Reddit expects revenue above estimates as AI tools fuel ad growth

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April 30 : Reddit forecast second-quarter revenue above analysts' estimates on Thursday betting on its AI-powered tools to boost advertising on the platform and sending its shares up 11 per cent in extended trading.

The social media company offers AI-focused features that allow advertisers to target users based on interests and communities within subreddit discussion threads.

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.

"Our active advertiser count grew 75 per cent year-over-year, which I think is the third consecutive quarter that we've had really strong active advertiser count," Reddit Chief Operating Officer Jen Wong told Reuters.

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Reddit shares have fallen around 35 per cent so far this year.

The company's quarterly revenue forecast of $715 million to $725 million exceeded the LSEG-compiled analysts' average estimate of $711.6 million.

Reddit expects adjusted earnings before interest, taxes, depreciation and amortization of $285 million to $295 million, above estimates of $277.1 million.

A day earlier, bigger rival Meta projected second-quarter revenue of $58 billion to $61 billion, in line with estimates. Meta also confirmed its plans for layoffs during its post-earnings call.

Wong said Reddit is "still hiring and adding to our talent base." She acknowledged that "every company is thinking" about how AI could reshape the workforce.

Reddit said its first quarter revenue rose 69 per cent to $663 million, beating estimates of $610.9 million.

Performance advertising, which focuses on driving measurable actions such as purchases, installs or sign-ups, represented over 60 per cent of total ad revenue, Wong said on the post-earnings call.

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.

Strong results from Reddit show its strategy is paying off as it jostles with dominant platforms such as TikTok and Meta's Instagram and Facebook for ads amid geopolitical uncertainty.

Wong said, "what we have heard from our partners is that...they're planning month to month," due to the volatility in the backdrop, but there is no material change in their commitments.

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