Reddit Shares Drop Over 15% Following Disappointing User Growth Report
Reddit Inc. (RDDT) shares fell more than 15% on Wednesday, February 12, 2025, after the company reported weaker-than-expected user growth in its fourth-quarter earnings. The social media platform’s daily active uniques (DAUq) rose 39% year-over-year to 101.7 million, missing Wall Street estimates of 103.1 million. CEO Steve Huffman attributed the shortfall to a Google search algorithm change that caused “volatility” in user growth during the quarter, though he noted that search-related traffic had recovered in the first quarter of 2025.
Despite the user growth miss, Reddit posted strong financial results. Revenue surged 71% year-over-year to $428 million, surpassing expectations of $405 million. Net income nearly quadrupled to $71 million, or 36 cents per share, compared to $18.5 million, or breakeven per share, in the same period last year. Adjusted earnings of $154 million also topped analysts’ forecasts of $128 million. The company provided optimistic guidance for the first quarter of 2025, projecting sales between $360 million and $370 million, ahead of the $358 million consensus estimate.
Reddit’s advertising business showed resilience, with logged-in DAUq growing 27% year-over-year to 46.1 million, while logged-out DAUq rose 51% to 55.6 million. The company has been working to convert logged-out users into logged-in accounts, which are more lucrative for its advertising-driven business model. Reddit went public in March 2024 at $34 per share and has seen its stock price soar more than sixfold to $216.47 as of Wednesday’s close, despite the after-hours selloff.
The company’s long-term growth strategy includes expanding internationally and improving user experience and discovery features. However, Reddit faces risks, including competition, reliance on advertising revenue, and evolving regulations. The filing also highlighted a net loss of $484.3 million for the fiscal year 2024, driven by increased expenses in research and development, sales and marketing, and general administrative costs. Despite these challenges, Reddit ended the year with $1.8 billion in cash and marketable securities, positioning it to navigate potential headwinds.
Reddit shares plunge after Google algorithm change contributes to miss in user numbers
Reddit reported better-than-expected results, but the company issued disappointing user numbers.
www.cnbc.comReddit stock tumbles as daily active users fall short of estimates
In addition to a miss on quarterly EPS, Reddit's daily active users in the December quarter hit 101.7 million, less than the 103.8 million expected.
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Reddit Inc. Class A (RDDT) reports earnings
The report was filed on February 13, 2025
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What Analysts Think of Reddit Stock Ahead of Earnings
Reddit is scheduled to report fourth-quarter earnings after the market closes Wednesday, with analysts expecting growing revenue and users.
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What Wall Street experts are saying about Reddit ahead of earnings - TipRanks.com
Reddit (RDDT) is expected to announce fourth quarter results on Wednesday, February 12 after the market close, with a conference call scheduled for 5:
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