Reddit stock is having the best day in its short history after the social network announced third-quarter 2024 results yesterday that were better than many analysts expected. Investors reward the company. In market trading this morning, shares of Reddit (NYSE: RDDT ) are trading up 24% since the time of writing.
Reddit reported its first profitable quarter
Reddit had a good third fiscal quarter, which ended September 30, 2024. Part of that is because the company saw strong growth in several key areas. But another reason the quarter was so good—and the biggest reason the stock is up so much in the market—is that the company beat most analysts’ expectations to start the quarter.
For its Q3 2024, Reddit reported:
- $348.4 million in total revenue (up 68% from the year-ago quarter)
- $315.1 million of that revenue came from advertising (a 56% year-over-year increase)
- $29.9 million in net income (compared to a net loss of $7.4 million in the year-ago quarter)
To put that revenue figure into perspective, most analysts had expected Reddit to post a lower revenue of $312.8 million, CNBC noted. In the end, Reddit had earnings per share of 16 cents for the quarter compared to the 7 cents analysts were expecting.
Reddit users have grown, too
But it wasn’t just more money and revenue that got Reddit investors excited this morning. Two other factors contributed to the rise of RDDT stock.
The first is that Reddit also reported very healthy growth in what it calls Daily Active Uniques (“DAUq”). Reddit defines a DAUq as “a user we can identify by a unique identifier who has visited a page on the Reddit website, www.reddit.com, or opened a Reddit app at least once during a 24-hour period.” In other words, DAUq is each user who visits Reddit on any given day.
And in the quarter, Reddit’s global DAUqs increased 47% year-over-year to 97.2 million (in the year-ago quarter, Reddit had 66 million DAUqs).
Breaking down the DAUq’s again, Reddit revealed that US DAUqs reached 48.2 million in the quarter (51% growth) and International DAUqs reached 49 million in the quarter (44% growth). .
Any way you cut it, whether it’s local or international, a lot of people use Reddit. And for a site that relies on user-generated content, that’s music to investors’ ears.
Reddit’s prediction also pleased investors
One additional factor that appears to have helped light a fire under RDDT stock this morning is the company’s fourth-quarter revenue forecast—Reddit’s current quarter.
For Q4, Reddit expects revenue to be between $385 million and $400 million, and expects adjusted EBITDA between $110 million and $125 million. As CNBC notes, most analysts were expecting a forecast of $357.9 million in revenue for the quarter. Analysts on average also expect adjusted EBITDA of $85.2 million.
In other words, Reddit believes it has a brighter near-term future than analysts think.
The first year of RDDT started well
Before 2024, Reddit was still a private company despite being one of the most popular websites in the world for nearly 20 years. The company was founded in 2005 but did not go public until March 21 this year.
In its initial public offering (IPO), Reddit shares were sold for $47 each. At today’s market price, RDDT shares have now more than doubled in just over seven months.
Announcing Reddit’s strong Q3 results, CEO Steve Huffman said, “It was another strong quarter for Reddit and our communities as we hit important milestones, including new levels of user traffic, revenue growth, and profitability. Reddit continues to be one of the most visited and trusted places in the world with opportunities available to us that are not available to many companies.”
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