Reddit shares soar 17% on fastest revenue growth in 3 years

Reddit shares jumped more than 17% after reporting second-quarter revenue that beat Wall Street expectations, posting its fastest growth in three years.

Shares of Reddit (RDDT) jumped more than 17% in after-hours trading on Thursday as the social media platform reported second-quarter revenue that beat Wall Street expectations. The results marked a reversal from the downward trend in Reddit's stock price over the previous two quarters.

Revenue and profit far exceeded forecasts

Reddit's second-quarter revenue jumped 78% to $500 million, its fastest revenue growth in three years, the company said. That was higher than the $425 million Wall Street analysts had forecast. Reddit also reported adjusted earnings per share of $0.92, beating estimates of $0.72.

Global daily active users reached 110.4 million, slightly above the 110 million forecast, while US users were 50.3 million, slightly below the 50.5 million expectation.

Impact of Google AI Search Changes Overview

Traffic from Google, which accounts for 40-50% of Reddit's total traffic, fluctuated due to changes in its search algorithm, which particularly affected US users. CEO Steve Huffman said Google traffic was volatile in Q2, but Reddit picked up US users towards the end of the quarter, improving the situation.

The AI-powered search engine, Reddit Answers, launched in December 2024, reached 6 million weekly active users in Q2, up sharply from 1 million in the previous quarter. According to CEO Huffman, Reddit is becoming a real search destination, competing with other platforms thanks to unique content.

Advertising revenue remained the main source of revenue, but “other revenue,” which includes data licensing, grew 24% to $35 million.

Reddit has signed a $60 million deal with Google and OpenAI to use user content to train AI models. Huffman said Reddit is a key source of content for chatbots, with huge potential in the data licensing space.

Reddit forecasts third-quarter revenue of $535 million to $545 million, beating Wall Street estimates of $473 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to be $185 million to $195 million, above expectations of $159.5 million. The positive results help Reddit's stock rebound after two consecutive quarters of decline.

Reddit shares have risen about 110% from a low of $87 in April, helped by the launch of an AI advertising tool at the Cannes Lions Festival in June. However, the stock price remains below its February peak of $220 and is down 2% year to date. The second-quarter report marked a turning point, reinforcing confidence in Reddit’s growth potential.

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