Reddit(RDDT.US) Q3 performance surges unexpectedly: turns profitable YoY and beats Q4 profit guidance

Zhitong Finance learned that on Tuesday, Reddit's (RDDT.US) stock price rose 24.8% after hours, breaking the $100 mark for the first time. The social media company had previously reported better-than-expected third-quarter results and made an optimistic forecast for the current quarter. Revenue grew 67.9% year-on-year to $348.4 million, topping analysts' expectations of $312.8 million. Earnings per share were 16 cents, topping analysts' expectations of a loss of 7 cents. Net profit was $29.9 million, compared with a net loss of $7.4 million a year ago.

Looking ahead, Reddit expects fourth-quarter revenue to be between $385 million and $400 million, topping analysts' average expectation of $357.9 million; adjusted earnings to be between $110 million and $125 million, topping the average expectation of $85.2 million.

The company said its daily active users grew 47% year-on-year to 97.2 million in the third quarter, topping analysts' expectations of 96.5 million. Average revenue per user (ARPU) was $3.58, topping analysts' expectations of $3.24. The gross margin improved 280 basis points year-on-year to 90.1%. ARPU in the U.S. and international markets rose 12% and 16%, respectively. Advertising revenue grew 41% to $315.1 million. Other sources of revenue were $33.2 million.

Steve Huffman, Reddit's CEO, said in a statement: "This is another strong quarter for Reddit and our community, with important milestones in user traffic, revenue growth and profitability hitting new levels. Reddit remains one of the largest and most trusted websites in the world, and we have access to opportunities that most companies don't."

This is Reddit's third earnings report since its March IPO. From the after-hours gain, the stock has nearly tripled since its IPO. Reddit's market value was $13.6 billion at the close on Tuesday.

Since last year, Google's search update helped Reddit improve its content ranking in search results, attracting a large number of new users to the 19-year-old social media service. However, Reddit detailed in its financial filings that new users generated less online advertising revenue for the company than existing users, who usually spend more time on the platform.

Huffman said in an interview in August that Reddit was trying to get users who had deleted their accounts to re-register the service and make it easier for them to do so. He also said that Reddit's direct traffic was "very resilient" to any changes in Google search.