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Reddit’s second-quarter earnings report blew past Wall Street expectations on Thursday, sending its shares soaring as much as 20% in after-hours trading. The social media giant posted a 78% year-over-year revenue jump, marking the biggest beat since going public in March 2024.

Investors were particularly encouraged by Reddit’s solid financials, rapid user growth, and bullish guidance for the third quarter — a sign that the platform is hitting its stride amid growing competition from Google, Meta, and AI-driven search engines.

Q2 Earnings Highlights

Here’s how Reddit performed compared to analysts’ expectations, according to LSEG and StreetAccount:

• Revenue: $500 million (vs. $426 million expected)
• Earnings per Share (EPS): 45 cents (vs. 19 cents expected)
• Net Income: $89 million (compared to a $10 million loss in Q2 2023)

The second-quarter revenue not only represents a 78% increase year-over-year, but also a 17% beat over consensus estimates, cementing Reddit’s position as a high-growth player in the digital media and advertising space.

Q3 Outlook Exceeds Forecasts

Reddit also issued a robust Q3 forecast:

• Revenue Guidance: $535 million to $545 million (vs. Wall Street estimate of $473 million)
• Adjusted Earnings: $185 million to $195 million (above expectations of $160 million)

This guidance suggests sustained momentum in user engagement, advertising demand, and Reddit’s nascent AI-driven offerings.

Surge in User Base and Monetization Metrics

User engagement continues to trend upward:

• Global Daily Active Users (DAUs): 110.4 million, up 21% YoY (vs. 109 million estimated)
• Logged-in DAUs: 49.3 million (up 17% YoY)
• Logged-out DAUs: 61.1 million (up 24% YoY)

Reddit’s global average revenue per user (ARPU) hit $4.53, well above analyst estimates of $3.90 — a clear signal that the company is improving its monetization efficiency.

U.S. and International Growth

Reddit's second-quarter revenue breakdown:

• U.S. Revenue: $409 million (vs. $335 million expected)
• International Revenue: $91 million (vs. $89 million projected)
• “Other Revenue” (including data licensing): $35 million, up 24% YoY

The company’s U.S. market remains its strongest performer, but international expansion is showing promise, with Reddit exploring new ad formats and partner opportunities in Europe, India, and Southeast Asia.

AI-Powered Features Driving Future Growth

CEO Steve Huffman highlighted Reddit’s AI ambitions in his shareholder letter, emphasizing the rapid growth of its Reddit Answers tool:

• Reddit Answers Weekly Users: 6 million (up from 1 million last quarter)
• Plans are underway to integrate AI-powered Answers deeper into Reddit’s core search experience and roll it out globally.

This tool is a strategic bet on long-form, community-generated insights as a complement — or even alternative — to traditional search and generative AI apps like ChatGPT or Google’s AI Overviews.

Navigating AI-Search Competition

Huffman acknowledged that Google’s evolving AI features had a dampening effect on Reddit’s Q2 search-driven traffic, especially early in the quarter. However, by the end of Q2, he said traffic trends were improving.

“Reddit is one of the most searched-for terms on Google,” Huffman stated, emphasizing the platform’s unique position in the content ecosystem. “What users want is the Reddit perspective.”

He added that Reddit’s job is to turn search and AI-driven traffic into long-term community members, whether they arrive via traditional search engines or directly through the app.

Strategic Shifts and Long-Term Vision

To sharpen focus, Reddit is scaling back certain initiatives including its “user economy” efforts — originally designed to introduce games and digital marketplaces. Instead, the company is leaning into advertising, AI integration, and data licensing as core revenue pillars.

Huffman closed his letter with optimism:

“Recently, we celebrated Reddit’s 20th year, and I’ve never been more excited about our business and potential than I am today.”

Industry Context and Market Impact

Reddit’s blowout earnings come amid a strong quarter for digital advertising platforms:

• Google’s parent Alphabet posted a solid beat last week.
• Meta also exceeded expectations with better-than-expected ad performance.

Next up: Snap reports on Tuesday, followed by Pinterest on Thursday, offering more insight into the broader adtech ecosystem.

Bottom Line

With accelerating revenue growth, strong Q3 guidance, and expanding AI integration, Reddit is proving it can evolve from a niche community hub into a scalable and monetizable digital ecosystem. As investors eye platforms that balance engagement, innovation, and monetization, Reddit may now be on the shortlist of serious long-term tech plays.