Reddit shares rise on earnings beat, strong forecast

reddit On Thursday, the company reported third-quarter earnings in which it beat both the peak and trough and provided strong guidance.

Shares rose more than 8% in after-hours trading Thursday.

Here’s how the company compares to LSEG forecasts:

• Earnings per share: 51 cents expected versus 80 cents
• Revenues: $585 million while the expectation was $546 million

Reddit’s sales increased 68% in the third quarter compared to the same period last year, with net income of $163 million; This represents a 23% increase over the $133 million it generated in the same period the previous year.

The company said it expects fourth-quarter sales to be between $655 million and $665 million, above the $638 million Wall Street expected.

Reddit said it expects fourth-quarter adjusted earnings to be between $275 million and $285 million, topping StreetAccount’s estimates of $259 million.

The company said global average revenue per user in the third quarter was $5.04, above analysts’ estimates of $4.82.

Third-quarter revenue in the U.S. was $480 million, beating StreetAccount’s estimates of $445 million. Reddit generated $105 million in international sales in the third quarter, above StreetAccount’s $104 million forecast.

Reddit’s “Other revenue” category, which includes the company’s data licensing business, rose 7% from last year to $36 million. Google and OpenAI are some of Reddit’s largest data licensing partners.

The company said global daily active uniques in the third quarter rose 19% year-over-year to 116 million, beating analysts’ estimates of 114 million.

Reddit’s DAUq entry for the United States, its most lucrative region, rose 7% annually to 23.1 million in the third quarter. This was slower than the 12% year-over-year increase Reddit recorded in the second quarter, when DAUq inflows for the US were 22.9 million. This is the fifth consecutive quarter in which the company’s U.S. logged-in user growth has slowed.

The company’s global logged-in DAUq in the third quarter increased 14% year over year to 50.2 million, while its global logged-in DAUq increased 24% to 65.8 million.

Investors are watching for any changes in Reddit’s user growth as Google increasingly rolls out generative AI features like AI Overview, which provides summaries of search questions. Reddit has seen a wave of users come to its platform from Google, and the social media company is making more money from users creating accounts than from ads.

Reddit CEO Steve Huffman told analysts during an earnings call on Thursday that the company isn’t seeing major traffic from AI-powered chat apps right now.

“I look forward to continuing to work on these issues with these partners, but they are not a significant traffic driver today,” Huffman said. “But I think there are a lot of opportunities there as long as we continue to work together.”

In response to an analyst’s question about how Reddit plans to persuade more people to create accounts and use its app regularly, Huffman reiterated his previous comments about improving the platform’s user experience.

Huffman said the company is working to “make sure there are no barriers” preventing users from seeing relevant content based on their interests.

“The biggest driver of retention is following subreddits that are relevant to your interests,” Huffman said. “And it’s not rocket science.”

Reddit’s chief operating officer Jen Wong also noted how the company is increasingly running performance marketing campaigns aimed at attracting more users, especially overseas users who may not be aware of the platform. Although the company has historically not relied on marketing to acquire new users, Wong said promotions will help in countries where “our awareness and consideration is lower than in the U.S. because we’re newer.”

“We saw an increase in Reddit app installs as a result of the brand campaign, which I think is good,” Wong said. “We have also seen a movement in brand awareness and brand consideration, which I think is also positive and lays the groundwork for subsequent performance.”

Google and Meta Both reported third-quarter earnings on Wednesday, and both tech giants beat Wall Street’s expectations.

WRISTWATCH: We are working to see if meta AI can reach consumer scale.