- Reddit shares closed up 42% on Wednesday after reporting a surprise profit in its third-quarter results
- Reddit’s revenue jumped 68% year-over-year to $348.4 million, beating analyst expectations
- The company provided upbeat fourth-quarter revenue guidance between $385 million and $400 million
Reddit‘s stock jumped over 40% on Wednesday after the social media company reported better-than-expected third quarter results and issued an upbeat revenue outlook for the fourth quarter.
Q3 Financial Results Beat Expectations
In the third quarter, Reddit generated revenue of $348.4 million, a 68% increase versus the same period last year and above analysts’ consensus estimate of $312.8 million. The company swung to a net profit of $29.9 million, or $0.16 per share, compared to a net loss of $7.4 million, or $(0.13) per share, in the year-ago quarter.
Analysts were modeling a net loss of $(0.07) per share.
Strong User Growth and Engagement
Reddit also saw strong growth in users and engagement. Daily active users grew 47% year-over-year to 97.2 million in Q3.
According to CEO Steve Huffman, it was “another strong quarter for Reddit and our communities as we achieved important milestones including new levels of user traffic, revenue growth and profitability.”
Upbeat Q4 Revenue Outlook
For the fourth quarter, Reddit expects revenue between $385 million and $400 million, well above the consensus estimate of $357.9 million.
The company’s rosy Q4 guidance indicates that momentum will continue through the end of the year.
Analysts Raise Price Targets on Continued Execution
Following the results, analysts praised Reddit’s ability to deliver on growth and profitability. Several firms raised their price targets, citing strong execution across users, products, and monetization.
JP Morgan said it is “encouraged by Reddit’s strong revenue growth, improved profitability and growing daily active unique users.” The firm believes Reddit will continue making progress on introducing new ad formats and reaching its long-term adjusted EBITDA margin target.
Conclusion
Reddit’s third quarter results and fourth quarter outlook underscore the company’s potential for robust growth and profitability. The social platform is capitalizing on strong user engagement and rolling out initiatives to better monetize its audience. If execution remains solid, Reddit appears poised for more upside.
