Reddit has experienced a notable surge in stock value, jumping 25% in after-hours trading following a strong quarterly performance that included a revenue beat and its first-ever profit, Business Insider reports.
This impressive growth stems from the company’s strategic use of artificial intelligence (AI) to enhance user experience, which has contributed significantly to both user engagement and revenue.
In its third quarter, Reddit saw revenue increase by 68% year-over-year, reaching $348.4 million, well above analysts’ estimates of $312.8 million. The company reported a profit of 16 cents per share, surpassing forecasts for a loss, and reversing a 13-cent-per-share loss from the same period last year. Additionally, Reddit’s daily active unique visitors rose by 47% to 97.2 million, marking a significant boost in user engagement. The company’s global average revenue per user also saw growth, climbing 14% to $3.58.
Reddit CEO Steve Huffman highlighted how AI-powered language translation has facilitated this growth. Initially rolled out in French and subsequently expanded to Spanish, Portuguese, Italian, and German, AI-driven translation has quadrupled the number of users accessing content across languages. Huffman announced plans to extend this feature to over 30 countries by 2025. Moreover, a redesign of the popular “Ask Me Anything” (AMA) format led to a fivefold increase in AMA posts, further enhancing user interaction and engagement.
Since its IPO in March, Reddit has continued to outperform other social media platforms. In contrast, X, formerly known as Twitter, reported only a 1.6% rise in daily active users in the second quarter of 2024, while Meta’s platforms, including Facebook, Instagram, and Threads, saw a combined user increase of 7%. Reddit’s third-quarter performance adds to a strong streak, with revenues of $243 million and $281 million in its first two quarters, representing year-over-year increases of 48% and 54%, respectively.
Looking forward, Reddit projects fourth-quarter revenue between $385 million and $400 million, above analyst expectations of $357.9 million. Jefferies analysts reaffirmed their “Buy” rating on the company, noting Reddit’s “nascent monetization opportunity” in digital advertising, which offers potential for further growth.
Reddit’s stock, initially priced at $34 during its IPO, has experienced a robust rise, closing at $81.74 before advancing to $102 in extended trading.
