Reddit just flipped the switch on Wall Street’s expectations. On Thursday, the company posted third-quarter results that wiped the floor with every estimate.
Revenue jumped 68% year-over-year to $585 million, while earnings per share landed at $0.80, blowing past the $0.51 target. Shares immediately shot up more than 8% in after-hours trading, and by Friday morning, the stock was up 10%.
And folks, this is Reddit’s cleanest beat yet since going public.
Net income came in at $163 million, up from $133 million during the same period last year, a 23% increase. The company also raised its Q4 outlook. It expects revenue between $655 million and $665 million, comfortably above the Street’s $638 million forecast.
Adjusted earnings guidance for Q4 is now $275 million to $285 million, outpacing projections of $259 million. This wasn’t a “beat by a little” moment. Reddit slapped expectations off the table.
Reddit boosts revenue from users and licensing, but U.S. growth weakens
During Q3, average global revenue per user hit $5.04, higher than the $4.82 estimate. The U.S. market, Reddit’s biggest money-maker, brought in $480 million, topping StreetAccount’s $445 million guess.
International sales also edged past expectations at $105 million, versus the $104 million analysts projected.
Revenue from “Other” sources, which includes data licensing, rose 7% year-over-year to $36 million. That’s the category where Reddit counts big names like Google and OpenAI as customers.
This segment is getting a lot more attention as tech firms chase Reddit’s real-time, human-made content to train AI systems.
Global daily active users (uniques) reached 116 million, a 19% increase compared to last year.Analysts were only expecting 114 million.The logged-in DAUq globally rose 14% to 50.2 million, and logged-out DAUq surged 24% to 65.8 million.
But it wasn’t all clean. In the U.S., logged-in DAUq only grew 7% to 23.1 million. That’s slower than Q2’s 12% growth, and it’s the fifth straight quarter U.S. user growth has cooled.
CEO Steve Huffman spoke about traffic patterns during the earnings call. He said Reddit isn’t getting much boost from AI-powered chat tools like those popping up from Google or OpenAI.
“I’m looking forward to continuing to work on these things with these partners, but they’re not a major traffic driver today,” Steve said. Still, he believes “there’s plenty of opportunity” ahead.
Company leans into marketing as it pushes for more sign-ups
Steve also talked about getting more people to create accounts. He said Reddit is focused on improving the user experience and removing barriers that keep people from seeing relevant content.
“The biggest driver of retention is following subreddits that are relevant to your interests,” Steve said. “It’s not rocket science.”
COO Jen Wong said Reddit is now spending more on performance-marketing campaigns, especially in countries where it’s still new and less known. “We saw an increase in Reddit app installs as a result of a brand campaign, which I think is good,” she said.
Jen added that there were gains in brand awareness and consideration, and said that’ll help build performance later.
While Google and Meta also beat earnings expectations this week, Reddit’s report stood out for how far it beat both revenue and profit targets, and for how clearly it admitted U.S. user growth is starting to level off.
But globally, Reddit is clearly still expanding its footprint, especially by squeezing more value out of its users and its massive data firehose.
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Source: https://www.cryptopolitan.com/reddit-stock-surges-10-after-q3-beat/
