Social media giant Reddit (RDDT) has taken the market by storm, with shares rocketing by 25% in after-hours trading following a stellar third-quarter earnings report. The company not only exceeded revenue expectations but also posted a profit for the first time since going public in March 2024, signaling that its bold bets on artificial intelligence (AI) are beginning to pay off.
A Strong Quarter Driven by AI and User Engagement
Reddit’s third-quarter revenue jumped an impressive 68% from a year ago, reaching $348.4 million and comfortably outpacing analysts’ forecasts of $312.8 million. Alongside revenue growth, Reddit reported earnings of 16 cents per share, a notable turnaround from a 13-cent loss per share in the same quarter last year. This financial momentum has pushed Reddit’s stock price from its initial IPO value of $34 per share in March to close at $81.74, hitting $102 in extended trading.
AI Transforming the Reddit Experience
Reddit’s CEO, Steve Huffman, emphasized how AI has become a key pillar in the company’s growth strategy, especially for improving user experience and international reach. The company has applied AI-driven machine translation to make the platform more accessible to non-English speakers, starting with languages like French, Spanish, Portuguese, Italian, and German. These efforts have been met with enthusiasm, with machine translation alone drawing four times more users this quarter compared to last.
Huffman also highlighted an AI-powered refresh of Reddit’s popular “Ask Me Anything” (AMA) feature, leading to a fivefold increase in AMAs created in the new format. This boost in content creation has not only deepened user engagement but also amplified Reddit’s presence as a go-to platform for community discussions and advice.
User Metrics Soar
The latest quarter revealed a substantial rise in user activity. Reddit’s daily active users grew by 47%, reaching 97.2 million, a number that far surpasses the growth seen on competitor platforms. Global average revenue per user also increased by 14% to $3.58, demonstrating Reddit’s growing potential to monetize its expanding user base.
In fact, Reddit’s user growth outpaced platforms like X (formerly Twitter), which reported only a 1.6% increase in daily active users in the second quarter of 2024, as well as Meta’s suite of platforms, which saw a 7% rise. This unique competitive edge is positioning Reddit as a fast-growing force in social media.
A Positive Forecast for Fourth Quarter
Reddit’s fourth-quarter outlook continues to fuel optimism. The company expects revenue to range between $385 million and $400 million, above analyst projections of $357.9 million, according to LSEG. Analysts at Jefferies have also shown confidence in Reddit’s future, reiterating a “Buy” rating and noting that Reddit’s growing advertising revenue highlights an “emerging monetization opportunity.”
The company’s success has already translated into a massive post-IPO market response, with Reddit shares nearly tripling from the initial IPO price of $34. As Reddit continues to invest in AI and expand globally, analysts believe it has multiple avenues to drive revenue growth.
Reddit’s Rise Shows No Sign of Slowing
For a platform that went public just months ago, Reddit’s performance has been nothing short of impressive. In the first quarter after its IPO, Reddit reported $243 million in revenue, a 48% increase from the prior year, followed by $281 million in revenue for the second quarter—a 54% year-over-year boost. With consistent gains in revenue and active user growth, Reddit is solidifying its place as a dominant social media platform poised for sustained success.