Reddit Surpasses Revenue Expectations Amid Strong Advertising Spend
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Reddit forecasts quarterly revenue above estimates on strong ad spend
Reddit forecast third-quarter revenue above Wall Street estimates on Tuesday, a sign that a recovering digital ad market would draw more advertisers to the social media platform. The results, its second after going public in March, follow bigger rival Meta's upbeat second-quarter revenue and rosy sales forecast, driven by robust digital ad spending. Shares of the San Francisco-based company were down 4.3% in extended trading. "(This) is probably a 'sell the news' reaction to get out of the stock ahead of this Friday, when the pre-IPO lockup ends for private or pre-IPO investors," said Michael Ashley Schulman, chief investment officer, Running Point Capital. Some analysts also pointed to low average revenue per user (ARPU) growth and the conservative quarterly forecast for the stock downswing. However, the earnings fanned optimism that Reddit's content licensing deals with Alphabet's Google and Microsoft-backed OpenAI are paying off. "It's been smooth enough sailing for Reddit so far in its short time as a public company, but its long-term challenge is convincing brands that it's a safe, stable and high-value platform to advertise on," Emarketer analyst Daniel Konstantinovic said. Reddit also signed deals with sports leagues, including the National Basketball Association, to attract advertisers. "Later this year we will begin testing new search results powered by AI to summarize and recommend content," CEO Steve Huffman said in an earnings call. The company expects third-quarter revenue to be between $290 million and $310 million, compared with analysts' average estimate of $278.7 million, according to LSEG data. Its daily active unique visitors increased 51%, to 91.2 million in the second quarter ended June 30, while its global ARPU increased about 2%, to $3.08. Revenue for the second quarter rose about 54%, to $281.2 million from a year earlier, compared with the estimate of $253.6 million. Reddit reported a per-share loss of 6 cents in the second quarter, compared with analysts' estimate of a loss of 33 cents per share.
[2]
Reddit forecasts quarterly revenue above estimates on strong ad spend
The results, its second after going public in March, follow bigger rival Meta's upbeat second-quarter revenue and rosy sales forecast, driven by robust digital ad spending. Shares of the San Francisco-based company were down 4.3% in extended trading. "(This) is probably a 'sell the news' reaction to get out of the stock ahead of this Friday, when the pre-IPO lockup ends for private or pre-IPO investors," said Michael Ashley Schulman, chief investment officer, Running Point Capital. Some analysts also pointed to low average revenue per user (ARPU) growth and the conservative quarterly forecast for the stock downswing. However, the earnings fanned optimism that Reddit's content licensing deals with Alphabet's Google and Microsoft-backed OpenAI are paying off. "It's been smooth enough sailing for Reddit so far in its short time as a public company, but its long-term challenge is convincing brands that it's a safe, stable and high-value platform to advertise on," Emarketer analyst Daniel Konstantinovic said. Reddit also signed deals with sports leagues, including the National Basketball Association, to attract advertisers. "Later this year we will begin testing new search results powered by AI to summarize and recommend content," CEO Steve Huffman said in an earnings call. The company expects third-quarter revenue to be between $290 million and $310 million, compared with analysts' average estimate of $278.7 million, according to LSEG data. Its daily active unique visitors increased 51%, to 91.2 million in the second quarter ended June 30, while its global ARPU increased about 2%, to $3.08. Revenue for the second quarter rose about 54%, to $281.2 million from a year earlier, compared with the estimate of $253.6 million. Reddit reported a per-share loss of 6 cents in the second quarter, compared with analysts' estimate of a loss of 33 cents per share. (Reporting by Jaspreet Singh in Bengaluru; Editing by Pooja Desai)
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Reddit, the popular social media platform, has forecasted higher-than-expected quarterly revenue, driven by robust advertising spending. This comes as the company prepares for its highly anticipated initial public offering (IPO).
Reddit's Impressive Revenue Forecast
Reddit, the social media giant known for its diverse communities and user-generated content, has announced a quarterly revenue forecast that exceeds market expectations. This positive outlook is primarily attributed to strong advertising spending on the platform, signaling a robust financial position as the company gears up for its much-anticipated initial public offering (IPO)
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.Advertising Spend Drives Growth
The company projects its first-quarter revenue to fall between $67 million and $73 million, surpassing the average analyst estimate of $75.6 million, according to LSEG data. This forecast underscores the platform's growing appeal to advertisers and its ability to monetize its user base effectively
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.IPO Plans and Valuation
Reddit's strong financial performance comes at a crucial time as the company prepares to go public. The social media platform has confidentially filed for an IPO and is reportedly seeking a valuation of up to $15 billion. This valuation reflects the company's growth trajectory and its position as a unique player in the social media landscape
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.User Engagement and Platform Growth
With over 70 million daily active unique users and more than 100,000 active communities, Reddit has established itself as a significant force in the social media sphere. The platform's diverse range of topics and engaged user base have made it an attractive destination for advertisers looking to reach specific audiences
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Competitive Landscape
Reddit's strong performance comes amid a challenging environment for social media companies. While some platforms have faced headwinds due to privacy concerns and changing user preferences, Reddit's unique community-driven model appears to be resonating with both users and advertisers
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.Future Outlook
As Reddit moves closer to its IPO, the company's ability to maintain and grow its advertising revenue will be crucial. The positive revenue forecast suggests that the platform is well-positioned to capitalize on its engaged user base and diverse communities. However, as with any public offering, investors will be closely watching how Reddit navigates the challenges of being a publicly-traded company while maintaining its unique community-driven ethos
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