Reddit shares jumped 16% in premarket trading on Friday. An optimistic forecast for quarterly revenue, thanks to the social media company’s AI-powered advertising tools, fueled the rise. The company’s AI-optimized ad platform helps advertisers place targeted ads directly within relevant discussion threads across its interest-based communities, known as subreddits.
These strong results signal that Reddit’s strategy is working well. The company is successfully competing with bigger ad rivals like Meta’s Instagram and Facebook. “Reddit is still hiring and adding to our talent base,” Chief Operating Officer Jen Wong told Reuters on Thursday.
Her comments paint Reddit as an exception. Companies like Meta, Snap, and Pinterest have cut thousands of jobs over the past year to streamline operations and refocus spending on artificial intelligence. Reddit’s stock has had a rough year, falling roughly 36% year-to-date. In comparison, Snap and Pinterest have each dropped about 24%.
Its daily active unique visitors grew 17% to 126.8 million in the quarter. Global average revenue per user increased by 44%. “Executing well in these areas (U.S. user growth) remains key to making Reddit more valuable… as it will show its growing importance, even in a future world powered by GenAI and AI agents,” said analysts at Morgan Stanley.
Reddit’s ad platform uses AI to improve how ad campaigns are created and managed. This includes features like an AI copywriter for Reddit-specific ads and an automatic tool that crops creative assets to fit various ad placements. The platform’s vast library of content has also become a valuable asset. AI companies are looking for data to train their large language models, which power chatbots like ChatGPT. Reddit has a 12-month forward price-to-earnings ratio of 30.40. This compares to Snap’s 9.93, Pinterest’s 10.27, and Meta’s 19.05.
