Reddit just released its first-quarter earnings report as a newly public company. The social media and chat platform pleasantly surprised investors with a significant increase in revenue.
Following the release of its earnings report on Tuesday, Reddit stock skyrocketed by 15% to $57 per share in after-hours trading, marking its highest level since its initial public offering in March. Reddit's debut quarter performance surpassed Wall Street's projections.
In the first quarter of the year, Reddit reported a revenue of $243 million, representing a notable 48% increase compared to the same period last year and surpassing the anticipated $214 million. However, the company also disclosed a loss of $575.1 million, largely attributed to expenses associated with its IPO. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined to $10 million from $50.2 million compared to the previous year.
Founded in 2005, Reddit has long been a prominent player in the social media landscape but has struggled to match the financial success of competitors like Meta and X. The platform boasted approximately 73 million unique daily visitors at the time of its IPO filing. Nonetheless, the platform experienced a surge in new members, with weekly active users rising by 40% to 306.2 million and daily active users increasing by 37% to 82.7 million.
Before its public offering earlier this year, Reddit acknowledged that it was still early in monetizing its business and had yet to achieve annual profitability. Analysts remained cautious about the company'fos prospects, with investment firm New Street Research giving it a "neutral" rating in March.
Looking ahead, Reddit forecasts second-quarter sales of $240 million to $255 million and adjusted earnings of $0 to $15 million, surpassing analyst estimates. This progress is seen as a promising step toward profitability for Reddit, which has yet to turn a profit in its 19-year history. Market research firm eMarketer predicts that Reddit's worldwide ad revenues will reach $1.33 billion by 2026.
Goldman Sachs suggested that licensing content for artificial intelligence and language learning models could be a significant future revenue stream. OpenAI CEO Sam Altman holds nearly $800 million worth of Reddit shares, indicating confidence in the platform's potential.
Reddit also revealed plans to enhance its search functionality by integrating artificial intelligence tools to provide users with a more personalized experience. Reddit CEO Steve Huffman emphasized the company's strategic efforts to expand its workforce in these areas, with a 2% increase in headcount from the previous quarter and a 4% increase year over year.
