IBD Stock Of The Day: How Reddit's AI Strategy Is Making It A Popular 2026 Pick On Wall Street
Dec 29, 2025 16:41:00 -0500 by RYAN DEFFENBAUGH
Reddit (RDDT) is the IBD Stock of the Day for Monday. Shares of the social media company are approaching a cup-with-handle buy point while holding above a short-term moving average.
San Francisco-based Reddit’s social media platform features more than 2 billion posts across more than 100,000 communities. Reddit stock soared out of the IPO gate with a more than 600% rally over the 18 months following its March 2024 debut. Shares opened Monday about 19% below a record high from September, but are still on track to close 2025 with a roughly 40% gain.
Analyst are bullish on further gains next year, helped by the prominence of Reddit posts in AI-powered search results.
“As overall referral traffic shrinks, the platforms that AI answers cite (like Reddit) become increasingly valuable, we believe,” Needham analyst Laura Martin wrote to clients Monday. She added that several recent studies show Reddit is a “key beneficiary” of citations within answers generated through Google’s AI overviews and ChatGPT.
Those types of referrals contribute to user growth that has helped Reddit build a fast-growing digital ad business. Martin named Reddit as her top pick for 2026 and added Reddit to Needham’s “conviction list” of top stocks through a separate client note last week. Analysts with Piper Sandler and Jefferies similarly tabbed Reddit stock as a top pick for 2026 in research notes earlier this month.
On the stock market today, Reddit stock rose 3.9% to close at 234.65.
Reddit Stock: 2026 Revenue Growth Projections
The picks highlight growing confidence on Wall Street that Reddit can come out a winner as AI powers more of the broader internet. Analysts see Reddit benefiting from the trust that consumers have in its massive trove of conversations.
“Reddit offers ad buyers high-intent audiences in a low ad-clutter environment, especially in tech, gaming, consumer electronics and discovery-driven categories,” Needham’s Martin wrote last week. “Reddit’s human community is tightly focused on the exchange of ideas, which is a key competitive advantage for ad buyers.”
With only its December-ending quarter results remaining, Wall Street projects Reddit will grow sales 65% this year to $2.15 billion. Revenue is seen rising another 40% next year to $2.98 billion, according to FactSet analyst consensus.
Nearly 95% of Reddit’s revenue comes from advertising. The rest comes from licensing deals that allow AI developers to train their models on Reddit’s user data. The company has licensing deals with ChatGPT creator OpenAI and Google parent Alphabet (GOOGL), among others. Martin expects that number to grow following the resolution of lawsuits Reddit brought against AI startups Anthropic and Perplexity for allegedly using Reddit data without a licensing agreement.
The deals with top AI developers are part of an effort from Reddit to be an “an AI winner without a lot of the AI cost,” as CFO Drew Vollero told IBD in a recent interview.
Meanwhile, Reddit posted its first profitable quarter in the third quarter of 2024 — ahead of expectations. For 2025, analysts expect Reddit to post a full-year profit of $2.32 per share, compared to a loss of $3.33 per share in 2024. Next year, analysts forecast Reddit’s earnings will rise 67%, to reach $3.87 per share.
Reddit’s User Growth
Despite the strong overall year-to-date gain, Reddit stock has been volatile this year. Shares went from a peak of 230.41 in February to an April low of 79.75, a 65% tumble. Reddit then rallied back another 250% to its mid-September record high of 282.95.
Wall Street has spent much of the past year debating whether Google’s shift toward AI overviews will hurt Reddit’s traffic. Google is a main source of referrals to Reddit’s website. Recent studies have found users are less likely to click on secondary websites when Google cites them in AI overviews, compared to traditional search results.
But Reddit’s frequent citations within Google’s AI overviews appear to be winning back confidence. Reddit’s average daily-active-users are projected to rise 13% year over year in 2026 to 132 million, according to FactSet.
“Stabilizing daily active user trends should help reinforce confidence in the long-term story, helping magnify the impact of Reddit’s attractive monetization opportunity,” Jefferies analyst John Colantuoni wrote in a recent client note, which named Reddit a top pick.
Reddit Stock On IBD 50 List
Meanwhile, Reddit stock is on the IBD 50 flagship screen of leading growth stocks. It also is on IBD’s Leaderboard list.
IBD MarketSurge charts show Reddit stock below a 240.18 cup-with-handle buy point. Shares exceeded that level earlier this month before retreating.
Reddit stock has found support at its 21-day exponential moving average. Risk-tolerant investors could use Monday’s rebound from that technical level as an aggressive early entry.
Meanwhile, Reddit stock holds a Composite Rating of 92 out of 99, according to IBD Stock Checkup. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
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