After becoming a publicly traded company following an initial public offering (IPO) in March 2024, Reddit has reported its first quarterly profit. This week, the company’s stock price experienced a significant increase, rising by over 35%.
The company achieved remarkable growth, reporting a 47% increase in monthly users to nearly 100 million. Revenue surged 68% year-over-year to $348.4 million, surpassing analyst forecasts. Impressively, the company also recorded a profit of $29.9 million. Prior to its public listing, Reddit achieved profitability in both 2021 and 2023.
Reddit is popular for its users generated content (UGC) forums in the world. Its communities, known as subreddits, allow users to coalesce around a specific topic.
AI Key to Reddit Profits
In February, the social media platform struck a deal with Google to make its content available for training the search engine’s artificial intelligence models. The contract with Alphabet-owned Google is reported to be worth about $60 million per year. Reddit also has a deal with Microsoft-backed OpenAI for training their AI models. Market analysts observe that the AI deals have been key in boosting the quarterly revenues.
CEO Steve Huffman attributed the surge in user growth to the introduction of a new AI-powered translation feature. This feature enables English posts to be translated into French, Spanish, Portuguese, Italian, and German. Huffman’s letter to shareholders indicates that Reddit plans to expand the language support for this feature in the near future.
COO Jennifer Wong highlighted the company’s use of generative AI, including its application in creating “Reddity headlines.” She also emphasized the significance of the Memorable AI acquisition and its creativity on performance and optimize advertising efforts.
“We want to take that and integrate into our ad stack,” she said. “And the next step would be having those insights tied to a gen AI capability to actually do the work based on those insights. It’s early in that we just acquired them, and we’re integrating them into our asset, but we do see a very fulsome and exciting road map related to ad creative in terms of gen AI.”
