Reddit shares rose more than 12% on Friday after the company issued a stronger-than-expected quarterly revenue forecast, supported by growth in its advertising business and wider use of AI-driven ad tools.
If the gains hold, Reddit is set to add about US$3.4 billion in market value. The stock remains down around 36% for the year, compared with declines of about 24% each for Snap and Pinterest.
AI ad tools support revenue forecast
The company forecast second-quarter revenue of US$715 million to US$725 million, above analysts’ estimates of US$711.6 million. It also expects adjusted earnings before interest, taxes, depreciation, and amortisation of US$285 million to US$295 million.
Reddit’s first-quarter revenue rose 69% from a year earlier to US$663 million, beating estimates of US$610.9 million. Advertising revenue increased 74% to US$625 million. Daily active unique visitors grew 17% to 126.8 million in the quarter. Global average revenue per user rose 44%.
Performance advertising accounted for more than 60% of Reddit’s total ad revenue during the quarter, Chief Operating Officer Jen Wong told Reuters. Performance advertising is tied to measurable actions such as purchases, app installs, or sign-ups.
The company’s active advertiser count rose 75% year-on-year, according to Reuters. Wong said it was the third consecutive quarter in which Reddit recorded strong growth in active advertisers.
Reddit leans on subreddit-based targeting
Reddit has been building its advertising platform around its interest-based communities, known as subreddits. Its ad system allows advertisers to place campaigns within discussion threads linked to specific topics and user interests.
Reddit’s business materials say subreddits and interest groups provide intent signals because users discuss, compare, and review topics that advertisers can match to campaigns. The company says its targeting tools focus on communities and interest groups, rather than only keywords.
Reddit’s ad products use discussion context, including the communities users visit, the topics they follow, and conversations around products, services, and categories.
Reddit says advertisers can use community and interest-based targeting to reach users based on what they are discussing or researching. The company presents those signals as a way to align campaigns with subreddit-level activity, rather than relying only on search terms or general audience segments.
The company has added AI tools to support campaign creation and management. These include an AI copywriter designed for Reddit-specific ads and an automatic creative asset cropper that adjusts images for different ad placements.
Reddit says its Max campaigns use Reddit Community Intelligence and AI to estimate impression value, automate targeting and budget allocation, and support bidding. The tool can also select combinations of headlines, creative assets, and calls to action for each impression.
The company says Max campaigns reduced cost per action by 17% and increased results by 27% in split tests conducted between June and August 2025. The tests compared Max campaigns with standard campaigns over 21-day periods.
Max campaigns are available for traffic and conversion campaigns. Reddit says some advertisers may not yet have access to the campaign type.
The tool includes automated targeting controls that allow advertisers to provide audience suggestions while the system identifies impressions with a higher stated likelihood of conversion. It also distributes budget across the campaign and adjusts bids to minimise cost per result, according to Reddit.
Reddit says Max campaign reporting shows performance by audience persona, placement, device, location, creative asset, interest, and community.
The company’s AI creative tools are also aimed at adapting ads to Reddit’s format. Reddit says Max campaigns can generate headlines using Reddit-specific language, create thumbnails, and crop existing creative assets for different ad placements.
The results come as Reddit competes for advertising budgets with larger social media platforms, including Meta’s Instagram and Facebook. Wong told Reuters that Reddit is “still hiring and adding to our talent base.”
That hiring stance contrasts with recent workforce reductions at Meta, Snap, and Pinterest, which have cut thousands of jobs as they streamline operations and shift more spending toward artificial intelligence.
Analysts at B.Riley Securities said Reddit’s daily active unique visitor growth and engagement should benefit from efforts to improve feed personalisation, narrow the gap between its iOS and Android app experiences, simplify onboarding, and strengthen marketing.
Morgan Stanley analysts said execution in areas such as US user growth remains important for Reddit’s valuation, as it would demonstrate the platform’s relevance in a market increasingly shaped by generative AI and agentic technologies.
Reddit has also been expanding tools for advertisers to track activity across communities. Reddit Pro Trends lets advertisers monitor keywords such as brand names, products, competitors, and categories, and receive recommendations on communities where those terms are being discussed.
Reddit says Reddit Pro can be used to track fast-moving topics, brand mentions, competitor discussions, and category-level conversations. The company says the tool can help advertisers identify where products, services, or industry topics are being discussed across the platform.
Reddit says advertisers can use Reddit Pro to track brand mentions, share of voice, search ranking, referral traffic, comment engagement, and Reddit Ads performance data. The platform also combines organic and paid performance data through analytics and profile management features.
Reddit says advertisers can compare campaign activity with community engagement, referral traffic, and brand-related discussions outside paid placements.
Reddit’s archive of user discussions has also become part of its broader business value. AI companies have been seeking large datasets to train large language models, the technology used in chatbots such as ChatGPT.
Following the results, at least seven brokerages raised their price targets on Reddit’s stock, according to LSEG data.
(Photo by Brett Jordan)
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