Reddit Rides on Solid Momentum in Ad Business: A Sign of More Upside?
Reddit RDDT is benefiting from strong momentum in its advertising business, which has emerged as a key driver of growth for the company. Its strong focus on enhancing user-friendly features and expanding advertiser tools such as DPA, RedditRDDT-- Pixel, and CAPI is driving significant growth in user engagement and ad revenues. In the fourth quarter of 2025, Advertising revenues surged 75% year over year to $690 million.
The company is also seeing significant growth in its advertiser base, with total active advertiser count increasing more than 75% year over year in the fourth quarter of 2025. This includes large brands, mid-market companies and small-to-medium businesses (SMBs), with SMB revenues doubling year over year.
The company’s expanding portfolio has been noteworthy. In January 2026, RDDTRDDT-- announced the beta launch of Max campaigns. This AI-powered automated ad solution optimizes targeting, creative, placements and budget in real time to improve performance and reduce manual effort.
Using Reddit Community Intelligence, Max campaigns offer unique audience insights, including Top Audience Personas, which help advertisers understand who engages with their campaigns and what content resonates. Early testers experienced up to 27% more conversions and lower costs, showing both efficiency and effectiveness.
RDDT’s expanding portfolio of advertising tools and rising user engagements are expected to drive the company’s top-line growth. For the first quarter of 2026, RDDT expects revenues between $595 million and $605 million.
RDDT Faces Stiff Competition
Reddit is facing stiff competition from competitors like Snap SNAP and Meta Platforms META. Both Snap and Meta Platforms are expanding into advertising to compete in the rapidly growing digital ad market.
Snap is benefiting from strong revenue growth driven by improved advertising demand and the expansion of direct revenue streams. In the fourth quarter of 2025, total active advertisers jumped 28% year over year, driven in part by simplified onboarding, improved campaign workflows and increased performance.
Meta Platforms’ focus on integrating AI into its platforms, which include Facebook, WhatsApp, Instagram, Messenger, and Threads, is driving user engagement to boost ad revenues. In the fourth quarter of 2025, Advertising revenues increased 24.3% year over year to $58.14 billion and accounted for 97.1% of fourth-quarter revenues. At cc, revenues rose 23% year over year.
RDDT’s Share Price Performance, Valuation and Estimates
RDDT shares have plunged 41.1% in the trailing six-month period, underperforming the broader Zacks Computer & Technology sector and the Internet - Software industry’s decline of 4% and 27.1%, respectively.
RDDT Stock Performance
Image Source: Zacks Investment Research
RDDT shares are overvalued, with a forward 12-month Price/Sales of 7.88X compared with the Computer & Technology sector’s 5.84X. RDDT has a Value Score of D.
RDDT Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2026 earnings is pegged at $4.02 per share, which has increased 25.44% over the past 30 days. This suggests 53.44% year-over-year growth.
RDDT currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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