Reddit (RDDT) is embracing its newfound status as a mainstream social media platform after a remarkable quarter marked by profitability, a strong user base expansion, and soaring stock value. Shares of Reddit spiked over 40% on Tuesday following the company’s first-ever profitable quarter, signaling growing confidence in its business model.
“We finally made the product easy enough to use that we’re hitting this tier of mainstream-ness,” said Reddit co-founder and CEO Steve Huffman. The platform’s daily active users worldwide jumped 47% year-over-year to 97.2 million, while weekly global active unique users rose by 53%.
Revenue Growth and Profitability
Revenue climbed 68% year-over-year to $348.4 million, surpassing analyst expectations of $314 million. Reddit’s adjusted operating profit also reached $94.1 million, a significant improvement from a $6.9 million loss a year prior. Earnings per share were $0.16, reversing a $0.13 loss from last year, with Wall Street anticipating a $0.07 loss.
A substantial part of Reddit’s revenue boost comes from growth in its advertising segment, as advertisers increasingly view Reddit as a viable platform for reaching engaged audiences. The platform, known for its niche communities and diverse user-generated content, has taken steps to enhance user experience, making it more accessible and appealing to a broader audience.
IPO Success and Stock Performance
Reddit’s IPO in March was the first major social media debut since Pinterest’s (PINS) in 2019, giving Reddit an initial valuation of $6.4 billion. Initially expected to price between $31 and $34 per share, Reddit’s IPO priced at the high end at $34, with shares opening trading at $47 and climbing to $50.44 by the end of the day. Now, the stock trades around $112, bringing Reddit’s market cap to an impressive $18.6 billion.
This significant market performance reflects investor optimism in Reddit’s future growth potential as a mainstream social media platform and an advertising revenue generator.
Data Licensing and Strategic Partnerships
Reddit has also unlocked new revenue avenues with recent licensing deals, such as its partnership with Google to use Reddit data to train large language models, followed by a similar agreement with OpenAI in May. These deals represent high-margin revenue opportunities, supporting a positive outlook for Reddit’s financial growth.
“We think Reddit has multiple avenues to drive impressions and pricing higher over time, which contributes to an impressive growth profile for advertising revenue,” said Jefferies analyst John Colantuoni, who praised the platform’s data licensing as a high-margin ancillary revenue source.
With this successful quarter, Reddit has not only achieved profitability but also entered an era where it is regarded as a major player in social media, poised to build on its recent success with a diverse revenue stream and loyal user base.
