Reddit rallies as AI‑driven ad growth fuels strong revenue outlook

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May 1 : Reddit shares jumped 16 per cent in premarket trading on Friday after an upbeat quarterly revenue forecast underscored growing returns from the social media company's AI-driven advertising tools.

The company's AI-optimized ad platform helps advertisers place targeted ads directly within relevant discussion threads across its interest-based communities called subreddits.

The strong results signal that the company's strategy is paying off as Reddit takes on bigger ad rivals such as Meta's Instagram and Facebook.

Reddit is "still hiring and adding to our talent base," Chief Operating Officer Jen Wong told Reuters on Thursday.

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The remarks paint Reddit as an outlier, as companies such as Meta, Snap and Pinterest have cut thousands of jobs over the past year to streamline operations and refocus spending on artificial intelligence.

Reddit's stock has had a turbulent year, sliding roughly 36 per cent year-to-date, while Snap and Pinterest have dropped about 24 per cent each.

Its daily active unique visitors grew 17 per cent to 126.8 million in the quarter, while global average revenue per user increased by 44 per cent.

"Execution across these areas (U.S. user growth) remains key to driving multiple expansion for Reddit…as it will showcase its growing importance, even in a future GenAI enabled and agentic landscape," said analysts at Morgan Stanley.

Its ad platform uses AI to improve campaign creation and management through features including an AI copywriter for Reddit-specific advertisements and an automatic creative asset cropper that optimizes images for various ad placements.

Its vast content library has also become a prized asset as AI companies hunt for data to train their large language models, the technology behind chatbots such as ChatGPT.

Reddit has a 12-month forward price-to-earnings ratio of 30.40, compared with Snap's 9.93, Pinterest's 10.27 and Meta's 19.05.

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