Reddit's Q4 Earnings: Strong Revenue Growth Amid AI Partnerships and User Expansion Challenges

Tech Stock Roundup: Reddit Plunges, Meta Lays off Employees, Eyes On Alibaba

Reddit (RDDT) stock plunged by 15% following mixed Q4 earnings. Revenue surged by 71% annually to $427.7 million, beating estimates of $405.5 million, but EPS missed at $0.36 vs. $0.48 expected. Daily active users rose by 40% to 101.7 million but fell short of the 103.8 million forecast. CEO Steve Huffman attributed traffic volatility to Google Search algorithm changes but said recovery is underway. Reddit is improving AI-powered search to retain users and convert logged-out visitors. Despite the stock drop, Reddit's Q1 guidance exceeded expectations, with projected revenue of $360-$370 million against $359 million expected. (Adjusted earnings of $80-$90 million from $72 million forecasted.) Since going public, Reddit has consistently beaten revenue forecasts, bolstered by AI partnerships, including a $60M content licensing deal with Google and OpenAI Analysts remain positive. They highlighted AI-driven ad revenue potential and a growing user base that could help Reddit compete with Google and Meta in ad pricing.

Reddit Shares Drop 15% Despite Record 71% Surge in Sales

However, analysts confirmed their positive views on the stock. Reddit stock dropped after mixed fourth-quarter earnings as daily active user growth fell short of projections. CEO Steve Huffman blamed Google Search algorithm changes for traffic volatility but said recovery is underway. Reddit Stock Plunges Despite Strong Results Reddit (RDDT) stock fell by 15% in after-hours trading after mixed fourth-quarter earnings . Revenue jumped by 71% on an annual basis to $427.7 million, beating estimates of $405.5 million, but EPS came in at $0.36, missing expectations of $0.48. Daily active users hit 101.7 million, up by 40% year-over-year but below the 103.8 million forecast. CEO Steve Huffman blamed Google Search algorithm changes for traffic volatility but said Q1 recovery is underway. Reddit is enhancing its AI-powered search to retain users and convert logged-out visitors into active accounts. Reddit's first-quarter guidance exceeded expectations , projecting revenue of $360-$370 million (vs. $359 million expected) and adjusted earnings of $80-$90 million (vs. $72 million forecasted) Since going public, Reddit has beaten revenue forecasts every quarter, boosted by AI partnerships, including a $60 million annual Google deal and a content licensing agreement with OpenAI. Google Algorithm Hits Reddit Traffic In a letter to shareholders , CEO Steve Huffman acknowledged recent fluctuations in Reddit's traffic due to a Google Search algorithm update. Daily user growth slowed to 39% in the fourth quarter, down from 47% in the previous quarter. U.S. daily active users reached 48 million, a 32% annual increase. However, this was slightly below the 48.2 million reported in Q3. Reddit's reliance on Google for traffic remains a key concern for investors. In October, Huffman noted that Google's algorithms can both boost and hinder the platform's visibility. "Our teams have navigated numerous algorithm updates and did an excellent job adapting to these latest changes effectively," Huffman said. "This particular swing was interesting, though, because we saw a corresponding increase in the query term 'Reddit,' which suggests users are searching with the specific intent of reaching Reddit, and this propensity continues to rise." Analysts Confirm Buy Recommendations Following the earnings report, 19 Wall Street analysts set a 12-month average price target of $190.17 for Reddit, with estimates ranging from $142.00 to $250.00. This suggests a potential 12.15% decline from its previous price of $216.47. Analysts also highlighted Reddit Answers, its AI-powered post summarization tool, as a potential driver of ad revenue by capturing search budgets through promoted links. Morgan Stanley noted that Reddit has multiple growth opportunities for 2025. These include its partnership with Google, which boosts search traffic to the platform. A larger, more engaged user base could also help Reddit close the gap in ad pricing with competitors like Google and Meta.

Reddit Posts Solid Q4, Analysts Expect AI Language Translations To Grow Daily Active Users - Reddit (NYSE:RDDT)

Shares of Reddit Inc RDDT tanked in early trading on Thursday, despite the company reporting upbeat fourth-quarter results. Here are some key analyst takeaways. Piper Sandler analyst Thomas Champion maintained an Overweight rating, while raising the price target from $197 to $210. JMP Securities analyst Andrew Boone reiterated a Market Outperform rating, while lifting the price target from $190 to $200. Needham analyst Laura Martin maintained a Buy rating, while raising the price target from $190 to $220. Goldman Sachs analyst Eric Sheridan reiterated a Neutral rating, while lifting the price target from $176 to $185. JPMorgan analyst Doug Anmuth reiterated a Neutral rating, while cutting the price target from $142 to $185. Check out other analyst stock ratings. Piper Sandler: Reddit delivered "another quarter of strong results," with revenues of $428 million, up 71% year-on-year and 23% sequentially, Champion said. "User growth remains solid with Global DAUs (daily active users) climbing to around 102 million on average in the fourth quarter, he added. "Management highlighted the improvements to ML models including translating content via machine translation," the analyst wrote. The number of languages will expand from the current eight in 2025 and "is driving 40-50% of international user growth," he further wrote. JMP Securities: Reddit reported DAU and revenue 2% and 5% above consensus, respectively, while EBITDA came in $23 million higher, Boone said. "However, the revenue beat tightened (vs. 3Q24) and U.S. DAUq declined Q/Q," he added. The sequential decline in US DAUs "highlights the volatility of SEO as Reddit's goal of reaching 1B DAU seems further away after the quarter," the analyst wrote. The company has "multiple growth levers" that can support meaningful free cash flow ahead, he further stated. Needham: Reddit's fourth-quarter revenue growth accelerated to 71% year-on-year from 62% in 2024, Martin said. Total ad revenues in the quarter reached $395 million, up 60% year-on-year, she added. The company reported DAUs of 101.7 million, up 39% year-on-year and 5% sequentially, including 46% growth in international DAUs, the analyst stated. "AI-driven language translations should accelerate int'l DAU growth in FY25," she further wrote. Goldman Sachs: Reddit's fourth-quarter results, which came in "solidly above the guided range," reflects continued operating momentum, Sheridan said. US DAUs came in below Street estimates due to Google traffic changes but this was offset by strong international user growth, he added. Management's commentary was positive around "both the scope/impact of AI across the platform as well as continued progress on monetization in the coming years," the analyst stated. "Our conviction level in Reddit's ability to sustainably grow revenues well above industry average rates increased with this set of results," he further wrote. JPMorgan: While DAU growth softened after Thanksgiving, this was due to a change in the Google search algorithm, Anmuth said. "The search traffic headwinds did not impact either logged in user growth or the fourth-quarter revenue, and the company indicated that search traffic has recovered so far in the first quarter, he added. "Despite DAUq headwinds, Reddit continues to execute well & capture share of advertiser budgets," the analyst wrote. Strong revenue growth and improved cost leverage supported strong profit gains, with Reddit growing revenue around 4.2 times faster than non-GAAP expenses in 2024, he further stated. Price Action: Shares of Reddit had declined by 5.53% to $204.50 at the time of publication on Thursday. Read More: Reddit CEO Acknowledges Google Search Update's Impact On Traffic But Shrugs It Off: 'These Changes Happen All The Time' Image: Shutterstock RDDTReddit Inc$203.46-6.01%WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

Reddit forecasts quarterly revenue above estimates

Feb 12 (Reuters) - Reddit (RDDT.N), opens new tab forecast first-quarter revenue above Wall Street estimates on Wednesday, betting on its artificial intelligence content licensing deals and a robust digital advertising spend. Reddit is benefiting from its conversation placement ads format, where brands can advertise directly into discussion threads within interest-based communities known as subreddits. That is bolstered by the company's ramping content licensing deals with Alphabet's (GOOGL.O), opens new tab Google and Microsoft-backed (MSFT.O), opens new tab OpenAI, which have helped it diversify its revenue streams. The company expects first-quarter revenue of $360 million to $370 million, compared with analysts' average estimate of $358.1 million, according to data compiled by LSEG. Reddit's daily active unique visitors rose 39% to 101.7 million in the fourth quarter ended December 31, while its global average revenue per user increased 23% to $4.21. Reporting by Jaspreet Singh in Bengaluru; Editing by Alan Barona Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Technology