Reddit's Q2 revenue jumps to $500 mn, driven by digital ad and AI growth
According to Chief Operating Officer Jen Wong, much of the ad growth comes from existing advertisers who are finding success with the company’s AI-powered features. These include "conversation placement ads" that allow brands to advertise within specific discussion threads.
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Reddit's stock rose over 16% in extended trading after the social media company issued a third-quarter revenue forecast that surpassed Wall Street expectations. The positive outlook is primarily driven by strength in its digital advertising business, which has been bolstered by new AI-powered tools.
The company's second-quarter revenue grew 78% to $500 million, exceeding analyst estimates of $426 million. Reddit also reported earnings of 45 cents per share, which was above the 19 cents that analysts had projected.
A key factor in this growth is the company’s focus on artificial intelligence for its advertising platform. According to Chief Operating Officer Jen Wong, much of the ad growth comes from existing advertisers who are finding success with the company’s AI-powered features. These include "conversation placement ads" that allow brands to advertise within specific discussion threads. The company has also secured AI content licensing deals with Google and OpenAI.
For the third quarter, Reddit projects revenue between $535 million and $545 million, a range that is higher than the average analyst estimate of $473 million. It also anticipates adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be in the range of $185 million to $195 million, compared to estimates of $160.4 million.
While the company saw strong financial results, it did note a challenge with traffic from Google Search. CEO Steve Huffman said traffic has been "volatile" due to Google's algorithm changes related to the integration of AI Overviews.
Reddit's user base continued to expand, with daily active unique visitors increasing by 21% to 110.4 million in the quarter. This was supported by a new machine translation feature that now supports 23 languages, aiding growth in international markets.
