Trade Desk Inc.
02/27/2026 | Press release | Distributed by Public on 02/27/2026 15:17
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes to those statements included in "Item 8. Financial Statements and Supplementary Data" to this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations and involve risks and uncertainties. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section titled "Item 1A. Risk Factors" and the "Special Note About Forward-Looking Statements."
Overview
We are a global leader in advertising technology. We empower ad buyers to create, manage and optimize digital advertising campaigns across ad formats, channels and devices. Our platform's depth, AI capabilities and rich ecosystem of inventory, publisher and data partner integrations enable superior reach and decisioning for clients. In addition to the primary capabilities provided by our self-service platform, our enterprise APIs equip our clients with the ability to customize and expand platform functionality.
Since our founding in 2009, we have been committed to building a more transparent and objective advertising ecosystem and enabling more expressive and data-driven campaigns through pioneering technology innovations.
Our clients are advertising agencies, advertisers and other service providers for agencies or advertisers, with whom we enter into ongoing MSAs. We generate revenue by charging our clients a platform fee generally based on a percentage of our clients' total spend on our platform and from providing value-added services and data to support their advertising campaigns.
Executive Summary
Highlights
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
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(in thousands, except percentages)
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| Revenue | $ | 2,896,284 | $ | 2,444,831 | $ | 451,453 | 18 | % | |||||||||||||||
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Net income
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$ | 443,304 | $ | 393,076 | $ | 50,228 | 13 | % | |||||||||||||||
| Net cash provided by operating activities | $ | 992,721 | $ | 739,456 | $ | 253,265 | 34 | % | |||||||||||||||
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Gross spend (1)
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$ | 13,394,683 | $ | 12,040,872 | $ | 1,353,811 | 11 | % | |||||||||||||||
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Adjusted EBITDA (2)
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$ | 1,196,449 | $ | 1,010,649 | $ | 185,800 | 18 | % | |||||||||||||||
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| (1) |
For internal management purposes, we utilize gross spend as a metric to assess our market share and scale, plan for optimal levels of support for our clients and measure our growth from existing clients. Gross spend measures the amount of a client's spend on our platform for advertising inventory, value-added services and data; plus the platform fee, which is generally based on a percentage of a client's total spend on our platform. Other companies, including companies in our industry, may calculate gross spend or similarly titled measures differently, which reduces its usefulness as a comparative measure. For further information, refer to "-Components of Our Results of Operations" below.
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| (2) |
To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we present Adjusted EBITDA, which is a Non-GAAP financial measure. Additional information can be found in "- Non-GAAP Financial Measures" below, including reconciliations of Adjusted EBITDA to the corresponding GAAP measure of net income.
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Trends, Opportunities and Challenges
Since our founding, we have focused on developing the most sophisticated, rich and objective platform for buyers of advertising. The growing digitization of media, fragmentation of audiences and ongoing lack of transparency in the advertising technology ecosystem have increased the complexity of advertising, and thereby increased the need for an ad buying platform that users can trust. Our platform delivers valuable insights and results to clients without the conflict of interest and lack of objectivity that come with also selling owned advertising inventory. We believe our continued success relies on further developing our platform's programmatic capabilities while expanding access to advertising inventory, value-added services and data to support our clients' advertising campaigns.
We believe that our key opportunities include (i) our ongoing global expansion, (ii) continuing development of our omnichannel ad inventory (including in channels such as CTV and other video, mobile, audio and others), (iii) continuing development, optimization and adoption of the data usage, measurement and targeting capabilities provided by our platform, which create a natural flywheel in our business, (iv) the adoption and utilization of third-party data, in particular, retail data, and first-party data by our clients, and (v) continuing development and incorporation of AI in our platform and related offerings.
We believe that growth of the programmatic advertising market is important for our ability to grow our business. Adoption of programmatic advertising by advertisers allows us to acquire new clients and grow revenue from existing clients. Although our clients include some of the largest advertising agencies and advertisers in the world, we believe there is significant room for us to expand our business relationships with these clients to gain a larger portion of their advertising spend through our platform. We also believe that the industry trends noted above will lead to advertisers adopting programmatic advertising through platforms such as ours. Accordingly, we see a significant market opportunity across advertisers and agencies with which we do not yet do business.
Similarly, the adoption of programmatic advertising by inventory owners and content providers allows us to expand the volume and type of advertising inventory we present to our clients. For example, we have expanded our CTV, audio and other advertising offerings through our integrations with supply-side partners and publishers. In addition, we have expanded our efforts to improve the efficiency and transparency of complex open internet supply channels.
We invest for long-term growth. We anticipate that our operating expenses will continue to increase in the foreseeable future as we invest in platform operations for our hosting capabilities as well as technology and development to enhance our platform and related offerings, including our continued focus on the development and incorporation of AI. We also anticipate that our sales and marketing expenses will continue to increase to acquire new clients and reinforce our
relationships with existing clients. In addition, we expect to continue making investments in our infrastructure, including our information technology, financial and administrative systems and controls to support our growing operations.
We believe the markets outside of the United States, and in particular across Europe and Asia in markets such as the U.K., Germany, France, China, Japan, India and Australia, offer opportunities for growth. We intend to make additional investments in sales and marketing and product development to expand in international markets where we are making significant investments in our platform and growing our team.
We believe that these investments will contribute to our long-term growth, although they may negatively impact profitability in the near term.
Our business model has allowed us to grow significantly, and we believe that our operating leverage enables us to support future long-term growth profitably.
Macroeconomic Uncertainty
Changes in interest rates, foreign currency exchange rates, trade policies and practices, inflation and other geopolitical developments have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services in various industries, including those provided by our clients, while also disrupting supply chains, sales channels and advertising and marketing activities for an unknown period of time until economic activity normalizes. In addition, due to high demand for hosting infrastructure components, their prices have become increasingly inelastic and the cost for such components has been rising. As a result of the current uncertainty in economic activity, we are unable to predict the size and duration of the impact on our revenue and our results of operations. The extent of the impact of these macroeconomic factors on our operational and financial performance will depend on a variety of factors, and the duration and extent of geopolitical and global economic disruption and their respective impacts on our clients, partners, industry and employees, all of which are uncertain at this time and cannot be accurately predicted. See "Item 1A. Risk Factors" in Part I of this Annual Report on Form 10-K for further discussion of the adverse impacts of macroeconomic uncertainty on our business.
Factors Affecting Our Performance
Growth in and Retention of Client Spend
Our recent growth has been largely driven by expanding our share of spend by our existing clients and adding new clients. Our clients include some of the largest advertising agencies and advertisers in the world, and we believe there is significant room for us to expand further within these clients, including room to expand the aperture of customers we support across the mid-market. As a result, future revenue growth depends, in large part, upon our ability to retain our existing clients and to gain a larger amount of their spend through our platform in a highly competitive advertising market. This includes our ability to differentiate to clients our platform's overall value from competitors' platforms that may offer artificially low prices, which are enabled by inherent conflicts of interest and a lack of objectivity that come with also selling advertising inventory. We believe that we offer differentiated offerings with superior value to new and existing clients.
In order to analyze gross spend contributions and growth from new and existing clients, we measure annual gross spend on our platform for the set of clients that commenced spending on our platform in a specific year relative to subsequent periods. Historically, our existing clients have generally increased their spend on our platform. However, over time, our existing clients may spend less on our platform and the growth rate of revenue may change. Any such change could have a significant negative impact on revenue and operating results.
Ability to Expand our Omnichannel Reach, Including CTV, and Innovate across our Platform
We enable the purchase of advertising inventory in a wide variety of ad formats and channels, including CTV and other video, display, audio, and native, on a multitude of devices, such televisions, streaming devices, mobile devices, computers and digital-out-of-home devices. Our future growth will depend on our ability to maintain and grow the inventory and spend across these channels, in addition to continued growth in CTV and potentially in any new inventory sources that may arise with the advent of AI. Our future growth will also depend on our ability to continue innovating and improving the technology underlying our platform and related offerings and enhancing their functionality, including the development of new or improved value-added services or the inclusion of additional data, and driving continual and increased adoption of such value-added services and data by our clients. We believe that our ability to integrate and offer
CTV and other quality advertising inventory for purchase through our platform, our ability to continuously improve the features and functionality of our platform and related offerings and, in particular, our ability to manage the increased costs that will accompany these efforts, such as the cost of developing and hosting our growing, AI-rich platform and related offerings, will impact the future growth and profitability of our business.
Growth of the Programmatic Advertising Market
Our operating results and prospects will be impacted by the overall adoption of programmatic advertising by inventory owners and content providers, as well as advertisers and the agencies and service providers that represent them. Programmatic advertising has grown rapidly in recent years, and any acceleration or slowing of this growth may affect our operating and financial performance. In addition, even if the programmatic advertising market continues to grow at its current rate, our ability to position ourselves within the market will impact the future growth of our business. Further, our ability to effectively manage our investments in infrastructure and headcount in response to this potential growth will impact our future profitability.
Development of International Markets
We have been increasing our focus on markets outside the United States to serve the global needs of our clients. As the middle class grows abroad, we believe that the global opportunity for programmatic advertising is significant and should continue to expand as publishers and advertisers outside the United States seek to adopt the benefits that programmatic advertising provides. To capitalize on this opportunity, we intend to continue investing in our presence internationally. Our growth and the success of our initiatives in newer markets will depend on the continued adoption of our platform by our existing clients, as well as new clients, in these markets. Information about geographic concentrations of our business is set forth inNote 12-Segment and Geographic Information.
Seasonality
In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing. Historically, the fourth quarter of the year reflects our highest level of advertising activity and the first quarter reflects the lowest level of such activity. Additionally, advertising activity is typically heightened in the periods leading up to major United States political elections. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.
Components of Our Results of Operations
We have one primary business activity and one operating segment.
Revenue
We generate revenue from clients who enter into agreements with us to use our platform to purchase advertising inventory, value-added services and data. We charge our clients for total spend on our platform, which includes spend and fees on advertising inventory, value-added services and data to support those purchases, in addition to the platform fee that is generally based on a percentage of our clients' total spend on the platform. Generally, we report revenue as an agent on a net basis, which represents gross billings net of amounts we pay suppliers for the cost of advertising inventory, supplier-provided components of value-added services and data (collectively, "Supplier Components").
Accounts receivable is recorded at the amount of gross billings to clients, net of allowances, for the amounts we are responsible to collect; and our accounts payable are recorded at the amount payable to suppliers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis.
Revenue earned from gross spend on our platform may fluctuate from period to period based on the types of services rendered and the extent to which our platform's value-added services and data are utilized by clients; our client and channel mix; changes in our platform or related offerings; pricing; volume discounts; and the amount of certain costs of supplier-provided components of value-added services and data recorded as reductions to revenue versus as expenses in platform operations. We expect that our revenue earned from our clients' gross spend will fluctuate in the future pursuant to these factors, especially as we introduce new and enhanced platform features and related offerings that may be adopted by our clients, expand our omnichannel capabilities, extend our reach to more CTV and other inventory and add additional clients whose businesses may have different underlying business models.
Refer to "-Critical Accounting Policies and Estimates-Revenue Recognition"below for a description of our revenue recognition policies.
Operating Expenses
We classify our operating expenses into the following four categories and allocate overhead such as information technology infrastructure, rent, office support and occupancy charges based on headcount for these categories:
Platform Operations.Platform operations expense consists of expenses related to hosting our platform, which includes "internet traffic" associated with the viewing of available impressions or queries per second ("QPS") and computing power to enable technical features and functionality such as AI, purchasing data used to inform and improve the platform and providing support to our clients. Platform operations expense includes hosting costs, including depreciation relating to data center computing and networking equipment, personnel costs, data-related costs and amortization of capitalized software costs for platform development. Personnel costs include salaries, stock-based compensation, employee benefit costs, commission costs, bonuses and travel for personnel who support our platform and provide our clients with platform support. We capitalize certain costs associated with the development of our platform, which are amortized in platform operations expense over their estimated useful lives.
We expect platform operations expense to increase in absolute dollars in future periods as we continue to experience increased volumes of QPS through our platform, invest in our hosting capabilities, including to support new technical features and functionality of our platform and related offerings and our growing AI and machine learning capabilities, and hire additional personnel to support our clients. Platform operations expense as a percentage of revenue may fluctuate period to period based on revenue levels and the timing of our investments in our hosting capabilities, subject to rising prices for data center components, as we continue to strategically invest in data center computing and networking capacity. Platform operations expense also may vary due to the amount of certain costs of supplier-provided components of value-added services and data recorded as platform operations expense versus as reductions to revenue.
Sales and Marketing.Sales and marketing expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, employee benefits costs, commission costs and travel, for our sales and marketing personnel. Sales and marketing expense also includes costs for market development programs, marketing events, advertising and promotional and other marketing activities. Commissions costs are expensed as incurred.
Our sales organization focuses on marketing our platform and related offerings to increase their adoption by existing and new clients. We are also focused on expanding our business by growing our sales teams in countries in which we currently operate, including in the United States and internationally, as well as establishing a presence in additional countries. As a result, we expect sales and marketing expenses to increase in absolute dollars in future periods. Sales and marketing expense as a percentage of revenue may fluctuate from period to period based on revenue levels and the timing of our investments in our sales and marketing functions as these investments may vary in scope and scale over periods and are impacted by the revenue seasonality in our industry and business.
Technology and Development.Technology and development expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, employee benefits costs and travel, as well as third-party consultant costs associated with the ongoing development of our platform and related offerings as well as integrations with our advertising inventory and data suppliers. Technology and development costs are expensed as incurred, except to the extent that such costs are associated with software development that qualifies for capitalization. We record capitalized software development costs related to platform development in other assets, non-current in our consolidated balance sheets, and we amortize those costs in platform operations expense.
We believe that continued investment in our platform is critical to attaining our strategic objectives and long-term growth. Therefore, we expect technology and development expense to increase as we continue to invest in the development of our platform and related offerings to support additional platform features and functionality, including AI and machine learning, increase the number of advertising inventory and data suppliers and support the anticipated increase in volume of QPS on our platform.
General and Administrative.General and administrative expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, employee benefits costs and travel associated with our executive, finance, legal, human resources, compliance and other administrative personnel, as well as accounting and legal professional
services fees, local business taxes and fees and credit loss expense. General and administrative expenses also include stock-based compensation expense related to the CEO Performance Option, which was granted in 2021.
We expect to continue to invest in corporate infrastructure and headcount to support growth. Excluding the impact of the CEO Performance Option, we expect general and administrative expenses to increase in absolute dollars in future periods. In addition, general and administrative expenses may fluctuate period to period due to various litigation, regulatory and governance matters, in which timing and extent of such expense is variable.
Other Income, Net
Interest Expense.Interest expense is mainly related to our debt, which carries a variable interest rate and fees for undrawn amounts. Refer to "-Liquidity and Capital Resources - Credit Facility" below for further information.
Interest Income.Interest income is mainly related to our cash, cash equivalents and short-term investments, which carry variable interest rates.
Foreign Currency Exchange Loss (Gain), Net.Foreign currency exchange loss (gain), net consists primarily of gains and losses on foreign currency transactions net of gains and losses on foreign currency forwards. We do not designate foreign currency forwards as hedges for accounting purposes. We have foreign currency exposure related to our accounts receivable and, to a much lesser extent, accounts payable that are denominated in currencies other than the U.S. Dollar, principally the Euro, British Pound, Canadian Dollar, Australian Dollar, Japanese Yen, Indian Rupee, Indonesian Rupiah, Hong Kong Dollar, New Zealand Dollar, South Korean Won and Singapore Dollar.
Provision for Income Taxes
The provision for income taxes consists primarily of U.S. federal, state and foreign income taxes. Our provision for income taxes may be significantly affected by changes to our estimates for tax in jurisdictions in which we operate, and other estimates utilized in determining the global effective tax rate. Actual results may also differ from our estimates based on changes in economic conditions. Such changes could have a substantial impact on the income tax provision. We evaluate the judgments surrounding our estimates and make adjustments, as appropriate, each reporting period. Our provision for income taxes may also be affected by the timing of vesting and/or exercise of our stock-based awards. The extent of the impact may be subject to volatility resulting from changes in our stock price and volume of transactions by employees.
Our effective tax rate differs from the U.S. federal statutory tax rate of 21% primarily due to the impact of stock-based awards including non-deductible stock-based compensation net of tax benefits associated with employee exercises of stock options and vesting of restricted stock, state taxes, research and development tax credits and foreign tax effects.
Realization of our deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, we consider our historical, as well as future, projected taxable income along with other objectively verifiable evidence, both positive and negative. Objectively verifiable evidence includes our realization of tax attributes, assessment of tax credits and utilization of net operating loss carryforwards during the year.
We maintain a full valuation allowance against our U.K. net deferred tax assets, based on the history of cumulative losses and the conclusion that future taxable profit may not be available for the utilization of the deferred tax assets for U.K. income tax purposes. We expect to maintain this valuation allowance for the near term, until it becomes more likely than not that the benefit of these U.K. deferred tax assets will be realized by way of expected future taxable income. To the extent sufficient positive evidence becomes available, we may release all or a portion of our valuation allowance in one or more future periods. A release of the valuation allowance, if any, would result in the recognition of certain deferred tax assets and may result in a material income tax benefit for the period in which such release is recorded.
Refer to Note 11-Income Taxes for additional information.
Results of Operations for the Year Ended December 31, 2025, Compared with the Year Ended December 31, 2024
The following discusses the results of our operations for the year ended December 31, 2025, compared with the year ended December 31, 2024. For a discussion of the results of our operations for the year ended December 31, 2024, compared with the year ended December 31, 2023, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with
SEC on February 21, 2025. References to "Notes" are notes to our consolidated financial statements in "Item 8. Financial Statements and Supplementary Data."
The following table sets forth our consolidated results of operations for the periods presented.
| For the Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (in thousands) | (% of Revenue) | (in thousands) | (% of Revenue) | ||||||||||||||||||||
| Revenue | $ | 2,896,284 | 100 | % | $ | 2,444,831 | 100 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Platform operations | 619,067 | 21 | % | 472,012 | 19 | % | |||||||||||||||||
| Sales and marketing | 644,300 | 22 | % | 546,517 | 22 | % | |||||||||||||||||
| Technology and development | 525,141 | 18 | % | 463,319 | 19 | % | |||||||||||||||||
| General and administrative | 518,455 | 18 | % | 535,816 | 22 | % | |||||||||||||||||
| Total operating expenses | 2,306,963 | 80 | % | 2,017,664 | 83 | % | |||||||||||||||||
| Income from operations | 589,321 | 20 | % | 427,167 | 17 | % | |||||||||||||||||
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Other expense (income):
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| Total other income, net | (69,434) | (2) | % | (80,135) | (3) | % | |||||||||||||||||
| Income before income taxes | 658,755 | 23 | % | 507,302 | 21 | % | |||||||||||||||||
| Provision for income taxes | 215,451 | 7 | % | 114,226 | 5 | % | |||||||||||||||||
| Net income | $ | 443,304 | 15 | % | $ | 393,076 | 16 | % | |||||||||||||||
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Note: Percentages may not sum due to rounding.
Revenue
Revenue increased by $451 million, or 18%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The overall increase was driven by an 11%increase in gross spend on our platform, which was primarily driven by more overall advertising campaigns executed by new and existing clients, increased application of and changes in the mix of revenue-generating value-added services and data and higher spend per campaign. The increase in revenue was also driven by a higher proportion of revenue earned from client spend due to increased utilization of our value-added services and data; and higher platform fees. Enhancements to our platform and the value-added services and data available to clients in 2025, including from Kokai and other features, and increased pricing associated with value-added services and data, enabled both our clients and us to capture increased value and drove higher utilization of our value-added services and data.
Revenue earned from gross spend on our platform may fluctuate from period to period based on the types of services rendered and the extent to which our platform's value-added services and data are utilized by clients; our client and channel mix; changes in our platform or related offerings; pricing; volume discounts; and the amount of certain costs of supplier-provided components of value-added services and data recorded as reductions to revenue versus as expenses in platform operations.
Platform Operations
Platform operations expense increasedby $147 million, or 31%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily due to increases of $123 million in hosting costs and $20 million in personnel costs, which included a $5 million increase in stock-based compensation. The increase in hosting costs was primarily attributable to support costs relating to the increased use of our platform to query ad opportunities and purchase ad impressions on the platform, increased use of features by our technical teams in support of our platform and investment in new data centers to support the continued growth of our platform. The increase in personnel costs was primarily due to headcount growth as well as the increase in stock-based compensation driven by new equity awards.
We expect platform operations expense to increase in absolute dollars in future periods as we continue to experience an increased volume of queries per second ("QPS") and media impressions purchased through our platform;
invest in our hosting capabilities, including to support new technical features and functionality of our platform and related offerings and our growing our growing AI and machine learning capabilities, subject to rising prices for data center components; and hire additional personnel to support our clients. Platform operations expense also may vary due to the amount of certain costs of supplier-provided components of value-added services and data recorded as platform operations expense versus as reductions to revenue.
Sales and Marketing
Sales and marketing expense increasedby $98 million, or 18%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily due to increases of $74 million in personnel costs, which included a $13 million increase in stock-based compensation, $17 million in marketing costs and $7 million in allocated facilities costs. The increase in personnel costs was primarily due to headcount growth to support our sales efforts and to continue to develop and maintain relationships with our clients, an increase in incentive compensation driven by headcount, an increase in severance benefit costs and an increase in travel costs. The increase in stock-based compensation was primarily driven by new equity awards. The increase in marketing costs was primarily due to an increase in marketing campaigns, creatives, client engagement, sponsorships and marketing events. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth as well as office support expenses.
We expect sales and marketing expenses to increase in absolute dollars in future periods, as we focus on increasing the adoption of our platform and related offerings with existing and new clients and expanding our international business.
Technology and Development
Technology and development expense increasedby $62 million, or 13%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily due to increases of $52 million in personnel costs, which included a $25 million increase in stock-based compensation, and $6 million in allocated facilities costs. The increase in personnel costs was primarily attributable to headcount growth to maintain and support further development of our platform and related offerings, partially offset by a decrease in taxes on equity awards. The increase in stock-based compensation was primarily driven by new equity awards. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth as well as office support expenses.
We expect technology and development expense to increase in absolute dollars as we continue to hire additional personnel, invest in the development of our platform and related offerings to support additional platform features and functionality including AI and machine learning, increase the number of advertising inventory and data suppliers and support the anticipated increase in volume of QPS on our platform.
General and Administrative
General and administrative expense decreasedby $17 million, or 3%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily due to a $48 milliondecrease in stock-based compensation, partially offset by increases of $18 million in administrative costs, $11 million in personnel costs and $2 million in allocated facilities costs. The decrease in stock-based compensation was primarily due to a $61 million decrease relating to the CEO Performance Option driven by the graded-vesting attribution method, under which more expense is recognized earlier in the option's life, partially offset by a $13 million increase primarily driven by new equity awards and an acceleration of stock-based compensation in connection with an executive transition. The increase in administrative costs was primarily driven by increases in external professional fees, including legal expenses for various litigation, regulatory and governance matters. The increase in personnel costs was primarily attributable to increased headcount to support our growth, partially offset by a decrease in cash incentive award expenses. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth as well as office support expenses.
Excluding the impact of the CEO Performance Option, the stock-based compensation for which is expected to be fully recognized by the first quarter of 2026, we expect general and administrative expenses to increase primarily due to continued investment in corporate infrastructure, headcount to support growth and various litigation, regulatory and governance matters, for which expenses may fluctuate from period to period. For additional information regarding the CEO Performance Option, refer to Note 10- Stock-Based Compensation.
Other Income, Net
Total other income, net decreasedby $11 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily due to lower interest income on our cash and cash equivalents and short-term investments primarily driven by lower amounts invested in money market funds and falling portfolio interest rates.
Provision for Income Taxes
The difference between the effective tax rate in 2025 of 33% and the U.S. federal statutory income tax rate of 21% was primarily due to nondeductible stock-based compensation, net of tax benefits associated with stock-based awards, and the impact of taxes in state and foreign jurisdictions, partially offset by research and development tax credits. For 2025, the provision for income taxes included approximately $9 million of tax benefits associated with stock-based awards and $18 million of research and development tax credits, excluding changes in unrecognized tax benefits.
The difference between the effective tax rate in 2024 of 23% and the U.S. federal statutory income tax rate of 21% was primarily due to nondeductible stock-based compensation, net of tax benefits associated with stock-based awards, and the impact of taxes in foreign and state jurisdictions, partially offset by research and development tax credits. For 2024, the provision from income taxes included approximately $73 million of tax benefits associated with stock-based awards and $30 million of research and development tax credits, excluding changes in unrecognized tax benefits.
On July 4, 2025, the United States enacted the OBBBA, which changes or makes permanent certain tax laws for corporations. The provisions of the OBBBA did not have a material impact on our effective tax rate or total provision for income taxes for the year ended December 31, 2025. However, the OBBBA allows for the accelerated deduction of any remaining unamortized domestic research and development costs over a one-year or two-year period beginning after December 31, 2024, at our election. As a result, during the year ended December 31, 2025, we recognized $175 million relating to domestic research and development costs as income taxes receivable, presented in prepaid expenses and other current assets, with a corresponding reduction in deferred tax assets. While we do not currently expect the provisions of the OBBBA to have a material effect on our effective tax rate or total provision for income taxes in the near term, we continue to monitor for changes in our operations that could be impacted by the legislation.
Refer to Note 11-Income Taxes for additional information.
Liquidity and Capital Resources
As of December 31, 2025, we had working capital of $2.0 billion, which included $658 million in cash and cash equivalents, $104 million of which was held by our international subsidiaries, and $645 million in short-term investments in marketable securities. Additionally, we had $445 million available under our Amended Credit Facility (refer to the "Credit Facility" section below). For the year ended December 31, 2025, we generated $993 million in cash flows from operating activities.
We believe our existing cash and cash equivalents, cash flow from operations and our undrawn available balance under our Amended Credit Facility will be sufficient to meet our working capital requirements and investments we make from time to time for at least the next 12 months. We believe our existing cash and cash equivalents, short-term investments and cash flow from operations will be sufficient to fund our share repurchase program. Further, we have a shelf registration statement on Form S-3 on file with the SEC (the "Shelf Registration"), which permits us to issue equity securities and equity-linked securities from time to time, subject to certain limitations. The Shelf Registration is intended to provide us with additional flexibility to access capital markets for general corporate purposes, subject to market conditions and our capital needs. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in "Item 1A. Risk Factors" in Part I of this Annual Report on Form 10-K.
In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt-financing arrangements, such as a new credit facility arrangement. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by incurring additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors.
There can be no assurance that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives. In addition, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected. We are closely monitoring the effect that current macroeconomic factors may have on our working capital requirements.
Credit Facility
On June 15, 2021, we and a syndicate of banks, led by JPMorgan Chase Bank, N.A., as agent, entered intoa Loan and Security Agreement (the "Credit Facility"). The Credit Facility consists of a $450 million revolving loan facility, with a $20 million sublimit for swingline borrowings and a $15 million sublimit for the issuance of letters of credit. Under certain circumstances, we have the right to increase the Credit Facility by an amount not to exceed $300 million.
On December 17, 2021, we amended the Credit Facility to expand the process for issuing letters of credit and the related invoicing, particularly with respect to letters of credit not denominated in U.S. Dollars. On February 9, 2023, we further amended the Credit Facility (as amended, the "Amended Credit Facility") to transition from a variable interest rate based on the London Interbank Offered Rate ("LIBOR") to a variable interest rate based on the Secured Overnight Financing Rate ("SOFR").
As of December 31, 2025, we did not have an outstanding debt balance under the Amended Credit Facility. Availability under the Amended Credit Facility was $445 million as of December 31, 2025, which is net of outstanding letters of credit of $5 million. The Amended Credit Facility matures, and all outstanding amounts become due and payable, on June 15, 2026. As of December 31, 2025, we were in compliance with all covenants.
For additional information regarding the Amended Credit Facility, refer to Note 7-Debt.
Share Repurchase Program
In February 2023, our board of directors approved a share repurchase program to repurchase our Class A common stock. The share repurchase program, which has no expiration date, is designed to help offset the impact of future share dilution from employee stock issuances. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases determined at our discretion, depending on market conditions and corporate needs. Open market repurchases are structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Exchange Act. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares under this authorization. This program does not obligate us to acquire any particular amount of Class A common stock, and may be modified, suspended or terminated at any time at the discretion of our board of directors.
As of December 31, 2024, $464 million remained available and authorized for repurchases. At the end of January 2025, an additional $564 million was authorized under this program, bringing the total amount for future repurchases to $1 billion. In October 2025, an additional $500 million was authorized under this program after the previous authorization was used. During the year ended December 31, 2025, we repurchased and subsequently retired 26.2 million shares of our Class A common stock for an aggregate repurchase amount of $1.4 billion. The aggregate repurchase amount for the year ended December 31, 2025, included $10 million relating to the 1% excise tax on share repurchases, net of share issuances, from the IRA. As of December 31, 2025, $150 million remained available and authorized for repurchases. In February 2026, an additional $350 million was authorized under our share repurchase program, bringing the total amount available for future repurchases to $500 million.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 992,721 | $ | 739,456 | |||||||
| Net cash used in investing activities | $ | (292,632) | $ | (157,513) | |||||||
| Net cash used in financing activities | $ | (1,411,377) | $ | (107,609) | |||||||
Operating Activities
Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our clients and related payments to our suppliers for Supplier Components. We typically pay suppliers in advance of collections from our clients. Our collection and payment cycles can vary from period to period. In addition, we expect seasonality to impact cash flows from operating activities on a sequential quarterly basis during the year.
In 2025, cash provided by operating activities of $993 million resulted primarily from net income adjusted for noncash items of $1.3 billion and a net decrease from our operating assets and liabilities of $275 million. The net decrease was primarily due to a $433 million increase in accounts receivable, a $77 million increase in prepaid expenses and other assets and a $64 million decrease in operating lease liabilities, partially offset by a $291 million increase in accounts payable. The increase in accounts receivable resulted primarily from the growth of our business and the timing of cash receipts from clients. The increase in prepaid expenses and other assets was primarily due to the recognition of income taxes receivable for domestic research and development expenses pursuant to the OBBBA and estimated tax payments, partially offset by the tax provision. The decrease in operating lease liabilities was due primarily to rent payments. The increase in accounts payable was due to the growth of our business and the timing of payments to suppliers for Supplier Components.
In 2024, cash provided by operating activities of $739 million resulted primarily from net income adjusted for noncash items of $949 million and a net decrease from our operating assets and liabilities of $209 million. The net decrease was primarily due to a $474 million increase in accounts receivable, a $42 million decrease in operating lease liabilities and a $39 million increase in prepaid expenses and other assets, partially offset by a $299 million increase in accounts payable and a $47 million increase in accrued expenses and other liabilities. The increase in accounts receivable resulted primarily from the growth of our business and the timing of cash receipts from clients. The decrease in operating lease liabilities was due primarily to rent payments. The increase in prepaid expenses and other assets was primarily due to the prepayment of certain travel costs, office lease deposits and software, networking and infrastructure costs to support our platform. The increase in accounts payable was due to the growth of our business and the timing of payments to suppliers for Supplier Components. The increase in accrued expenses and other liabilities was primarily due to an increase in income tax liability driven by the current income tax provision net of tax payments; an increase in various accrued personnel-related costs primarily driven by headcount growth, growth in our business and the timing of accruals and payments; and an increase in the liability related to the ESPP for employee contributions toward the upcoming purchase of shares.
Investing Activities
Our primary investing activities consist of investing in short-term marketable securities, capital expenditures for property and equipment for the expansion of facilities to support our hosting capabilities and growing headcount as well as capital expenditures to develop our software in support of enhancing our platform and related offerings. As our business grows, we expect our capital expenditures to increase, and our other investment activity may increase. Capital expenditures to support our hosting capabilities are also subject to rising prices for data center components, the timing, extent and duration of which cannot be predicted.
In 2025, we used $293 million of cash in investing activities, consisting of $197 million to purchase property and equipment, $79 million of net purchases of short-term investments, $13 million of investments in capitalized software and $4 million for the acquisition of certain assets accounted for as a business combination.
In 2024, we used $158 million of cash in investing activities, consisting of $98 million to purchase property and equipment, $50 million of net purchases of short-term investments and $9 million of investments in capitalized software.
Financing Activities
Our financing activities consist primarily of repurchases of our Class A common stock, proceeds from our stock-based award plans and taxes paid to net settle restricted stock.
In 2025, we used $1.4 billion of cash in financing activities, consisting of $1.4 billion of cash paid for repurchases of Class A common stock and $98 million of taxes paid for restricted stock settlements, partially offset by $43 million of proceeds from the ESPP and $24 million of proceeds from stock option exercises.
In 2024, we used $108 million of cash in financing activities, consisting of $235 million of cash paid for repurchases of Class A common stock and $139 million of taxes paid for restricted stock settlements, partially offset by $216 million of proceeds from stock option exercises and $50 million of proceeds from the ESPP.
Off-Balance Sheet Arrangements
We do not have any relationships with other entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We did not have any off-balance sheet arrangements at December 31, 2025, other than the indemnification agreements described below.
Contractual Obligations and Known Future Cash Requirements
Our principal commitments consist of non-cancelable operating leases for our various office and hosting facilities, and other contractual commitments consisting of obligations primarily for our hosting services, hardware providers and providers of software as a service. In certain cases, the terms of the lease agreements provide for rental payments on a graduated basis.
The following table summarizes our non-cancelable contractual obligations as of December 31, 2025 (in thousands):
| Payments Due by Period | |||||||||||||||||
| 2026 | 2027 and Thereafter | Total | |||||||||||||||
| Operating lease commitments | $ | 90,748 | $ | 704,445 | $ | 795,193 | |||||||||||
| Other contractual commitments | 226,727 | 39,123 | 265,850 | ||||||||||||||
| Total | $ | 317,475 | $ | 743,568 | $ | 1,061,043 | |||||||||||
In January 2026, we entered into non-cancelable commitments of $92 million with certain cloud-based hosting and data-related service providers to support our platform and related offerings. These commitments commence in 2026 and expire in 2028.
As of December 31, 2025, our total amount of gross unrecognized tax benefits was $116 million before netting with deferred tax assets for tax credit carryforwards and is considered a long-term obligation. Due to their nature, there is a high degree of uncertainty regarding the timing of future cash outflows and other events that extinguish these liabilities.
In the ordinary course of business, we enter into agreements in which we may agree to indemnify clients, suppliers, vendors, lessors, business partners, lenders, stockholders and other parties with respect to certain matters, including losses resulting from claims of intellectual property infringement, damages to property or persons, business losses or other liabilities. Generally, these indemnity and defense obligations relate to our own business operations, obligations and acts or omissions. However, under some circumstances, we agree to indemnify and defend contract counterparties against losses resulting from their own business operations, obligations and acts or omissions, or the business operations, obligations and acts or omissions of third parties. These indemnity provisions generally survive termination or expiration of the agreements in which they appear. In addition, we have entered into indemnification agreements with our directors, executive officers and other officers that will require us to indemnify them against liabilities that may arise by reason of their status or service as directors, officers or employees. In the ordinary course of business, demands have been made upon us to provide indemnification under such agreements, but we are not aware of any claims that could have a material effect on our consolidated financial statements. Accordingly, no material amounts have been recorded at December 31, 2025.
Non-GAAP Financial Measures
In addition to our GAAP results, we consider certain non-GAAP financial measures, including Adjusted EBITDA as described below. Management believes that Adjusted EBITDA allows investors to evaluate the Company's performance using one of the same key operating measures as used by management and securities analysts.
This Non-GAAP financial measure is supplemental to our GAAP measures, and this non-GAAP financial measure should notbe considered in isolation of, as a replacement for or as superior to corresponding, similarly captioned, GAAP measures.
Adjusted EBITDA
We use Adjusted EBITDA to evaluate our financial performance, operational efficiency and profitability and for certain financial and operational decision-making purposes, including annual budgeting and evaluating the effectiveness of business strategies. We define Adjusted EBITDA as net income before depreciation and amortization expense; stock-based compensation expense; interest income, net; and provision for income taxes. Adjusted EBITDA is influenced primarily by fluctuations in our revenue and operating expenses, except for the income and expenses it excludes. Fluctuations impacting revenue and operating expenses are described above in "-Results of Operations".
We believe Adjusted EBITDA helps identify underlying trends in our business that could be masked by the effect of the income and expenses that it excludes. Adjusted EBITDA is frequently used by investors and securities analysts to measure a company's operating performance. However, Adjusted EBITDA should not be considered as an alternative to net income, income from operations or any other measure of financial performance calculated and presented in accordance with GAAP. Limitations of Adjusted EBITDA include, for example:
•Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs or contractual obligations, (2) the potentially dilutive impact of stock-based compensation, which will continue for the foreseeable future and represent recurring expense and a key part of our compensation strategy, (3) interest income earned from cash and cash equivalents and short-term investments or interest expense relating to our Amended Credit Facility or (4) tax payments that may represent a reduction in cash available to us;
•Although depreciation and amortization expense are non-cash expenses, the assets that are depreciated or amortized - such property and equipment and capitalized software development costs - may have to be replaced or expanded in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or expansions; and
•Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
The following table presents a reconciliation of net income, the most comparable GAAP measure, to Adjusted EBITDA for the years ended December 31, 2025 and 2024 (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net income | $ | 443,304 | $ | 393,076 | |||||||
| Add back (deduct): | |||||||||||
|
Depreciation and amortization expense
|
115,784 | 87,490 | |||||||||
| Stock-based compensation expense | 490,627 | 494,699 | |||||||||
| Interest income, net | (68,717) | (78,842) | |||||||||
| Provision for income taxes | 215,451 | 114,226 | |||||||||
| Adjusted EBITDA | $ | 1,196,449 | $ | 1,010,649 | |||||||
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our
estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates.
We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition as net versus gross in our revenue arrangements, stock-based compensation expense and income taxes have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
Revenue Recognition
We generate revenue from clients who enter into agreements with us to use our platform to purchase advertising inventory, value-added services and data. We charge our clients for total spend on our platform, which includes spend and fees on advertising inventory, value-added services and data to support those purchases, in addition to the platform fee that is generally based on a percentage of our clients' total spend.
Generally, we report revenue net of amounts we pay suppliers for Supplier Components. Judgment is required to determine whether we are the principal and report revenue on a gross basis for Supplier Components or the agent and report revenue on a net basis for the amount of fees charged to the client. In this assessment, we consider if we obtain control of the specified service before it is transferred to the client, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk and discretion in establishing price.
From time to time, we may enter into agreements with data suppliers where the purchased data is used to inform and improve our platform, generally at no additional charge to our clients outside of our standard fees. Costs associated with this data ("data-related costs") are recorded in platform operations expense. We continue to monitor changes in our platform and related offerings to assess whether the related third-party costs of supplier-provided components of value-added services and data should be recognized as reductions to revenue or expenses included in platform operations under the principal versus agent criteria.
For additional information regarding revenue and the assumptions used for determining our revenue recognition refer to Note 2-Basis of Presentation and Summary of Significant Accounting Policies.
Stock-Based Compensation
Stock-based compensation expense related to stock options, restricted stock awards and units (collectively, "restricted stock"), and awards granted under the ESPP is measured and recognized in our consolidated financial statements based on the fair value of the awards granted. In October 2021, we granted the CEO Performance Option under the 2016 Incentive Award Plan. The fair values of our ESPP and stock option awards are estimated on the grant date using the Black-Scholes option-pricing model, except for the CEO Performance Option that was estimated using the Monte Carlo valuation model. The fair value of restricted stock is calculated using the closing market price of our common stock on the date of grant.
Stock-based compensation expense related to restricted stock and stock options is recognized on a straight-line basis over the requisite service periods of the awards, which is generally four years. Stock-based compensation for the CEO Performance Option, which was granted in 2021, is recognized on a graded-vesting basis over a derived service period of approximately five years but may be accelerated if the vesting criteria is met prior to the estimated performance period. Stock-based compensation expense for ESPP awards is recognized on a graded-vesting attribution basis over the requisite service period of each award.
Determining the fair value of stock options and ESPP awards requires judgment, and the models described above require the input of subjective assumptions such as the estimate of the volatility of the underlying common stock and the derived service period of the CEO Performance Option. For stock options granted in 2024 and thereafter, we determined the expected term of our stock options using historical option exercise behavior after obtaining sufficient historical exercise data. Prior to 2024, we applied the simplified approach in which the expected term of an award is presumed to be the mid-point between the vesting date and the expiration date of the award. This change did not materially impact stock-based compensation expense.
On May 27, 2025, our stockholders approved the 2025 Incentive Award Plan (the "Incentive Award Plan"), an amendment and restatement of the original 2016 Incentive Award Plan (the "2016 Plan"). The changes from the 2016 Plan
to the Incentive Award Plan included removing the ten-year plan expiration date and providing other minor technical and administrative updates. Existing stock-based awards granted under the 2016 Plan continue unchanged under the Incentive Award Plan, and the provision for annual increases in shares authorized for grant under the Incentive Award Plan ended on and included January 1, 2026. These changes did not materially impact our financial statements for the year ended December 31, 2025. We do not currently expect the new or modified provisions of the Incentive Award Plan to materially impact our financial statements in the near term.
For additional information regarding stock-based compensation and the assumptions used for determining the fair value of stock options and ESPP awards, refer to Note 2-Basis of Presentation and Summary of Significant Accounting Policies andNote 10-Stock-Based Compensation.
Income Taxes
Our income tax provision may be significantly affected by changes to our estimates for tax in jurisdictions in which we operate, changes to the evaluation of the realizability of our deferred tax assets and changes to other estimates utilized in determining the global effective tax rate. Actual results may also differ from our estimate based on changes in economic conditions. Regarding the realizability of deferred tax assets, and the determination of their valuation allowance, actual taxable income could differ from projected taxable income in future periods. Such changes could have a substantial impact on the income tax provision and deferred income tax assets and liabilities. We evaluate the judgments surrounding our estimates and make adjustments, as appropriate, each reporting period.
For additional information regarding income taxes and the assumptions used for determining our income tax provision, as well as our related deferred income tax assets and liabilities, and the impact of other tax legislation such as the OBBBA, refer to Note 2-Basis of Presentation and Summary of Significant Accounting Policies andNote 11-Income Taxes.
Recently Issued Accounting Pronouncements
Refer to Note 2-Basis of Presentation and Summary of Significant Accounting Policiesof our consolidated financial statements.
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