Reddit's latest quarterly earnings report, covering up to September, shows a robust performance that exceeded expectations, marking significant milestones for the company. The social media platform's sales revenue for the third quarter surged 68% year-over-year to $348.4 million, surpassing the anticipated $312.8 million. For the first time in history, Reddit posted an adjusted EBITDA of $94.1 million, turning profitable after a loss of $6.9 million in the same period last year.
Following these positive results, Reddit's stock price soared in after-hours trading, reaching a record high since its initial public offering (IPO). The company's stock and valuation have more than doubled since then. Notably, Reddit's daily active users (DAU) grew from 66 million last year to 97.2 million, while the gross profit margin improved to 90.1%, up by 280 basis points year-over-year.
Looking forward, Reddit projects its fourth-quarter sales revenue to be between $385 million and $400 million, ahead of analysts' expectations of $356 million. The company also forecasts an adjusted EBITDA ranging from $110 million to $125 million. Reddit's CFO, Drew Vollero, emphasized that the quarter marked a significant milestone, highlighting the growth in users, revenue, and profit margin as key drivers of profitability.
Vollero attributed Reddit's success to its "differentiated profit model." Unlike other social media platforms, Reddit focuses on text content, resulting in lower costs. The financial report revealed that the company’s capital expenditure for the third quarter was $1.4 million, merely 1% of its revenue.
Reddit has been actively developing its advertising business and pursuing collaborations with companies like Alphabet and OpenAI for AI content licensing, aiming for diversified growth. The advertising revenue for the third quarter reached $315 million, representing 90.4% of the total revenue and a 56% increase year-over-year.
Founded in 2005, Reddit's WallStreetBets forum has become a popular gathering place for individual U.S. stock investors and gained fame during the GameStop short squeeze event against Wall Street shorts.
