Taking over trillion-dollar corporations isn’t any straightforward feat. That is evident within the latest performances of each The Commerce Desk(NASDAQ: TTD) and AppLovin(NASDAQ: APP). The 2 adtech corporations have seen their share costs slashed amid aggressive pressures from tech giants Amazon(NASDAQ: AMZN) and Meta Platforms(NASDAQ: META).
Whereas rising competitors from deep-pocketed tech giants with established relationships with hundreds of thousands of small companies creates vital uncertainty for smaller rivals, the sell-off in each shares could current a chance for traders. If it’s important to decide one, although, which inventory must you purchase: The Commerce Desk or AppLovin?
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Whereas fears of aggressive strain have impacted each The Commerce Desk and AppLovin, the risk is most evident in The Commerce Desk’s monetary outcomes.
The Commerce Desk has produced slowing income development in every of the final three quarters. 2025 income development slowed to 18% for the yr, down from 26% in 2024.
Administration’s first-quarter outlook is way from encouraging, too. It expects simply 10% income development. That does not bode effectively for the remainder of the yr. Making issues worse, administration’s steerage means that adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) will decline this quarter.
Nevertheless, The Commerce Desk CFO Tahnil Davis assured traders the adjusted EBITDA margin for the total yr is anticipated to match final yr’s. The corporate will expertise increased prices within the first quarter attributable to investments in infrastructure and expertise.
Many traders attribute the slowdown in development to Amazon’s demand-side platform. CEO Jeff Inexperienced has repeatedly argued that Amazon primarily sells its owned-and-operated stock, whereas The Commerce Desk operates on the “open web,” because the CEO places it. Nevertheless, the monetary outcomes clearly present a aggressive affect on the corporate.
At AppLovin, nonetheless, the specter of Meta’s reentry into in-app promoting bidding has but to point out up in its financials. Income grew 66% yr over yr within the fourth quarter, and the adjusted EBITDA margin expanded from 77% to 84%. Administration’s first-quarter income steerage got here in forward of analysts’ expectations, projecting 19% development on the midpoint because it digests the robust earnings development of 2025. Analysts anticipate income to climb 46% for the total yr.
The Commerce Desk’s Inexperienced advised analysts, “We predict our enterprise mannequin is extra conducive to, and can profit extra from, AI than any of our rivals,” through the firm’s fourth-quarter earnings name. That begins with its new ad-buying platform, Kokai, which places AI on the middle. After a tough transition, almost all its shoppers at the moment are operating by means of Kokai as of late February.
Inexperienced argues that The Commerce Desk’s benefit with synthetic intelligence (AI) stems from its objectivity, which allows it to leverage first- and third-party information to optimize bids for advert patrons. Opponents like Amazon or Meta will at all times prioritize what’s finest for themselves. If it may possibly ship on that promise with Kokai, it might reaccelerate development.
AppLovin’s latest acceleration in income development has been pushed by its Axon 2 mannequin, which optimizes advert bidding to extend return on advert spend. Whereas The Commerce Desk goals to make use of AI to assist facilitate advertisers’ choices, AppLovin is utilizing AI to make these choices for them. Meta makes use of an identical “black field” advert optimizer.
AppLovin CEO Adam Foroughi argues that it has constructed a dominant AI mannequin within the house that will not be overcome by Meta or another competitor. “It’s a closed-loop mannequin that’s repeatedly reinforcing itself and getting smarter,” he advised analysts on the corporate’s fourth-quarter earnings name.
In the meantime, AppLovin sees a pair extra initiatives that might increase its income development. First, it is rolling out self-service instruments within the first half to ease the bottleneck for onboarding new clients. Second, it is testing generative AI instruments that may develop advert campaigns for entrepreneurs. Each have the potential to extend the variety of advertisers and the variety of adverts they run on AppLovin’s platform, enabling it to win extra placements and generate extra income.
Whereas AppLovin at the moment trades at a a lot increased earnings a number of than The Commerce Desk, it appears like a greater worth proper now. AppLovin’s ahead P/E of 29 appears like a discount, as analysts anticipate earnings development above 40% this yr and round 33% subsequent yr. The Commerce Desk shares are low cost, at slightly below 12 occasions earnings expectations, however the deteriorating efficiency makes shares robust to personal.
One phrase of warning about AppLovin, although: It is at the moment underneath SEC investigation relating to its data-collection practices. That gives an overhang on the inventory and will clarify its comparatively low P/E ratio, given its development expectations. Traders could wish to maintain off on buying shares till the SEC concludes the investigation. In any other case, it is prudent to contemplate a smaller place measurement given the danger.
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Adam Levy has positions in Amazon and Meta Platforms. The Motley Idiot has positions in and recommends Amazon, Meta Platforms, and The Commerce Desk. The Motley Idiot has a disclosure coverage.
The Commerce Desk vs. AppLovin: Which AI-Powered Adtech Inventory Is the Higher Purchase? was initially printed by The Motley Idiot
