What happened: Reddit stock (RDDT) jumped 12% in morning trading on Thursday.
What’s behind the move: Reddit reported that its advertising revenue surged 74% year over year to $625 million, driving better-than-expected net sales and profits in the first quarter. CEO Steve Huffman said the “deeply engaged communities” on Reddit’s online discussion forums give it a unique advantage in the age of artificial intelligence.
Earnings per share of $1.01 on total revenue of $663 million handily beat estimates, for earnings of $0.56 per share and revenue of $612 million.
What else you need to know: Despite Friday’s gains, Reddit’s stock remains down nearly 30% year to date.
Heading into the earnings report, the Street grew concerned that Reddit would not be able to sustain daily active user and advertising revenue growth as the platform matures — and as Alphabet (GOOG, GOOGL) and Meta (META) continue to dominate the ad market. Analysts cited decelerating growth among peers like Snap (SNAP) and Pinterest (PINS) as a harbinger of potential weakness.
But Reddit’s report on Thursday offered investors a dose of optimism.
“While yesterday’s print likely does little to settle the DAU [daily active user] debate for Reddit we were pleased by some of the initiatives aimed at more sustained growth,” Deutsche Bank analysts wrote in a note. “To that end, early tests (where LLMs were deployed for interest identification during onboarding) are yielding early positive results, leading the company to roll these features out more broadly.”
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