Reddit (NYSE:RDDT)surprised the market with a prediction of an adjusted core profit for the second quarter, fueled by robust user growth and a recovering advertising market. This announcement sent its shares soaring over 16% in extended trading on Tuesday.
This optimistic forecast starkly contrasts with Wall Street’s expectations, which had anticipated a loss. In its first earnings report since its initial public offering in March, Reddit also projected second-quarter revenue figures significantly higher than market estimates.
In an effort to diversify its revenue streams, Reddit has ventured into licensing its user-generated content for AI model training, securing a deal earlier this year with Google, valued at approximately $60 million annually.
The company’s upbeat projections follow encouraging earnings from peers like Snap, amidst growing optimism that marketers are increasing their budgets after the advertising downturn in 2023, which was driven by persistent inflation and economic uncertainties.
For the second quarter, Reddit anticipates adjusted earnings before interest, taxes, depreciation, and amortization to range from break-even to $15 million. This stands in sharp contrast to the $18.2 million loss analysts had predicted, based on LSEG data. Additionally, Reddit expects its second-quarter revenue to be between $240 million and $255 million, surpassing analysts’ average projection of $223.8 million.
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