Artificial intelligence (AI) has had a positive impact on several businesses, including semiconductors, workplace collaboration software, and cloud computing. Consumers, businesses and governments are looking to make the most of this emerging technology to improve productivity.

The digital advertising industry has also adopted AI to enable advertisers to target audiences more effectively, thereby reducing costs while increasing return on advertising investment. According to Grand View Research, spending on AI tools in digital marketing could increase from $15.8 billion in 2023 to $82 billion in 2030, a compound annual growth rate of 26%.

This is one of the reasons why The exchange office (NASDAQ:TTD)the supplier of a programmatic advertising platform, has seen robust revenue and profit growth over the past few quarters, leading to a healthy 69% rise in its stock price so far in 2024. The company will report its third quarter results on November 7, and there’s a good chance he could deliver another better-than-expected report. Let’s see why this may be the case.

Growth accelerates in 2024

The Trade Desk provides a data-driven programmatic advertising platform for brands and advertisers. It allows them to buy ad inventory and serve ads in real-time to relevant audiences across multiple platforms such as video, connected TV, mobile and social.

The company’s platform automates ad buying and digital marketing campaigns to help increase advertisers’ return on spend, using AI in the process.

The Trade Desk has used AI in its programmatic advertising platform since 2016, and it took it a step further last year with the launch of Kokai, an AI-powered digital advertising platform.

The company claims that this AI tool has generated significant gains for advertisers, with Kokai users experiencing a 36% drop in cost per click on average, as well as a 34% drop in cost per action (in (which advertisers are only charged when a particular action is taken by the intended user).

The Trade Desk claims Kokai has access to more than 15 million ad impressions every second, helping advertisers optimize their campaigns by buying “the right ad impressions, at the right price, to reach the target audience at the best time.”

As a result, clients who switched from the company’s Solimar programmatic advertising platform (introduced in 2021) to Kokai saw a 70% increase in reach.

Management is accelerating the integration of Kokai into its platform to help advertisers improve their advertising ROI, and that’s likely one of the reasons the company’s growth has improved in 2024. grew 27% year-over-year in the first six months of 2024 to $1.08 billion, higher than the 22% growth seen during the same period last year. last. Earnings rose 29% in the first half of 2024 to $0.66 per share.

The Trade Desk says it expects third-quarter revenue of at least $618 million, which would represent a 25% increase from last year. It also expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to go from $200 million in the third quarter of 2023 to $248 million, or almost 25%.

However, revenue and profit figures could exceed these expectations. Management estimates its total addressable market at $1 trillion, which would mean it’s only scratching the surface of a huge opportunity. More importantly, its customer retention rate has exceeded 95% over the past decade, underscoring the strength of its platform.

And with the increasing integration of AI into its platform, there is a good chance that The Trade Desk will succeed in attracting more advertisers.

Faster earnings growth could lead to more upside

Analysts expect the company to end 2024 with earnings of $1.61 per share, an increase of 28% from 2023. Earnings growth is expected to slow to 19% in 2025 before accelerating to 24% in 2026.

TTD EPS estimates for the current financial year, data by Y charts.

But the company’s earnings estimates have risen significantly in 2024, suggesting it could generate better-than-expected results over the next couple of years. This is why investors looking for a growth stocks One can still envision The Trade Desk, which operates in a massive market that could help sustain healthy growth for a long time.

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Hard Chauhan has no position in any of the stocks mentioned. The Motley Fool posts and recommends The Trade Desk. The Motley Fool has a disclosure policy.