Reddit Inc. (NYSE: RDDT) has released its fourth-quarter and full-year 2024 financial results, showcasing impressive revenue growth but facing setbacks in user engagement. While the company exceeded earnings expectations, a miss in user growth estimates led to a significant 15% drop in stock price during after-hours trading.
Revenue and Earnings Beat Expectations
Reddit reported Q4 2024 total revenue of $427.7 million, marking a 71% year-over-year increase. The company's advertising business saw strong momentum, with ad revenue growing by 60% to $394.5 million.
Net income stood at $71 million, up from $18.5 million in the same period last year. Adjusted earnings per share (EPS) reached 36 cents, surpassing Wall Street's forecast of 25 cents.
For full-year 2024, Reddit’s revenue totaled $1.3 billion, reflecting robust ad sales and increased monetization efforts on the platform.
User Growth Misses Expectations
Despite the strong financial performance, Reddit's daily active unique users (DAUq) reached 101.7 million, a 39% year-over-year increase but below analysts' expectations of 103.1 million.
Reddit CEO Steve Huffman attributed this shortfall to a Google Search algorithm update, which affected the visibility of Reddit content for non-logged-in users. However, he noted that traffic from search has since rebounded in Q1 2025, signaling a potential recovery.
Stock Reaction and Market Concerns
Following the earnings report, Reddit’s stock plunged 15% in after-hours trading, reflecting investor disappointment over the user growth slowdown. Analysts believe that while revenue growth is promising, sustained user engagement is critical for long-term ad revenue stability.
Strategic Moves: Financial Data Partnership
In a major announcement, Reddit unveiled a partnership with Intercontinental Exchange Inc. (ICE), the parent company of the New York Stock Exchange (NYSE). The collaboration will focus on developing financial analytics products, leveraging Reddit’s vast user-generated content to provide insights for investors and financial institutions.
Future Outlook
Looking ahead, Reddit forecasts Q1 2025 revenue between $360 million and $370 million, exceeding last year’s $243 million and surpassing analyst expectations.
The company remains optimistic about advertising growth, expanding its Reddit Ads platform, and exploring new revenue streams through AI-driven content discovery.
While investors remain cautious about user engagement challenges, Reddit’s strategic initiatives and strong financials indicate long-term growth potential