Reddit CEO Steve Huffman stands on the floor of the New York Stock Exchange (NYSE) after ringing a bell on the floor setting the share price at $47 in its initial public offering (IPO) on March 21, 2024 in New York City.
Spencer Platt | Getty Images
Reddit reported third-quarter earnings on Thursday in which the company beat on the top and bottom and provided strong guidance.
Shares were up more than 8% in after-hours trading on Thursday.
Here’s how the company did compared with LSEG estimates:
Earnings per share: 80 cents vs. 51 cents expectedRevenue: $585 million vs. $546 million expected
Reddit’s sales jumped 68% year-over-year in the third quarter, while net income was $163 million, which was $133 million more than the $30 million it logged the previous year during the same period.
The company said it expects fourth-quarter sales to come in the range of $655 million to $665 million, ahead of the $638 million that Wall Street was expecting.
Reddit said it expects its adjusted earnings in the fourth quarter to be between $275 million and $285 million, topping StreetAccount’s projections of $259 million.
The company said third-quarter global average revenue per user was $5.04, ahead of analyst estimates of $4.82.
Third-quarter revenue in the U.S. came in at $480 million, surpassing StreetAccount estimates of $445 million. Reddit generated international third-quarter sales of $105 million, ahead of the $104 million that StreetAccount projected.
Reddit’s “Other revenue” category, which includes the company’s data licensing business, rose 7% year-over-year to $36 million. Google and OpenAI are the some of Reddit’s biggest data licensing partners.
The company said global daily active uniques for the third quarter grew 19% year-over-year to 116 million, surpassing analyst estimates of 114 million.
Reddit’s logged-in DAUq for the U.S., its most lucrative region, rose 7% year-over-year to 23.1 million during the third quarter. That was slower than the 12% year-over-year jump Reddit recorded during the second quarter when logged-in DAUq for the U.S. was 22.9 million. This the fifth quarter in a row in which the company sees its U.S. logged-in user growth slow.
The company’s third-quarter global logged-in DAUq rose 14% year over year to 50.2 million, while its global logged-out DAUq jumped 24% to 65.8 million.
Investors have been watching for any changes to Reddit’s user growth amid Google increasingly debuting generative AI features like AI Overview, which provides summaries to search questions. Reddit has seen a wave of users come to its platform from Google, and the social media company makes more advertising-related money from users who create accounts.
Reddit CEO Steve Huffman told analysts on Thursday that the company is not currently seeing any major traffic from AI-powered chat apps.
“I’m looking forward to continuing to work on these things with these partners, but they’re not a major traffic driver today,” he said. “But I think there’s plenty of opportunity there as we continue to work together.”
In response to an analyst’s question about how Reddit plans to convince more people to create accounts and routinely use its app, Huffman reiterated previous comments about improving the platform’s user experience.
The company is working on “making sure there are no barriers” preventing users from seeing relevant content based on their interests, Huffman said.
“The biggest driver of retention is following subreddits that are relevant to your interests,” he said. “It’s not rocket science.”
Reddit Chief Operating Officer Jen Wong said that the company is increasingly running performance-marketing campaigns intended to attract more users, particularly those overseas, who may not be aware of the platform. Although the company has not historically relied on marketing to obtain new users, Wong said the promotions will help in countries “where our awareness and consideration is lower than in the U.S., because we’re newer.”
“We saw an increase in Reddit app installs as a result of a brand campaign, which I think is good,” Wong said. “And we saw movement in brand awareness and consideration, which I think was also positive and provides a foundation for performance later.”
Google and Meta both reported their third-quarter earnings on Wednesday in which both tech giants surpassed Wall Street expectations.
WATCH: Looking to see if Meta AI can reach consumer scale.
