Reddit's Q2 Revenue Surges 78% to $500M, Stock Jumps 20%

Reddit, the social media platform, reported a 78% increase in revenue for the second quarter, reaching 500 million dollars. This growth rate is the fastest the company has seen in three years, surpassing the 425 million dollars anticipated by analysts. The adjusted earnings per share were 0.92 dollars, also exceeding market expectations. The company's net profit reached 89 million dollars, more than double the 36 million dollars predicted by analysts on average.

Following the release of these financial results, Reddit's stock price surged by 20% during after-hours trading, although it had declined by 1.4% for the year prior to the report. The company also projected third-quarter sales to be between 535 million dollars and 545 million dollars, with the midpoint of this range exceeding the 473 million dollars expected by analysts.

Reddit, which went public in March 2024, has been continuously investing in advertising technology to capture a larger share of the digital advertising market, currently dominated by Meta Platforms and Alphabet's Google. The company's advertising revenue is primarily driven by a few large marketing clients, but it is actively seeking to attract more small and medium-sized advertisers to mitigate risks. The company's chief operating officer highlighted the increasing number of active advertisers on the platform and the effectiveness of investments in the sales team, advertising technology stack, and development roadmap.

Reddit's platform, with its vast amount of user-generated content, has become a crucial data source for major tech companies training AI chatbot models. While advertising remains the company's primary revenue source, it has also entered into data licensing agreements with OpenAI and Google, and is exploring additional partnerships. The company is also leveraging its 20 years of accumulated data, having launched its own AI chatbot, "Reddit Answers," in December 2023 to present forum content more accurately.

The company is currently focused on developing internal products based on this intelligent dataset, while its efforts to monetize Reddit content through external partnerships are still in the exploratory phase. Additionally, Reddit is involved in a legal dispute with Anthropic, accusing the company of illegally obtaining and misusing its data. Reddit's daily active users reached 110 million, a 2% increase from the previous quarter, while its AI chatbot, "Reddit Answers," has 6 million weekly active users. When asked about potential advertising integration within "Reddit Answers," the company's chief operating officer stated that while there are opportunities for monetization, the current focus is on developing and integrating the tool.