Reddit Beats Estimates In Q2 2024 As Massive User Growth Fuels 54% Revenue Spike
In its second quarterly report since going public, Reddit (NYSE: RDDT) reported substantial growth in user engagement and revenue. The social media platform’s performance exceeded Wall Street expectations, signaling resilience and strategic prowess in an increasingly competitive landscape.
Reddit’s revenue for the second quarter soared to $281.2 million, a 54% increase from the previous year and well above the analyst forecast of $253.6 million. The company’s net loss narrowed considerably to $10.1 million, down from $41.1 million in the same quarter last year. This improvement translated to a loss per share of $0.06, outperforming expectations of a $0.33 loss per share.
User engagement has been a key driver of Reddit’s robust financial results. The platform’s daily active users (DAUs) increased by 51% year-over-year to reach 91.2 million. Even more striking was the 57% rise in weekly active users (WAUs), which climbed to 342.3 million.
Reddit’s advertising revenue, a significant part of its financial structure, grew by 41% year-over-year, totaling $253.1 million, reflecting a broader recovery in the digital advertising market, which had been hit hard in 2022 due to inflation and economic uncertainties.
Furthermore, Reddit’s “other revenue” segment, including data licensing, saw an extraordinary increase of 691%, reaching $28.1 million. This surge underscores Reddit’s successful efforts to diversify its revenue streams, particularly through data monetization strategies.
Reddit has made strategic investments in technology to enhance its platform and advertising products. Notably, the acquisition of Memorable AI is set to boost generative AI capabilities for Reddit’s ad partners, promising improved returns on ad spend.
The company has also taken steps to maximize the value of its unique data. By increasing the price of API access and entering into data-sharing agreements with major firms like Google, Reddit aims to protect and monetize its data assets.
Reddit’s gross margin improved to 89.5%, up 530 basis points from the previous year. This enhancement points to increased operational efficiency and effective cost management. The company’s operating cash flow also showed a significant turnaround, reaching $28.4 million, an improvement of $82.5 million from the previous year.
The second quarter also saw Reddit improve its free cash flow to $27.2 million, compared to a negative $54.9 million in the prior year. Capital expenditures were kept minimal at $1.2 million.
For the third quarter of 2024, Reddit projects revenue between $290 million and $310 million, with an adjusted EBITDA expected to range from $40 million to $60 million.
Despite the positive earnings report, Reddit’s stock experienced a modest increase of 0.4% in after-hours trading.
Reddit last traded at $54.42 on the NYSE.
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