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Key Metric
- Reddit will report earnings Tuesday after the market closes, with analysts expecting higher revenue but a larger net loss than the same time last year.
- Shares have surged since Reddit went public in March, with the stock more than doubling from its offer price.
- Analysts expect international growth and AI-related data licensing deals to provide avenues for growth in both daily users and revenue in the coming quarters.
Reddit (RDDT) is set to report earnings after the bell on Tuesday, with analysts expecting revenue growth, but a slightly larger net loss than it recorded the same time last year before the social media company went public.
Analysts expect revenue to rise to $311.5 million for the third quarter, up from $207.5 million a year ago and $281.2 million in the second quarter. Reddit is also expected to report an $18.1 million net loss for the quarter, more than twice the $7.4 million it lost a year ago.
Reddit shares have surged since their trading debut in March, and analysts continue to hold bullish ratings on the stock, with seven of nine analysts tracked by Visible Alpha with “buy” ratings, and two others with “hold” ratings. However, the average target price for the social media platform is $76.22, below Reddit’s Thursday close above $78.
| Analyst Estimates for Q3 2024 | Q2 2024 | Q3 2023 | |
| Revenue | $311.46 million | $281.18 million | $207.51 million |
| Earnings Per Share (Loss) | (11 cents) | (6 cents) | (13 cents) |
| Net Income (Loss) | ($18.11 million) | ($10.10 million) | ($7.38 million) |
Key Metric: User Base, International Growth
Jefferies and Deutsche Bank analysts wrote ahead of Reddit’s earnings that international expansion is an important avenue for Reddit to increase its user base as the platform rolls out new language capabilities. France was one of Reddit’s top three fastest-growing markets in the second quarter as French translations became more widely available, Jefferies wrote, with the addition of languages like German and Spanish likely to boost growth.
“With the full utility of the platform now unlocked across a larger percent of the global population, we contend that ramped content velocity is a likely outcome, which in turn could stimulate higher global engagement and attract incremental [daily active users] over time,” Deutsche Bank analysts wrote, raising their price target to $85 from $73.
Business Spotlight: AI Licensing Deals
The third quarter will provide Reddit with its first full quarter since it announced a licensing deal to give OpenAI’s ChatGPT access to its content for artificial intelligence (AI) training, as it was only in effect for about half of the second quarter.
Jefferies analysts said new licensing deals for its content could provide a high-margin source of revenue growth for Reddit, as it already has deals with OpenAI and Alphabet’s (GOOGL) Google, two of the largest consumer-facing AI companies.
Reddit’s shares finished up more than 1% on Thursday to $78.60, more than twice the $34 at which its IPO priced earlier this year.