By Jaspreet Singh
(Reuters) -Reddit forecast third-quarter revenue above Wall Street estimates on Thursday, betting on growing digital advertising driven by its artificial intelligence-powered marketing tools.
Shares of the social media company, which went public in March last year, rose more than 16% in extended trading.
The forecast follows bigger rival Meta’s upbeat second-quarter results and strong revenue outlook on Wednesday, lifted by the Facebook and Instagram parent’s core ad business.
Advertisers are increasingly turning to platforms such as Reddit, Meta, and TikTok, which offer advanced AI-powered tools for ad creation.
“We’ve been growing our active advertiser base really nicely, but most of our growth still comes from existing advertisers that are well retained,” said Chief Operating Officer Jen Wong.
Reddit offers marketers various ad formats, including conversation placement ads, which allow brands to advertise directly within discussion threads in its interest-based communities known as subreddits.
The company recently launched two new AI-powered ad features designed to help brands drive engagement by tapping into user conversations on the platform. It also has AI content licensing deals with Alphabet’s Google and ChatGPT-maker OpenAI.
“Reddit just turned in a quarter that would make even its harshest subreddit proud,” Emarketer analyst Jeremy Goldman said.
The company expects third-quarter revenue of $535 million to $545 million, well above analysts’ average estimate of $473 million, according to data compiled by LSEG.
It projected quarterly adjusted earnings before interest, taxes, depreciation, and amortization of $185 million to $195 million, compared with estimates of $160.4 million.
Second quarter revenue rose 78% to $500 million, beating estimates of $426 million. Its profit per share of 45 cents also exceeded estimates of 19 cents.
The company said its machine translation feature now supported 23 languages, helping fuel user growth across Asia Pacific, Europe and Latin America.
Daily active unique visitors increased 21% to 110.4 million in the quarter ended June 30.
Reddit said it has seen volatile traffic from Google Search due to algorithm changes tied to the search engine’s integration of AI Overviews and AI Mode.
“Traffic from Google varies from week to week, but overall it was a headwind in the second quarter,” said CEO Steve Huffman.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Tasim Zahid)
