Reddit Shares Dip as AI Licensing and Global User Growth Fuel Tripled Market Cap Amid 23% Volume Decline

Reddit (RDDT) closed at $225.08 on August 29, 2025, down 0.20% with a trading volume of $880 million, a 23.17% decline from the previous day. The stock remains near its 52-week high of $253.14, reflecting its $42.1 billion market capitalization, which has more than tripled year-over-year. Recent AI licensing deals and global user growth have bolstered investor confidence despite valuation concerns.

The company’s trailing twelve-month revenue reached $1.67 billion, up 77.7% YoY, driven by a 21% annual increase in daily active users to 110.4 million. International traffic now accounts for half of Reddit’s user base, though only 17% of revenue is generated overseas. Expansion into non-English markets, supported by machine translation into 23 languages, has unlocked growth in regions like Brazil and India. AI-powered features such as Reddit Answers have boosted engagement by 32%, while average revenue per user rose to $2.04 in 2025.

Strategic AI partnerships, including $60 million and $70 million licensing agreements with Alphabet and OpenAI, have positioned Reddit as a key content provider for AI models. These deals highlight the potential for data monetization to scale into a $300 million annual revenue stream within three years, with SaaS-like margins near 80%. However, the stock trades at a 24.2x price-to-sales multiple, significantly higher than peers like Pinterest (6.1x) and Baidu (1.7x), raising questions about valuation sustainability.

Analysts remain divided, with price targets ranging from $197 to $320. Institutional ownership at 88.2% underscores confidence in Reddit’s capital-light model, though short interest at 18.1% of float indicates ongoing skepticism. With $2.06 billion in cash and minimal debt, the company has flexibility for acquisitions or further monetization initiatives. Forward revenue projections for 2025 suggest continued growth, but execution risks and competitive pressures from emerging AI platforms could temper long-term upside.

Reddit’s recent performance aligns with its 52-week range, but the stock’s trajectory will depend on scaling AI licensing and international revenue while maintaining profit margins. Current fundamentals support a buy rating, though investors should monitor user growth and monetization efficiency to assess whether the valuation justifies long-term potential.