Reddit CEO Steve Huffman stands on the floor of the New York Stock Exchange (NYSE) after ringing the bell to set the stock price at $47 for an initial public offering (IPO) in New York City on March 21, 2024.
Spencer Pratt | Getty Images
reddit In its third-quarter results released Thursday, the company beat both the top and bottom and provided strong guidance.
Shares rose more than 8% in after-hours trading Thursday.
Here’s how LSEG’s estimates compare to the company’s performance.
Earnings per share: 80 cents vs. 51 cents expected Earnings: $585 million vs. $546 million expected
Reddit’s third quarter revenue increased 68% year-over-year, with net income of $163 million, an increase of $133 million from $30 million in the year-ago period.
The company said it expected fourth-quarter sales to be in the range of $655 million to $665 million, higher than Wall Street’s estimate of $638 million.
Reddit said it expects fourth-quarter adjusted profit to be between $275 million and $285 million, beating StreetAccount’s estimate of $259 million.
The company announced average global revenue per user of $5.04 in the third quarter, beating analysts’ expectations of $4.82.
U.S. third-quarter revenue was $480 million, beating StreetAccount’s estimate of $445 million. Reddit’s third-quarter international revenue was $105 million, beating StreetAccount’s estimate of $104 million.
Reddit’s “other revenue” category, which includes the company’s data licensing business, grew 7% year over year to $36 million. Google and OpenAI are some of Reddit’s largest data licensing partners.
According to the company, global daily active uniques in the third quarter rose 19% year-on-year to 116 million, exceeding analysts’ expectations of 114 million.
Login DAUq in the US, Reddit’s most profitable region, rose 7% year over year to 23.1 million in the third quarter. This number was slower than the 12% year-over-year growth that Reddit recorded in Q2, when U.S. login DAUq was 22.9 million. The company sees this as the fifth consecutive quarter of slowing growth in logged-in users in the United States.
The company’s global login DAUq increased 14% year-over-year to 50.2 million in the third quarter, and global logout DAUq increased 24% to 65.8 million.
Investors are watching for any changes in Reddit’s user growth as Google increasingly introduces generative AI features such as AI Overview, which provides summaries of search questions. Reddit is seeing an influx of users from Google onto its platform, and the social media company is making more ad-related revenue from users who create accounts.
Reddit CEO Steve Huffman told analysts Thursday that the company doesn’t currently see significant traffic from AI-powered chat apps.
“We look forward to continuing to work with these partners, but they are not the primary drivers of transportation today,” he said. “But I think there’s a lot of opportunity there as we continue to work together.”
In response to an analyst’s question about how Reddit plans to convince more people to create accounts and use the app on a daily basis, Huffman reiterated previous comments about improving the platform’s user experience.
Huffman said the company is working to “make sure there are no barriers” that prevent users from seeing relevant content based on their interests.
“The biggest factor in retention is following subreddits that are relevant to your interests,” he said. “It’s not rocket science.”
Jen Wong, Reddit’s chief operating officer, said the company is increasingly running performance marketing campaigns aimed at attracting more users, especially international users who may not be aware of the platform. Wong said the company has not relied on marketing to attract new users in the past, but the promotion will be helpful in a country where “we’re a latecomer, so there’s less awareness and attention than in the United States.”
“As a result of the brand campaign, the number of installations of the Reddit app has increased, which I think is a good thing,” Wong said. “And we also saw brand awareness and consideration, which is also a positive and I think will be the foundation for future performance.”
Google and Meta Both companies reported third-quarter results on Wednesday, and both tech giants beat Wall Street expectations.
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