Reddit Q4 Earnings: Mixed Results, but Q1 Guidance Beats Expectations
Reddit (RDDT) stock faced an after-hours decline of 18% on Wednesday as its Q4 earnings report fell short of heightened investor expectations.
Financial Performance
- Revenue surged by 70% year-over-year to $427.7 million, exceeding Wall Street's estimate of $405.5 million.
- Diluted earnings per share (EPS) of $0.36 missed analysts' projections of $0.48.
- Daily active users reached 101.7 million, a 40% increase compared to 2023, but below the anticipated 103.8 million.
CEO Comments
CEO Steve Huffman attributed the platform's traffic fluctuations to a Google Search algorithm change in Q4. However, he noted that traffic has since rebounded in Q1.
Q1 Guidance
Despite the mixed Q4 results, Reddit provided optimistic guidance for Q1:
- Revenue projections of $360-$370 million, surpassing analysts' forecasts of $359 million.
- Adjusted earnings expected to range from $80-$90 million, exceeding the $72 million estimate.
Market Outlook
Reddit's stock has been buoyed by advertising revenue growth and AI licensing deals. The company's partnership with OpenAI and content licensing agreement with Google have contributed significantly to its financial performance. Investors recognize Reddit as an AI play, with its shares rising over 33% year-to-date and 363% since 2024.
Analyst Ratings
Ahead of the earnings report, analysts at Deutsche Bank, Jefferies, and Raymond James maintained Buy ratings on Reddit stock, citing the company's strong advertising revenue, data licensing deals, and international growth strategy.
Conclusion
While Reddit's Q4 earnings results were mixed, its Q1 guidance and overall market outlook remain positive. The company's AI-driven advertising growth and strategic partnerships continue to drive its stock performance.