Steve Huffman, co-founder and CEO of Reddit, speaks at the WSJ Tech Live conference hosted by the Wall Street Journal at Montage Laguna Beach in Laguna Beach, California on October 21, 2024.
Frederick J. Brown | AFP | Getty Images
reddit reported better-than-expected profits and sales in its first-quarter earnings report on Thursday, and also issued an optimistic outlook. Shares rose more than 9% in extended trading.
Here’s how LSEG’s estimates compare to the company’s performance.
Earnings per share: $1.01 vs. 58 cents expected Earnings: $663 million vs. $611 million expected
Revenue for the quarter was up 69% from $392 million in the same period last year, Reddit said in an earnings call. Net income jumped to $204 million, or $1.01 per share, from $26 million, or 13 cents per share, a year ago.
Revenue for the second quarter should be in the range of $715 million to $725 million, according to Reddit, higher than analysts’ expectations of $712 million. Adjusted profit is expected to be between $285 million and $295 million, beating the average estimate of $276 million.
The strong performance continues the trend of online advertising. meta and alphabetBoth digital advertising leaders reported higher sales on Wednesday, showing their strongest growth in years. They also revealed plans to increase the amount they spend on artificial intelligence infrastructure.
On Thursday, Alphabet shares rose while Meta shares fell, highlighting investor concerns about parent company Facebook’s large AI investments and lack of a cloud business.
Reddit CEO Steve Huffman told analysts on an earnings call Thursday that the social media company’s business has grown significantly, even without significant capital spending. He noted that Reddit has now had seven consecutive quarters of revenue growth of more than 60%, and the company’s cash flow is “a record in excess of $300 million.”
“At the same time, capital expenditures are kept low at just $1 million, highlighting the benefits of Reddit’s capital-light model,” Huffman said. “Among more than 300 publicly traded technology companies, only one has achieved this level of growth, profitability, and efficiency: Reddit.”
Reddit’s global daily active unique users (DAUq) rose 17% year-over-year to 126.8 million in the quarter, beating analysts’ expectations of 125.9 million. The company’s U.S.-specific DAUq in the first quarter was 53.5 million, up 7% year-over-year.
Huffman told analysts that Reddit currently has a “goal of reaching 100 million daily users in the U.S. and is actively implementing strategies to get there,” but did not provide a specific deadline.
Average revenue per user (ARPU) was $5.23, beating analyst expectations of $4.81. The company’s U.S.-specific ARPU was $9.63, beating Wall Street’s expectations of $8.53.
The company’s “other revenue” category, which includes its data licensing business, increased 15% year over year to $39 million. Google and OpenAI are two of Reddit’s largest data licensing partners.
Huffman said non-revenue benefits of Reddit’s data licensing business include “citations” and “mindshare.” He also said, “These companies have data centers and underlying models that aren’t inside Reddit, but are important to social media companies’ products and growth strategies.”
“We have significant partnerships with both Google and OpenAI,” Huffman said. They mean a lot to us and I think it’s mutual. We will continue to cherish them. ”
What to watch: The market is showing concern about capex plans, especially meta.
