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The Trade Desk (TTD +22%) is bouncing back nicely on a much improved Q1 report. Recall that the stock sold off in February following disappointing Q4 results with downside revs. That was not the case this time. This operator of a cloud-based online advertising-buying platform beat handily on EPS. Whereas in Q4, TTD reported a rare top line miss, the company reported huge upside this time. TTD also guided higher for Q2 after downside guidance last time.

• Let's start with TTD' macro view. Basically, Q4 was relatively stable although signs of volatility were building beneath the surface after a contentious election cycle. That pressure intensified in Q1 with growing concern among its clients. TTD's primary clients are the largest brands in the world and the agencies that serve them, all of whom are navigating increasing volatility so far in 2025. In this environment, TTD aims to be a source of vision and stability for its clients.
• TTD notes that programmatic advertising is extremely agile. Because its technology buys one impression at a time and evaluates every single impression, TTD can adjust quickly. It's also more data-driven than other forms of advertising. As such, TTD believes that in an environment when CMOs and CFOs are trying to do more with less, TTD can help. In this environment, TTD's focus is to win market share from competitors, just as it did during the pandemic.
• Turning to Kokai, which is TTD's next-gen programmatic advertising platform, powered by AI. TTD conceded in Q4 that it endured a slower-than-expected uptake of its Kokai platform. However, Kokai adoption accelerated exiting December. TTD says around two-thirds of its clients are now using it and the bulk of the spend in its platform is now running through Kokai. TTD expects all clients to be using it by the end of year.
• Looking ahead to Q2, TTD concedes it is dealing with a volatile macro backdrop, which is having an impact on large global brands. Nevertheless, TTD is encouraged by the strength of its underlying business, driven by continued progress on Kokai, and a growing pipeline of joint business plans. TTD remains confident given its track record of gaining market share during periods of economic volatility.

This Q1 report was welcome news for investors who were quite spooked by the rare Q4 revenue miss and downside guidance, which almost never happens. Based on the strong results and commentary on the call, Q4 is looking more like a one-time blip rather than a prolonged structural problem. Kokai was a problem area in Q4, but it sounds like client adoption is picking up. We think there was a lot of negativity priced into the shares, which helps explain the big move today.