By Jaspreet Singh
(Reuters) – Reddit on Tuesday reported its first quarterly profit and forecast current-quarter revenue above Wall Street estimates, helped by its AI content licensing deals and strong digital advertising spending.
Shares of the company, popular for its user-led communities known as subreddits, rose 19% in extended trading.
Reddit’s quarterly results, third after going public in March, stoke confidence that more advertisers are turning to the platform, driven by initiatives including translation in other languages using machine learning to tap new users.
The company’s content licensing deals with Alphabet (NASDAQ:)’s Google and Microsoft-backed OpenAI for training their AI models have also been boosting its revenue, analysts have said.
The social media platform also has deals with sports leagues with the likes of National Basketball Association, which are helping the company to bring more sports content on the platform and attract ad dollars.
“Reddit’s AI partnerships with Google and OpenAI are a huge bonus right now, and while they contributed a good deal to this quarter’s revenue, they’re like training wheels on a bike — good for stability, but they won’t fuel long-term growth,” said Jeremy Goldman, senior director of briefings at Emarketer.
Reddit expects fourth-quarter revenue to be between $385 million and $400 million, compared with analysts’ average estimate of $357.9 million, according to data compiled by LSEG.
The company reported a profit per share of 16 cents for the third quarter, compared with a loss of 13 cents a year earlier. Analysts on average had expected a loss of 7 cents per share.
The company’s daily active unique visitors increased 47% to 97.2 million in the third quarter ended Sept. 30, while its global average revenue per user (ARPU) increased 14% to $3.58.
Revenue rose 68% to $348.4 million in the quarter, beating analysts’ estimate of $312.8 million.
