The Trade Desk vs. PubMatic: Which Ad-Tech Stock Is the Better Pick?
Since both firms having massive exposure to the booming CTV and retail media trends, this makes for an intriguing comparison for investors.
So, which stock makes a better investment pick at present? Let's deep dive into the pros and cons for each company.
TTD is confident in its ability to outpace the market and seize future opportunities owing to solid execution across key initiatives — connected TV (CTV), retail media, international expansion, Kokai, UID2 and OpenPath. The acquisition of Sincera, a leading digital advertising data company, will aid in enhancing its programmatic advertising platform by integrating Sincera's actionable insights on data quality. It recently unveiled the OpenSincera application to offer Sincera's rich advertising metadata to the ad tech ecosystem.
The company's Kokai platform is being used by two-thirds of the clients, much ahead of schedule. The platform is delivering on lower funnel KPIs, including 24% lower cost per conversion and 20% lower cost per acquisition, per TTD. 100% adoption by clients is expected to be completed by this year's end. The integration of Koa AI tools was highlighted by management as a 'game changer' for the Kokai platform. It recently introduced Deal Desk, an innovation within its Kokai platform designed to enhance how advertisers and publishers manage one-to-one deals and upfront commitments.
First-quarter revenues of $616 million jumped 25% year over year and surpassed management's guidance of at least $575 million. Adjusted EBITDA was $208 million (34% margin) compared with $162 million (33% margin) in the year-ago quarter. Video, which includes connected TV or CTV, represented a high 40 percent share of digital spend, while mobile had a mid-30 percent share. Display constituted a low double-digit share, and audio represented around 5%. Customer retention was over 95% for the quarter reported.
Nonetheless, increasing macroeconomic uncertainty and escalating trade tensions do not augur well for TTD, as these could squeeze ad budgets. TTD highlighted the impact of the volatile macro backdrop, particularly on the large global brands. If macro headwinds worsen or persist into the second half of 2025, revenue growth may face further pressure due to reduced programmatic demand. The intensely competitive nature of the digital advertising industry, dominated by industry giants like Alphabet and Amazon, continues to put pressure on TTD's market position.
While CTV remains a strong revenue driver, the market is increasingly fragmented and competitive. Heavy reliance on CTV for growth is a concern, as any adverse impact on this segment could weigh heavily on the company's overall performance. Moreover, TTD derived 88% of its revenues from North America, while only 12% came from international markets. A weak international footprint limits TTD's total addressable market expansion potential.
Excluding the drag from a large DSP client and political ad revenues, PubMatic's underlying business grew 21% year over year in the first quarter of 2025. The strong momentum is being driven by secular tailwinds in CTV, SPO (Supply Path Optimization) and emerging revenue streams. Importantly, these growth drivers now comprise 70% of total revenues, signaling a diversified business that is less dependent on legacy display advertising.
Like TTD, PUBM is gaining from growth in the CTV business, which bolsters its strategic positioning in the high-growth programmatic video. PUBM is expected to gain from the continuing shift of ad dollars from linear TV to streaming, especially in a market favoring programmatic spot buys with flexibility over heavy upfront commitments. PubMatic has already secured over 80% penetration among the top 30 streamers.
In the last reported quarter, CTV revenues surged over 50% year over year, while omni-channel video revenues grew 20% and represented 40% of total revenues. PubMatic is also heavily investing in Activate for SPO, Convert for commerce media, and Connect for curation to drive growth and create sticky customer engagement. Strategic partnerships like Spectrum Reach and TCL in live sports augur well.
PubMatic is embedding AI across its portfolio to enhance both efficiency and outcomes. It has launched a GenAI-powered end-to-end platform that offers buyers direct access to the open internet almost entirely. This technology aids in optimizing the entire stage of the media buying process, including inventory discovery and performance optimization. PubMatic is scaling across international markets. The company is witnessing strong performance in India, Europe, Australia and Japan. The recent expansion of its collaboration with BBC and other traditional broadcasters indicates growing recognition of PUBM's platform for streaming monetization.
Given these factors, PUBM forecasts $66-$70 million in revenues, assuming over 15% year-over-year growth of the underlying business. The competitive landscape and the ongoing macro uncertainty and cautious advertiser behavior are concerning. One of PubMatic's major DSP clients also revised the bidding approach, affecting PUBM's top line. In the last reported quarter, revenues declined 4% year over year despite strength in the underlying business.
Year to date, PUBM and TTD have lost 24.7% and 41.6%, respectively, amid macroeconomic uncertainties and effects of tariffs and inflation surrounding the industry.
Image Source: Zacks Investment Research
Valuation-wise, TTD is overvalued, as suggested by the Value Score of F, while PUBM has a Value Score of B.
Image Source: Zacks Investment Research
In terms of the forward 12-month price/earnings ratio, TTD shares are trading at 10.87X, higher than PUBM's 1.74X.
Analysts have made significant downward revisions for PUBM's bottom line.
Image Source: Zacks Investment Research
For TTD, there is a relatively lower downward revision.
Image Source: Zacks Investment Research
TTD and PUBM currently carry a Zacks Rank #3 (Hold) each. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Trade Desk, driven by its leading DSP position, rapid innovation through platforms like Kokai and OpenPath, and strong execution in high-growth areas like CTV and retail media, emerges as a stronger investment case. While PubMatic shows potential, significant downward estimate revision and declining revenues keep us on the sidelines.
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The Trade Desk (TTD) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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