Key Takeaways
Reddit reported its first quarter of profitability since going public in March 2024.
Revenue exceeded analyst estimates, up 68% year over year to $348.4 million.
Revenue is increased, and post-exposure is enhanced through partnerships with Google and OpenAI.
Reddit, a forum social network, had its shares rise 25% in extended trading on October 29 after recording its first profitable quarter since its March 2024 IPO.
Significant revenue gains from AI content licensing deals and a strong increase in user engagement are mostly responsible for the company’s success this quarter, which has allowed it to outperform Wall Street’s forecasts.
Reddit revealed in its third-quarter report that its revenue had increased 68% year over year to $348.4 million, surpassing analyst estimates of $312.8 million.
Additionally, the business provided a positive Q4 prediction, predicting revenue of $385 million to $400 million, which is significantly higher than the average analyst expectation of $357.9 million.
Why Is Reddit’s Revenue So High?
Reddit’s collaboration agreements with industry titans like Google and OpenAI have been a significant source of income. These multi-million-dollar agreements enable these AI firms to build sophisticated AI models using Reddit’s extensive user-generated content database.
Reddit posts apparently ranked higher on Google search engine results as a result of the agreement with Google, giving the community forum greater exposure.
In order to give users access to video highlights from sports leagues including the NFL, NBA, PGA Tour, and NASCAR and to add more sports content to the site, the platform launched collaboration deals with these leagues last July.
These collaborations not only increase Reddit’s earnings but also establish the company as a significant player in the rapidly expanding AI market. According to the company’s third-quarter report, the number of daily active unique visitors increased by 47% to 97.2 million.
In an update that takes its AI-centered strategy to the next level, CEO Steve Huffman stated on a post-earnings call that Reddit intends to include AI models and autocomplete tools into its search functions to provide more individualized and intuitive results.
