Core Insights - Reddit's Q3 earnings report exceeded expectations, showcasing significant revenue growth and profitability earlier than anticipated by analysts [2][9] - The company's stock has experienced volatility, with a notable increase of over 450% since its IPO in March 2024, but has recently faced a decline of more than 30% from its record close [2][11] Financial Performance - Reddit's revenue grew by 68% to $585 million in Q3, with advertising sales increasing by 74% to $549 million [9] - The company achieved profitability in Q3 2024, which was sooner than most analysts had forecasted [2] User Growth and Engagement - International daily active users increased by 31% to an average of 64 million, while U.S. daily users grew by 7% to 51.6 million [5] - More than 75 million users engaged with Reddit's search feature weekly during Q3, indicating rising user engagement [7] AI Utilization - Reddit is leveraging AI to enhance its growth, including machine translation to support international user growth and improved search capabilities [4][5] - The company has established licensing deals with major tech firms like OpenAI and Google, allowing them to utilize Reddit's user-generated content for AI training without incurring significant costs [3] Advertising Strategy - Reddit is focusing on enhancing its advertising technology to compete effectively in a market dominated by Meta, particularly in the lower funnel of advertising [8][9] - The company is strategically investing in brand and performance ads to drive user growth, despite a 37% year-over-year increase in total expenses [15] Analyst Perspectives - Analysts have mixed views on Reddit's stock, with 18 out of 30 rating it a buy, while concerns about high valuation persist [12][13] - Some analysts expect continued revenue growth driven by strong gross margins and fixed cost leverage, while others caution about the impact of rising expenses on user growth [14][15]
How Reddit Is Using AI To 'Play Offense' After Big Post-IPO Rally