Reddit Inc. experienced a significant increase in its shares, rising by as much as 22% during after-hours trading on Tuesday following the company’s impressive sales and forecast that exceeded analyst expectations.
Since its initial public offering in March, the social network operator reported sales of $348.4 million for the quarter ending in September, surpassing the average estimate of $312.8 million. CEO Steve Huffman mentioned in an interview that Reddit was profitable on a GAAP basis for the first time since going public.
Before the latest report, Reddit’s shares had already more than doubled in value, reaching a new high close to three times their initial price.
The company has been focusing on investing in advertising technology to better monetize its large audience, a strategy that seems to be paying off based on its latest financial report. Reddit also projected sales for the holiday quarter to be between $385 million and $400 million, exceeding analysts’ expectations of $356 million.
Huffman stated, “Our hypothesis of Reddit, which is that every company’s customers are on Reddit somewhere, plays out. We’ve been more successful in helping businesses be on Reddit, find their customers on Reddit, and land their messaging.”
Reddit went public nearly two decades after its founding as a forum-based site. Since the spring, the social media platform has been heavily investing in its ads business to better compete with rivals Meta Platforms Inc. and Alphabet Inc.’s Google. It has introduced new ad formats, including shopping and video ads, and has secured content partnerships with major sports leagues to attract advertisers.
Furthermore, Reddit is expanding its business beyond advertising by collaborating with artificial intelligence companies. The company has data-licensing agreements with Google, OpenAI, and other AI developers who utilize its data for training large language models. In January, Reddit signed licensing deals worth $203 million in total for the upcoming years.
Although Huffman mentioned that the company will continue to engage in discussions with potential licensing partners, he did not disclose any specific companies.
Reddit also benefits from agreements with Google and OpenAI that allow Reddit results to appear in Google searches and in ChatGPT responses. In the US, the word “Reddit” was the sixth most searched term on Google this year. Reddit recorded an average of 97.2 million daily active unique visitors in the September quarter, marking a 47% increase from the previous year.
(This article has been updated with the extent of the share price movement and additional details)
Recommended newsletter
Data Sheet: Stay on top of the business of tech with thoughtful analysis on the industry’s biggest names.
Sign up here.