Reddit Sees Q4 2024 Revenue Jump 71%, But Shares Crash On Tepid Guidance
Reddit (NYSE: RDDT) posted gains in revenue and margins for both the fourth quarter and full year 2024, yet its share price tumbled sharply following the release of results.
In Q4, total revenue reached $427.7 million, up 71% from $249.8 million in the same period last year. Advertising remained the dominant driver at $394.5 million, while “Other” revenue contributed $33.2 million. In geographical division, US market took the lion share at $347.7 million, also a jump from last year’s $204.4 million.
The revenue jump also led a swing to the operating income despite the inflated operating expenses at $374.8 million in Q4, up from $246.7 million last year. Operating income now stands at $52.9 million, a jump from $3.0 million in Q4 2023.
Net income rose to $71.0 million, or 16.6% of revenue, compared with $18.5 million in the prior-year quarter. Diluted earnings per share also came in above expectations at $0.36, supported by a gross margin of 92.6%, which was 420 basis points higher than a year earlier. Adjusted EBITDA saw a jump to $154.3 million from last year’s $23.2 million.
Full-year revenue grew 62% to $1.30 billion, but net losses widened substantially from $90.8 million in 2023 to $484.3 million in 2024. Much of that disparity stemmed from a surge in operating expenses, especially research and development, which more than doubled to $935.2 million. High stock-based compensation associated with the company’s initial public offering also elevated overall costs.
Examining the quarterly cash flow statements shows that Reddit produced $90.0 million in operating cash flow in the fourth quarter, flipping from a $17.4 million outflow a year ago. Free cash flow turned positive as well, reaching $89.2 million versus negative $22.0 million before.
Cash, cash equivalents, and marketable securities rose to $1.84 billion, putting current assets at $2.22 billion. Current liabilities were $176.0 million.
The company’s capital structure changed significantly when its convertible preferred stock converted into common stock following the IPO, explaining why shareholders’ equity grew to $2.13 billion from a deficit of $412.9 million in 2023.
Production output data, measured by daily active uniques, advanced 39% year-over-year to 101.7 million, compared to 73.2 million a year earlier, missing analyst estimates. Executives partly blamed a dip in search-traffic referrals caused by adjustments to Google’s algorithm, although management has emphasized that much of that traffic rebounded early in 2025.
In Q1 2025, the firm estimates that revenue will land in the range of $360 million to $370 million and adjusted EBITDA in the range of $80 million to $90 million.
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