Reddit, the popular social media platform, has reached a significant milestone by turning a profit for the first time in its nearly 20-year history. In its third-quarter report, the company announced a profit of $29.9 million, alongside $348.4 million in sales, marking a 68% increase compared to the previous year.
This achievement comes after years of financial struggles, including a $575 million loss in its first quarter as a public company earlier this year. However, Reddit has steadily reduced its losses, reporting a $10 million loss in the previous quarter before finally entering the black.
The platform’s daily active users have surged to 97.2 million, a 47% year-over-year increase, with some days even surpassing 100 million users. This growth has been attributed to Reddit’s AI-powered translation feature, which initially allowed users to translate posts into French and has since expanded to include Spanish, Portuguese, Italian, and German. CEO Steve Huffman revealed plans to extend this feature to over 30 countries by 2025, further enhancing the platform’s global reach.
Reddit’s advertising revenue also saw a significant boost, reaching $315.1 million, while “other” revenue, including data licensing agreements with companies like Google and OpenAI, contributed $33.2 million. These partnerships allow tech giants to train their AI models on Reddit’s vast repository of user-generated content.
In a letter to shareholders, Huffman emphasized Reddit’s growing influence across the internet, noting that “Reddit” was the sixth most-searched word on Google in the U.S. in 2024. He highlighted the platform’s role as a go-to destination for answers, advice, and community engagement. Additionally, Reddit is working to improve its search functionality, aiming to make it “simpler and more intuitive.”
Despite these successes, Reddit’s shares experienced a 16.5% drop in extended trading following its fourth-quarter earnings report, even though the company exceeded expectations with a net income of $71 million and revenue of $427.7 million, a 71% increase from the previous year. Daily active users reached 101.7 million, a 39% year-over-year rise, though slightly below analyst forecasts. International growth outpaced the U.S., with daily active users outside the U.S. increasing by 46% to 53.7 million.
Reddit’s gross margin improved to 92.6% in the fourth quarter, up 420 basis points from the same period last year. Looking ahead, the company anticipates first-quarter revenue between $360 million and $370 million, surpassing analyst expectations.
Since its IPO in March 2024, Reddit’s stock has risen by an impressive 329.2%, reflecting investor confidence in its growth trajectory. The platform continues to innovate, leveraging AI and expanding its global footprint, while exploring new revenue streams such as paid subreddits and enhanced advertising partnerships. As Reddit solidifies its position as a key player in the social media landscape, its influence and profitability are expected to grow even further.
February 13, 2025
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