Greetings. Welcome to the Trade Desk second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Chris Toth. You may begin.

Thank you, Operator. Hello and good afternoon to everyone. Welcome to the Trade Desk Second Quarter 2025 Earnings Conference Call. On the call today are CEO and co-founder Jeff Green and Chief Financial Officer Laura Schenkine. A copy of our earnings press release is available on our website in the Investor Relations section at thetradedesk.com. Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risk and uncertainties and reflect our views and assumptions as of the date such statements are made. Actual results may vary significantly, and we expressly disclaim any obligations to update the forward-looking statements made today. If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. For a detailed discussion of risks, including the most recent economic volatility caused by tariffs, please refer to the risk factors mentioned in our press release and our most recent SEC filings. In addition to our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures is available in our earnings press release. We believe that presenting these non-GAAP measures alongside our GAAP results offers a more comprehensive view of the company's operational performance. With that, I will now turn the call over to CEO and co-founder, Jeff Green.

Thanks, Chris, and good afternoon, everyone. Thank you for joining us today. As you've seen from our press release, we again posted strong growth in the second quarter. Our revenue grew about 19% compared with Q2 last year, and we continue to outpace the digital advertising market, driven by the innovation and value we deliver to our clients every day. CTV continues to be our fastest growing channel with no signs of slowing down. Partners like Disney, NBCU, Walmart, Roku, LG, Netflix, and many others are deepening their relationships with us around the growing decision programmatic opportunity in CTV, which delivers the most effective and highest return on ad spend compared to insertion order or programmatic guaranteed buying. I could not be more excited about our position in CTV and the size of the growth opportunity for us in the years ahead. With our leadership in CTV, as well as other areas such as retail media, digital audio, identity, measurement, and data, we are winning more business with both new and existing customers. We are signing more multi-year JVPs, or joint business plans, than ever before with leading agencies and brands. In fact, the number of live JVPs is at an all-time high, and we continue to see spend under JVPs significantly outpace the rest of our business. What's even more encouraging is the strength of our jvp pipeline with nearly 100 jvps in progress many of them in the late stages of development and while many of our jvps are signed directly with brands we are working hand in hand with their agencies almost in every case to bring these partnerships to life it is not an either or i want to start by giving you an update on our business but i also want to take the time to describe our vision and where we're heading. We see clearly what is on the horizon for our space and we're convinced we're the best positioned company in ad tech to accelerate our growth in 2026. But it is important we share the opportunity we see because we think aligning our vision and efforts with our team, our clients, our partners, and our investors will maximize our ability to capture the unprecedented and unique opportunity in front of us so first an update on the business there are several key areas of progress to highlight here first we are delivering on cocai our most significant platform upgrade to date and one that represents a new frontier in digital advertising trading cocai gives advertisers unprecedented power to drive precision and relevance in everything they do all powered by the industry's most advanced ai technology koa we have injected ai into so many parts of the system that clients that have adopted kochi have seen tremendous performance improvements samsung was able to drive a 43 improvement in reaching its target audience for an omnichannel campaign in europe cash rewards saw a 73 improvement in cost per acquisition for campaigns in Asia using COCAI. In the aggregate, we are seeing more than a 20-point improvement across key KPIs for campaigns running in COCAI. What's even more encouraging is the clients who have transitioned the majority of their spend on COCAI are increasing their overall spend on the Trade Desk by more than 20% faster than those who have not. this is precisely what we believed was possible when we launched kokai advertisers are getting meaningfully better returns on their ad dollars and they are doubling down on the open internet and on us as a result around three quarters of all client spend is now running through kokai and we expect all of our clients to be using kokai by the end of this year second we are trying to create the most efficient supply chain possible for digital advertising and we are seeing great progress with OpenPath. OpenPath allows publishers to directly integrate with the Trade Desk if they choose to, and it enables publishers to see more clearly how much our clients are willing to pay for their ad impressions. And it gives our clients a direct line of sight into what they are buying. And today, a material amount of spend on our platform is now flowing through OpenPath, and it is doing exactly what we expected. OpenPath is both a canary in the coal mine and a stocking horse. We don't expect 100% of spend to flow through OpenPath, but we do expect it to, one way or another, make the supply chain better and more efficient. And the benefits have been exceptional, not just for our clients, but for the publishers too. By providing our clients with clearer signal, they have more confidence in what they're buying and they're typically willing to buy more. We have a long-standing partnership with News Corp, for example, and the New York Post has been one of the pioneers of OpenPath, and they've seen a 97% boost in their programmatic display revenue as a result. Also in the journalism field, Hearst newspapers have adopted OpenPath and has seen a 4x improvement in their fill rate since deploying it. As Amanda Gomez, SVP of Revenue Operations and Ad Technology at the New York Post said, and I quote, the New York Post is always striving for ways to simplify our connection to advertisers to help fill our ad spots more efficiently and transparently. We partnered with the Trade Desk to test OpenPath to help achieve this goal with great success over the past year ultimately helping to fuel programmatic revenue growth open path is not an attempt by the trade desk to get into the supply side of digital advertising we're not getting into the yield management business our clients are exclusively the buyers open path is simply an effort to improve the quality of the supply chain for everyone in the ecosystem key to our supply chain work is our Sincera acquisition earlier this year. We have already made a tremendous amount of supply chain data available to the ecosystem for free via Open Sincera. There, anyone can log in and see the quality of advertising on thousands of publisher sites. Since launching Open Sincera just a few weeks ago, we've already had many publishers contact us to say they didn't realize some of the quality dynamics of the ad experience on their own destinations, and they are improving those ad experiences as a result. But as important as OpenSincera is, I'm even more excited to embed the full scope of Sincera data across our platform as one of the most important metadata sources and signals for the way that we value individual impressions and work on behalf of the buyers. For instance, we might see the same ad impression from hundreds of supply paths. We don't want to burden our clients with figuring out which one is best, and it is not efficient to manage that challenge by defaulting to deals. Instead, KoKai does that work for our clients, leveraging AI and data from sources like Sincera so advertisers can obsess about buying the right impression rather than the delivery mechanism. But I do want to talk about deals for a second. One additional innovation that will help accelerate our supply chain work is DealDesk. It is one of the major final pieces of COCI, and it is in beta now. DealDesk leverages AI, especially AI forecasting, to reshape how we think about deals between advertisers and publishers and intermediaries such as SSPs. It helps advertisers and publishers understand how deals are performing how they are pacing whether the right impressions are being delivered and so on but perhaps just as important when deals are underperforming deal desk will help those deals get back on track and it will showcase open market and premium internet alternatives we are seeing very strong appetite for deal desk across both advertisers and publishers everyone recognize the limitation of deals and wants innovation that can help improve them disney is one of the first publishers to lean into deal desk jamie power at the walt disney company has said several times over the past couple years that they intend to shift 75 of their ad revenue to biddable programmatic by 2027. i'm thrilled that our innovation will help them achieve this goal and she said when talking about deal desk and i quote as more buyers shift toward biddable activation we're focused on ensuring they have the tools access and flexibility they need to drive results our relationship with the trade desk reflects our commitment to meeting advertisers where they are and evolving how we transact to deliver greater efficiency and performance close quote the third area i'd like to focus on is work we've been doing to advance objectivity in everything we do and across the ad tech ecosystem if the google antitrust trial taught us one thing it's that big tech walled garden advertising platforms have a vested interest in guiding spend to their owned and operated media so with google it's youtube with amazon it's prime video And of course, they can make it seem really cheap from a platform perspective because they make up that cost and much more on the other side of the transaction because they own the media. But if you want to reach your audience with objectivity and with no thumb on the scale across the best of the Internet, you're more likely to come to the trade desk. We're seeing more and more clients understand the importance of objectivity and the power of the premium open internet to reach their target audience as precisely and cost efficiently as possible. Live sports is a great case study. It's where advertisers get to act with precision and objectivity in reaching their audience where they are most engaged. A few years ago, just after the pandemic, I was on an industry panel in New York City where many of my peers on stage made the argument that live sports would be the linchpin that keeps viewers on linear tv for years to come i think many of you may have even been at that event if you fast forward through the impact of a global pandemic now all live sports are available via streaming tv and represent one of the most valuable pillars of the open internet and we continue to innovate with our partners to bring the full value of live sports to our clients. One of the promises of live sports in a biddable CTV environment is that advertisers can target key moments like overtime in an NBA game or the PKs at the end of a soccer game when the audience is most leaned in. Well, now we will be offering this capability with new tooling in Ko-Kai and partnerships with companies such as Disney, Sky ITV, and Omnicom, which we announced at Cannes a few weeks ago. Another major pillar of objectivity on the open internet is the ability to measure business outcomes of marketing campaigns with precision. KoKai already has the industry's most advanced retail media marketplace, but we've recently launched expanded partnerships with leaders such as Instacart and Okado to provide even more granular data on actual consumer purchases so advertisers can measure with even greater precision. Again, objectivity is a major factor here. Unlike others in the market, our goal is to drive the use of retail data across as many advertiser campaigns as possible. We do not compete with retailers, and only an independent, objective partner like us can truly help advertisers unlocked this opportunity in q2 a record amount of spend was influenced by retail data both on our platform and on the walmart dsp as more shopper marketing budgets flow into programmatic and fourth i'd just like to reiterate that underpinning all of our success this year is a strong focus on operational rigor this includes strengthening our leadership team As you know, Vivette Kundra joined us as our COO in March. I'm also pleased to announce here that Alex Ka'iel will be joining as our new CFO. You may know Alex as he's on our board, but his relationship with this company spans over a decade, initially as an early investor in 2014. He's also been a leader in the digital space for more than two decades. I'm thrilled that he's agreed to join our leadership team, as I believe there are few in our industry who have Alex's experience and strategic mindset in finance in a way that incents and drives growth for the organization. This shift has been made possible by Laura working with Alex to facilitate this transition. She will remain in the seat until August 21st and then stay on the team through the end of the year. I have worked with Laura for more than a decade, and I have nothing but tremendous respect and admiration for her work and her expertise. We wouldn't be here without her contribution to this point. Laura's contribution and passion will live in the Trade Desk for the entire future of its existence. I love that we joined the S&P 500 during her last full quarter. What a milestone and what a note to end on. We are also enhancing the board of directors, and I couldn't be more excited to announce that Omar Tawakal will also be joining the board. Over the years, Omar has been one of the real innovators in ad tech, whether it was founding Blue Kai in 2007 or more recently founding Rembrandt, one of the leaders in creative AI and advertising. I look forward to his innovator's vision as a part of our board work. In addition to strengthening our leadership team, we have improved the structure and clarity of our go-to-market organization, particularly in how our media traders, account management, and business development teams work together. This ensures that our clients experience the full power of our platform with clear roles and responsibilities across our teams. Lastly, I think this is a unique and important moment to remind our investors, our clients, our partners, and the rest of our industry about our mission, our vision, and our collective opportunity. Global advertising is a trillion-dollar industry today, and that, TAM, is all up for grabs. Additionally, AI is changing everything and creating new opportunities. Quality AI requires quality data, and to trust AI-driven buying long-term requires objectivity. A black box that just sells owned and operated media will struggle far beyond what ad networks have struggled with for decades our vision is to define clearly the category of a dsp access is not at the core of our value proposition simply getting access to inventory database decisioning and measurement is at the core of our offering some have mistakenly thought our ambitions are about display some have mistakenly thought our ambitions were only about CTV or branding budgets. Our goal is to buy the entire open internet objectively for buyers, big and small. We've started with the biggest and we serve them well. We think we've done the best job in the history of ad tech of aligning our interests with buyers. This enables them to trust us with their data. On that topic, one of the biggest flaws with Walled Gardens is that they measure their own performance. We believe it is in the best interest of every retailer including amazon to have the measurement of the open internet based on something more auditable more independent and more transparent than what happens today we've partnered already with hundreds of retailers around the world to measure in this more objective way our retail partnerships play a very significant role in making it so that the premium open internet gets the first dollar of budget and not the last dollar. There are a tremendous number of inefficiencies in the open internet supply chains for both media and data. And we have big plans to change those. AI is currently changing the world. It is also changing the world of advertising and media buying. There are so many specific tasks where AI can massively level up the status quo. What is an impression worth to a specific brand? What is the price that this option is likely to clear at? What is the best supply chain to maximize transparency and minimize unnecessary costs? These applications of AI are already in our product. COA is what powers COCAI's forecasting, which is predicting the reach and performance of a campaign before a single dollar is spent. Distributed AI is foundational in COCI, and this is only the beginning. There are many tasks where agents can improve performance in part because they're always on. As you consider the power of AI in these specific applications, you can see how winning the trust of buyers is so critical. It is a buyer's market, and as a result, premium inventory matters more than ever. Again, our value add isn't that we merely have access to the best of the internet, which is what we refer to as the big five. These big five are the best of TV, the best of movies, the best of music, the best of journalism, and the best of sports. Currently, consumers spend most of their time on these big five, but most of the money goes to search and social. It is our aim to make the open internet the lion's share of spend and the highest efficacy ad spend in digital as i've said for over a decade the lines between brand and performance are artificial and will go away over time everything is performance but some performance is optimized for awareness and top of the funnel outcomes and others are pointed at the bottom of the funnel outcomes nevertheless everything that can be quantified will be, and most spend will be pointed at outcomes. Before I wrap up, I want to take a moment to speak to the proposed extension of our dual-class share structure, which was included in our most recent proxy filing. There will be plenty of opportunities to engage in more detail in the weeks ahead, but I think it's important to provide some perspective now on why the Board is making this recommendation. From the day the Trade Desk was founded, we believe that long-term thinking is our greatest advantage. The vision that we described is a long-term North Star that we think about in nearly every major decision we make. Dual class helps maintain that long-term North Star orientation. When we went public in 2016, we chose a dual class structure because we knew building something transformative, something that could truly redefine the open internet, would require conviction, patience, and freedom from the short-term pressures that weigh on public companies or are the one-size-fits-all approach often promoted by some governance analysts and major proxy advisory firms. Our belief has proven correct. Since then, we've grown from below a $1 billion market cap to about $40 billion today and included in the S&P 500. We've helped shape the future of identity with UID2, built leadership in CTV and retail media, expanded globally, and invested in innovations like Kochi, Sincera, and our TV operating system, all of which require decisions that didn't pay off in a quarter or even a year, but instead had positioned us to lead for years to come. We're now at another inflection point. The digital advertising landscape is evolving rapidly with ongoing regulatory scrutiny of walled gardens, the rise of AI, and growing demand for transparency and independence. We believe the next decade will be pivotal in determining the winners and losers in our space, and that staying true to our long-term vision is more important now than ever. this proposed extension isn't about entrenchment. It's about ensuring that the founder-led strategy that got us here can continue to guide us forward. We deeply value the trust our shareholders have placed in us, and we remain committed to earning it every day and for the long term. Let me wrap up by bringing some of these points together. We continue to earn a growing share of the total advertising pie. That momentum is a direct result of the innovation and execution we're delivering week in and week out and the value our clients consistently realize by working with us. About three quarters of our spend is using the COCAI platform. It is the best platform we have ever shipped and we're confident it will buy better than every other platform pointed at the open internet. We have always prioritized helping brands find their target audience with precision and relevance across the breadth of the open internet. The Trade Desk empowers brands with the tools to control and own their own future. We do that by prioritizing objectivity in everything we do and with a relentless focus on driving a clean, transparent, and competitive marketplace. I believe it's these principles and the performance they ultimately drive that attract major brands to our platform. And it's our dedication to those principles that's keeping them here. All of this positions, the trade disc, to lead through what we believe will be another defining period of growth. We're building right now for this next chapter, not just for this year, but for the long-term future of the open internet. AI is yet another force separating the great platforms from the weak ones. We've proven time and again that our alignment with advertisers, our focus on innovation, and our commitment to transparency and objectivity sets us apart. And with the upgrades we've made across our company, our platform, and our partnership, I'm more confident than ever that the Trade Desk will continue to capture more than our fair share of this growing market. With that, I'll hand it over to Laura to walk through the financials.

Thank you, Jeff, for the kind words and good afternoon, everyone. I've been at the Trade Desk since 2014, and I'm proud of what we've accomplished together, from our early days as a startup to going public to joining the S&P 500. It's been an honor to work alongside and as part of the leadership team. There were and are so many talented people across this company. I've also truly valued the relationships and conversations I've had with many of you in the investment community over the years. As I transitioned to a new challenge, I leave knowing the company is in a strong position for the future. Our finance and accounting teams are as capable and energized as ever, and I'm committed to supporting a smooth transition for Alex as he steps into the CFO role. I met Alex in 2014 when Hermes was one of the company's earliest investors. He is respected, and I have confidence in him as he takes on this new role. With that, let's move on to our results. We delivered a strong second quarter with revenue of $694 million, representing 19% year-over-year growth. Excluding political spend related to the U.S. elections last year, revenue increased around 20% year-over-year. During the quarter, we continued to build momentum across our key growth areas as advertisers increasingly value the efficiency and measurable results of their media investments. Growth was particularly strong within CTV and retail media, fueled by the continued shift into decision channels for buying TV and the rapid adoption of retail media across verticals and regions. With over 70% of spend now on COCAI, we continue to see strong results from the new platform. We look forward to completing the COCAI transition and continuing to innovate on behalf of the industry and our clients. With the strong top-line performance in Q2, we generated approximately $271 million in adjusted EBITDA, or about 39% of revenue. From a scaled channel perspective, CTV led our growth again during the quarter. In Q2, video, which includes CTV, represented a high 40s percentage share of our business and continues to grow as a percentage of our mix. Mobile represented a mid-30s percentage share of spend during the quarter, while display represented a low double digit share and audio represented around 5%. Geographically, North America represented about 86% of spend and international represented about 14% of spend for the quarter. We're pleased that international growth once again outpaced North America as we continue to execute our growth playbook globally, led by CTV. We remain optimistic that our business outside North America will continue to be a strong contributor to our overall growth throughout the remainder of this year and in the years to come. In terms of verticals that represent at least 1% of our spend, we saw double-digit growth in the majority of our verticals, with particularly strong growth in technology and computing and medical health. Home and garden and style and fashion were below average. We continue to see significant opportunities for us to gain share in all of the verticals we serve. Turning now to expenses. Q2 operating expenses excluding stock-based compensation were $448 million, up 23% from a year ago. During the quarter, we continued to make investments in our team and platform, particularly in areas like platform operations, as the AI and machine learning tools embedded in COCAI continued to drive greater campaign performance. Income tax expense was $43 million in the second quarter, driven primarily by our profitability and stock-based awards. Adjusted net income for the quarter was $203 million, or $0.41 per diluted share. Net cash provided by operating activities was $165 million, and free cash flow was $117 million in Q2. DSOs exiting the quarter were 91 days, up one day from a year ago. dpos were 77 days up two days from a year ago we ended the quarter with a strong cash and liquidity position our balance sheet had about 1.7 billion in cash cash equivalents and short-term investments at the end of the quarter in q2 we used 261 million of cash to repurchase our class a common stock via our share repurchase program given our strong balance sheet and consistent cash flow generation we plan to continue opportunistic share repurchases while also offsetting dilution from employee stock issuances. Turning to our outlook, assuming the macro environment remains stable and we don't see disruptions from large global brands, which make up a significant portion of our business due to tariff uncertainty, we expect Q3 revenue to be at least $717 million, reflecting 14% year-over-year growth. Excluding the benefit of U.S. political ad spend in Q3 of 2024, our estimated growth rate in Q3 of this year would be approximately 18% on a year-over-year basis.

We estimate adjusted EBITDA for Q3 to be approximately $277 million.

In closing, we are pleased with our strong performance in Q2 and throughout the first half of the year. The opportunity ahead has never been more compelling. We're operating in a large and expanding market, supported by a business model that consistently delivers strong top-line growth, solid profitability, and healthy cash flow. I remain confident and optimistic as we look to the second half of this year and beyond. That concludes our prepared remarks, and with that, operator, let's open up the call for questions.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. The first question comes from Sham Patel with SIG. Please proceed.

Hey, Jeff. Congrats on another solid quarter. I just had one question. As we look into the back half of this year and into next year, what gives you the most confidence as you think about how the digital ad environment is evolving and how you're positioned to lead through it uh thanks for the kind words first uh sham and appreciate the question into 2026 many are managing and there are a number of macro issues to me all of the first being that

uncertainty is an opportunity for us to grab land second everything in in program third advertisers are more performance in all the the industry press and that is that the supply demand the fifth and and we have understated this to date but i believe a lot more in our prepared remarks this time we sit on top of what and given that we do in 30 seconds as many transactions as visa and master card do in a year if you add them together and that quality data is now feeding an ai engine that helps the biggest buyers in the world sort out the most complex supply chain they've ever faced in advertising that means our data plus ai creates an amazing opportunity for the biggest brands in the world and then six which is somewhat related to that supply and demand imbalance that i mentioned consumers spend more of their time in the premium open internet than they do inside of walt's gardens and premium advertising performs better and yet more ad spend goes to walt's A huge opportunity. As one employee said recently who joined our company, something to the effect of, I joined Trade Desk from Facebook because I believe TTV and the open internet have a bigger TAM, a lot more unrealized. And I believe all of that stuff put together is the reason why we continue to take share. You can see that in the CTV upfront this year. Many advertisers, you could even say most advertisers, prioritize flexibility over full year commitments. And that is a benefit to us. CTV remains our biggest opportunity, and we continue to see amazing momentum in CTV, but we're also seeing great traction in retail media, and our joint business plans have more JVPs under negotiation than we've ever had before, and the spend within those JVPs are actually growing significantly faster than the overall spend on our platform. You know, internally, we're leveling people, process, and the coordination between product and engineering has been improved dramatically, and that's accelerating the innovation and product velocity to unprecedented levels. We expect all clients to be using CoCup, and DealDesk continues to gain traction. With Vivek joining as our COO, we're also doubling down on operating, we're driving efficiency across the ecosystem with innovations like OpenPath and our integration. As Google continues to pull away from the open internet, that creates a vacuum which we're stepping into. Publishers need partners like the Trade Desk to win, and as Google and Facebook have largely abandoned the open internet, the Trade Desk is the largest source of third-party demand for many publishers around the world. Uncertainty, and I look at some of which we've shared publicly, but some of which we have team.

Thanks, Sean.

Okay. The next question comes from Vasily Kerasiav. Please proceed. Vasily, your line is live. Vasily seems to be having technical difficulties.

Yep. Let's just go to the next caller.

Okay. The next question comes from Yusef Squally with Truist Securities. Please proceed. All right. Thank you so much.

And Laura, thank you for all the help over the years and best of luck in your future endeavor. Jeff, I have a question for you. So there's been growth investor and media focus lately on Amazon's advertising efforts, particularly with DSP and Prime Video ad inventory. From your vantage point, how are you evaluating the evolving competitive landscape? And I guess more specifically, have there been any meaningful changes in how Amazon has shown up competitively in the market?

Yeah, thanks for the question uh so first and foremost we give marketers the power and the tools the things that have gotten objectivity as to the entire internet in my opinion that is the only way to get large clients to come on your platform and stay there for the long term and consistently won the trust of the world's largest brands we have long said in a truly objective way So when you look at it from that point, it's not a competitor, and Google really isn't much of a competitor anymore either. We're trying to buy the open internet, leveraging technology that values media objectively. We don't have any media, and we don't grade our own homework. In my opinion, and to me all the data suggests that they're mixed message, they can't. They have way too much prime video supply to objectively buy the open internet. they push sponsored listings most neither of those compete with us which is why i say that we're not really trying to compete with amazon when they argue that their dsp which is not even their top advert of their business when they argue that that's objective to the biggest world to the biggest advertisers in the world i believe they weaken the rest of their advertising pitch and they weaken the strength of their aws pitch a scaled independent dsp like the trade desk becomes video inventory in the recent months that creates a number of conflicts and in my opinion it further weakens their already shaky arguments the world's biggest advertising which makes it difficult for those brands and when you add in concerns around trust especially data trust we're challenging for amazon to credibly position itself as a neutral or even major brands have been reallocating spend nicely because of our independence and objectivity so to be clear if you insist on calling amazon a competitor we compete with a tiny division of amazon we don't compete with amazon.com don't compete with aws we compete with whatever small amount of spend goes to the amazon dsp that isn't spend on amazon owned and often it is a long time we believe we'd be an amazing partner to drive demand to them and it wouldn't but to sum up while we watch them closely we are playing in a very different standpoint identity and outdated deals that lack of none of their strategic decisions or investments suggest that they're trying to buy the open internet objectively or even that that is a priority i'm very optimistic the bigger tam of advertising will always be pointed at the open internet and that's why we're focused on that thank you so much for the question Thank you, Jeff.

Next question is from Vasily Kerasiav with Kennebar Research. Vasily, please proceed.

Hi, can you hear me now? Yes.

Welcome to the call.

I apologize for what happened before. So, Jeff, you work with nearly all of the world's biggest advertisers, and Lauren, her prepared remarks, mentioned the uncertainty because of the tariff situation, And we also heard names like P&G, Kimberly-Clark, Ford, Volkswagen talk about this uncertainty on their earnings calls. So my question is, how do you see that dynamic playing out in terms of ad spend in the remainder of the year? And how are you factoring that into your Q3 guidance? I would appreciate call on this.

Because I think an example of interfacing pressure. If we look at how 2.4 was relatively stable. uh though you could see particularly against the backdrop of what seems like a long time ago with growing concerns the majority of our business in q2 starting right at the beginning of april some of the biggest brands particularly in sectors like which are of course meaningful categories they began to experience even greater volatility but since then things have stabilized i think things are the impact of terror there is an important point that we haven't made it about the difference between us and many other businesses in digital advertising most others rely heavily so we see the effects that are directly impacting them which by the way this fact that we concentrate on the large ones is not generally a negative it is almost always a positive but just in this this moment it's negative because of how uniquely they're being affected by the tariffs and related policies but the reason i am so bullish is things have historic agility and performance is at its very best that's the very best that we can offer to them and that's when we're doing our best work for them so because programmatic which really is just a fancy word for fact is measurable because it's so we also see some tailwinds increase and the spend under those jvps is growing significantly faster than the overall spend on our platform. Agility and flexibility matter more years more than ever. And that's been especially evident in the CTB upfronts where many advertisers are opting for flexible commitments over the full-year deals. And that shift continues to play. So while I'm mindful of some of the biggest brands.

Thank you. Up next is Justin Patterson with KeyBank. Please proceed.

Great. Thank you. And best of luck to you, Laura, with the next steps. Jeff, could you please elaborate on the progress with COCI, both from a product perspective and from the engineering changes you made late last year? And then related to that, can you also talk about the ROI you're seeing from some of these AI capabilities embedded across the platform, whether it's algorithms or some of those agentic use cases that might emerge over time?

Thank you so much, Jeff. Really appreciate the question. I mentioned that I was excited about the Amazon question because it's one of the things that was most excited to talk about the one that i was most hoping for because there is both in the short term and in the long term that i am that is largely connected to a just so excited about what we're seeing already in the results that have come from ai and what that means for our future again finally utilizing what i think has been one of the most underappreciated data assets the last few months has been amazing the iteration on client feedback has been really rapid and the releases especially by of course is the most significant and it really marks what i think is a new frontier in programmatic advertising in part just because of the advent of ai and what's possible in predictive clearing and in all of so to just give you a sense of some of the improvements percent increase in pain in europe cash rewards in asia reported a 73 improvement in cost per acquisition but even more telling are the clients who have shifted the majority more than 20 faster than those who haven't so those that lean in and try today about just getting started with innovation to happen in parallel from a number of different teams which makes me really excited about our pace of innovation honestly there's not a single topic that I can talk about today that I am more excited about than our pace of innovation we're building toward an even more where there's agentic use cases where intelligent agents can monitor adjust and optimized campaigns in a more effective and more real-time way like one of the great advantages of ai is that we look at at doing this in a way that is a little bit different than trying to do that in conjunction or in cooperation with agencies and those final pieces of co-casting to rethink how deals between advertisers publishers and the intermediaries between them could work or should work deal desk can evaluate pacing delivery performance that really every you're performing deals by surfacing we're seeing strong interests by the way the early adopters that denotes an amazing vote of confidence but it's also that the strain on deals is actually one of the biggest is driving real performance gain underneath it is powering both near-term our teams are shipping faster and more efficiently than ever. And because of that, I'm this year to continue to layer and innovate on top of what we've been building all year long. I'm really proud of what our engineering and products for a much brighter and super grateful for their work. Thanks, Justin.

Next question comes from Mark Mahaney with Evercore. Please proceed.

Okay, thanks. I want to run by you two questions. First, you talked about this 20-point improvement across key KPIs for campaigns running in COCAI. Is there a snowball element to that? Is that something that you just go from zero to 20, or is this something that builds over time? Like, talk about the cohortization or whatever, how long it takes to get to that 20-point improvement, and do you think it goes higher than that? And then, Laura, the two segments you called out is underperforming, home and garden style and fashion. I think that's 10% to 15% of your revenue, something like that. Any color on why you think that segment may be underperforming? Thank you very much.

Yeah, absolutely. Mark, first, thanks for the question, and let me just open with the first part, and then I'll hand it off to Laura. As it relates to the 20% improvement, let me answer the last part. It's really just beginning. Whether that is slow or fast largely depends. Often a bunch of people really can't solve it for people to see what is constraining their campaign, and what would be the unlock. It's not just simply, give it your money and step away from the keyboard. The biggest advertiser in the world would never operate that way. So in order for us to help them own their future, we have to enable that dialogue, which is, of course, more complicated than just saying, give us your money and we'll take care of everything from there. So with that approach, sometimes the 20%, if you will, can be found immediately. and sometimes it just takes a little bit of ramp it depends on how well they've optimized their campaigns to date in the somewhat manual way that many of them do so we just need to continue to engage with them and it's very quickly becoming that the tools are not the body engagement the feedback the reporting the new way of engaging which takes some time to learn that is increasingly the

bottleneck to them realizing that 20% of the plus or the question of the categories that I mentioned I believe the first of them was home and garden and I would just say for home and garden it's just more seasonal on that summer moves on that's only about around 80% of the business if I recall correctly the second category I I mentioned with style and fashion which is about half of that 4% of the business there are just always some categories about the corporate rate and some below and those were the two that I liked in the midst okay thank you and congrats Laura on a great track record 34 out of 35 that's uh that's amazing so congrats

wishing you all the best thanks Mark the next question is from Jessica Reef Ehrlich with Bank of America please proceed thank you Jeff well you make a passionate argument for the open internet it seems like it's losing share when you look at the growth rate of wall gardens including meta, Amazon, Google, these big companies. How do you envision the share shift, the way you describe it, how do you envision the share shift in walled gardens versus open internet over the next few years? I mean, is it just that CTV and retail media are just growing slower than walled gardens? And for, I guess, trade does specifically, you talk about taking share. Look, who are you taking share from?

Is it other BSPs or is it from the walled gardens? uh thank you so much for the question it is true that that consumers spend more of their time on the premium open internet and if you think about this from your own perspective inside of spot when i think about i think about those big five that we described and the amount of time that's spent there as well as where engagement that i have the premium open internet performs way better it's amazing performance i do think they they fully understand that that of course in some ways they do have an easier assignment in that they have a nearly unlimited on instagram and interact with that is very good for them it is a much easier short-term assignment to inject ai into one destination for the entire the most premium parts of the open internet it naturally and if if you look at this long term where do do consumers spend most of their time where what they love the most where do those with the biggest brands in the world to affiliate if you get way more big brands in that in that big five instagram and so as a result of that just very real phenomenon i believe it's only a matter of time before the majority of spend is on the open internet and not inside of walled gardens it's simply because they have an easier job and also because they've taken the easy path, if you will, as it relates to measurement, which is it is easier to grade your own homework and not rely on anybody else. As we try to make it so that we're we're ensuring that we're actually selling them, that we're in this for the long haul, it takes a lot more work to coordinate among hundreds or even thousands of companies to make the very best supply chain. But as great markets do, they always over time work out the inefficiencies. Those that navigate to the media side, that is a long haul. I really appreciate the question.

Jessica and John, we have time for one more.

Okay. The next question comes from Matt Swanson with RBC Capital Markets. Matt, please proceed.

Yeah. Thank you so much for making time for me and taking this last question. Jeff, we've touched on it a lot. You guys obviously have an enviable position in the enterprise in terms of your customer base. But when we think about kind of like the usability of COCAI and then the established space of the SMB for performance dollars and then kind of this emerging SMB market in CTB, you know, does the usability and AI features of COCAI make that a more attractive market for you to go after over time? uh thank you very much for for the for the question uh because this is one thing that i don't think we were able we've been very just be open to that at first which in the world our

strategy but i actually think it served us very many of our most devoted clients future will keep doing that uh and we uniquely that if we could win the trust and do well for the biggest brands in the world, that it would make it easier for us to do that with mid-size and smaller. Incidentally, I think the acronym SMB, small and mid-size business, is only useful in the sense that it makes it digestible, but mid-size are as different, if not more different than small, than the large are to the mid or to the small. So there are at least three categories, But if you just look at it as key slope, where you see down that slope, we recognize that servicing M's and S's are then servicing the L's that we focus on today. But we also know that if you figure out how to serve them well, and they're very tough critics, they have very high demands, if you figure out how to service them well, then you can use those same tools. Of course, you get rid of all the questions and the dials that you give to them and simply just perform. for them. But taking out reports and taking out dials is a lot easier than starting with nothing. But it is absolutely in our ambition, but it is not our fault. If you look at how much of the TAM is made up of the ELs, it's almost half of them. Because there's so much TAM there, we just want to continue to support them and help them grow. I think that's a critical part of the future. And especially if you look at how much of CTV has been made up by those in the past and will likely represent the lion's share for as far as we can see into the future, that becomes a great place for all that.

This is a part of- You close out the call. Thank you.

Absolutely. Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.