Reddit’s Ad Machine Roars to Life as AI Tools Turn Clicks Into Cash (Stock Pops 13%)

Reddit shares jumped 13% Friday after the company posted stronger-than-expected earnings and gave an upbeat outlook for the rest of the year.

Revenue climbed 68% from a year ago to $585 million, topping Wall Street’s estimate of about $546 million. Profit came in at $0.80 per share, well above expectations of $0.51.

The company also raised its forecast for the fourth quarter, calling for $655 million to $665 million in revenue… ahead of the $638 million analysts had penciled in. Reddit expects adjusted EBITDA around $280 million, also beating estimates.

Advertising was the big story this quarter. The company said nine of its 15 largest advertiser categories grew more than 50% from last year, helped by new automation tools and AI features that improve ad targeting. Active advertisers were up 75% year-over-year.

“This shows steady progress in Reddit’s ad and platform strategy,” Morgan Stanley’s Brian Nowak wrote, adding that he sees “a long runway for growth” as advertisers spend more on the platform.

User growth also came in strong. Daily active users rose 19% to 116 million, topping expectations. Logged-in users were up 14% globally to 50.2 million, while daily unique visitors grew 7% to 23.1 million.

CEO Steve Huffman said Reddit continues to get a boost from Google traffic but is focusing on converting more visitors into registered users. “These partnerships are promising, but they’re not major traffic drivers today,” he said.

Reddit’s data-licensing business (which includes deals with Google and OpenAI) brought in $36 million, up 7% from last year. The company also rolled out new AI tools like Reddit Answers and Reddit Pro for publishers to help advertisers better understand what drives engagement.

Founded in 2005, Reddit built its reputation as the internet’s messy, meme-filled message board… and helped spark the GameStop frenzy back in 2021. But since its IPO earlier last year the company’s been focused on showing it can actually make money.

So far, it’s working. The latest results show a company that’s growing fast, improving profits, and finally earning Wall Street’s respect for more than their memes.

At the time of publishing this article, Stocks.News holds positions in Google and Gamestop as mentioned in the article.