What’s driving Reddit’s stock to new heights today? Check out how the social discussion forum crushed analysts’ expectations in the third quarter.
Shares of Reddit (RDDT 41.98%) soared to the skies on Wednesday. The news aggregator and social forum operator reported fantastic results in the third quarter of 2024, lighting a fire under the stock. Share prices rose as much as 43.1% on the news, settling down to a slightly milder 40% gain by noon ET. All told, the stock has gained 146% since joining the public stock market seven months ago.
Reddit’s slam-dunk Q3 performance
Your average Wall Street analyst expected a loss of $0.23 per share on revenues near $313 million. Reddit blew those estimates out of the water. Sales jumped 68% year over year, landing at $348 million. The bottom line swung from a net loss of $0.13 to positive earnings of $0.16 per diluted share.
Reddit’s active user counts surged 51% higher in the U.S. and 44% higher in international markets. Average revenue per user (ARPU) increased by mid-teen percentages around the world. These separate improvements added up to a 56% boost to worldwide ad sales.
Meanwhile, the smaller category of “other revenue” soared 547% higher. This segment largely accounts for Reddit’s data licensing partnerships.
Unpacking Reddit’s growth drivers
This report highlighted a couple of interesting developments. First and foremost, Reddit demonstrated a healthy market appetite for digital advertising services after a long downturn. Second, the data licensing business emerged as a high-octane growth driver.
On the earnings call, Reddit COO Jen Wong said that the company licenses its user data to support advertising data analytics, as well as training large language models (LLMs) and other artificial intelligence systems.
Other revenue still accounted for just 9.5% of Reddit’s third-quarter sales, leaving plenty of room for continued growth. It remains to be seen how Reddit’s users will react to making their writing available for LLM training purposes, but it’s a robust growth vector at the moment.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
