Reddit Projects Strong Ad Sales, Announces Share Buyback Program

Reddit Inc. reported fourth-quarter 2025 earnings and revenue that exceeded Wall Street estimates, signaling robust performance from its advertising business. The company also announced its first-ever share repurchase program since its 2024 initial public offering. Reddit's shares rose in after-hours trading following the results.

The social media platform expects first-quarter revenue to range between $595 million and $605 million, surpassing the average analyst estimate of $577.3 million. In the fourth quarter, Reddit reported revenue of $726 million, a 70% increase compared to the same period a year ago and well above the $666.7 million forecast.

Reddit's advertising business has become the primary driver of its growth. In 2025, the company generated more than $2 billion in sales—nearly triple the revenue it reported two years ago—and the momentum has led to the approval of the $1 billion buyback program. Chief Operating Officer Jen Wong cited the company's strong financial position as a key factor in the decision.

Why Did This Happen?

Reddit's advertising business has matured quickly since its IPO, allowing the company to scale its revenue with limited operational complexity. The platform reported nearly $2 billion in sales for the first time in 2025, driven almost entirely by ad revenue.

The strong growth in advertising has also translated into higher profitability. Reddit's fourth-quarter net income was $252 million, representing a 255% increase from the previous year. This profitability has given the company confidence to reinvest in its shares and explore strategic acquisitions.

How Did Markets React?

Reddit's stock rose 11% in extended trading following the earnings announcement and the buyback authorization. The stock has been volatile in the past year, with a 29% decline over the past 12 months. Investors are now watching whether the recent performance and buybacks can stabilize the stock.

The company's valuation remains high, trading at 37.6 times the earnings expected over the next 12 months. However, the recent positive guidance and strong revenue results have renewed interest in Reddit as a potential growth story, especially in the digital advertising sector.

What Are Analysts Watching Next?

Analysts are focusing on how Reddit can sustain its growth while managing the risks associated with artificial intelligence. Reddit has its own AI chatbot, Reddit Answers, and is looking to invest in AI-driven advertising technology.

Jen Wong, the COO, stated that the company is actively seeking deals that can enhance its advertising technology and bring in new machine learning capabilities. This strategy aligns with the broader industry trend of integrating AI into advertising platforms.

Investors are also monitoring the company's user growth metrics. Reddit's global daily active users (DAUq) rose 19% year-over-year to 121.4 million in Q4, slightly above analyst expectations. However, U.S. logged-in DAUq growth has slowed in recent quarters, which could impact long-term ad revenue potential.

With a $1 billion share buyback in place, Reddit is signaling confidence in its financial model and growth outlook. The company has shown a clear ability to scale its advertising business, but it will need to continue demonstrating strong performance to justify its current valuation in the eyes of investors.

The stock has yet to return to its 52-week high of $282.95. While the recent results provide a positive outlook for the near term, long-term investors will want to see how Reddit navigates the evolving digital advertising landscape and AI-related challenges.