Happy first IPO-iversary, Reddit. (And happy 20th birthday.)
The market got you a present.
Reddit’s stock soared nearly 18% in after-hours trading on Thursday thanks to a revenue beat in the first quarter and strong guidance for Q2.
The company, which went public in March 2024 and reported for the first time last May, generated just over $392 million in Q1, with ad revenue making up the lion’s share at $358.6 million.
Total revenue and ad revenue were each up 61% apiece year over year.
Reddit expects total revenue in Q2 to fall somewhere between $410 million and $430 million, which would represent 46% to 53% YOY revenue growth.
The uptick in ad revenue was mainly driven by YOY impression growth and higher ad pricing.
“We’re delivering more valuable impressions, and advertisers are benefiting from efficiency improvements,” COO Jen Wong told investors.
In these uncertain times, etc.
Reddit has been making big investments in its ad stack with a focus on ad performance and making the platform easier for advertisers to use.
In Q1, for example, more than 90% of its managed service advertisers adopted Reddit’s first-party tracking pixel, and Reddit also recently launched an integration between its pixel and Google Tag Manager to simplify the process of adopting new ad formats.
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“We believe the gains in pricing reflect the progress from our investments in performance and targeting in the middle and lower funnel,” said CFO Drew Vollero. “We’re delivering more clicks and conversions, which is driving more efficient ad spend and higher returns for our advertisers.”
But what about uncertainty in the market? (Of course, there was a de rigueur investor question about uncertainty in the market and how the macro environment might affect Reddit’s business.)
“I will acknowledge there’s a lot of uncertainty,” Wong said, “but, so far, it’s mostly business as usual.”
According to Wong, Reddit is actually quite well positioned to help brands through the volatility as a source of insights on changing customer behavior.
“Reddit is a really important resource for users, for people who are just trying to figure out, ‘Should I buy this now?’ or are [they] becoming more considered about their purchases because of the uncertainty,” Wong said. “They come to Reddit to navigate that.”
The Google question
And when users come to Reddit, it’s increasingly through the conduit of Google search.
Early last year, Reddit signed a data licensing deal that allows Google to train its AI models and enhance search results based on Reddit’s trove of user-generated content. In turn, the increased visibility of Reddit discussions within Google search results helps drive traffic back to Reddit.
But people are also appending “Reddit” by name to their Google searches, said Reddit CEO Steve Huffman, a sign that they’re explicitly seeking out content on Reddit.
“In the last 90 days, the word ‘Reddit’ was the sixth most searched word on Google between ‘news’ and ‘Trump,’” Huffman said. “The Google algorithm serves users what they want and what they ask for, and we’ve had a long and symbiotic relationship with Google.”
Then again, Reddit experienced a decline in search referrals in late 2024, which Huffman told investors last quarter was a result of changes to Google’s algorithm.
But Huffman now says he’s not worried that “short-term bumps” will impact Reddit’s long-term strategy.
“The search ecosystem is under heavy construction, and the near term could be more bumpy than usual,” Huffman said. “But is there long-term risk to Reddit here? In my view, the answer is ‘no,’ and, in fact, I think there’s opportunity.”
