Reddit (RDDT) shares surged 16% in premarket trading on Friday after the company reported first-quarter earnings that far exceeded Wall Street expectations. The social media platform posted Q1 revenue of $663 million, up 69% year-over-year from $392 million, easily beating the $611 million analyst estimate. Earnings per share came in at $1.01, nearly double the $0.58 consensus, while net income soared to $204 million from just $26 million a year ago.
CEO Steve Huffman highlighted that Reddit has now delivered seven consecutive quarters of 60%-plus revenue growth. "When you look across the more than 300 publicly traded tech companies, there's only one that combines this type of growth, profitability and efficiency, and that's Reddit," Huffman told analysts. He also pointed to the company's record cash flow of more than $300 million while maintaining capital expenditures at just $1 million.
The company's AI-powered advertising platform was a key driver of the outperformance. Advertising revenue rose 74% year-over-year to $625 million, fueled by tools such as an AI copywriter designed for Reddit-specific ads and automatic image cropping for different placements. This strategy is helping Reddit compete more directly with larger rivals like Meta's Instagram and Facebook for advertiser dollars.
User metrics also showed continued expansion. Daily active unique users grew 17% year-over-year to 126.8 million, edging past the 125.9 million estimate. U.S.-specific daily actives rose 7% to 53.5 million. Global average revenue per user (ARPU) hit $5.23, ahead of the $4.81 estimate, while U.S. ARPU was $9.63, beating the $8.53 Wall Street projection. Huffman stated Reddit's goal is to reach 100 million daily U.S. users, though no timeline was provided.
Other revenue, which includes data licensing, rose 15% to $39 million. Google and OpenAI remain Reddit's biggest data licensing partners. Huffman framed these partnerships as providing both "citations" and "mind share" for the platform. He added that Reddit lacks internal data centers and foundational models but that its partners fill that gap.
COO Jen Wong told Reuters the company is "still hiring and adding to our talent base," contrasting with cost-cutting moves at Meta, Snap, and Pinterest over the past year.
For Q2, Reddit guided revenue in the range of $715 million to $725 million, ahead of the $712 million consensus. Adjusted earnings guidance of $285 million–$295 million also topped the $276 million average estimate.
Despite the strong quarter, RDDT stock is still down roughly 36% year-to-date heading into Friday's session. The 12-month forward P/E stands at 30.40, compared with Snap at 9.93, Pinterest at 10.27, and Meta at 19.05.
Analysts at Morgan Stanley noted that U.S. user growth "remains key to driving multiple expansion for Reddit," adding it would demonstrate the platform's relevance "even in a future GenAI enabled and agentic landscape."
