Advertising software maker The Trade Desk (NASDAQ:TTD) reported Q1 CY2024 results beating Wall Street analysts' expectations, with revenue up 28.3% year on year to $491.3 million. Guidance for next quarter's revenue was also better than expected at $575 million at the midpoint, 1.4% above analysts' estimates. It made a non-GAAP profit of $0.26 per share, improving from its profit of $0.02 per share in the same quarter last year.

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Founded by former Microsoft engineers Jeff Green and Dave Pickles, The Trade Desk (NASDAQ:TTD) offers cloud-based software that uses data to help advertisers better plan, place, and target their online ads.

Advertising Software

The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.

Sales Growth

As you can see below, The Trade Desk's revenue growth has been very strong over the last three years, growing from $219.8 million in Q1 2021 to $491.3 million this quarter.

This quarter, The Trade Desk's quarterly revenue was once again up a very solid 28.3% year on year. However, the company's revenue actually decreased by $114.5 million in Q1 compared to the $112.5 million increase in Q4 CY2023. Regardless, we aren't too concerned because The Trade Desk's sales seem to follow a seasonal pattern and management is guiding for revenue to rebound in the coming quarter.

Next quarter's guidance suggests that The Trade Desk is expecting revenue to grow 23.9% year on year to $575 million, in line with the 23.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 21.2% over the next 12 months before the earnings results announcement.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. The Trade Desk's free cash flow came in at $176.3 million in Q1, roughly the same as last year.

The Trade Desk has generated $542.6 million in free cash flow over the last 12 months, an eye-popping 26.4% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from The Trade Desk's Q1 Results

It was encouraging to see The Trade Desk beat analysts' revenue guidance expectations. We were also glad its revenue this quarter outperformed Wall Street's estimates. On the other hand, its gross margin declined. Zooming out, we think this was still a decent quarter, showing that the company is staying on track. The stock is up 1.4% after reporting and currently trades at $87.3 per share.

So should you invest in The Trade Desk right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.