Reddit shares jumped over 12% on Friday after an upbeat quarterly revenue forecast underscored growing returns from the social media company’s AI-driven advertising tools.
If current gains hold, Reddit is on track to add about US$3.4 billion in market value.
The company’s AI-optimised ad platform enables advertisers to place targeted ads directly within relevant discussion threads across its interest-based communities called subreddits.
The strong results signal that the company’s strategy is paying off as Reddit takes on bigger ad rivals such as Meta’s Instagram and Facebook. Reddit is “still hiring and adding to our talent base,” chief operating officer Jen Wong told Reuters on Thursday.
The remarks paint Reddit as an outlier, as rivals such as Meta, Snap and Pinterest have cut thousands of jobs over the past year to streamline operations and refocus spending on artificial intelligence.
Reddit’s stock has fallen roughly 36% year-to-date, while Snap and Pinterest have dropped about 24% each.
Its first-quarter revenue rose 69% year-over-year, while daily active unique (DAUq) visitors grew 17% to 126.8 million in the quarter and global average revenue per user increased by 44%.
“DAUq growth and engagement should benefit from initiatives to improve feed personalization, close the gap between iOS and Android app experiences, simplify user onboarding, and improve marketing,” said analysts at B.Riley Securities.
Reddit’s ad platform uses AI to improve campaign creation and management through features including an AI copywriter for Reddit-specific advertisements and an automatic creative asset cropper that optimises images for various ad placements.
“Execution across these areas (US user growth) remains key to driving multiple expansion for Reddit…as it will showcase its growing importance, even in a future GenAI enabled and agentic landscape,” said analysts at Morgan Stanley.
Reddit’s vast content library has also become a prized asset as AI companies hunt for data to train their large language models, the technology behind chatbots such as ChatGPT. At least seven brokerages raised their price targets on the stock, following the results, according to data compiled by LSEG.
Reddit has a 12-month forward price-to-earnings ratio of 30.40, compared with Snap’s 9.93, Pinterest’s 10.27 and Meta’s 19.05.
