Reddit Stock Soars 16% After Beating Earnings Estimates and Issuing Optimistic Forecast

Reddit shares experienced a significant surge, jumping 16% in extended trading on Tuesday, following the company’s announcement of its third-quarter financial results. These results exceeded analyst estimates and included a positive forecast for the fourth quarter.

The social media company reported earnings per share of 16 cents, contrasting with the expected loss of 7 cents. Revenue for the third quarter reached $348.4 million, a 68% increase from the same period last year. This growth led to a net income of $29.9 million, a marked improvement from the net loss of $7.4 million in the previous year.

Reddit’s user base also saw substantial growth, with daily active users increasing by 47% year-over-year to 97.2 million, surpassing analyst estimates of 96.5 million. The average revenue per user was $3.58, beating the expected $3.24.

The company’s forecast for the fourth quarter is equally promising, with projected revenue between $385 million and $400 million, and adjusted earnings ranging from $110 million to $125 million. These projections are higher than the average analyst estimates of $357.9 million in revenue and $85.2 million in adjusted earnings.

Since its initial public offering (IPO) in March, Reddit’s stock has more than doubled in value, closing at $81.74 on Tuesday and giving the company a market cap of $13.6 billion. CEO Steve Huffman attributed the success to increased user traffic, revenue growth, and the company’s efforts to make it easier for new users to create accounts and engage with the platform.

Huffman also noted that Reddit’s direct traffic has been resilient to changes in Google search algorithms, which have otherwise benefited the platform by pushing its content higher in search results and attracting more users.