Reddit (NYSE:RDDT) Issues Quarterly Earnings Results

Key Points

• Reddit exceeded third-quarter expectations: Earnings reached $1.40 per share versus the $1.33 consensus, while revenue rose 53% year over year to approximately $895 million. Advertising revenue increased 54% to $847 million, supported by stronger clicks, conversions and international growth.
• Management issued a strong fourth-quarter outlook, forecasting revenue of $1.0 billion to $1.03 billion and adjusted EBITDA of $480 million to $510 million.
• Search-traffic and user trends remain a key risk: Google referrals declined sharply, U.S. daily users fell while international users grew, and Reddit warned that daily active users could decline by a low-double-digit percentage in Q4 if the trend continues. The stock fell to $130.29 following the results.

Reddit (NYSE:RDDT - Get Free Report) issued its quarterly earnings results on Thursday. The company reported $1.40 earnings per share for the quarter, topping analysts' consensus estimates of $1.33 by $0.07, FiscalAI reports. Reddit had a return on equity of 29.02% and a net margin of 31.35%. The business had revenue of $894.96 million for the quarter, compared to analyst estimates of $874.91 million. During the same quarter in the previous year, the firm earned $0.80 earnings per share. The company's revenue was up 53.0% on a year-over-year basis.

Here are the key takeaways from Reddit's conference call:

• Strong Q3 financial performance: Revenue rose 53% year over year to $895 million, while free cash flow nearly doubled to $363 million and adjusted EBITDA margin reached 45%. Reddit also surpassed $3 billion in trailing 12-month revenue.
• Advertising momentum remained broad-based: Advertising revenue increased 54% to $847 million, supported by more than 50% growth in clicks, more than tripling conversion volume, strong international and mid-market growth, and rising adoption of Reddit Max campaigns.
• Search referral traffic is declining sharply: Management said Google-related referral declines accelerated in Q3 and continued into Q4, with October referrals down by more than 1 million per week on average. If the trend persists, total daily active users could fall by a low-double-digit percentage in Q4 from the current 130 million base.
• Reddit plans to test a logged-in-only experience: Tests will begin in select markets outside the U.S. in Q4, aiming to improve personalization, engagement, ad targeting, regulatory flexibility, and protection of Reddit’s data corpus, though management acknowledges the change may trade reach for higher-value engagement.
• Q4 outlook remains strong: Management expects revenue of $1.0 billion to $1.03 billion, representing 38% to 42% year-over-year growth, and adjusted EBITDA of $480 million to $510 million, with an approximately 49% margin at the midpoint.

Reddit Price Performance

RDDT traded down $4.41 during trading on Thursday, reaching $130.29. 17,503,779 shares of the company's stock were exchanged, compared to its average volume of 4,249,091. Reddit has a 1 year low of $119.27 and a 1 year high of $263.50. The stock has a market capitalization of $25.07 billion, a P/E ratio of 31.33, a price-to-earnings-growth ratio of 0.62 and a beta of 2.05. The company's fifty day simple moving average is $151.54 and its 200-day simple moving average is $161.02.

More Reddit News

Here are the key news stories impacting Reddit this week:

• Positive Sentiment: Q3 results exceeded expectations. Reddit reported earnings of $1.40 per share versus the $1.31–$1.33 analyst consensus, while revenue increased 53% year over year to approximately $895 million, ahead of estimates near $875 million. EPS also rose from $0.80 in the year-ago quarter. Reddit Inc. Q3 Earnings and Revenues Beat Estimates
• Positive Sentiment: The company’s profitability remained strong, with a reported 31.35% net margin and 29.02% return on equity. Zacks Research also upgraded Reddit from “Hold” to “Strong Buy,” providing a potentially supportive analyst signal. Zacks Research rating
• Neutral Sentiment: Reddit is testing a “For You” feed alongside its “Following” feed, a move intended to improve content discovery and engagement but still unproven financially. Reddit adopts the For You feed
• Negative Sentiment: Forward guidance and user trends overshadowed the earnings beat. Reports indicated that the company’s outlook pressured the stock, raising concerns that growth could moderate despite the strong quarter. Reddit Q3 highlights
• Negative Sentiment: U.S. daily users declined by roughly 0.9 million, while international users increased by 15.2 million. Because Reddit generates about $13.82 per U.S. user per quarter versus $2.43 internationally, the geographic mix shift could weigh on monetization and future revenue quality. Reddit earns more from fewer U.S. users
• Negative Sentiment: Google search referrals to Reddit have declined amid AI-powered search changes. Management plans to test requiring visitors to log in, which could reduce scraping and improve registration but may also limit casual traffic and further expose user-growth concerns. Reddit search traffic declines

Insider Buying and Selling at Reddit

In other news, COO Jennifer L. Wong sold 60,000 shares of the stock in a transaction on Wednesday, October 14th. The shares were sold at an average price of $150.55, for a total value of $9,033,000.00. Following the sale, the chief operating officer owned 1,012,226 shares in the company, valued at $152,390,624.30. This represents a 5.60% decrease in their ownership of the stock. The transaction was disclosed in a legal filing with the Securities & Exchange Commission, which is available through the SEC website. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CEO Steve Huffman sold 17,308 shares of the firm's stock in a transaction on Tuesday, October 13th. The stock was sold at an average price of $158.57, for a total transaction of $2,744,529.56. Following the transaction, the chief executive officer directly owned 336,432 shares of the company's stock, valued at approximately $53,348,022.24. This trade represents a 4.89% decrease in their position. Additional details regarding this sale are available in the official SEC disclosure. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. In the last ninety days, insiders sold 306,052 shares of company stock worth $49,754,523. Company insiders own 28.48% of the company's stock.

Wall Street Analysts Forecast Growth

Several brokerages recently commented on RDDT. Raymond James Financial reaffirmed a "strong-buy" rating and issued a $205.00 price objective on shares of Reddit in a research report on Monday, August 17th. BNP Paribas Exane assumed coverage on shares of Reddit in a research report on Friday, September 18th. They set a "neutral" rating and a $180.00 target price on the stock. Telsey Advisory Group set a $240.00 target price on shares of Reddit in a research report on Friday, July 31st. UBS Group restated a "buy" rating on shares of Reddit in a research note on Friday, July 31st. Finally, Piper Sandler reaffirmed an "overweight" rating and issued a $195.00 price target (down from $215.00) on shares of Reddit in a report on Friday, July 31st. Three equities research analysts have rated the stock with a Strong Buy rating, seventeen have given a Buy rating and nine have issued a Hold rating to the company's stock. According to MarketBeat.com, the stock currently has an average rating of "Moderate Buy" and a consensus target price of $219.29.

Reddit Company Profile

Reddit, Inc operates a global online platform where users participate in communities organized around shared interests, topics and activities. Members can submit text posts, links, images and videos, as well as comment on and vote on content. The platform includes thousands of communities, commonly known as subreddits, covering subjects such as news, entertainment, technology, sports, finance and lifestyle.

Reddit generates revenue primarily through digital advertising, offering advertisers access to audiences based on community interests and user engagement.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.