Reddit Stock Surges Nearly 40% Toward Best Day Ever After ...

11 hours ago

Forbes

Topline

Reddit reported an increase in third-quarter revenue that exceeded analyst expectations, sending the social media company’s stock soaring Wednesday toward its best day since going public in March, as analysts say the firm is benefitting from new search algorithms and other licensing deals.

Analysts say the social media company benefitted from new search algorithms and other licensing ... [+] deals.

SOPA Images/LightRocket via Getty Images Key Facts

Shares of Reddit increased by more than 38% to over $113 as of around 12:25 p.m. EDT, the largest jump for the stock since a 30% increase on March 25, the first day of trading after the company went public.

The stock boost increased Reddit’s market valuation from $7.7 billion Tuesday to nearly $11 billion.

Reddit reported third-quarter revenue of $348.4 million Tuesday, a nearly 68% increase over the same period last year ($207.5 million) and well above analyst estimates of $312.8 million, according to FactSet.

The company had a net income of $29.9 million, or 16 cents per share, well ahead of an estimated loss of 7 cents per share and a loss of 13 cents per share during the same period last year.

Reddit forecast fourth-quarter revenue between $385 million and $400 million, which also beat analyst estimates of about $357.9 million.

JPMorgan said in a note Wednesday that Reddit likely benefited from a growing daily user base and new advertising products from deals with Google and OpenAI.

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Big Number

97.2 million. That’s the average number of daily active users on Reddit as of Sept. 30, a 47% increase over the same period in 2023 (66 million), according to the company. Lily Ray, vice president of the marketing firm Amsive, told the BBC that Reddit has had an “unprecedented” increase in traffic since Google updated its search algorithms earlier this year.

Key Background

Reddit’s IPO launched in March, about 19 years after the social media platform—featuring thousands of online forums—was founded. The company’s IPO was one of the largest so far this year with $748 million raised, and Reddit’s shares have since soared nearly 127%. Before its IPO launch, Reddit reportedly signed a content licensing deal with OpenAI, allowing the company to train its AI models on Reddit’s content. Reddit reached a similar deal with Google less than a week later, and the social media platform holds partnerships with sports leagues like the NBA and NFL.