Reddit shares rose 16% in pre-market trading on Friday following an upbeat quarterly revenue forecast that supported higher profits from the social media company’s AI-powered advertising tools.
The company’s AI-optimized advertising platform helps advertisers place targeted ads directly within relevant discussion threads across interest-based communities called subreddits.
The strong results show that the company’s strategy is paying off as Reddit competes against larger advertising rivals like Meta’s Instagram and Facebook.
Reddit “continues to hire and strengthen our talent base,” Chief Operating Officer Jen Wong told Reuters on Thursday.
The remarks highlight Reddit as an outlier as companies like Meta, Snap, and Pinterest have cut thousands of jobs over the past year to streamline operations and refocus spending on artificial intelligence.
Reddit stock has had a rocky year, falling about 36% since the start of the year, while Snap and Pinterest have each fallen about 24%.
Daily active unique visitors increased 17% to 126.8 million in the quarter, and global average revenue per user increased 44%.
Morgan Stanley analysts said, “Execution in these areas (U.S. user growth) remains key to driving Reddit’s multiple expansions, as it also signals Reddit’s increasing importance in future GenAI-enabled and agent environments.”
The company’s advertising platform uses AI to improve campaign creation and management through features such as an AI copywriter for Reddit-specific ads and an automated creative asset cropper that optimizes images for various ad placements.
Its vast content library has also become a valuable asset as AI companies seek data to train large language models, the technology behind chatbots such as ChatGPT.
Reddit’s 12-month forward price/earnings ratio (P/E) is 30.40, compared to Snap’s 9.93, Pinterest’s 10.27, and Meta’s 19.05.
