TLDR:
- Reddit reported surprise Q3 profit of $0.16 per share vs expected loss
- Revenue surged 68% to $348.4M, beating analyst estimates
- Daily active users grew 47% year-over-year to 97.2M
- Stock jumped over 40% following earnings announcement
- Company forecasts Q4 revenue of $385M-$400M, above expectations
Reddit delivered its strongest quarterly performance since going public, posting its first-ever profit and exceeding Wall Street expectations across key metrics. The social media platform’s shares responded with a dramatic rise of more than 40% in Wednesday trading.
The company reported third-quarter revenue of $348.4 million, representing a 68% increase from the same period last year. This figure substantially beat analyst predictions of $312.8 million, according to LSEG data.
In a major milestone, Reddit achieved profitability with net income of $29.9 million, or 16 cents per share. This marks a notable turnaround from the $7.4 million loss, or 13 cents per share loss, recorded in the same quarter last year. Analysts had expected a 7-cent loss per share.
The platform’s user base showed robust growth, with daily active unique users increasing 47% year-over-year to reach 97.2 million. This expansion in user engagement helped drive advertising revenue up 56% to $315 million.
Reddit’s “other revenue” category, which includes content licensing deals with companies like Google and OpenAI for AI model training, saw exceptional growth of 547% to $33.2 million.
The company’s gross margin improved to 90.1%, representing a 280 basis point increase from the previous year. Operating cash flow reached $71.6 million, while free cash flow totaled $70.3 million during the quarter.
Looking ahead, Reddit provided strong guidance for the fourth quarter, projecting revenue between $385 million and $400 million, surpassing analyst estimates of $357.9 million. The company also expects adjusted EBITDA to range from $110 million to $125 million.
CEO Steve Huffman highlighted the quarter’s achievements in a press release, stating, “It was another strong quarter for Reddit and our communities as we achieved important milestones, including new levels of user traffic, revenue growth, and profitability.”
Chief Operating Officer Jen Wong noted stable industry conditions and emphasized the company’s structural improvements, stating, “The current industry environment feels stable and we are benefiting from structural improvements we have made to the core ad business.”
Multiple analysts responded positively to the results, with several raising their price targets. Needham increased its target from $85 to $120, while Piper Sandler adjusted from $70 to $115.
The stock’s performance has been strong since its March IPO, with shares now up more than 130% from their first-day closing price.
Reddit’s influence continues to grow, with Huffman noting that “Reddit” was the sixth most Googled word in the United States in 2024, indicating its increasing role as a destination for information and community engagement.
The platform generated $71.6 million in operating cash flow and $70.3 million in free cash flow during the third quarter, demonstrating improved operational efficiency.
Wall Street firms, including Citi and JP Morgan, maintained positive outlooks on the stock, citing the company’s execution across user growth, product development, and monetization strategies.
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