Reddit (RDDT) experienced a monumental day on Wall Street on Wednesday, with its stock price soaring 42% to reach an unprecedented high of $118.25. This remarkable surge came on the heels of the company announcing its first-ever profit as a publicly traded entity, showcasing a robust financial performance in its latest earnings report.
The social media giant reported a third-quarter revenue of $348 million, marking a significant 68% increase year-over-year, and surpassing analyst expectations which had pegged the figure at $313 million. This impressive revenue growth was primarily fueled by a 56% increase in advertising sales, highlighting Reddit’s growing appeal among advertisers looking to tap into its vibrant community.
Despite the revenue triumph, Reddit’s earnings per share of $0.16 did not meet the $0.20 anticipated by Wall Street. However, this was overshadowed by the company’s achievement of a $30 million profit, a stark contrast to the net losses of $10 million in the previous quarter and $7.4 million in the same period the year before. This profitability was a notable turnaround, especially considering Reddit had only previously enjoyed profit in the fourth quarters of 2021 and 2023 prior to its IPO.
The platform’s user engagement also hit peak levels, with daily active users increasing by nearly 50% to over 97 million, underscoring Reddit’s growing user base and its potential for further monetization. This user growth has been a critical factor in boosting Reddit’s attractiveness for advertisers and AI technology partnerships.
Speaking of partnerships, Reddit’s strategic AI licensing agreements with tech giants Google and OpenAI have begun to pay dividends. These deals, potentially worth billions, are not only enhancing Reddit’s revenue streams but also positioning it as a key player in the AI data space. CEO Steve Huffman hinted at further potential collaborations in the AI sector during an investor call, suggesting a bright future for revenue diversification.
The market responded enthusiastically, with several high-profile analysts from institutions like Deutsche Bank, Bank of America, JPMorgan, and Jefferies raising their price targets for Reddit’s stock, with some setting a new high at $120. This analyst optimism reflects confidence in Reddit’s business model and growth trajectory, particularly in light of its financial turnaround and strategic alliances.
For Sam Altman, a major investor with a stake of about 12.2 million shares, Reddit’s stock performance has been particularly lucrative, with his investment now valued at potentially over $1.4 billion.
Reddit’s journey from a niche online forum to a profitable public company illustrates its significant evolution and sets a promising stage for its future endeavors in the ever-evolving digital landscape.
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