Reddit's latest earnings announcement has energized investors, with shares surging over 40% following a surprise third-quarter profit and a strong outlook for growth. The social media giant reported impressive revenue growth of 68%, reaching $348.4 million—well above analysts' forecasts of $312.8 million. Alongside this revenue boost, Reddit posted a net income of $29.9 million, or 16 cents per share, a significant turnaround from last year's loss of $7.4 million.
CEO Steve Huffman expressed confidence in Reddit's momentum, pointing to key milestones in user traffic, revenue, and profitability. The company’s fourth-quarter revenue forecast, expected to land between $385 million and $400 million, also topped analysts' estimates of $357.9 million, adding to the upbeat sentiment. Citi analysts noted a 47% spike in daily active unique users, which reached 97.2 million—a number they described as a testament to Reddit’s impressive growth trajectory. Citi maintained a buy rating on Reddit and boosted its target price for the stock to $120, up from $70.
JP Morgan analysts highlighted Reddit’s success in refining its user engagement and monetization efforts, emphasizing the company’s advancements in advertising formats like Search, Conversation Ads, and Shopping Ads. The firm lauded Reddit's efforts to improve advertiser reach, accelerate revenue, and pursue a long-term EBITDA margin target of 40%.
Bringing a unique perspective, Bernstein analysts compared Reddit’s resurgence to a “Dr. Jekyll and Mr. Hyde story.” They noted that while Reddit seemed to struggle for growth prior to its IPO, the post-IPO phase has seen it exceed performance expectations. With AI and translation tools driving ad revenue and user expansion, Bernstein analysts suggest Reddit has become a “winner” in the tech space, hitting profitability targets previously set for years down the road.
Reddit’s impressive third-quarter performance and optimistic outlook have reignited investor enthusiasm, positioning the platform as a standout in the digital advertising landscape with momentum that’s hard to ignore.
