Reddit shares soar 25% as it turns its first profit

Reddit, a social media platform known for its loyal online communities and heated debates, has surprised Wall Street by turning a profit for the first time just a few months after going public, showing a 25% rise in shares to a record high, UNN reports citing the Financial Times.

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In a phone call with analysts, Reddit executives said that investments in advertising technologies designed to improve advertising efficiency are paying off, as is the move to "machine translation" to automatically translate its content into languages to increase its audience. The company now has almost 100 million daily active users, up 47% quarter-on-quarter.

The company, which listed on the New York Stock Exchange in March, posted a net profit of $29.9 million in the third quarter, up from a net loss of $7.4 million in the same period last year, and well above Wall Street's estimates of a $10 million loss.

"As we continue to look to 2025 and beyond, we will look for opportunities to accelerate our roadmap, whether through new product development, global expansion, or expansion of our advertising business," said Steve Gaffman, CEO of Reddit, "while maintaining our commitment to scaling profitably and ensuring that Reddit becomes the place to be for conversation and community online.

Reddit's third-quarter revenues rose 68 percent to $348.4 million, compared to the Wall Street consensus of $314.8 million. The company also forecasts revenues for the current quarter of $385 million to $400 million, which is higher than Wall Street's forecasts.

Huffman said the company will invest in modernizing its search capabilities, including developing "beautiful results pages" and integrating large language models into its results data.

Huffman also said that the company is committed to supporting companies, brands, and creators that have an official presence on Reddit, marking a new direction for a platform that was once known for hosting heated, anonymous conversations and not interfering with moderation.

The White House now has an official account with the new Reddit Pro offering for businesses, he added, and used it to share important information with local communities during the recent hurricanes in the United States.

However, Huffman was reportedly very cautious when talking about the licensing deals - selling its data to tech and AI companies to train their models - that it touted before its listing.

OpenAI signs agreement to train AI on Reddit dataMay 17 2024, 10:11 AM • 17707 views

In particular, the company generated enthusiasm by pointing to it as a potential source of revenue when it signed deals with Google and later OpenAI.

However, on Tuesday, Huffman said that while the company is still negotiating future deals, there have been a "limited" number of them, and they have mostly been with smaller players.

"The fact is that Reddit data is extremely valuable for many players in the market," said Huffman. - "That's why we are open for business and find the right balance between providing this information and creating our own products based on it.