Shares of Reddit (NYSE: RDDT) soared to the skies on Wednesday. The news aggregator and social forum operator reported fantastic results in the third quarter of 2024, lighting a fire under the stock. Share prices rose as much as 43.1% on the news, settling down to a slightly milder 40% gain by noon ET. All told, the stock has gained 146% since joining the public stock market seven months ago.
Your average Wall Street analyst expected a loss of $0.23 per share on revenues near $313 million. Reddit blew those estimates out of the water. Sales jumped 68% year over year, landing at $348 million. The bottom line swung from a net loss of $0.13 to positive earnings of $0.16 per diluted share.
Reddit's active user counts surged 51% higher in the U.S. and 44% higher in international markets. Average revenue per user (ARPU) increased by mid-teen percentages around the world. These separate improvements added up to a 56% boost to worldwide ad sales.
Meanwhile, the smaller category of "other revenue" soared 547% higher. This segment largely accounts for Reddit's data licensing partnerships.
This report highlighted a couple of interesting developments. First and foremost, Reddit demonstrated a healthy market appetite for digital advertising services after a long downturn. Second, the data licensing business emerged as a high-octane growth driver.
On the earnings call, Reddit COO Jen Wong said that the company licenses its user data to support advertising data analytics, as well as training large language models (LLMs) and other artificial intelligence systems.
Other revenue still accounted for just 9.5% of Reddit's third-quarter sales, leaving plenty of room for continued growth. It remains to be seen how Reddit's users will react to making their writing available for LLM training purposes, but it's a robust growth vector at the moment.
Before you buy stock in Reddit, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Reddit wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $865,595!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of October 28, 2024
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.