Key Stats for Reddit Stock
- 1-day Price Change for Reddit stock: 7.5%
- $RDDT Share Price as of Oct. 31: $209
- 52-Week High: $283
- $RDDT Stock Price Target: $228
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What Happened?
Reddit (RDDT) stock surged close to 8% on Friday after the social media company crushed third-quarter expectations and issued guidance that blew past Wall Street forecasts.
The results mark another impressive quarter for the recently public company, as it continues to prove its business model works.
Reddit reported revenue of $585 million, up 68% from the same period last year and significantly ahead of the $550 million analysts had expected.
Moreover, Reddit posted a net income of $163 million compared to just $30 million in the same period last year. Earnings per share came in at $0.80, beating estimates of $0.52.
The strong performance prompted Reddit to raise its outlook for the fourth quarter. The company now expects revenue to be between $655 million and $665 million, exceeding the $638 million that Wall Street had projected.
Adjusted earnings guidance of $275 million to $285 million also topped analyst estimates of $259 million.
CEO Steve Huffman credited the results to strong execution across the business. “Q3 was a strong quarter for Reddit with differentiated results and solid execution across product, growth and revenue,” Huffman said on the earnings call.
Reddit stock has been one of the year’s best-performing IPOs, and these results show why. It hit a significant milestone by achieving a 40% adjusted EBITDA margin, a profitability target it set when it went public just last year.
The fact that Reddit reached this goal so quickly demonstrates its efficient business scaling.
Global daily active users grew 19% year-over-year to 116 million, beating estimates of 114 million. However, logged-in user growth in the U.S.—Reddit’s most valuable market—slowed to 7% from 12% in the prior quarter.
This marks the fifth consecutive quarter of decelerating U.S. logged-in user growth, a trend that investors have been closely monitoring.
International growth is filling the gap as global logged-out users jumped 24% year-over-year, driven partly by Reddit’s expansion of machine translation to 30 languages.
CFO Drew Vollero emphasized the company’s focus on converting more users to the app, where engagement and monetization are highest.
The average revenue per user reached $5.04, surpassing the $4.82 analysts had expected and increasing 41% year-over-year. That figure remains low compared to peers like Meta, suggesting Reddit has significant room to grow monetization over time.
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What the Market Is Telling Us About Reddit Stock
The enthusiastic response to Reddit’s earnings shows investors believe the company is executing on multiple fronts.
Reddit stock continues to move higher as the business proves it can grow both revenue and profits simultaneously—something many tech companies struggle to achieve.
Advertising revenue drove most of the gains, jumping 74% year-over-year to $549 million. The company is experiencing broad-based strength across advertiser types, with total active advertisers increasing by over 75%. Reddit’s unique positioning as a platform for authentic conversations gives it an edge with brands seeking engaged audiences.
COO Jen Wong highlighted progress on lower-funnel advertising products, which help advertisers drive actual conversions rather than just brand awareness.
The company’s Dynamic Product Ads are gaining traction, and improvements to conversion tracking tripled year-over-year. These capabilities make Reddit more attractive to performance-focused advertisers with large budgets.
One area investors are watching closely is Reddit’s relationship with AI companies. The company’s data licensing business generated $36 million in the quarter, representing a 7% year-over-year increase.
Google and OpenAI are Reddit’s biggest data licensing partners, paying for access to Reddit’s vast archive of human conversations to train their AI models.
There’s been concern that Google’s AI Overview feature—which provides direct answers to search queries—could reduce traffic to Reddit.
However, Huffman downplayed these worries, noting that external search traffic was basically flat in the quarter.
He emphasized that Reddit’s growth is coming more from product improvements, such as machine translation, than from search referrals.
Looking ahead, Reddit stock appears well-positioned despite some questions about user growth trends.
Management is investing heavily in improving the first-time user experience, which Huffman believes is key to driving retention. The company is also ramping up its performance marketing efforts, particularly in international markets where awareness is lower.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
