Forum social network Reddit recorded its first profitable quarter since its March 2024 IPO, sending its shares up 25% in extended trading on October 29.
The company’s success this quarter can be largely credited to significant revenue gains from AI content licensing deals and a sharp rise in user engagement, both of which have helped it surpass Wall Street’s expectations.
In its third-quarter report, Reddit announced a 68% increase in revenue year-over-year, reaching $348.4 million and exceeding analyst projections of $312.8 million.
The company also offered an optimistic Q4 forecast, projecting revenue between $385 million and $400 million, well above the average analyst estimate of $357.9 million.
What’s Behind Reddit’s Bullish Revenue?
A major revenue driver has been Reddit’s partnership deals with tech leaders like Google and OpenAI. These multi-million dollar deals allow these AI companies to use Reddit’s vast database of user-generated content to train advanced AI models.
The deal with Google reportedly led to an upward ranking of Reddit posts on Google search engine results, affording the community forum more visibility.
Last July, the platform announced partnership programs with sports leagues, including the NFL, NBA, PGA TOUR, and NASCAR to let users gain access to video highlights from these leagues and bring more sports content to the platform.
These partnerships not only enhance Reddit’s revenue but position it as a valuable partner in the fast-growing AI sector. The company’s third-quarter report also highlighted a 47% rise in daily active unique visitors, reaching 97.2 million.
CEO Steve Huffman, in a post-earnings call, noted that Reddit plans to integrate AI models and autocomplete features into its search functions to deliver more intuitive and personalized results — an update that pushes its AI-centered strategy to new heights.