Reddit Stock Surges 128% Amid Strong AI Engagement and Record Revenue Growth

NEW YORK, N.Y. — Reddit‘s stock has surged 128% in the second quarter of 2025, signaling a remarkable turnaround for the social media platform as it capitalizes on innovative AI-driven strategies. This impressive growth follows a quarterly revenue increase of 78% year-over-year, bringing in $500 million.

The stock price boost aligns with the launch of Reddit Answers, an AI feature designed to enhance user engagement by summarizing complex discussions. This tool has helped Reddit achieve a substantial rise in its Daily Active User count, which now stands at 110.4 million.

CEO Steve Huffman stated, “Our focus has always been on fostering human connections while incorporating technological advancements. Reddit Answers is a prime example of how we can enhance the user experience without losing our core identity.” This strategy has proven effective, as Reddit’s advertising revenue has seen an impressive growth of 84%, comprising $465 million of its total revenue.

In addition, Reddit announced a $60 million annual data licensing agreement with a major tech company, further solidifying its position in the AI landscape.

Despite its rapid growth, concerns about sustainability linger. Reddit’s stock is trading at a high price-to-earnings (P/E) ratio of 101.29, far exceeding the average of 25 for the S&P 500, raising questions about whether such a valuation can hold.

Legal challenges, including a class-action lawsuit related to alleged misleading statements about AI impacts and compliance with the UK’s Online Safety Act, also present potential hurdles. Analysts warn that a decline in growth rates could trigger a significant drop in the stock’s valuation.

The latest financial results show a net income of $89.3 million, compared to a loss of $10 million in the previous year. Reddit’s user base is becoming more international, as 32% of its daily active users now come from outside the United States, establishing the platform’s global appeal.

Investors remain watchful as Reddit charts its path forward in a competitive digital market landscape, balancing the potentials of AI integration with the risks of overvaluation and legal scrutiny. As management looks ahead, projections for the next quarter suggest revenue could reach between $535 and $545 million.