Reddit just released its first-quarter earnings report as a
newly public company. The social media and chat platform pleasantly surprised
investors with a significant increase in revenue.
Following the release of its earnings report on Tuesday, Reddit stock skyrocketed
by 15% to $57 per share in after-hours trading, marking its
highest level since its initial public offering in March. Reddit’s debut
quarter performance surpassed Wall Street’s projections.
In the first quarter of the year, Reddit reported a revenue
of $243 million, representing a notable 48% increase compared to the same
period last year and surpassing the anticipated $214 million. However, the
company also disclosed a loss of $575.1 million, largely attributed to expenses
associated with its IPO. Adjusted earnings before interest, taxes,
depreciation, and amortization (EBITDA) declined to $10 million from $50.2
million compared to the previous year.
Founded in 2005, Reddit has long been a prominent player in
the social media landscape but has struggled to match the financial success of
competitors like Meta and X. The platform boasted approximately 73 million
unique daily visitors at the time of its IPO filing. Nonetheless, the platform
experienced a surge in new members, with weekly active users rising by 40% to
306.2 million and daily active users increasing by 37% to 82.7 million.
Before its public
offering earlier this year, Reddit acknowledged that
it was still early in monetizing its business and had yet to achieve annual
profitability. Analysts remained cautious about the company’fos prospects, with
investment firm New Street Research giving it a “neutral” rating in
March.
Looking ahead, Reddit forecasts second-quarter sales of
$240 million to $255 million and adjusted earnings of $0 to $15 million,
surpassing analyst estimates. This progress is seen as a promising step toward
profitability for Reddit, which has yet to turn a profit in its 19-year
history. Market research firm eMarketer predicts that Reddit’s worldwide ad
revenues will reach $1.33 billion by 2026.
Goldman Sachs suggested that licensing
content for artificial intelligence and language learning
models could be a significant future revenue stream. OpenAI CEO Sam Altman
holds nearly $800 million worth of Reddit shares, indicating confidence in the
platform’s potential.
Reddit also revealed plans to enhance its search
functionality by integrating artificial intelligence tools to provide users
with a more personalized experience. Reddit CEO Steve Huffman emphasized the
company’s strategic efforts to expand its workforce in these areas, with a 2%
increase in headcount from the previous quarter and a 4% increase year over
year.