Reddit Stock Soars on Earnings Beat

A trader on the floor of the NYSE with a Reddit T-shirt works after the opening bell as Reddit begins trading on the New York Stock Exchange (NYSE) in New York on March 21, 2024. (Timothy A. Clary / AFP /Getty Images)

Key Points

• Reddit’s revenue reached $585 million and earnings per share hit 80 cents, surpassing analyst expectations of $549 million and 52 cents.
• Daily active users increased to 116 million, a low single-digit rise quarter over quarter, with a 19% year-over-year gain.
• Other revenue, including AI licensing deals, grew to $36 million, and the company launched Reddit Answers, an AI-powered feature.

Reddit surged on Friday after the social media company beat expectations for earnings, extending this year’s rally.

After waffling between gains and losses overnight, shares surged 18% to $229.65 in Friday trading. With that move, the stock is up about 40% this year, far outpacing the S&P 500’s roughly 20% gain. Shares, however, are still down 15% from their all-time high of $270.71 set on Sept. 18, according to Dow Jones Market Data.

The company solidly beat analyst estimates for both revenue and earnings, which came in at $585 million and 80 cents a share, respectively. Analysts surveyed by FactSet were expecting those numbers to land at $549 million and 52 cents.

Created with Highcharts 9.0.1RedditStock ticker: RDDTSource: FactSetAs of Oct. 31

Created with Highcharts 9.0.1April 2024'25050100150200250$300

For the current quarter ending in December, Reddit expects revenue in a range of $655 million to $665 million and adjusted earnings before interest, taxes, depreciation, and amortization of $275 million to $285 million.

Daily active users continued their low single-digit increase quarter over quarter at 116 million, versus last quarter’s 110 million. The increase from last year of 19% slowed from the 21% gain for the prior quarter.

While most of Reddit’s revenue comes from advertising, its other revenue, which includes licensing deals with Google and OpenAI to train their generative artificial intelligence, brought in $36 million. That’s a slight increase from last quarter’s $35 million.

The rise of generative artificial intelligence and chatbots doesn’t appear to have hurt Reddit, which relies on sharing knowledge through human conversations instead of using AI summaries. Content deals with AI companies have helped, and the company also launched its own Reddit Answers, which uses generative AI to give Reddit users answers based on its own content.

Write to Anita Hamilton at anita.hamilton@barrons.com