Reddit (NYSE:RDDT) Announces Quarterly Earnings Results, Beats Expectations By $0.30 EPS

Reddit (NYSE:RDDT) posted its earnings results on Thursday. The company reported $1.25 earnings per share (EPS) for the quarter, beating analysts’ consensus estimates of $0.95 by $0.30, Zacks reports. Reddit had a net margin of 28.60% and a return on equity of 25.48%. The firm had revenue of $804.91 million during the quarter, compared to analyst estimates of $731.00 million. During the same period in the previous year, the business posted $0.45 EPS. Reddit’s revenue was up 61.0% on a year-over-year basis.

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

• Strong financial performance: Q2 revenue rose 61% year over year to $805 million, advertising revenue increased 64% to $762 million, and adjusted EBITDA margin reached 43%. Operating cash flow more than doubled to $262 million, with last-twelve-month operating cash flow surpassing $1 billion.
• Advertising momentum remained broad-based. Active advertisers grew more than 70%, scaled-channel revenue doubled, conversion volume increased over 100%, and Reddit Max revenue rose more than 150% sequentially as automation and lower-funnel products gained adoption.
• User growth faced search-referral headwinds. Product-driven gains in daily active users were offset by declining and volatile search traffic, particularly late in the quarter; management acknowledged that user retention remains below industry peers and that direct-user growth will take time.
• Management guided to continued growth in Q3, forecasting revenue of $860 million to $870 million and adjusted EBITDA of $385 million to $395 million, or a 45% margin at the midpoint. Reddit also lowered its full-year stock-based compensation outlook and repurchased approximately $235 million of stock, with $760 million remaining under its authorization.
• Reddit is investing heavily in its product roadmap, including improved feed technology, app onboarding, video, search, shopping ads, and SMB automation. Executives also said data-licensing outcomes with major AI companies remain uncertain and will depend on maximizing value across multiple potential uses.

Reddit Stock Down 21.9%

Shares of NYSE RDDT traded down $39.05 during mid-day trading on Friday, hitting $138.99. 20,172,012 shares of the company traded hands, compared to its average volume of 5,203,989. Reddit has a 1 year low of $119.27 and a 1 year high of $282.95. The stock has a market capitalization of $26.76 billion, a price-to-earnings ratio of 39.65 and a beta of 1.93. The business has a 50 day moving average of $176.74 and a two-hundred day moving average of $165.09.

Insiders Place Their Bets

In other Reddit news, COO Jennifer L. Wong sold 39,166 shares of the firm’s stock in a transaction dated Tuesday, June 16th. The shares were sold at an average price of $176.94, for a total value of $6,930,032.04. Following the completion of the transaction, the chief operating officer directly owned 1,050,339 shares in the company, valued at $185,846,982.66. This trade represents a 3.59% decrease in their ownership of the stock. The sale was disclosed in a filing with the SEC, which is available through this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CEO Steve Ladd Huffman sold 18,000 shares of the business’s stock in a transaction that occurred on Tuesday, June 30th. The shares were sold at an average price of $173.13, for a total transaction of $3,116,340.00. Following the sale, the chief executive officer owned 373,814 shares in the company, valued at $64,718,417.82. This represents a 4.59% decrease in their position. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. In the last quarter, insiders have sold 169,141 shares of company stock worth $28,680,845. Company insiders own 28.48% of the company’s stock.

Institutional Investors Weigh In On Reddit

Institutional investors have recently bought and sold shares of the business. State Street Corp increased its holdings in shares of Reddit by 6.0% in the 4th quarter. State Street Corp now owns 2,631,332 shares of the company’s stock valued at $604,864,000 after purchasing an additional 149,401 shares during the period. Morgan Stanley increased its stake in Reddit by 11.4% in the 4th quarter. Morgan Stanley now owns 2,372,443 shares of the company’s stock valued at $545,354,000 after buying an additional 242,709 shares during the period. Invesco Ltd. lifted its position in Reddit by 36.7% in the 4th quarter. Invesco Ltd. now owns 2,033,626 shares of the company’s stock worth $467,470,000 after buying an additional 545,685 shares in the last quarter. Bank of America Corp DE grew its holdings in shares of Reddit by 38.4% during the 3rd quarter. Bank of America Corp DE now owns 1,724,560 shares of the company’s stock valued at $396,632,000 after acquiring an additional 478,095 shares in the last quarter. Finally, Wellington Management Group LLP increased its stake in shares of Reddit by 125.4% in the fourth quarter. Wellington Management Group LLP now owns 1,224,045 shares of the company’s stock worth $281,371,000 after acquiring an additional 681,076 shares during the last quarter.

Wall Street Analysts Forecast Growth

Several analysts have weighed in on RDDT shares. Zacks Research raised Reddit from a “hold” rating to a “strong-buy” rating in a research note on Monday. Cantor Fitzgerald reduced their price objective on shares of Reddit from $200.00 to $170.00 and set a “neutral” rating for the company in a report on Friday. Telsey Advisory Group set a $240.00 target price on shares of Reddit in a research note on Friday. Weiss Ratings reiterated a “hold (c)” rating on shares of Reddit in a report on Friday, May 8th. Finally, Wells Fargo & Company dropped their target price on Reddit from $187.00 to $142.00 and set an “equal weight” rating on the stock in a report on Friday. Two research analysts have rated the stock with a Strong Buy rating, twenty have assigned a Buy rating and eleven have assigned a Hold rating to the company. According to data from MarketBeat.com, Reddit has an average rating of “Moderate Buy” and an average price target of $223.65.

Key Headlines Impacting Reddit

Here are the key news stories impacting Reddit this week:

• Positive Sentiment: Reddit reported second-quarter revenue of approximately $805 million, up 61% year over year, while adjusted earnings of $1.25 per share exceeded the roughly $0.95-$0.99 analyst consensus. Net income rose to $253 million. Reddit crushes revenue and earnings estimates, issues strong guidance
• Positive Sentiment: Management forecast third-quarter revenue of $860 million to $870 million, above the approximately $830 million consensus estimate, indicating continued advertising momentum. Reddit is also developing AI-powered advertising tools intended to attract more marketers. Reddit expects revenue above estimates as AI tools attract advertisers
• Positive Sentiment: The company highlighted opportunities in AI, advertising and product upgrades, including a planned “video Reddit” experience that could let users watch videos and listen to posts in the background, potentially increasing engagement. RDDT Q2 Earnings Call Highlights AI, User Growth Push
• Neutral Sentiment: Analyst sentiment is mixed: Truist raised its target to $275 and kept a buy rating, while Wedbush cut its target to $221 but maintained outperform. Cantor Fitzgerald lowered its target to $170 and assigned a neutral rating, reflecting greater near-term caution.
• Negative Sentiment: Management warned that search referrals have become “choppy” or volatile. Investors fear Google’s AI-generated search summaries and other AI-powered search tools could reduce traffic sent to Reddit, weakening user growth, advertising exposure and potentially the value of Reddit’s search-related partnerships. Reddit reports a solid quarter but shows signs of AI’s impact
• Negative Sentiment: The strong earnings beat and above-consensus outlook failed to overcome concerns about the durability of traffic growth, particularly as U.S. user growth slows and AI search changes how people discover online content. Reddit shares slump after management warns of search traffic volatility

Reddit Company Profile

Reddit is an online social news aggregation, discussion and content-sharing platform organized around user-created communities called “subreddits,” each focused on a particular topic or interest. Registered users submit links, text posts, images and video, and community members vote and comment to surface popular content. The site is accessed via its web platform and mobile apps for iOS and Android, and it supports live events such as Ask Me Anything (AMA) sessions and community-driven discussions.

Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit is headquartered in San Francisco and serves a global audience with particularly large user bases in the United States and other English-speaking markets.