Core Insights - Reddit (RDDT) is experiencing significant growth in user engagement and advertising revenue, with a 74% year-over-year increase in advertising revenues to $549 million in Q3 2025 [2][12] - The company reported 116 million daily active users and 444 million weekly active users, both reflecting a 20% year-over-year increase [3][12] - Automation tools have led to a 75% year-over-year increase in active advertisers, enhancing campaign management efficiency [4][12] User Engagement and Advertising Growth - Reddit's investment in AI-powered tools is driving user engagement, contributing to the growth in daily and weekly active users [3] - The introduction of tools like Reddit Pixel, Conversion API, and Dynamic Product Ads supports campaign performance and advertiser outcomes [5] - Innovative tools such as Reddit Pro for publishers enhance user engagement and create advertising opportunities [6] Competitive Landscape - Reddit faces competition from Meta Platforms (META) and Snap (SNAP), both of which are expanding their advertising capabilities in the digital ad market [7] - Snap's advertising revenues increased by 5% year-over-year to $1.32 billion, driven by Direct Response advertising [8] - Meta Platforms reported a 25.6% year-over-year increase in advertising revenues to $50.08 billion, with a strong focus on AI integration [9] Stock Performance and Valuation - RDDT shares have gained 58.5% over the past six months, outperforming the broader Zacks Computer & Technology sector [10] - The company is considered overvalued with a forward 12-month Price/Sales ratio of 14.48X compared to the sector's 6.51X [14] - The consensus estimate for 2025 earnings is $2.35 per share, indicating a projected 170.57% year-over-year growth [17]

Core Insights - Reddit (RDDT) is expected to report third-quarter 2025 revenues between $535 million and $545 million, reflecting a year-over-year growth of 54% to 56% with a midpoint of 55% [1] - The Zacks Consensus Estimate for revenues stands at $549.69 million, indicating a year-over-year growth of 57.80% [2] - Earnings per share are estimated at 52 cents, showing a significant year-over-year growth of 225% [2] Revenue Drivers - Increased ad sales and growing AI initiatives are anticipated to positively influence Reddit's third-quarter performance [3] - The advertising business is benefiting from innovations in ad products, automation, and tools like Reddit Insights and Community Add-Ons, which are expected to enhance advertiser performance [3][4] - Reddit Answers has seen substantial growth, with weekly users increasing from 1 million to 6 million, contributing to improved ad revenues [4] International Expansion - Reddit's international expansion, supported by machine translation in 23 languages, is a key growth driver, reaching new markets in Asia, Europe, and Latin America [5] Competitive Landscape - Reddit shares have increased by 34.2% year-to-date, outperforming the Zacks Computer & Technology sector and the Zacks Internet - Software industry [7] - Compared to peers like Meta Platforms, Pinterest, and Snap, Reddit has shown stronger performance in the advertising space [8] Stock Valuation - RDDT is trading at a premium with a forward Price/Sales ratio of 15.46X, significantly higher than the industry average of 5.63X and its peers [11] - The company's expanding portfolio has driven a 47% year-over-year increase in ARPU to $4.53, indicating effective monetization strategies [13] Product Innovations - The introduction of Dynamic Product Ads and automation tools has attracted more advertisers, enhancing campaign performance and ARPU [14] - New features like Reddit Pro and Community Intelligence tools have improved user engagement and brand interaction [16] Future Outlook - Reddit's prospects are bolstered by an expanding advertising business, a growing client base, and enhanced user experience through upgraded features [20]

Core Viewpoint - Citigroup has raised the target price for social media platform Reddit from $220 to $250, maintaining a "buy" rating, citing new advertising initiatives and the potential of Reddit Pro to attract more advertisers, along with the promotion of AI feature Reddit Answers to drive growth [1] Group 1 - Citigroup's target price increase for Reddit reflects confidence in the platform's advertising strategy [1] - The introduction of new advertising plans is expected to enhance advertiser engagement on Reddit [1] - The rollout of Reddit Answers, an AI-driven feature, is anticipated to contribute to the platform's growth [1]

Product Updates - Reddit is launching new Publisher tools under Reddit Pro [1]

Group 1 - Reddit launched a set of free tools for publishers to track article performance and receive sharing suggestions within communities as part of Reddit Pro [1][4] - The new tools include article insights showing where stories have been shared, along with stats like views, upvotes, and clicks [2] - Publishers can sync RSS feeds to Reddit Pro and utilize AI for community sharing suggestions [4] Group 2 - Reddit is enhancing the consumer news-reading experience by allowing easier access to links without closing the original thread [5] - The platform aims to improve story distribution for publishers, aligning with its ambition to become a search engine [8] - Reddit will stop displaying member counts on subreddits, replacing them with a seven-day visitor figure and contributions made during that time [9]

Financial Data and Key Metrics Changes - Revenue grew 78% year over year to $500 million, marking the fastest quarterly growth rate since 2022 [7][28] - Daily active users increased to 110 million, up 21% year over year, with growth in both the U.S. and international markets [7] - Adjusted EBITDA reached $167 million, with a margin of 33%, up over 1,900 basis points year over year [28][29] - GAAP net income was $89 million, translating to $0.48 per basic share [40] Business Line Data and Key Metrics Changes - Advertising revenue grew 84% year over year to $465 million, driven by broad-based strength across the business [20][31] - Other revenue, including data licensing, reached $35 million, growing 24% year over year [31] - Average revenue per user (ARPU) increased 47% year over year to $4.53 [31] Market Data and Key Metrics Changes - Revenue in the U.S. grew significantly, with international markets also showing strong performance, particularly in Europe [31] - The total active advertiser count expanded by over 50% year over year [20] Company Strategy and Development Direction - The company is focusing on improving the core product, enhancing search capabilities, and expanding internationally [12][15] - Strategic investments are being made in sales, marketing, and machine learning to drive user engagement and revenue growth [34][38] - The company is deprioritizing some initiatives, such as the user economy, to concentrate resources on areas that will drive immediate results [13][45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the unique role Reddit plays in human conversation and its potential for growth [8][10] - The company sees a significant opportunity in becoming a trusted source of information in an increasingly automated world [10][12] - For Q3 2025, the company estimates revenue in the range of $535 million to $545 million, representing 54% to 56% year-over-year growth [41] Other Important Information - The company is investing in machine translation to unlock Reddit for millions of users across various regions [16] - The launch of new products like Dynamic Product Ads and Reddit Insights is expected to enhance advertiser performance and user engagement [22][24] Q&A Session Summary Question: What is one memorable discussion you had at the Cannes Lions Festival? - Management highlighted a discussion where an advertiser realized a new customer segment and expressed excitement about the quality of the team [43] Question: What projects are being prioritized over the user economy? - The focus is on improving user engagement through core app improvements and diversifying traffic sources [45] Question: How are U.S. user trends evolving? - There was a slower start in April, but traction improved throughout Q2, with higher daily active users reported in July [53][54] Question: What innovations are expected in the advertising business? - Exciting developments include Dynamic Product Ads and automation features that enhance advertiser onboarding and performance [56][57] Question: How is the search experience evolving with Reddit Answers? - The company is unifying the search experience to integrate Reddit Answers, making it more accessible for users [63] Question: How have advertiser relationships evolved? - The company has created a global accounts team to better service larger clients and is seeing increased demand for integrated advertising solutions [66] Question: What are the key learnings from marketing efforts? - There is a need to build awareness and consideration, especially outside the U.S., and to create a unique search experience on Reddit [75][78]

Core Insights - Reddit (RDDT) operates a community-driven social media platform with over 100,000 active subreddits, generating more than 90% of its revenue from digital advertising, reporting first-quarter revenues of $392 million, reflecting a 61% year-over-year growth [1] - The company faces significant competition in the digital advertising space, primarily from established players like Meta Platforms and Alphabet, which have advanced advertising infrastructures and extensive advertiser relationships [5][7] - Reddit shares have declined 10.3% year-to-date due to rising competitive pressures and a challenging macroeconomic environment, underperforming compared to the broader Zacks Computer & Technology sector and the Zacks Internet Software industry [2] Financial Performance - For 2025, the Zacks Consensus Estimate for Reddit's revenues is $1.85 billion, indicating a year-over-year growth of 42.07%, with earnings estimated at $1.21 per share, an improvement from a loss of $3.33 per share in 2024 [12] - Daily Active and Weekly Active Unique users increased by 31% year-over-year, reaching 108.1 million and 401 million, respectively, in the reported quarter [15] Competitive Landscape - Reddit's advertising technology is less sophisticated than that of Meta Platforms and Alphabet, with weaker targeting and measurement tools, which may hinder its ability to compete for advertising budgets [8][9] - Reddit trades at a forward price-to-sales (P/S) ratio of 12.67X, significantly higher than the industry average of 5.71X and competitors like Meta and Alphabet, which trade at P/S ratios of 9.1 and 6.36, respectively [9] Product Development and User Engagement - Reddit has been expanding its platform with tools like Reddit Answers, which reached one million weekly users, and Reddit Community Intelligence, aimed at generating marketing insights [13][14] - The company is enhancing user engagement through AI-powered features, which are expected to improve the value of its advertising inventory [8][14] Conclusion - While Reddit's growing product suite and user engagement show long-term potential, the current premium valuations, intense competition, and macroeconomic uncertainties suggest limited near-term gains [17][18] - The stock currently carries a Zacks Rank 4 (Sell), indicating that investors should avoid the stock at current levels [19]

Core Insights - Reddit (RDDT) is enhancing its advertising business by leveraging real-time community engagement to provide strategic insights for brands, gaining traction among advertisers seeking authenticity and scale [1][4]. Advertising Business Development - Reddit launched Community Intelligence, a suite that allows marketers to monitor live conversations across subreddits, analyze sentiment, and optimize campaign decisions, transforming the platform into a dynamic planning engine [2]. - In Q1 2025, Reddit's advertising revenue reached $358.6 million, a 61% increase year-over-year, with performance campaigns making up 60% of total ad spend, indicating strong growth among mid- and lower-funnel advertisers [4][10]. User Engagement Metrics - User engagement on Reddit is robust, with Weekly Active Users at 401 million and Daily Active Uniques at 108 million, both reflecting a 31% year-over-year increase, which is a key driver for advertising growth [3][10]. Competitive Landscape - Reddit faces significant competition from Alphabet (GOOGL) and Meta Platforms (META), both enhancing their AI-driven advertising capabilities. Alphabet's Google Ads and YouTube offer large-scale performance marketing, while Meta strengthens its advertising tools across its platforms [6][7]. Valuation and Market Performance - Reddit's stock has declined 18.1% year-to-date, contrasting with a 1.6% return for the broader Zacks Computer & Technology sector and a 13% increase in the Zacks Internet - Software industry [8]. - The forward 12-month Price/Sales ratio for Reddit is 11.8X, significantly higher than the sector average of 6.36X, indicating a premium valuation [12]. Earnings Estimates - The Zacks Consensus Estimate for Q2 2025 earnings is 19 cents per share, an improvement from a loss of 6 cents per share in the same quarter last year. For fiscal 2025, the earnings estimate is $1.21 per share, up from a loss of $3.33 per share in fiscal 2024 [15].

Core Insights - Reddit (RDDT) and Nextdoor (KIND) are community-driven social platforms that provide investors with exposure to both global and localized engagement [1] - The social networking market is projected to grow by $312.3 billion from 2024 to 2029, with a CAGR of 21.6%, driven by increased Internet penetration and demand for targeted advertising [2] Reddit (RDDT) Overview - RDDT experienced a 61% year-over-year revenue increase in Q1 2025, reaching $392.4 million, primarily due to higher ad impressions and investment from performance advertisers [3][10] - Daily Active Uniques rose 31% year over year to 108.1 million, while mobile app usage grew by 45% [4][10] - Reddit is enhancing its platform with AI-led features, such as Reddit Answers, which has one million weekly users, and is expanding into the U.K. and Australia [5][6] - The introduction of Reddit Pro has improved advertiser tools, facilitating better community engagement and visibility [6] Nextdoor (KIND) Overview - KIND's revenue grew by 2% year over year to $54 million in Q1 2025, although it fell short of consensus estimates by 1.3% [7][10] - Weekly Active Users increased by 6% year over year to 46.1 million, with platform engagement metrics also showing growth [8][10] - Nextdoor is advancing its product portfolio through the NEXT redesign initiative, which aims to enhance content discovery and usability [9] - AI-powered tools have been introduced to improve user engagement and support monetization efforts [11] Market Performance and Valuation - Year-to-date, RDDT and KIND shares have declined by 27.7% and 35.8%, respectively, due to a challenging macroeconomic environment [12] - Both companies are currently considered overvalued, with RDDT trading at a forward Price/Sales ratio of 10.46X compared to KIND's 2.28X [15] - The Zacks Consensus Estimate for RDDT's 2025 earnings is $1.21 per share, indicating a 136.34% year-over-year increase, while KIND's 2025 loss is estimated at 20 cents per share, an improvement from the previous year's loss [18] Conclusion - Reddit is positioned favorably with strong revenue growth, an expanding product portfolio, and increasing adoption of AI tools, making it a more attractive investment compared to Nextdoor, which is still in the early stages of scaling its platform [20][21]

Core Viewpoint - Reddit's shares have significantly underperformed in 2023, dropping 38.8%, compared to a 2.6% decline in the broader Zacks Computer & Technology sector and a 5.4% increase in the Zacks Internet - Software industry [1][2] Performance Analysis - Reddit's advertising revenues surged 61% year over year to $358.6 million in Q1 2025, driven by higher user engagement and AI initiatives [4] - For Q2 2025, Reddit anticipates revenues between $410 million and $430 million, with a Zacks Consensus Estimate of $426.12 million, reflecting a year-over-year growth of 51.55% [12] Competitive Landscape - Reddit faces stiff competition from Alphabet and Snap, both of which are expanding their advertising capabilities in the digital ad market [13] - Snap's new features, such as Snap School sponsorships and Snap Pixel, are enhancing its advertising offerings, posing challenges to Reddit's market position [14][15] Strategic Developments - Reddit is diversifying its advertising solutions, including the launch of Dynamic Product Ads, which aim to deliver personalized ads and improve Return on Ad Spend [5] - The company has enhanced its partnership with Integral Ad Science to provide advertisers with better measurement capabilities and transparency [8][9] Valuation Concerns - Reddit's stock is currently considered overvalued, with a trailing 12-month Price/Sales ratio of 8.82, compared to the sector average of 6.10 [17] Conclusion - Despite Reddit's expanding advertising business and improved user experience, intense competition and ongoing tariff uncertainties present significant challenges [19]