Reddit Inc. (NASDAQ:RDDT) has reported stronger-than-expected sales growth, driven by expanded data licensing partnerships and investments in new advertising technology. For the current quarter, Reddit forecasts sales between $290 million and $310 million, surpassing analysts’ average estimate of $281.8 million.
In its quarterly report for the period ending June 30, Reddit achieved $281.2 million in revenue, exceeding the projected $253.7 million. Despite this positive performance, Reddit shares fell 4.5% in after-hours trading. Since its March IPO, the stock has gained 60%, but sustaining growth may be challenging in a competitive advertising landscape.
Analyst Daniel Konstantinovic from Emarketer notes that while Reddit has shown growth, its long-term challenge lies in convincing brands of its value in a crowded market. Reddit’s revenue is still significantly lower than competitors like Pinterest and Snap, and the platform struggles with average revenue per user.
Founded in 2005, Reddit has been heavily investing in advertising since 2018, adding new features such as shopping and video ads. Recent content partnerships with the NFL, NBA, and other sports leagues aim to attract more video advertisers. Reddit’s advertising revenue accounted for 98% of its $804 million in sales last year.
To diversify its revenue, Reddit is focusing on data licensing, projecting over $60 million in earnings this year from deals with companies like Alphabet Inc.’s Google and OpenAI. The company signed data licensing agreements worth $203 million for the next two to three years. Reddit’s user base grew to an average of 91.2 million daily active unique visitors in the quarter, a 51% increase year-over-year, surpassing expectations of 84.7 million.
Reddit’s shift towards new business lines may support its profitability goals. The company reported a net loss of $10.1 million in Q2, a significant improvement from a $41.1 million loss a year earlier. EBITDA was $39.5 million, reversing a loss of $35.4 million in the previous year.
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