Key Points
Reddit reported sales and earnings performances for the second quarter that crushed Wall Street’s expectations.
The company also issued very encouraging guidance for Q3.
Reddit is seeing strong sales tailwinds connected to the importance of its platform in training AI models.
10 stocks we like better than Reddit ›
Reddit (NYSE: RDDT) stock is surging Friday despite strong bearish pressures shaping the broader market. The company’s share price was up 21.1% as of 11:40 a.m. ET. At the same point in the day’s trading, the S&P 500 was down 1.7%, and the Nasdaq Composite had fallen 2.2%.
While the broader market is seeing big sell-offs in response to a weaker-than-expected July jobs report, Reddit is enjoying huge valuation gains on the heels of its recent second-quarter report. In addition to beating sales and earnings targets for the period, the company also issued very strong forward guidance.
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Reddit stock surges as Q2 results crush expectations
Reddit’s Q2 report arrived with plenty for investors to be excited about. The company posted earnings per share of $0.45 on revenue of $500 million, crushing the average analyst estimate’s call for per-share earnings of $0.19 on sales of $426 million. Revenue was up roughly 78% year over year in the quarter, and daily active users on its platform rose 21% year over year to reach 110 million. Even better, it seems strong momentum is poised to continue in the near term.
What’s next for Reddit?
Reddit is guiding for sales to come in between $535 million and $545 million in the current quarter — good for growth of roughly 55% year over year at the midpoint of the guidance range. Non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) is projected to be between $185 million and $195 million — improving from $94.1 million in last year’s quarter.
While Reddit is pivoting away from its focus on driving growth through the user economy, the company is seeing some very strong tailwinds connected to artificial intelligence (AI). CEO Steve Huffman noted that Reddit continues to be the “most cited domain for AI across all models,” and the company could continue to post very strong results and crush expectations if that tailwind holds.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
