reviewing our results, I would like to share what I've shared with our team internally about my priorities over the coming months. My focus during this transition is on continuity and clear objectives. I'm here to support the ongoing operations and strategic priorities for the overall business. I'm incredibly fortunate to work alongside a world-class finance organization, and I'm confident our team will continue to support the growth at The Trade Desk in the near term and beyond.

Now on to our results. For the full year 2025, we delivered revenue of $2.9 billion, representing 18% year-over-year growth. Spend was approximately $13.4 billion. In Q4, we delivered revenue of $847 million, representing 14% year-over-year growth. Excluding political spend related to last year's U.S. elections, revenue increased approximately 19% year-over-year. Our strong performance in Q4 was driven by strong growth across CTV and audio from a channel perspective as well as in regions outside of the U.S. CTV grew at a faster rate than the overall business throughout 2025, including during Q4 despite lapping strong political CTV spend in the quarter.

Video, which includes CTV represented about 50% of our business in Q4 and continues to grow as a percentage of our channel mix. Mobile represented around 30% share of our business during the quarter, while display represented a low double-digit share. Audio represented around 6% of the business and grew year-over-year at a rate higher than any other channel in Q4.

Geographically, the United States represented approximately 84% of our revenue in Q4 and international represented about 16%. Growth across our international business continues to outpace growth in North America. Our strong momentum in EMEA and APAC is a reflection of the investments we have made in these regions over the last several years.

Among the verticals that represent at least 1% of our business in Q4, as Jeff mentioned, CPG and to a lesser extent, auto, where our softest verticals and those trends have continued into Q1. In contrast, we saw particularly strong year-over-year growth in medical health, technology and business and finance. Importantly, this strength reflects not just market dynamics, but the diversification work that we have been doing across our business. We continue to broaden exposure across verticals with meaningful growth and new client wins in areas such as pharmaceuticals and telecommunications.

Q4 operating expenses were $590 million, up 8% from a year ago. Excluding stock-based compensation, Q4 operating expenses were $478 million, up 15% a year ago. The Trade Desk generated approximately $400 million in adjusted EBITDA or about 47% of revenue. Q4 income tax expense was $83 million, driven primarily by our profitability and the impact of stock-based awards. Q4 net income was $187 million or $0.39 per diluted share or about 22% of revenue. Adjusted net income for the quarter was $284 million or $0.59 per diluted share. Net cash provided by operating activities was $312 million, and free cash flow was $282 million in Q4. We ended the quarter with a strong cash and liquidity position.

Our balance sheet had about $1.3 billion in cash, cash equivalents and short-term investments at the end of the quarter. We had no debt on the balance sheet. DSOs and DPOs were consistent with prior periods. DSOs were approximately 100 days and DPOs are under 85 days.

In Q4, we used $423 million of cash to repurchase our Class A common stock via our share repurchase program. As you saw in our press release, we announced an additional authorization, bringing the total to $500 million inclusive of the amount remaining from the existing authorization.

Given our strong balance sheet and consistent cash flow generation, we plan to continue opportunistic share repurchases while also offsetting dilution from employee stock issuances.

Turning to our outlook. Our Q1 guidance reflects a prudent approach in an environment where visibility remains somewhat lower, particularly in CPG and to a lesser extent, Auto vertical. That softness is partially offset by continued strength in Medical Health, Technology and Business and Finance and in EMEA and APAC. For the first quarter, we expect revenue to be at least $678 million, representing 10% year-over-year growth. We estimate adjusted EBITDA for Q1 to be approximately $195 million.

In terms of our operating plan, we intend to continue investing in the business while maintaining strong cost discipline. As in 2025, we expect head count growth to remain below revenue growth, reflecting our focus on productivity and operating leverage. We plan to be deliberate in prioritizing investments that directly support revenue growth and AI-driven innovation.

Taken together, we expect our full year 2026 adjusted EBITDA margin percentage to be approximately in line with 2025.

In closing, our fundamental view of the profit potential of The Trade Desk has not wavered. We have driven significant leverage over the years and given the strength of our client relationships, product focus and organizational actions underway, to strengthen our sales and go-to-market execution, we believe our revenue growth rate should improve over time. We are confident that the decisions that we are making today position us well to emerge from this period even stronger and to capture the large and growing digital advertising opportunity. That concludes our prepared remarks. Operator, please open the call for questions.

[Operator Instructions] The first question comes from Shyam Patil with SIG.

I have a 2-part question. First, Jeff, you talked about the impact of CPG and Auto on the business last year as well as potential further impact this year. And I was just wondering, can you talk a little bit about what you're seeing from these two verticals thus far in 1Q?

And then second, Tahnil, could you provide a bit more color on the 1Q EBITDA guide. And thoughts on the full year operating expenses?

First, Shyam, thanks for the question. Let me zoom out just a little bit and first explain why we called this out because obviously, we have not historically done that on a sort of per category basis. And I also don't want people to misunderstand CPGs and Autos are some of our very best partners they're some of the parts of our business that we're most optimistic about the future.

We called this out to highlight that there are some forces that are bigger than us and even bigger than them. And those are things like cost inflation, consumer pressures, tariffs, cost of living increases. And that inside some of the biggest brands, their marketing budgets and advertising budgets are a huge part of their machine, their operation and their costs. And so when you -- when the world hands them uncertainty, it's often the theme that gets paused. They would rather adjust marketing budgets then lay people off and certainly paying them off and then rehiring them when something changes is obviously less preferred than changing budgets or anything like that.

So bottom line, Autos and CPGs had a lot of unique pressures on them in 2025 and some of those continue today. We also call this out because of just the impact on our business overall. Because together, these two categories are roughly a 1/4 of our business, depending on how you categorize everybody. And if you look at the impact that these two categories have, we would have been at least 5% higher in growth rate if you don't include those categories or they were at parity with everybody else.

Additionally, there is, of course, the supply-demand imbalance that we talked about at length. And I do want to emphasize that in the supply/demand imbalance where there's more supply than demand than ever, that the value of decisioning is higher than it has ever been. And that some of the CPGs have the luxury of leaning in and focusing on growth, targeting their rethinking measurement, their thinking about the future and how do they build their brands.

There are other CPGs that are thinking about cost. They're great, they're focused on their cost cutting. And those that are doing that and still -- especially if they have a mindset of spray and pray and do that at the least amount of cost, those are not doing as well, and they don't have the luxury of looking forward.

But if you look at companies like Coca-Cola or Hershey's or even the Hondas and some of the forward thinking Auto brands. They are rethinking measurement. They are rethinking brand building in this new and emerging digital ecosystem and it's really benefiting them well.

Last two things I'll say, more specifically about like how did this affect or factor into our guide? Our Q1 guide reflects the prudence from both the Auto and the CPG categories and the state of the state, if you will, and what they're dealing with. And also, it does not reflect a diminished long-term opportunity for either The Trade Desk or these categories specifically. It is just something that's happening at a macro level at this moment in time, and it is bigger than them and bigger than us.

And the good news is that our dialogues with these brands in both categories are as strong in most cases as ever. So we're very optimistic about the future. Again the time back to Tahnil so she can answer the second part.

So regarding our Q1 EBITDA guide, thanks for the question. So first, in Q1, I would characterize this as primarily a timing thing. We continue to expect full year adjusted EBITDA margins to be approximately in line with 2025. The primary driver in Q1 is infrastructure investment. So looking back to 2025, we remain disciplined with hiring and reinvestment.

Headcount grew below revenue for the third consecutive year, and we drove operating leverage. Looking ahead, it's important to think about 2026 as a year of disciplined reinvestment. That's why we expect our full year adjusted EBITDA margin percentage to be approximately in line with 2025. We again expect head count growth to remain below revenue growth, reflecting operating discipline.

Our incremental investments are focused on infrastructure and talent. In particular, we're completing our transition to owned data centers and strengthening the AI and machine learning capabilities that power our platform. So the balance is clear: invest where the ROI is highest, maintain strong profitability and position us for improved leverage beyond 2026.

The next question comes from Vasily Karasyov with Cannonball Research.

Jeff, I wanted to ask you about what you would see as the most -- the biggest organizational improvements over the last 12 months. A year ago on this call, we were talking about your reorganization. So I wanted to ask you to talk about what you have achieved and that will drive growth that you are so confident in going forward?

Thanks for the question, Vasily. So first, let me just zoom out a little bit and just give a little bit of context, of course, as I mentioned in the prepared remarks, we're -- have we been public for a decade now, nearly. And obviously, a lot has changed in that time. throughout the history of our company, we have never changed our mission, what we're after, our business model. We've been very focused.

The things that we talked to investors about in the IPO roadshow is the same stuff we talked about today. Of course, there are things in the world that have changed, and there's advancements in technology, they're marketplace dynamics, the advent of issues of identity. We've navigated all those and won and gained market share at every single term.

But the people that we had at the time we were public, especially as a leadership team, are not the same people that we need to take us from $3 billion to $10 billion. And even the people in some cases that we've had in recent years, we've had to change. We also just need to change the way that we think about discipline and investments. Like I'm really happy about the way we're growing in a very disciplined way, and we're making very deliberate decisions across the board.

But of course, across the board, we're also saying what parts of our business work and what's done, what do we need to change? What are the things that got us here that we should never abandon and what are the things that got us here that won't get us there. and triaging between all of those things. And in doing that, of course, there needs to be clearer ownership. There needs to be operational rigor. We've definitely streamlined our go-to-market coverage. We've gotten rid of a bunch of overlap when you're a smaller company, the ambiguity can help you because you can be really agile and respond to it super collaborative. You can't be as collaborative. There has to be more clear roles and responsibilities, so you're not stepping on each other's toes and themes aren't falling between the cracks.

As a result, we have a very specific number of people assigned to every brand to every agency. They are very clear on their roles and responsibilities, clearer than ever. They're held accountable with more clarity than ever. As a result, our JBP pipeline is the greatest it's ever been. And that, to me, creates a tremendous optimism for the future.

Despite the fact that I don't think that this is our best earnings report ever. I hope you can hear that I am as optimistic as ever. And that's largely because we're improving all of these themes while not compromising our vision or on the values that got us here.

Of course, there's opportunity for us to improve on product. And I would just summarize that as in the last couple of years at times, we've used that same agility to go really fast and put a lot of things in market. Sometimes, we take too long to put things in market. And other times, we put them in market before they're ready. And we just need to do a better job of being deliberate about all of those. And in order for us to do that with the thousands of people that we employ, we just have to have the better systems to do that. we kicked off this year with better systems in the way that we roll things out, and that's part of the reason we're so convicted that our investments are going to pay off in 2026 because we have the clear vision, we have the passion that we always have. And now we also have rigor and discipline that we're confident we're laying the groundwork for that to pay off. Of course, at some point, accelerate. So thank you very much.

Our next question comes from Justin Patterson with KeyBanc.

Great. I guess kind of building out some of the responses you just said there, Jeff. There have been organizational changes the macro factors. But there's also been changes in just competitive intensity across the industry. So could you talk a little bit more about just how you're seeing a competitive pressure evolve across the DSP landscape, and just your expectations on how spend will kind of get back to historical cadence this year?

Justin, thank you so much for the question. I was hoping somebody would ask about this. So I just want to point out a couple of things as a bit of the backdrop for this because I get asked this question and honestly, the answer is more complicated than I would like it to be. And so as a result, I just need to give a little bit of context.

So has the competitive pressure gone up? I would say not really, and let me explain why. People want to talk about Amazon a lot as it relates to competition. And as I've said before, I think Google was a far better competitor than Amazon is today or, frankly, will likely ever be. But the market has gotten way more complicated. It's also gotten more fragmented. And I would also say that the press has not -- the trade press has not been super friendly to us. And when we talk to some of the editors and chief at these firms, they'll say things like, you know what, your name gets clicked especially when it's negative or controversial, and so they lead with that. And that hasn't always been helpful. And they love a good story of sort of a David and Goliath where The trade desk competing against a Google or an Amazon. And honestly, that's not always true, especially when you look at what we're doing versus what Amazon is doing.

And so now that said, and I'll come back to the comparison to Amazon. We have never said that there's only going to be one DSP. And in fact, when I talk to the biggest publishers in the world, I say, in order for you to manage your business properly, you need to run an auction for your premium inventory that involves competition. If we're the only bidder in the world, that's not competition. We're not trying to be the only DSP. We are trying to be the best, and we're trying to be the biggest. And we continue to maintain that the company that has the best objectivity and the best product and align its interest with the buyers because it will forever be a buyer's market, they will win the lion's share. We still think we will win the lion's share.

So part of the reason for that is because we play in a different sandbox than almost every competitor, and that includes and especially refers to Amazon. Amazon is mostly playing in selling their owned and operated inventory as well as trying to win on nondecision inventory. They can't compete on decision because if they say that they're objectively trying to buy the open Internet and then spend most of the money on their owned and operated where they make all their money then it imposes some [ hypocrisy ] or create some channel complex. And when you add the channel conflict, do they compete with most of the companies that are the biggest brands in the world, especially the CPGs that we talked about earlier, that poses a threat to them and their core business, both the retail business and AWS, especially in an AI fueled world.

So I believe that the market dynamics are complex. I do think there's more noise than ever. But I do think that we are competing as well as we ever have, and I think we're in a better position to win than we've ever been. As the market expands, so does complexity. But as I pointed out in the prepared remarks, that complexity is more of a moat than a threat or a problem to the business, but it does make it -- create a higher burden for us to explain that to the world.

It does also create more opportunities for AI, and that's where, again, we believe AI plus objectivity becomes way more potent and powerful, and we're really excited to play this out over the coming years.

At a moment where people are concerned about cost, it requires us to educate. That's part of the reason why all the operational rigor that I just talked about a minute ago is so important because as we get that finally tuned and as we go to market with a clear focus, we're often competing with companies who -- their DSP is their 37th highest priority, not their #1 priority. This is our #1 priority. And we believe that, coupled with all the things I just said, makes it so that we will win the lion's share and we're excited to compete over the years to come.

The next question comes from Youssef Squali with Truist Securities.

Jeff, you talked about AI in your prepared remarks and how it's been a source of innovation on the product side. Can you maybe talk about it on the monetization front. How does Agentic AI change the monetization model potentially for Trade Desk?

You bet. There are a whole bunch of ways where I think it improves it. Let me just start by emphasizing some of the points that I've made already. First, decisioning is at our core. So one way of explaining what we do is that we look at 20 million ad opportunities every single second, and then we figure out which couple of hundred we buy for any individual company. That burden of choice is also just a tremendous gift obviously, where they get to cherry pick the very best ads for them. But decisioning is getting harder and more complicated. And that obviously creates an opportunity for a Agentic to play a role, where humans can make lots of decisions but also agents and they can operate side by side.

In order for that to work, you have to be an incredibly trusted platform. In an AI world, trust matters more than ever. Data potency matters more than ever. But in the AI-fueled world, the third-party data ecosystem that we power using things like audience Unlimited and other things, all these innovations are meant to make it easier to bring data onto the platform and make it more powerful in the AI-fueled world. It just inherently is more powerful when you can use it in AI instead of a symbol algo or a basic bid factor.

So it will impact all parts of our business where data improves decisioning and efficacy because of the fact that agents can make that accelerate in particular. So -- and that's not to mention all the places where we inject AI that just makes our overall performance better.

So there are millions of paths to choose from in delivering a particular ad. Obviously, AI can make that better. And by making that better, our efficacy goes up. That's just one of hundreds of examples where we've already injected AI and are making better decisions. And that improves our ability to monetize in improves the client stickiness improves even our go-to-market effort. So I appreciate the question. Hopefully, that gives you some color.

Next question comes from Tim Nolan with SSR.

Amid so much discussion about AI. I'd like to actually return to a long-standing favorite topic, which is CTV. And Jeff, you referenced this very briefly in the prepared remarks. I'm wondering if you can give a bit more color as to the evolution of direct versus [ PMP ] deals versus open exchange transactions in CTV.

My question is, are advertisers and publishers demanding more bid transactions now. Or are they actually looking for more certainty via direct deals? And regarding Open Path to CTV, similarly, are these more via direct or by bidded means?

Great question. A little hard to unpack partly because you can kind of think of all of this as a Ven Diagram where there's slightly different definitions of a direct buy, a programmatic guaranteed buy, a private marketplace buy, biddable versus not biddable open exchange because you can have a [ PMP ] that is biddable, there are a whole bunch of variations on the groups that you described.

So let me sort of reduce this down, which is when you do a one-to-one deal and you -- and a buyer determines in advance, the price and the place they're going to buy it from often what they inadvertently do when they fix that deal is that they give away decisioning to the sell side. So the actual impression that you get, the actual user, the actual ad that you get is actually not your choice. It's a choice that the media company decided. And often it's not the very best ad that you could have purchased.

So what many of the biggest brands are doing is they're looking for ways to have guarantees on rates and to use their buying power to get some advantage while still having the benefit of decisioning, which usually brings them to biddable.

So the short answer to your question is the most sophisticated and growing brands are looking for more biddable, more decisioning while at the same time saying, how can I also get guarantees and assurances that I'm buying in the very best way.

And so overall, that move is towards decisioning, less programmatic guaranteed, less fixed price. It does mean there are as many direct conversations as ever. But they're saying I want a deal framework where I can buy any way I want and bid anywhere I want and then get credit for it in the same way that you might in an upfront or something like that across all the different ways that I buy.

I'm convinced that's the future. You'll see more brands asking for those sorts of deal structures with the biggest publishers and CTV companies in the world, which is onset $100 million but I want to buy it any way I want on anything I want and then I'll get a discount where I'll get some preference by buying in bulk that I wouldn't -- if I didn't prearrange this. So there will be more deals, but there will be more biddable and more decisioning for sure.

The next question comes from Jason Helfstein with Oppenheimer.

Just one question, one follow-up. So it feels like the overhang in the stock is now more than just Amazon as a DSP competitor, and there's a super bare view, not saying we read with this, but I think it's out there that an agenetic future makes brands relevant.

Okay. So like first we could say like I imagine you guys disagree with this, you probably have thoughts. And then as people kind of -- you've discussed how like AI should be a positive for your business and it's still early days in deploying it. I guess when folks say, "Well, do you have the scale when it comes to deploying AI to compete with Amazon, let's say, DV360 on the AI side?" So maybe kind of talk about that. And then just a follow-up on the comments about the rest of the year. I guess like factoring in your comments about the organizational upgrades, what needs to happen for you to accelerate growth if CPG and auto remains weak?

Okay. Great. I'll try to cover all that. There's a lot in there. So I'll start with the one that I want to challenge the most or the one that I find the most objectionable, which is Agenetic AI makes brands irrelevant. That one to me is a nonsequitor, but I will just say Agentic AI, I believe, will be the best thing that ever happened to programmatic advertising. And it's because it makes decisioning in a very complicated environment, easier. And when I say easier, I don't mean that the nature of the market is getting less complex. I mean that the power of man and machine together can reason through this really complicated decision that is in front of an advertiser, which is, should I buy this ad that literally you're deciding in milliseconds. So Agentic is just an amazing tool to use in that environment.

But the notion that Agentic makes brands irrelevant to me suggest that quality doesn't matter, consistency doesn't matter. In the world, you're describing integrity doesn't matter because if a brand performs over and over again, if they have a great product, consumers will buy it again.

Like all of us have brands we love and we buy again and again and again. I don't understand why Agentic would make Coca-Cola irrelevant. I'm still going to buy it. I still love it. Like there are just so many brands like that, that I don't understand the argument of how Agentic would make that go away. Can you remind me of the follow-up question?

Just that, basically, when you think about deploying AI. How do you think about your ability to scale it effectively relative to Amazon and DV360, which have the benefit of these parent organizations who are trying to dominate AI.

Yes. So as we're scaling AI, to me, the most important ingredient is the trust and the data that you get from the buyers themselves. So one of the thesis that we had when we went public that we really wrestled with was how can we possibly win when Google has so much more data than we have. And the way that we got comfortable with it. And we went over this over and over again, hundreds of times in the IPO roadshow was if we take our objectivity and our very focused technology and couple it with the brand's data, their data is worth way more to them than Google's data ever will be.

That was our thesis then. That's what we've taken to the biggest brands in the world. And we've said this is a game of winning trust.

As I said in the prepared remarks, that is more true in an AI world, than it was 10 years ago when we went public. So how can we compete with them? We stay super focused on what we're doing. We build technologies that are very specifically built for the task at hand, which is one of the most high-volume transaction ecosystems in the world. It's over $1 trillion TAM, so there's plenty to be focused on, and you don't make it a part-time job.

All of those companies, their DSPs are a part-time job. And I would argue that in both their AI efforts and their cloud products are as [indiscernible] with them owning the DSP. And if they get really focused on getting the best out of their DSP, they put at jeopardy their cloud products, and they put it at jeopardy their consumer-facing AI products. And -- those are obviously the way companies like Amazon and Google are primarily valued today. So I think there's a strong argument that those companies won't stay in this business for very long because of the objectivity problem that, that creates in the lines of business that really brings home the bacon for them.

The next question comes from Matt Swanson with RBC.

Great. here. Jeff, I wanted to follow up on some comments you made during the prepared remarks about -- I think it was Hershey I was talking about cheap reach. And just really how you're working with your brands to help them understand kind of the power of Kokai and getting their brand spend into a bit more of a performance lens. Or is it also more about maybe going a little bit more into that mid-market where there's already larger performance budgets and teaching them about what Trade Desk can do for them.

Yes. I really appreciate the question. So let me just first be very open about our strategy and the way we've gone to market.

I think we're the only player that has reached any scale that started by focusing on the head and not the tail, if you will, of the market, where we went to the biggest advertisers in the world and partnered with them and then have been working our way down to the torso and tail. So we're still very focused on the head because so many of the dollars are concentrated there.

But for those of you that were at our IPO or our first Investor Day, we talked then about the lines between brand and performance are artificial and temporary. So there is this narrative on Wall Street that performance budgets are more DTC or they're more mid-market and then there's brand budgets that are separate from that. That paradigm, I just reject. I think everything is performance now. It's just a matter of where you are in the funnel.

The problem with framing it that way is you reinforce a serious problem in the ecosystem, which is that all of the measurement frameworks that have existed to date, just give credit to the last person who touched the ball before it went in the net. The rest of the team gets nothing. And so in the brand-building business, it is by its very nature at the top of the funnel, where you win hearts and minds through -- it tends to be more expensive media. But nobody typed in by Mercedes-Benz into Google without seeing the commercial or hearing about the company before that. So giving all the credit to the last touch has been a serious mistake.

And so what we're working with brands like Hershey's and others to do is to create a better framework to reward the things that matter and make everything perform. Of course, the players on the back of the field, if we're using in the software analogy, the goalie and the defender, they matter as much as the striker. But let's not just give all the money to the person who kick the goal otherwise, we all play software like 5-year olds. We hover around the ball and just try to be the last one to touch it before it goes in. That, unfortunately, is too often the state of marketing. And all of the biggest brands in the world are trying to figure out how to spread out on the field and make better decisions, and that's what we're partnering with them to do.

Well, that's get thanks, Matt. Let's get one more in, John, and we'll close out the call.

Absolutely. The next question comes from Alec Brondolo, Private Investor.

Alec Brondolo from Wells Fargo. I appreciate the question. Pressure ports indicates they're uncomfortable getting into open path to the concerns about transparency or perceived conflict of interest. Do you think you have the product -- the right product market parts initiative? Or are you open to making changes to make it a little more appealing to [indiscernible].

Yes. Thank you for the question. So I'm sure part of the reason you're asking is that there's been some trade press on this, I find it kind of ridiculous to be on us, some of the assertions that are made. So let me just try to dispel some miss here. We created OpenPath to be the most efficient supply chain in the market, and we wanted it to be a canary in the coal mine and the stocking towers.

I've learned recently that when I use those metaphor, some people don't know what I'm talking about. So let me unbasket a little bit. Canary in the coal mine meaning, when there's a problem in the supply chain or there is a supply chain that is inefficient and opaque, having a more efficient one right next to it. an easier path to the inventory itself, it does prove in an A/B test that be is less efficient.

When you do that, then you have a stocking force in the sense that we now have a much more efficient path to that publisher of that inventory, and we expect the other paths to that inventory to get more efficient or they will not. So OpenPath is meant to be competitive.

So the thing that I just -- I really want to emphasize is that at a moment where many agencies are focused on principle-based buying. And I think not doing as good of a job of representing their clients as they could. And that [ SSPs ] in some cases, are convoluting the ecosystem more than they have in the past. The need for OpenPath is great, and you can expect to get criticism from those players that are -- that don't want a more efficient supply chain.

OpenPath is very simple in the way that it works. We plug in as directly as possible as we possibly can to the seller or the publisher. And then we charge them 4.5%, which is meant to be nearly breakeven, just slightly profitable so that we can create a more efficient supply chain. And instead of just relying in the past, on sell-side players that haven't always cared about the supply chain. And I would argue that many of them still today don't spend any time thinking or talking even about the efficiency of the supply chain and instead spend much of their time trying to exploit it.

So I'm not surprised at all that OpenPath ruffles feathers and bothers people. I'm not surprised that some people would like to turn it off if they find ways to get paid and unique ways. But what we're trying to do is to create more efficiency and improve the supply chain. That's all open path ever was. Our fee structure is super simple. Any assertion to the opposite is just not true.

John, you can close out the call.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the Trade Desk Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Chris Toth. You may begin.

Thank you, operator. Hello, and good afternoon to everyone. Welcome to The Trade Desk Third Quarter 2025 Earnings Conference Call. On the call today are CEO and Co-Founder, Jeff Green; and Chief Financial Officer, Alex Kayyal. A copy of our earnings press release is available on our website in the Investor Relations section at thetradedesk.com.

Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risks and uncertainties and reflect our views and assumptions as of the date such statements are made. Actual results may vary significantly, and we expressly disclaim any obligations to update these forward-looking statements made today. If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements.

For a detailed discussion of risks, please refer to the risk factors mentioned in our press release, and our most recent SEC filings. In addition to our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures is available in our earnings press release. We believe that presenting these non-GAAP measures, alongside our GAAP results, offers a more comprehensive view of the company's operational performance.

With that, I will now turn the call over to CEO and Co-Founder, Jeff Green. Jeff?

Thanks, Chris, and good afternoon, everyone. Thank you for joining us today. As you have seen from our press release, we again posted strong growth in the third quarter. Revenue grew approximately 18% compared with Q3 of last year, and when excluding political spend compared to last year's Q3, our revenue grew by 22%. CTV remains our largest and fastest-growing channel, continuing to grow at a faster rate than our overall business. The shift to biddable CTV is accelerating, and we expect decision CTV will become the default buying model in the years ahead. .

The advantages of decision buying compared to traditional programmatic guaranteed or insertion order models are so significant in terms of flexibility, control and performance that the choice for advertisers is becoming increasingly obvious. Retail Media continues to scale rapidly as well, and we are seeing strong adoption across verticals as more shopper marketing budgets flow into programmatic and more retailers turn to us as their trusted partners.

To begin, let's take a step back and provide some context about the state of our industry. So far, 2025 has been a year of innovation and change for our industry and our company. The change in landscape has created amazing upgrades to our business and our industry. Compared to last year, our TAM has grown significantly, including expansion from CTV and AI chatbots and growth in premium content. The supply chain is much more efficient, and our products have been enhanced with AI across the board. The Trade Desk is adding more value than ever before.

But the changes of 2025 are much more interesting and significant when you consider how they will change the trajectory and opportunity for the open Internet for the next several years. A reminder, the open Internet is the portion of the Internet where price discovery and competition exists. On the open Internet, every transaction is arm's length, whilst Gardens are built around owned and operated inventory instead of third-party inventory. Price discovery comes when the buyer and seller are different entities. Of course, premium content is largely created by those who focus on content excellence. So the open Internet is where the most loved content and the most premium content lives.

Because the open Internet has continued to win more and more consumer time in places like premium TV, movies, music consumption in places like Spotify, live sports, and journalism, we continue to see a growing desire for the open Internet to get the first dollar of any media plan and also to get the lion's share of any media plan. Because advertising is about helping consumers feel something about product, service or an opportunity, using great video and audio ads are essential to most brand building, customer loyalty efforts and all performance efforts, including Performance TV.

I contend that supply has always been greater than demand in digital advertising. And because it is so much easier to create more supply than it is to create a bigger marketing budget, the supply growth continues. This imbalance has grown steadily. And as a result, the market continues to strengthen for buyers. It's a buyer's market. All of this ripens the opportunity for The Trade Desk and the open Internet. In order for the open Internet to grow faster than closed ecosystems that are mostly filled with user-generated content and without price discovery, the efficiency of competitive supply chains and the benefits of competition in time must work for the market and not against it. This shift has happened in 2025.

To this end, AI is accelerating the improved effectiveness of the open Internet. Of course, every significant AI innovation and AI product needs quality data. The most valuable data to an advertiser is their own conversion and customer data. We will win long term because we built a business where buyers can own their future, which requires them to own, protect and use their own data. AI is fast tracking progress for companies that are eager to put their data to work and can leverage automation intelligently. Big brands are increasingly and rightfully leary of walled gardens as the AI-fueled future materializes.

Advertiser and agency data is more valuable in this AI world than ever. It is also less defensible in the hands of our big tech competitors who are written with conflict of interest and have insatiable appetite to own advertisers' data. AI is accelerating the path to the open Internet having vastly superior price discovery and fungibility. A world with better price discovery and better open Internet supply chains for the quality content will decrease the value of user-generated content destinations and other similar apps and sites that are full of ads and unsafe content.

Premium content and deliberate data-driven targeted buying is the only way for the biggest brands and advertisers to remain competitive. Nearly every big tech player in advertising, Amazon, Apple, Google, Facebook, is primarily focused on expanding and monetizing their owned and operated inventory and content. Google is clearly focused on search, their AI chat by Gemini and YouTube. Amazon's primary advertising efforts are focused on growing sponsored listings and then secondarily on Prime video. Both are putting Amazon owned and operated inventory first.

Facebook continues to focus on monetizing the Instagram and Facebook as destinations and TikTok the same, none of these companies are focused on monetizing the open Internet. This was helpfully made public throughout the antitrust trial of the Department of Justice versus Google. When they revealed numbers that Google normally does not report on exhibits and industry experts estimated that in 2019, the open Internet and owned and operated inventory on YouTube were equally split in share of wallet on DV360. However, between 2019 and today, roughly all of the incremental dollars and growth from DV360 has gone to YouTube.

YouTube spend increased by about 800% while Google's buying of the open Internet stayed essentially flat for the same period of time. During that time, The Trade Desk seems to have surpassed Google in the amount bought on the open Internet, again, according to others. The industry is evolving at a rapid pace. However, no one is driving that change with more force or focus than The Trade Desk. With that backdrop, I want to focus today on 3 key areas of progress.

First, let's walk through the foundational improvements and the upgrades we've made across the company over the last year. Since March, we've welcomed a new COO, a new CFO and a new CRO, who we just announced last week and began this week. Our COO, Vivet Kundra, has already driven operational progress and continues to improve our operations. Under his leadership, we've brought greater structure, discipline and clarity to how we operate. Streamlining our go-to-market organization, improving coordination across regions and teams and instilling stronger operating cadences that enhance accountability and performance. While we've always been data-driven in running campaigns and servicing our customers, we're building a more data-driven culture that emphasizes measurable outcomes for our employees and consistent execution.

These changes are helping us scale more predictably and efficiently while fostering the culture of ownership and operational excellence that will serve us well in the years ahead. Many of our largest clients are among the world's leading advertisers and they operate at global scale, often through multiple agencies. To manage this complexity, we have put new systems in place so we can execute account plans with thoroughness and rigor. This rigor helps every part of our business, from our engineers who can identify key innovation opportunities as they ship product every week all the way to our commercial services team who can help our clients take advantage of key opportunities as they emerge.

Let me give you one example. One of the most influential data analytics companies in the world recently ran a competitive test between The Trade Desk and a major walled garden, which offered to run campaigns with 0 fees. But because we're objective, data-driven and focused on measurable outcomes, we won the opportunity securing about $20 million more in incremental spend through the end of 2025.

Last year, we spoke about investing more resources to pursue closer relationships with the biggest brands. We've seen incredible results from this effort. JBPs continue to grow significantly faster than non-JBP accounts. Importantly, we've grown our relationships with top brands while simultaneously creating more growth and stickiness for the agencies. I'm confident that with Anders Mortenson coming to Board as our new Chief Revenue Officer, we will continue to improve effectiveness of our go-to-market organization.

I'm thrilled that he's joined the team. In fact, this week, he's become the latest executive to join our ranks from the likes of Google, Amazon and Meta in recent quarters across all parts of our business. Anders will help us scale our sales effectiveness. At Google, he was 1 of 2 executives who ran their ad business from a sales perspective. Anders oversaw their mid-market ad business covering more than 5,000 advertisers and their agencies and successfully grew that business at a pace that significantly exceeded broad market growth.

Anders will help us continue to grow within our established client base, and they will also help us expand to a broader range of advertisers and agencies around the world. The second area that I'd like to highlight is the innovation we're delivering in our platform. This year has really been the year of innovation for us. We've launched some of the most market-changing products that we ever have. And as you know, we have a track record of changing this industry with new product innovations. Prior to this year, over and over again, we've done things that people have told us we couldn't pull off. As a few examples, we weren't even one of the first 10 companies to get funding as a DSP, but we did it anyway. We lost bit factors, which proved to be a better system of targeting that was more expressive and enabled so many businesses to be built on our platform. That system also laid the foundation for an AI-powered platform.

Also, nearly a decade ago, we were the first to move the third-party data market usage to a percentage of spend. We created the largest cookie pool for the open Internet when our unified ID efforts were successful. Then Google changed the game with their war on cookies, and then we launched UID2. Now UID2 is the primary identity currency of ads for the open Internet around the world. It's ubiquitous. This is similar for things like global placement ID and transaction ID. These are metadata standards for the open Internet that have become standards because of our innovations and insistence. We've also enabled an entire ecosystem of innovation without our APIs and log level reporting, there are entire categories of companies that wouldn't be viable. None of the walled gardens enable businesses like this.

In 2018, we launched [indiscernible]. Our early focus on AI and machine learning has positioned us to upgrade our platform as the rise of AI tools has made upgrading our platform easier than any other DSP. At TTV, we are very focused, and we have a very clear North Star. This is a race to create the best performing ads and the best competitive supply chain, digital advertising has ever seen and thereby win the trust and investment of the biggest advertisers in the world.

Today, nearly all of our clients have tried Kokai with nearly 85% using Kokai as their default experience. When we build a new iteration of our platform, our primary goal is to deliver more value to our customers by increasing their performance. By this standard, Kokai is the best upgrade we have ever made to our product. relative to all previous versions and certainly relative to Solimar. Campaigns that have switched to Kokai are seeing impressive results. Since its launch, Kokai delivered on average better cost per acquisition, 58% better cost per unique reach and a 94% better click-through rate compared to Solimar. These are incredible performance improvements on top of what was already considered the most performant DSP in the world.

Kokai has a number of features in it that are game changers for our clients and for the open Internet. We've used the industry's most advanced AI to enhance our system with an architecture we call distributed AI. We break down every function and create separate AI models for each of them from valuing impressions to managing identity to choosing supply paths to predicting a price required to clear and to forecast the performance and reach of a campaign before a single dollar is even spent. This effort to distribute allows us to parallelize all AI efforts and enables checks and balances between these disparate functions. It cannot be overstated how much AI has changed and will change our business and the open Internet.

This year, we've launched and grown several products that are solely focused on substantially upgrading supply chains so that buyers get more for their money. Open Path is an integration between TTD and a direct source of inventory. Openpath plugs into options we trust. It is a collection of clean types of connections that are directly into inventory. We have grown OpenPath by many hundreds of percentage points this year. which means our clients are getting clear views of exactly what they're buying and publishers have a clearer sense of what advertisers are willing to pay when they describe their inventory in a transparent and accurate way. OpenAP Ad is an auction that we develop and sometimes host as an option for publishers. We then bid into a fair auction and even enable other buyers or DSPs to do the same thing, too.

The market needs a healthy auction and some sell-side players have continually weakened the integrity of the option. So we're developing an open source option that raises that bar. We just launched it, and we're already working to integrate with more than 20 of the biggest publishers on the web. We expect this to dramatically improve the supply chains of mobile in-app ads and browser-based ads, which, of course, can use the help in an AI scraping world.

Pubdesk is improving the supply chain by publishing data for the sell side, resellers, sellers and publishers can log into the platform and see what we paid the supply chain, what signals we value and adjust their sites and inventory to get more. This is largely fueled by the Sensera team and data that we acquired earlier in the year. Deal desk is a better way to manage one-to-one deals. Not only does it facilitate the buy, but using AI, it predicts how a deal will perform relative to the open market. This product enables them to do deals, but also gives them the unprecedented data and tools to avoid bad deals. It is important to note that this product will be foundational to a healthy forward market that can replace the outdated upfronts.

So far, deals on deal desk are performing about 35% better than those running on Solimar, which is more similar to the way they run everywhere else in the programmatic ecosystem. Digital advertising supply far exceeds demand. It always has and frankly, it always will. That dynamic makes digital advertising a true buyer's market where advertisers have unprecedented choice. At the same time, because Google has historically made it almost impossible for most SSPs to do true yield management, many tech players on the sell side of advertising that sit between us and content owners have been incentivized to duplicate their ad inventory, obfuscate it or sometimes even misrepresented. As advertisers increasingly gravitate to the premium advertising opportunities that are consistent with their brand, they want better tools to be able to distinguish between premium ad environments and ensure that their ads are not being placed on recipe sites with 20 different ads popping up for competing users' attention.

Looking against recipe sites, but I found recently that this example reminds people of how much room there is to actually creating better ad experiences. Key to this is the option a clean, credible option ensures that advertisers can understand exactly what they are buying and value it appropriately. Many of the largest premium publishers run their own actions, such as Disney with its draft platform. OpenPath connects directly into many of these premium publisher auctions. And companies like Disney do this because they want to ensure that their premium inventory can be correctly assessed and valued.

A healthy auction is not an inherently sell side or buy side consideration. It sits in between as the referee between the buy side and the sell side. And in order to have a healthy marketplace both sides have to trust the auction. In order to establish that trust, we started with the open source version of the prebid auction. Then we innovated and made it better to ensure it contains some key elements such as transaction ID and a Sincera signature to better reduce duplication and detect opuscation by sellers. We will open source key elements of open ads, and we will expose its mechanics for review.

Just like recent innovations such as UID2 or OpenPath, or Ventura, our intent here is to incentivize a more transparent competitive marketplace for all. In Q4, we announced 3 additional product features and upgrades that will be some of the most significant contributors to our growth for years to come. The first is the system upgrade and the other 2 are product launches. We have overhauled our data marketplace. We have reviewed the mechanics, incentives and market dynamics over our third-party marketplace and made significant upgrades. The result is a more competitive AI-driven marketplace with more data, more data segments and more reward for those who bring quality to the market.

Second, we're introducing trading modes. This is a bit like driving modes in a car where the user can decide how they would like to engage with the system, would they prefer to have control, where they have more decisions and a greater burden of work or would they prefer to simply optimize the performance and lean on the machine. In both cases, we're introducing Agentic AI as a copilot to ensure optimal campaign performance. But its role and engagement will differ based on the trading modes. This new feature will accelerate the adoption of the Agentic AI in our platform.

And third, in Q4, we introduced a new product called Audience Unlimited. This enables our users to use third-party data for a single fee, and that single fee will make it easier for them to layer on much more data and improve the efficacy of their campaigns. The third area that I'd like to cover is the momentum we're seeing in our business as we close out 2025 and prepare for 2026. Since our last earnings call, I've spent much of the time on the road. I hosted 11 Trader town halls with programmatic traders at our top agencies and brands in various cities around the world. I've met with dozens of major client CMOs and many of the world's leading publishers. What is clear across all of these communities is the confidence that everyone has in the potential of the open internet.

We maintain that the independent and objective DSPs will have the majority of open Internet spend at end state Today, all of our biggest competitors are conflicted, so it is ours for the taking. There are so many places that we are seeing progress. Here are just a few of them. Our research shows that the average consumer now spends 2/3 of their digital time on the open Internet, even though most budgets today still go through Facebook, Google and TikTok. This imbalance will correct over time.

Outside the U.S., our business is growing significantly faster than the United States. Given that 60% of the TAM is outside of the U.S., this movement is in the right direction of capturing the TAM. Audio has become 1 of the fastest-growing channels as consumers spend an average of 3 hours a day listening to their favorite music and podcasts. Bayer recently added Spotify to their omnichannel campaigns on Kokai and saw a 15% growth in their incremental reach. Adoption of Kokai is driving significant performance improvements for our clients. Specsavers in the U.K. saw a 43% reduction in the cost of securing customer appointments using Kokai while also cutting the conversion time by almost 50%. To announce our conversion rates go up by 1/3 for their Actimel yogurt product, leveraging the retail data marketplace and omnichannel strengths of Kokai.

Spend under JVPs are growing significantly faster. Open Path has grown by many multiples in this year. Publishers like [indiscernible] are seeing a 4x improvement in ad fill rates and 23% revenue increase when integrating Open Path. We are seeing enthusiastic interest in Open ads. We just launched Open Ad and we already have 20 publishers committed to integrating. On the supply side, SSP such as PubMatic are integrating with Deal desk using the new price discovery provisioning an API that helps sellers better understand and identify how sellers can increase the quality of their inventory. The injection of AI into our supply path optimization is finding better paths to publishers with double-digit percentages of efficiency. To bring this to a close, I just want to reiterate that we are building our business for the long term. The upgrades we've made to our company over the past year put us in the best possible position to execute on the opportunities that are right in front of us today and continue to scale and lead the open Internet in the years ahead.

I want to share a few of the principles that we've had for a very long time that continue to be critical to us continuing to lead the open Internet. First, we will always only represent the buy side of digital advertising. Everything we do that interacts with the supply side, such as Open Path and Open Ads is intended to drive better signal and a more transparent marketplace for our advertiser and agency clients. But we are hopeful that they also drive efficiencies that benefit the entire ecosystem.

Second, the digital advertising market will inevitably bend towards efficiency. Every market does over time. It's just a question of how fast we get there. There are still some in our industry who will say things like why shouldn't I be allowed to duplicate or [indiscernible] aspects of what I'm selling? Over time though, the survivors and the thrivers will be those who figure out how to win and a fair fight. We will always be advocating and advancing a fair price wherever we can.

And last, the open Internet offers compelling value in contrast to walled gardens. The open Internet is where most consumers spend most of their time. It is where they engage with the Internet's most premium content. Advertising on the open Internet is not the same as advertising in a walled garden. On the open Internet, an advertiser gets to select ad impressions across all opportunities, with objectivity and efficacy. It's not possible in a walled garden or using a walled garden DSP. For most marketers, these are 2 very different value propositions.

The work we do in any of these areas is not easy, let alone all of them, but that's our mission. We know that transparency, objectivity and innovation drive performance for us. But more than that, we know they are essential for our clients, and we're just getting started. I've never been more excited about the road ahead. And with that, I'll hand it over to Alex to walk you through the financials.

Thank you, Jeff, and good afternoon, everyone. I'm honored to be speaking to you as our CFO. It's been an incredible few months working closely with our leadership team and a world-class finance organization. I have even more confidence in our business today with the outstanding team that we have in place, and I'm grateful that they have made my transition so smooth. When I first met The Trade Desk 13 years ago, the company was generating less than $10 million in annual revenue. Over that time, I've been grateful to serve our Board of Directors over 2 distinct periods. As I reflect on the journey over all those years, what strikes me most is how much opportunity still lies ahead, which is exactly why it chose to step into this role.

My priorities as CFO are clear. helped grow the Trade Desk share of the $1 trillion advertising TAM as more dollars shifted programmatic, identify and prioritize the right investments to expand our leadership position, convert that growth into durable long-term free cash flow through disciplined operating leverage. And lastly, insurer business remains tightly aligned with agencies and advertisers over the long term. I am bringing a growth mindset to my role as CFO here. Our focus on profitable growth means that we can invest to ensure we are always innovating and delivering premium value to our clients.

As our TAM expands and given the AI opportunity, I am working with our team to take a fresh look at every aspect of the business so we can make the right investments and further accelerate our flywheel. That includes evaluating how innovation investments fuel growth, how we go to market, how we structure incentives in the organization and how our products and features are being adopted and creating value. We are already leading the way here with all the product innovations we've announced in the last quarter.

The Trade Desk is uniquely positioned with a large and growing addressable market, a differentiated market position, anchored and objectivity for advertisers, strong secular tailwinds, the best technology [indiscernible] tech and the business model built to deliver highly profitable growth. I believe the power of the open Internet combined with the foundational improvements the company has made throughout 2025, across leadership, operations and engineering has strengthened our position for the long term.

Across the company, and as you've heard from Jeff, we see significant opportunities to drive outsized growth, and we are committed to doubling down in those areas. With that, let's go through the numbers. In Q3, we delivered revenue of $739 million representing 18% year-over-year growth. Excluding political spend related to last year's U.S. elections, revenue increased approximately 22% year-over-year. Our strong performance in Q3 reflects our continued capture of incremental advertiser wallet share among large global brands during this period.

With the strong top line performance in Q3, The Trade Desk generated approximately $317 million in adjusted EBITDA or about 43% of revenue. CTV has been consistently growing at a faster rate than the overall business which was the case again in the third quarter. Video, which includes CTV represented around 50% of our business in Q3 and continues to grow as a percentage of our channel mix. Mobile represented a low 30 percentage share of the business during the quarter, while display represented a low double-digit share in audio represented around 5%.

Over time, I expect CTV and audio will grow as a percentage of mix, fueled by the premium authenticated nature of these channels. With supply significantly outstripping demand in our industry, our clients can be very deliberate in which ad impressions they select, which means those authenticated audiences become more attractive, especially in an objective buying platform like The Trade Desk. Geographically, North America represented 87% of our business in Q3 and international represented about 13%. Our strong momentum in both EMEA and APAC is a reflection of the investments we have made in these regions over the last several years. Our growth across our international business continues to outpace our growth in North America.

Among verticals that represent at least 1% of our business, we saw particularly strong growth in medical health, automotive and the technology sector. We have been making a concerted effort to continue to diversify our business across a larger number of verticals and we are seeing major client wins in verticals such as insurance, financial services and telco, for example. Q3 operating expenses, excluding stock-based compensation, were $457 million, up 17% from a year ago.

During the quarter, we continued to make investments in our team and platform, particularly in areas like platform operations. Income tax expense was $64 million in the third quarter, driven primarily by our profitability and stock-based awards. Adjusted net income for the quarter was $221 million or $0.45 per diluted share. Net cash provided by operating activities was $225 million, and free cash flow was $155 million in Q3. DSOs exiting the quarter were 92 days, up 3 days from a year ago. DPOs were 77 days, up 3 days from a year ago. We ended the quarter with a strong cash and liquidity position. Our balance sheet had about $1.4 billion in cash, cash equivalents and short-term investments at the end of the quarter. We had no debt on the balance sheet.

In Q3, we used $310 million of cash to repurchase our Class A common stock via our share repurchase program. Going back to our first authorization in 2023, the company has repurchased nearly $2 billion through our repurchase program, effectively offsetting dilution and reducing shares outstanding over that time. In October, we deployed the remaining amount from our January authorization and the Board of Directors subsequently approved a new authorization of $500 million. We have a strong balance sheet, and we'll continue to evaluate opportunistic repurchases as part of our capital allocation strategy.

For Q4, we expect revenue to be at least $840 million. Excluding the benefit of U.S. political ad spend in Q4 of 2024, our estimated growth in Q4 of this year would be approximately 18.5% on a year-over-year basis. We estimate adjusted EBITDA for Q4 to be approximately $375 million. As we look toward 2026, we remain well positioned to grow our share of the advertising TAM, generate significant profitability and cash flow and deepen the value we're delivering to advertisers. The Trade Desk sits squarely at the forefront of CTV transformation, a powerful application of AI, the expansion of retail media and the proliferation of programmatic buying internationally.

With these structural growth drivers and our focus on operational rigor at scale, we believe we've never been better positioned to capture the massive opportunity ahead across the open Internet and advertising more broadly. I look forward to engaging more with our customers, partners and our shareholders in the months and years ahead. I'm also more confident than ever that we have the right team in place to capitalize on this moment.

That concludes our prepared remarks. Operator, please open up the call for questions.

[Operator Instructions] First question comes from Shyam Patil with SIG.

I have a question for Jeff and then one for Alex. Jeff, this is a multi-parter. Some have interpreted your past comments as if you don't see Amazon as a competitor. Can you maybe just talk about that, clarify that a little bit? And then also, from your perspective, how do you see the competitive environment involving as companies like Google and Amazon try to evolve their DSPs. Won't they just price, everything is 0 to take share kind of like we're seeing right now with Amazon?

And then for Alex, Alex, you bring a pretty unique perspective to the role as you've gotten deeper into the business over the past several weeks, what are the top 2 or 3 areas where you think you can drive the most impact over the next couple of years?

Thanks, Shyam. Really appreciate the question. Honestly, I was hoping that we'd get to talk about this because I get this question a lot, especially in the last couple of months. So I'm happy to explain. Let me first just acknowledge that Amazon and Google are amazing companies and some of the greatest success stories in the history of the Internet and certainly in tech as well. And Amazon has done an amazing job in advertising in recent years. But I think it's worth taking a minute to double-click and look at what they're doing. .

This year, they'll do -- if we're just using very round numbers and back of the napkin math, about $70 billion-ish in advertising. From all of our market triangulation, there's about 90% that is in sponsored listings at least. In fact, it's probably more like 95% plus. So sponsored listings, in my view, are competing with Google Search and even the emerging AI search. And of course, we're not building the Google Search competitor. Amazon's primary advertising efforts are to compete with Google and it is driving nearly all of the revenue and all of the growth in advertising.

Now the second source of advertising revenue, of course, is Prime video. And from our calculation, this is a couple of billion dollars at most. And I'm convinced that, that's quite a bit less than, of course, that 10% of their total advertising and this, of course, is competing with Netflix and Disney and Paramount and all of the streamers. So while their advertising growth rate is really impressive at this scale, and I do think they have an amazing advertising story, the Amazon advertising story is about their impressive growth in owned and operated ad inventory.

Then there is a very distant advertising priority, which is their DSP. Now to be clear, our DSP is pointed at one of the biggest questions in advertising, what ads should a brand or advertiser or agency buy on the open Internet. And if it were up to me, we would define DSPs as buying platforms that buy the open Internet. Amazon's DSP is mostly about buying Prime Video and very little is buying the open Internet. Our estimates are that low single digits are in their DSP and a small percentage of that is pointed at decisioning the open Internet. It's either prime video or nondecision buying like programmatic guaranteed.

So to me, again, back of the napkin, 97%, 98%, 99% of advertising efforts are about monetizing owned and operated inventory and what's left goes to the open Internet. In advertising, Amazon first competes with Google and then it competes with Netflix and Disney. Very little time and money is competing with us. So the reality is we're playing in a very different sandbox. Our focus is in decisions, data-driven buying across the open Internet, especially in high-growth areas like CTV. And I would argue that we deliver capabilities that they just can't match. It seems like UID2 for identity, deep integrations with retail data, third-party data marketplaces, all the themes that we talked about in our innovations earlier in the call.

In 10 years, I don't think Amazon has a DSP as we define it. I think they will have tools to buy owned and operated, and they play in advertising the way that Facebook does today and the way that I think Google likely will in the future. So now let's move to the second part of your question.

Yes. [indiscernible]. So taking a step back, I'm really excited about the size of our TAM and the opportunity that I see ahead. And that's particularly true as we see the open Internet, just growing in importance and the fact that clients globally are really finding more value in an objective platform like ours. So as I look ahead, our focus is very much on growth right now. And I would say there are 2 areas in particular where we're spending a lot of time. First, we just want to be really disciplined on where we allocate resources really to drive the greatest ROI for us as a business. .

We're very fortunate to have a leadership position. We have a thriving ecosystem. We've made a number of fundamental product innovations, which you've heard about today, and we're leading the way with the eye. So we just want to capitalize on this momentum as we keep fueling that ecosystem in that flywheel. And secondly, we really just want to be more metrics-driven in every aspect of the company as we drive more rigor to help us scale. Maybe I'll give you just a couple of examples of how this shows up. Number one, on the go-to-market side, we're reevaluating how sales incentives and compensation structure really exists to better align with our long-term growth drivers as we plan for this next phase of growth. Secondly, internationally, we just continue to see lots of white space, as you heard, our growth there continues to outpace North America. And so we're excited about the success we're having there.

And finally, if you look at our success to date, A lot of it has been in some of the largest advertisers of the world. And so we see a big opportunity to go after the mid-market or the emerging Ls as we call them, especially, by the way, as AI really opens up new frontiers for us there. And so hopefully, that gives you a flavor for some of the key focus here for us right now. But I would say our goal ultimately is to make the right investments for the long-term durability while also continue to win market share.

Shyam, let me also just answer the other part of your question that you directed towards me, by the way, extra points for the multipart question. I just wanted to also answer the part about -- don't they eventually move the rate to 0. I actually love this question as well, in part because when we were on the IPO roadshow, I remember getting into a discussion with a very large room full of people, where one of the -- in my view, 1 of the smarter PMs on Wall Street asked the question, doesn't, in the end, Google just kick your ask because they can price it at 0. And I'll answer it now the exact same way that I answered it then, which is something to the effect of I hope they do eventually price it at 0 because it will be easier to point out then the problem of advertising today. Google doesn't break out the money they make from their DSP buying the open Internet because the Google P&L this is immaterial on the Google P&L. They make their money in other ways. So pricing the DSP at 0 will inspire the question, is this a trick if you make the DSP 0, where are you making your money.

In my opinion, DSPs that price at near 0 or a discount to get close to 0, only do that because they're primarily selling owned and operated inventory that has a cost of goods sold of near 0, and that's where they make the money. So when we orient the conversation around price, I think it's a trap for us and the buyers. If we orient the conversation around value, we win nearly every time. And I would argue that advertisers are getting smarter and they're asking the tougher questions, and we're helping them navigate in part because we have objectivity and I would argue that no other DSP has that. Either they don't have scale or they don't have objectivity. Thanks for the question, Shyam.

The next question comes from Justin Patterson with KeyBanc.

Great. Jeff, you've made a lot of important changes across the organization this year. As we approached the end of 2025, could you walk us through some of the more impactful changes in talent, where you see some green shoots? And then what areas in the organization you believe still need some more work?

You bet. Thanks for the question. If we look back on The Trade Desk 3 to 5 years from now, I believe one of the defining themes of 2025 will be the changes that we've made across the company to take the company to the next level. Right now, we're focused on strengthening our foundation so that we can lead well into the future. This year, we brought on new leaders, of course, to bring on the next phase of growth. Since March, we've welcomed a new COO [indiscernible], a new CFO, in Alex Kayyal; and most recently, a new CRO in Anders Mortenson. .

We also changed our inventory and supply side partner management. Of course, our Chief Commercial Officer, Tim Sims, left earlier in the year and the operational portion of his word moved to the back and the BD portion moved to one of our amazing leaders Will Doherty, our SVP of Inventory Development. Each of these new leaders, Vivek, Anders, Alex will bring critical experience to help us scale with rigor and discipline to the next phase of growth. Each of the leaders they replaced were here for 10 years or more, and they got us to this point. And for that, we are very grateful. We would not be here without them.

But as we look to the future, I want to make sure that we share with you some of the things that we changed and what we're looking for in the future. Under Vivek's leadership, we've introduced stronger structure and cadence across the company, and this includes how we run the business day to day, how we go to market and how we align the teams and become more rigorous. We've streamlined our go-to-market organization and improved cross-regional coordination. In the past, we've had too many people servicing the exact same accounts. And now we've rolled out a more rigorous end-to-end account planning, especially with our larger global clients who often operate across multiple agencies and markets, and we're already seeing the impact of stronger international growth and more consistent execution.

But some of these efforts are already showing results. First, we've leveraged automation and AI to drive productivity. We've automated some workflows with our traders and AMs and that's enabled us to be more proactive in client reactions. Second, we shared earlier in the call that JBPs outperformed the rest of our business. So of course, we're focused on strengthening the JBP pipeline and its execution. Last quarter, we had over 180 live JBPs, with some of our largest clients. We have an additional [indiscernible] JBPs in the pipeline right now worth billions of dollars in total.

We've been driving IC level accountability with BDAM and trader scorecards. As a result of those accountabilities alone, we believe that, that's contributed to CPMs declining by up to 43% on average and resulting in meaningful return on ad spend improvements. We've upgraded operating rhythm and quarterly operations reviews, weekly pipelines and spend reviews. We standardized the creation of account plans for high-growth accounts and this rigor is also pointed at incremental billions. As you know, we're getting closer to the budget decision makers and as programmatic and the open Internet becomes more and more central to a marketing plan, decision-making in brands and agencies is moving up the marketing work and even into the C-suite. This requires us to continually level up our talent, both promoting from within and hiring from outside where historically, at times, we've underinvested in brand relationships. This is why back in February, I said we were investing in senior level business development and account management to get closer to the brands. That strategy is working. And today, joint business plans now make up about half the business. And as you can tell from that pipeline, we're in a great position for that to be even more of our business as we go into next year.

This is somewhat indicative of the green shoots that we're seeing across the board in our company. Our culture is becoming more accountable and more aligned. Our internal coordination has improved dramatically as we continue to scale. One large health care brand, for example, has more than doubled its spend this year. And in this case, I credit that mostly with tighter internal coordination. That said, we know there's still a lot more to do. We're continuing to invest in training and internal tooling and systems that will ensure consistency and excellence across every team in every region. But as we close out 2025 and head into 2026, we're in a much stronger position than we began this year and we're excited about the road ahead. I really appreciate the question about this one.

Next question comes from Vasily Karasyov with Cannonball Research.

Jeff, I wanted to follow up on what you said in your prepared remarks about 2026. Can you tell us maybe what you're seeing in terms of broader advertising and macro environment. If there are any trends that you see that will benefit The Trade Desk next year? And how your restructuring positions you to benefit from those trends next year?

Thanks, Vasily. I appreciate the question as always, Well, first, as you can see from the strong print, we're seeing really strong momentum across our business and as we close out the year. At a macro level, I described the environment as a tale of 2 cities. On one hand, some large brands, particularly in categories like consumer products or CPG and then parts of retail are still feeling pressure from factors like tariffs and inflation. And in some cases, it's also a legacy mindset around advertising that still leans on cheap reach of user-generated content and sometimes even more legacy than that the cheap reach of linear TV.

Some have a very difficult job to do in measurement as well because much of their purchases are done offline or in physical stores, shops, dealerships or restaurants. But at the same time, we're seeing a growing number of forward-thinking brands outperform categories like financial services, health care, insurance, even parts of food and beverage and auto are leaning in to data-driven marketing and embracing measurement and increasingly turning to us to deliver real business outcomes. We're seeing a noticeable shift in how brands are scrutinizing the walled gardens. And this is in part because CMOs are under more pressure than ever from their CFOs and many are asking tougher questions, not just about reach or impressions, but whether the metrics they're being given actually map to business results. Walled gardens give easy answers that don't satisfy CMOs nearly as easily as they once did, certainly not as easily as they did 15 years ago. And that's in part because CEOs and CFOs of the biggest brands and the biggest agencies are looking for real growth. And the open Internet, our platform and objectivity are critical to their futures. That's where we perform the best, and that's exactly what we're trying to do in all of our efforts, including the efficiencies that we brought to the supply chain through innovations like OpenPath, Openet and Pub desk, all of these products are built in service of brands and agencies and leaning on our alignment with the buy side so that we can preserve that objectivity that will take us well into the future.

I can't emphasize enough the structural shift that is going on right now. There is more of a buyer's market at this moment than we've ever seen before, large CTV content owners and all other forms of publishers for that matter, are increasingly relying on independent partners like The Trade Desk to win. In fact, for most of them, we are the single largest source of third-party demand worldwide. So yes, there are some softer pockets in the market for some of the large brands. But when I look at the trends, the innovation and the partnerships that we've built, I feel really confident about where we're heading. I couldn't be more excited about the road ahead as we move into 2026. And I look to a world where advertising dollars go to the open Internet first and are avoiding systems that are easy and simply create their own homework. So I really appreciate the question. Really excited for 2026.

The next question comes from Jason Helfstein with Oppenheimer.

One for Jeff, one for Alex. Jeff, are you seeing an impact from a genetic search on available publisher inventory? And how are you helping publishers navigate that and basically AI? And then for Alex, I look forward to working with you. So in the fourth quarter, you're comping issues the company had with the Kokai adoption last year and some internal management issues you faced. Despite this, the revenue guide, I think it [indiscernible] ex political on a [indiscernible] comp. And so maybe that's kind of maybe a little surprising. Are you seeing anything specifically that's giving you concern around 4Q, maybe macro or something else?

Thank you very much. I'll turn to my brief, so I can give a little more time to Alex. So we look at roughly 20 million ad impression opportunities every single second. That's about $1.7 trillion every single day. That means we're doing more transactions than Visa, MasterCard and American Express put together in what they do in a year, we'll do in less than 30 seconds. So -- when you look at that and the impressions and just to be open, we buy a low single-digit percentage of that total. You have to win it's that big. So that means that if we take $20 million down to $15 million per second because of AI, there's not really much different about our business model. Nothing at all.

In my opinion, what that will likely do is make it so that there are fewer ads per page and that we actually create a little bit more of a healthy ecosystem than what we have today with the supply outnumbering the demand by so much. So I actually see whatever effect the AI search world is having on inventory supply. Given that I've said over and over again on this call that there's more supply than demand, and it is more of a buyer's market than ever. Whatever effect it's having on it, first of all, it's fairly de minimis as it relates to the open Internet at large. We shouldn't define the open Internet is just what happens in a browser, it is much bigger than. It's everything that happens in CTV, movies, sports, journalism, everything. And that's both in an app and in a browser, that's in every form of media that touches the Internet. If you look at it from that perspective, I don't think it's had any meaningful effect. And because I don't think CTV is going anywhere. I don't think music is going anywhere. I don't think sports is going anywhere. I think that the premium open Internet will continue to play the most significant role and building brands and doing actual advertising. And I don't think that AI will change that.

I do actually think that there will be more search like inventory available, which I think is really premium advertising opportunities. In the past, companies like ours have not had access to companies like Google ad inventory as it relates to search. I think in a world where that's much more competitive and there isn't a winner take all outcome, which I don't think there will be. I think there's going to be a bunch of opportunities for us to buy into their inventory. And I think it will actually look a lot like CTV in the sense that fragmentation will be nearly perfect in the sense that there are enough players that there's competition and that no one is big enough to have a monopoly or be draconian but it's consolidated enough that everybody will be rational and highly competitive. And I anticipate that, that will create new advertising opportunities that will have really amazing results and efficacy. I said I'd keep it brief, so I'll shut up and let Alex talk about the next.

Thanks, Jason. I appreciate the detailed question and also very much looking forward to working together. Maybe to start with Q3, as you heard -- we felt like Q3 was a really solid quarter with us growing about 22% ex political spend compared against Q3 of last year. Looking ahead and addressing Q4, excluding political we're guiding to approximately 18.5% year-on-year growth. You can factor political last year, it was about 5 percentage points of that. And we just continue to see strength in Decision TV and Retail Media -- you heard me talk about the opportunity outside North America, which is also growing very nicely.

The JBP commentary that Jeff provided where we're just really encouraged by the commitment these large brands are looking to make with us. And we just have such a diversified set of industries that we support today as more and more customers just resonate with our platform and our positioning. So overall, there's no change to our guidance philosophy. Our outlook is really grounded in the trends we've observed so far in October and November, and we feel good about the guide. But thank you for the question.

This question comes from Youssef Squali with Truist.

So Jeff, it looks like closing arguments for the Google antitrust lawsuits are about lesser in that 10 days, I think November 17. Can you maybe share your thoughts about potential fallout for Trade Desk from that? What are you -- and how are advertising you're talking to getting ready for the potential change in the industry from that? And just one quick follow-up. You've cited many new products in your prepared remarks. If you had to focus on the 1 or 2 that should have the biggest impact in the, call it, 12 to 18 months, what would those 2 be.

You bet. So first, as it relates to the outcome of the Google trial. Let me just keep it at a high level because there's a whole bunch of game theory, and we could talk through if they move here, we move there, all of that sort of stuff. But let me just say this, I think there is no scenario where Google doesn't back away from the open Internet to some degree. And the reason they do that is because most of their antitrust problems have come from draconian moves that they've made in the open Internet. And most of the money does not come from the open Internet. It comes from owned and operated. That's the very reason why when I talk about what I think they'll look like in 10 years, I think it's much more focused on owned and operated inventory, in part because they have a cost of goods sold that is so low, especially on YouTube. That will continue to be their focus and that their advertising focus outside of search and AI will look more like Facebook as they compete YouTube versus other user-generated content destinations. I think that's what you can expect from them in part because this has brought on so much burden for them, and they will just go slower, irrespective of the actual remedies or ruling. And then -- on the product side.

Yes, sorry. On the product side, honestly, there are so many products that we are talking about right now that I am really excited about. And I actually believe this has been the single biggest year of innovation for us in the company's history. So I'll ask you to pick which 1 is a favorite. It's a little bit like asking me which of my 3 children are my favorite. So it's just an impossible question to answer. But I will just highlight that I believe Kokai is the best platform we've ever pointed at the open Internet. It is doing amazing things and continues to get better and better. Some of the things that I'm most excited about adding on to it that we had in the last few months, number one deal desk, which is going to really lay the foundation for an amazing forward market in the future. I also think our trading modes, which make it so that we service different types of customers and we'll really lay groundwork for us creating even more unique interfaces for different types of users well into the future.

I think Audience Unlimited maybe one of the most significant innovations that we've ever made in the history of the company that will have huge implications into retail and some of the things that are coming ahead as it relates to retail and measurement and others. Those are a couple of the highlights. I feel like I'm leaving things off, to be honest. But -- those are some of the highlights that are most excited about.

Okay. This concludes the question-and-answer session. This concludes today's conference call. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.