By Jaspreet Singh
(Reuters) -Reddit forecast fourth-quarter revenue above Wall Street estimates on Thursday, thanks to its artificial intelligence-powered advertising tools that are boosting marketing spending on the social media platform.
Shares of the company rose 9% in volatile after-hours trading.
The company’s AI-optimized ad platform helps advertisers to place targeted ads directly within relevant discussion threads across its interest-based communities, known as subreddits.
Reddit’s vast content library is one of its valuable assets at a time when AI companies are looking for data to train their large language modes, a technology behind chatbots such as ChatGPT, Gemini and Grok.
The company already licenses its data to Alphabet’s Google and Microsoft-backed OpenAI. It sued Perplexity AI and other three data scraping companies last week, alleging them of illegally collecting Reddit’s data.
“To continue its upward trajectory, the company must continue to protect its intellectual property – consumer conversations – from data scrapers,” said Jeremy Goldman, senior director of briefings at Emarketer.
Reddit operates in a crowded social media market, where dominant platforms such as TikTok and Meta are aggressively vying for new advertisers with their massive user-bases and AI-powered ad tools. Facebook-parent Meta reported upbeat third-quarter revenue on Wednesday.
The company’s U.S. daily active unique visitors’ (DAUq) growth has decelerated significantly in the third quarter. Global DAUq, however, rose 19% to 116 million, while its average revenue per user increased by 41%.
Reddit’s U.S. logged-in DAUq, who have created an account on the platform, grew by 7% from a year earlier in the quarter. But it slowed from the 11% year-over-year growth in the prior quarter.
Reddit expects fourth-quarter revenue to be between $655 million and $665 million, compared with analysts’ average estimate of $637.9 million, according to data compiled by LSEG.
The company forecast fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization to be between $275 million and $285 million, compared with estimates of $258.8 million.
Third-quarter revenue rose 68% to $585 million, beating estimates of $545.7 million. The company said its machine translation feature now supported 30 languages.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel)
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