How did RDDT's Q4 2024 earnings surprise investors?

Reddit's Q4 2024 earnings report exceeded investor expectations in several key areas, leading to a significant positive reaction in the stock price. Here are the main points that contributed to the surprise:

1. **Revenue Beat**: Reddit reported total revenue for Q4 2024 at $427.71 million. This figure surpassed the analyst consensus estimate of approximately $311.42 million. The company's advertising revenue during the quarter totaled $315.1 million, which represented a 56% year-over-year increase. This substantial growth in revenue was driven by a 68% overall revenue increase and a 70% increase in international revenue.
2. **Profitability**: Reddit achieved its first quarterly profit on a GAAP basis, reporting a net income of $29.9 million, or 16 cents per share. This was a significant improvement from the net loss of $7.4 million, or 13 cents per share, in the same quarter of the previous year. The company's diluted earnings per share (EPS) of $0.16 exceeded the consensus estimate of -$0.08.
3. **EBITDA and Cash Flow**: Reddit reported an Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $94.1 million. This figure significantly exceeded the analyst estimates of approximately $60.04 million. The company also maintained a strong cash flow, with operating cash flow of $71.6 million, an improvement of $79.3 million from the prior year.
4. **Stock Price Reaction**: Following the earnings release, Reddit's stock soared by 17.45% in the extended trading session. The stock's price appreciation was a direct result of the company's strong financial performance and optimistic guidance for the upcoming quarter.
5. **Guidance Above Estimates**: Reddit provided guidance for Q4 2025, projecting revenue between $385 million and $400 million, which exceeded the FactSet consensus of $360 million. The company also forecasted an adjusted EBITDA range of $110 million to $125 million for the fourth quarter.

In conclusion, Reddit's Q4 2024 earnings report showcased impressive revenue growth, profitability, and strong cash flow, surpassing market expectations in multiple areas. These factors, combined with optimistic guidance for the future, contributed to a significant surge in the company's stock price.