Reddit gains 40% after Q3 revenue beats, user growth, and boost from AI 💣

Reddit shares surged 45% after a strong Q3 earnings report, driven by a 68% year-over-year revenue increase to $348.4 million, surpassing analyst expectations of $312.8 million. The company also drastically improved profitability and the platform's daily active users. According to the management, this performance reflects Reddit’s success in leveraging robust digital ad spending and AI content licensing.

• Revenue: $348.4 million (+68% YoY), above the $312.8 million analyst expectation
  • Average Revenue per User (ARPU): $3.58 (+14% YoY)
  • Advertising Revenue: $315.1 million (+56% YoY)
  • Other Revenue (AI and licensing): $33.2 million (+547% YoY)
• Profitability: Achieved GAAP net income of $29.9 million (16 cents per share), reversing a loss of 13 cents per share a year ago
• Daily Active Users (DAUs): 97.2 million (+47% YoY)
• Gross Margin: 90.1%, up by 280 basis points from the previous year
• Adjusted EBITDA: $94.1 million (27% margin), compared to $(6.9) million the previous year

Q4 guidance

• Q4 Revenue Guidance: $385 million to $400 million (well above $357.9 million consensus)
• Q4 Adjusted EBITDA Guidance: $110 million to $125 million

For Q4, Reddit projects revenue between $385 million and $400 million, well above the consensus forecast of $357.9 million, and expects adjusted EBITDA to range from $110 million to $125 million. CEO Steve Huffman highlighted Reddit’s growth fueled by innovations like AI-driven language translation and a redesigned “Ask Me Anything” feature, which boosted user engagement and community interaction. These initiatives have strengthened Reddit's appeal as a go-to platform for information and community-driven content.

D1 price chart

Reddit shares have gained nearly 40%, reaching $115 following yesterday’s earnings release. This surge brings the company's market capitalization to a new all-time high, with an ROI of almost 240% since the IPO price of $34 per share in March.