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Reddit is forecasting higher-than-expected fourth-quarter revenue, crediting its artificial intelligence-powered advertising tools for attracting increased marketing spending. Shares of the social media platform surged 9% in after-hours trading following the announcement.
The company’s AI-optimized ad platform enables brands to deliver targeted ads directly within discussion threads across thousands of subreddits, boosting engagement and relevance. Chief Operating Officer Jen Wong revealed that Reddit’s ad business expanded its client base significantly, with active advertisers growing more than 75% in the third quarter. She added that Reddit is testing an end-to-end automated campaign platform leveraging AI to streamline campaign setup and execution.
Reddit’s vast content library has also become highly valuable as artificial intelligence companies seek high-quality data to train large language models, the foundation of tools like ChatGPT. The platform has inked licensing deals with Google and OpenAI and recently filed lawsuits against Perplexity AI and three other firms for allegedly scraping its data illegally. Industry experts say protecting this data is critical to Reddit’s long-term success and competitive edge.
Despite strong revenue momentum, Reddit faces challenges in user growth. Global daily active unique visitors (DAUq) rose 19% year-over-year to 116 million, but growth among U.S. logged-in users slowed to 7% from 11% in the previous quarter. However, average revenue per user surged by 41%, indicating stronger monetization.
Reddit expects fourth-quarter revenue between $655 million and $665 million, surpassing analysts’ estimates of $637.9 million. It also anticipates adjusted EBITDA between $275 million and $285 million, above expectations of $258.8 million. Third-quarter revenue jumped 68% to $585 million, outpacing forecasts of $545.7 million — signaling the company’s growing influence in the AI-driven advertising landscape.
