Reddit (RDDT) stock surged after the company posted strong quarterly results and upbeat guidance.
Reddit’s latest quarterly report impressed Wall Street with better-than-expected revenue and profits, fueled by strong advertising sales, AI licensing deals, and steady user growth. Despite concerns about slowing engagement, the social platform continues to strengthen its position among social media companies that are good to invest in.
Key Points
- Revenue jumped 68% year over year to $585 million, beating expectations.
- Earnings per share rose to $0.80, well above the forecast of $0.52.
- AI licensing and ad revenue drove growth, while daily active users reached 116 million.
Reddit Beats Expectations with Strong Third-Quarter Results
Shares of Reddit soared more than 10% on Friday after the company delivered a blockbuster earnings report. Revenue for the quarter ending September 30 reached $585 million, surpassing Wall Street’s estimate of $549 million and marking a 68% increase from the prior year.
Earnings per share came in at $0.80, far exceeding analyst forecasts of $0.52. This strong performance reflects both robust advertising revenue and growing demand for the company’s AI-related business partnerships.
The stock has climbed roughly 40% so far this year, far outperforming the broader market, even though it remains below its all-time high of $270.71. Investors are encouraged by Reddit’s expanding monetization strategy and its ability to turn user engagement into profitable growth.
How Is Reddit Using AI to Drive New Revenue?
While Reddit’s primary revenue still comes from advertising, its “other revenue” category — which includes AI licensing deals with companies like Google and OpenAI — brought in $36 million last quarter. These agreements allow AI firms to use Reddit’s massive data trove to train generative models.
The company also launched Reddit Answers, an AI-powered feature that generates responses based on real user discussions. This innovation showcases Reddit’s effort to use AI in a way that complements its human-driven community, rather than replaces it.
For investors who analyze stocks, Reddit’s move into AI offers a compelling story: combining a loyal user base with technology that can scale new revenue opportunities.
Is Slowing User Growth a Concern?
Reddit’s daily active users rose 19% year over year to 116 million, slightly above analyst forecasts. However, growth has slowed for five straight quarters, signaling that user expansion may be reaching maturity.
Despite this deceleration, engagement remains high, and Reddit continues to add features that improve user experience and advertiser value. Management expects fourth-quarter revenue between $655 million and $665 million, suggesting confidence that advertising and AI deals will sustain momentum.
What It Means for Investors
For retail investors interested in the basics of investing or tracking the latest investment news, Reddit represents an intriguing opportunity in the social media and AI space. The company has proven it can convert user traffic into earnings growth, while also expanding into high-margin technology licensing.
Although its shares remain volatile — experiencing frequent 5%+ daily swings — Reddit’s fundamentals are strengthening. The company projects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of up to $285 million for the December quarter, indicating growing profitability.
In a market where innovation and engagement drive value, Reddit’s blend of advertising and AI income could make it one of the best company investments among emerging tech platforms.
Conclusion
Reddit’s third-quarter results highlight strong financial execution, expanding AI opportunities, and sustained user engagement. While growth in daily users has slowed, the company’s diversification into AI partnerships and advertising scale keeps it positioned as one of the best stocks to buy for investors seeking exposure to next-generation digital communities.
FAQs
What caused Reddit’s stock to rise after earnings?
Reddit’s stock jumped after reporting higher-than-expected revenue and profits, supported by strong ad sales and AI licensing deals.
How many daily active users does Reddit have?
Reddit reported 116 million daily active users, a 19% increase from last year.
What is Reddit’s outlook for the next quarter?
The company expects revenue between $655 million and $665 million and EBITDA between $275 million and $285 million.
How does Reddit make money from AI?
Reddit earns revenue through licensing agreements that allow AI companies to use its data to train generative models, and through its own AI product, Reddit Answers.
Is Reddit a good long-term investment?
With strong revenue growth, new AI initiatives, and high engagement, Reddit shows potential for long-term investors who can tolerate volatility.
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