Reddit released its first earnings report as a public company, showcasing significant growth in users and advertising revenue alongside expenses linked to its initial public offering (IPO).
Despite reporting a quarterly loss exceeding $500 million due to stock-based compensation expenses related to its IPO in March, Reddit demonstrated strong revenue and user expansion, highlighting the potential of its digital advertising business amid a surge in platform engagement. The company’s revenue for the first quarter reached $243 million, marking a 48 percent increase from the previous year and surpassing Wall Street estimates. However, the net loss amounted to $575.1 million, primarily attributed to substantial stock-based compensation expenses totaling $595.5 million. Daily active users also experienced a notable increase, reaching 82.7 million, up 37 percent from the previous year.
These results drove Reddit’s shares up by 17 percent to $58 in after-hours trading.
Steve Huffman, Reddit’s co-founder and CEO, credited the company’s growth to enhancements in product updates and content recommendations tailored to users’ preferences. He emphasized Reddit’s role as a diverse community platform, stating, “We’ve hit an inflection point where our work is working.”
As a recent entrant to the public market after nearly two decades as a private entity, Reddit’s IPO performance has drawn attention as a litmus test for tech IPOs. Despite concerns about potential profit-centric shifts post-IPO, Reddit’s successful debut has buoyed investor optimism, with shares trading above the IPO price of $34.
Primarily known as an online forum for discussions and information sharing among users, Reddit has been diversifying its revenue streams beyond digital advertising. The company has engaged in partnerships with Google, Cision, and other firms to license its vast conversation data for various applications, including AI technology and e-commerce initiatives.
In a shareholder letter, Huffman outlined plans to further invest in AI technology to enhance content recommendations and search functionality on the platform. Reddit forecasts revenue between $240 million and $255 million for the current quarter, exceeding analyst expectations.
Despite initial apprehensions among users about the company’s IPO, Huffman noted a recent decrease in concerns, describing the past month as relatively quiet.
