Outside of millennials who came of age in the '90s and investors who endured the dot-com bubble, not many people remember Netscape. Launched in 1994, the pioneering web browser predated Chrome, Firefox and Safari. At its peak, it dominated 90% of the browser market. Netscape lost most of its browser market share to Microsoft's (NASDAQ: MSFT) Internet Explorer during the browser wars, and AOL ultimately discontinued Netscape browser development and support in 2008.
Today, company co-founder Marc Andreessen is perhaps more widely recognized for writing a Wall Street Journal op-ed titled “Why Software Is Eating the World.” His argument was that software was beginning to take over major industries around the globe, citing examples like Hewlett-Packard (NYSE: HPE) “jettisoning its struggling PC business in favor of investing more heavily in software,” and Google’s plans to buy Motorola Mobility.
But in 2017, Jensen Huang, CEO of NVIDIA (NASDAQ: NVDA), popularized the next iteration of that quote by stating that “AI is going to eat software.”
And after reporting Q2 earnings in early August, The Trade Desk (NASDAQ: TTD) may have just proven him right.
Adapt or Lose: Software Is Yielding to AI
For decades, the tech playbook entailed building software and charging monthly per seat subscriptions or self-service fee structures to license workflows behind complex dashboards. And for decades, it worked.
The post-dot-com market recovery was dominated by names including Microsoft, Oracle (NYSE: ORCL), and Intel (NASDAQ: INTC), whose respective market caps swelled as they dominated niches within the industry.
But AI’s evolution has disrupted that model, and now the paradigm has shifted. Companies that evolved—including Microsoft, Oracle, and Intel—continue to find success through cloud services and data center infrastructure. However, firms providing Software-as-a-Service (SaaS) and self-service demand-side platforms (DSPs), like The Trade Desk, are increasingly illustrating the kind of disruption Huang anticipated.
According to industry consultancy firm Grand View Research, the global AI market is forecast to grow to nearly $3.5 trillion by 2033, registering a compound annual growth rate of 30.6%. Meanwhile, legacy platforms with complex user interfaces risk becoming less valuable in a world dominated by AI applications and AI search.
The Shift to AI Search May Have Broken The Trade Desk
Companies continue to turn to AI for agentic applications, allowing autonomous tools to act on behalf of humans rather than software being a tool used by humans.
When agentic AI executes tasks in this manner, it can undermine traditional SaaS seat-based licensing by reducing the number of human users needed to perform a task.
That’s one problem software firms are facing. Another is AI-dominated search. The Trade Desk isn’t a SaaS company; it is an ad tech provider with a cloud-based DSP platform that helps advertising agencies and brands buy digital ad space. It boasts omnichannel reach, enabling campaigns to span connected TV, streaming audio, websites, and mobile devices.
But growth has slowed dramatically at the same time that a structural shift toward AI search—and away from parts of the open Internet—has created a new threat to its business model. Meanwhile, its stock has plummeted more than 75% over the past year.
The Trade Desk’s business model benefits from a healthy open Internet with a large supply of advertising impressions outside of the major walled gardens. But with users increasingly turning to AI overviews that combine data from multiple sources and provide quick answers, web-browsing behavior is shifting, while some publishers are seeing declining referral traffic from traditional search.
For The Trade Desk, that creates the risk of so-called impression scarcity—a decline in available web traffic and, subsequently, digital ad impressions across parts of the open Internet. At the same time, agentic media buying offered by big tech rivals could allow brands to automate more of the advertising-buying process within platforms like Alphabet (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN), potentially reducing the value of independent DSPs like The Trade Desk.
Q2 Results Show The Trade Desk’s Growth Problem
For months, The Trade Desk was being touted as an undervalued bounceback candidate. Proponents pointed to the company’s fundamentals remaining intact, and attributed its poor stock performance to being an unwarranted victim of the SaaSpocalypse.
But after it reported Q2 earnings on Aug. 6, shares of The Trade Desk hit a seven-year low. Revised guidance shocked the market, and ongoing pressures from walled-garden ecosystems—like Alphabet, Amazon, and Meta Platforms (NASDAQ: META)—resulted in Wall Street downgrades.
The Trade Desk announced earnings per share of 34 cents, which missed analyst expectations of 40 cents. Revenue, which rose just 3% year over year (YOY) to $715.06 million, below the consensus forecast of $752.41 million. Operating expenses rose 6% YOY (12% when excluding stock-based compensation), while net income fell to $64 million from a multi-year high of $187 million in Q4 2025, good for a nearly 66% decrease.
The stock carries a consensus Reduce rating, with 10 of the 39 analysts covering it assigning TTD a Sell. Current short interest of 18.10% and zero insider buys over the past 12 months indicate that there may be more tough times ahead for shareholders hoping for reversal.
The article "The Trade Desk’s Earnings Miss Raises a Bigger Question About Its AI Future" first appeared on MarketBeat.
