TLDR
- Reddit posted 78% revenue growth to $500 million, beating Wall Street estimates by $75 million for its biggest quarterly beat as a public company
- Daily active users reached 110.4 million globally, slightly above analyst expectations of 110 million users
- Third quarter revenue guidance of $535-545 million far exceeds Wall Street estimates of $473 million
- AI-powered Reddit Answers tool jumped from 1 million to 6 million weekly users in one quarter
- Stock surged over 15% in pre-market trading after the earnings beat
Reddit delivered its strongest quarterly performance since going public, crushing revenue expectations and providing bullish guidance that sent shares soaring in after-hours trading.
The social media platform reported second quarter revenue of $500 million, up 78% year-over-year. This marked the company’s fastest revenue growth in three years and beat Wall Street estimates by a whopping $75 million.
The revenue beat represents Reddit’s largest consensus beat since becoming a public company in March 2024. Adjusted earnings per share came in at $0.92, well above the expected $0.72.
Reddit’s user metrics also impressed investors. Global daily active users hit 110.4 million in the quarter, edging past analyst estimates of 110 million.
However, US daily active users came in at 50.3 million, slightly below the expected 50.5 million. This metric has been closely watched due to recent volatility from Google search algorithm changes.
Traffic Challenges and Recovery
CEO Steve Huffman addressed the Google traffic concerns directly during the earnings call. He acknowledged that “traffic from Google varies from week to week, but overall it was a headwind in Q2.”
Google accounts for 40% to 50% of Reddit’s total traffic according to JPMorgan analysts. The search giant’s algorithm changes have created uncertainty around Reddit’s user acquisition.
Despite the headwinds, Huffman noted “better traction” in attracting US users as the quarter progressed. The company’s Q2 exit number was higher than the quarterly average of 110 million users.
Reddit’s ability to weather these challenges stems partly from brand recognition. Huffman pointed out that “Reddit is one of the most searched for terms on Google.”
Users actively seek out Reddit content through search engines. This direct intent provides some protection against algorithm volatility.
AI Tools Drive Engagement
Reddit’s AI-powered search tool Reddit Answers showed explosive growth during the quarter. The feature launched in December 2024 with 1 million weekly users.
By the second quarter, Reddit Answers had reached 6 million weekly active users. This six-fold increase highlights growing user interest in AI-powered search capabilities.
Huffman described Reddit as “one of the few platforms positioned to become a true search destination.” The company plans to integrate Reddit Answers more deeply into the core search experience.
The feature will expand globally, though Huffman didn’t provide specific timing. Reddit aims to help users find answers directly on the platform rather than through external search engines.
Data from Profound shows Reddit is the most cited domain for AI model training. This positions the company well for future AI partnerships and revenue opportunities.
Reddit’s “other revenue” segment, which includes data licensing deals, grew 24% year-over-year to $35 million. The company has signed $60 million agreements with both Google and OpenAI for content licensing.
Huffman sees a “huge opportunity” in the data licensing space as AI companies seek quality training data.
Looking ahead, Reddit provided strong third quarter guidance. The company expects revenue between $535 million and $545 million, well above Wall Street’s $473 million estimate.
Adjusted EBITDA is projected at $185-195 million, surpassing the expected $159.5 million. This represents continued momentum in both revenue growth and profitability.
Reddit shares jumped over 15% in pre-market trading following the results. The stock has recovered much of its earlier losses, climbing roughly 110% from April lows near $87.
Global average revenue per user reached $4.53 in the quarter, topping analyst estimates of $3.90. US revenue came in at $409 million while international revenue hit $91 million.
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