RDDT vs. META: Which Digital Advertising Stock Has an Edge Right Now?

Reddit RDDT and Meta Platforms META are leading social media platforms that monetize user engagement through digital advertising. While RDDT is an emerging social media platform, gaining traction with community-driven advertising, META leads the broader social networking space through platforms like Facebook and Instagram.

Per the Fortune Business Insights report, the global digital advertising market size was valued at $573.06 million in 2025. The market is expected to grow from $662.52 million in 2026 to $2,114.41 million by 2034, expanding at a CAGR of 15.61% during the forecast period between 2026 and 2030. Both Reddit and Meta Platforms are expected to benefit from this rapid growth pace.

RDDT or META — Which of these Digital Advertising stocks has the greater upside potential? Let’s find out.

The Case for RDDT Stock

Reddit benefits from strong user engagement, including rising daily and weekly active users, gains in Average Revenue Per User (ARPU), and the expansion of advertiser tools such as Dynamic Product Ads (DPA), the Reddit Pixel and CAPI. In the fourth quarter of 2025, ARPU increased 42% year over year to $5.98, indicating that portfolio expansions are driving higher monetization per user.

The company is also benefiting from its investment in AI-powered tools, which are increasing user engagement and advertising revenues. In the fourth quarter of 2025, Reddit reported 121 million daily active users, reflecting a 19% year-over-year increase, and 471 million weekly active users, marking 24% year-over-year growth.

Reddit’s expanding portfolio has been noteworthy. The company’s success in its diversified advertising portfolio has been a key catalyst. In the fourth quarter of 2025, Advertising revenues surged 75% year over year to $690 million.

The company’s expanding search-led engagement through its AI-powered features has been a major growth driver. The introduction of Reddit Answers, a feature that leverages community-driven insights to enhance search, has been noteworthy. In the fourth quarter of 2025, Weekly search activity on Reddit increased significantly, with more than 80 million people searching directly on the platform, up from 60 million a year ago. Reddit Answers, the AI-powered search feature, saw query volume grow from 1 million to 15 million over the year.

The Case for META Stock

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. The company is leveraging AI to improve ad creative, such as video generation tools, which achieved $10 billion revenue run rate in the fourth quarter of 2025.

In the fourth quarter of 2025, Meta Platform’s 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.

Ad impressions delivered across Family of Apps increased 18% year over year, and the average price per ad jumped 6% in the fourth quarter of 2025. Impression growth from Asia-Pacific, the Rest of World, the United States & Canada and Europe were 24%, 14%, 13% and 13%, respectively. Impression growth was driven primarily by engagement and user growth, and to a lesser degree, ad load optimizations.

META’s expanding portfolio has been noteworthy. Innovations like Advantage+ lead campaigns, Meta AI business assistant for advertisers and incremental attribution features have improved campaign optimization and real-time conversions.

Price Performance and Valuation of RDDT and META

In the trailing 12-month period, shares of Reddit and Meta Platforms have gained 5.4% and 1.4%, respectively. The outperformance in Reddit can be attributed to strong ad revenue growth, driven by improved targeting, performance tools, global expansion and increased engagement through search-led initiatives, such as Reddit Answers.

Despite a robust portfolio and clientele, META is facing challenging macroeconomic conditions, including tariff uncertainties, which do not bode well for Meta Platforms’ advertising business. Monetization of AI services will take considerable time, which is a concern. Increasing regulatory challenges are a headwind for investors.

RDDT and META Stock Performance

Image Source: Zacks Investment Research

Valuation-wise, RDDT and META shares are currently overvalued, as suggested by a Value Score of D and C, respectively.

In terms of the forward 12-month Price/Sales, RDDT shares are trading at 7.5X, which is higher than META’s 6X.

RDDT and META Valuation

Image Source: Zacks Investment Research

How Do Earnings Estimates Compare for RDDT & META?

The Zacks Consensus Estimate for RDDT’s 2026 earnings is pegged at $4.02 per share, which has increased 2.29% over the past 30 days, indicating a 53.44% year-over-year rise.

Reddit Inc. Price and Consensus

Reddit Inc. price-consensus-chart | Reddit Inc. Quote

The Zacks Consensus Estimate for META’s 2026 earnings is pegged at $29.75 per share, which has increased 1.53% over the past 30 days, indicating a 26.65% increase year over year.

Meta Platforms, Inc. Price and Consensus

Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote

RDDT and META’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. However, RDDT’s average surprise of 188.78% is higher than META’s surprise of 15.87%.

Conclusion

While both Reddit and Meta Platforms stand to benefit from the booming digital advertising market, Reddit offers greater upside potential given its rapid revenue growth, surging advertiser base, and expanding engagement tools.

Despite its dominant position in the digital advertising market, Meta Platforms faces ongoing macroeconomic uncertainties and rising regulatory pressures that could weigh on its advertising growth. Stiff competition further limits its upside potential.

Both Reddit and Meta Platforms currently carry a Zacks Rank #3 (Hold) at present. 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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