Reddit (RDDT) Stock Falls 15% After Weak User Growth in Q4 Earnings Report
Reddit shares (RDDT stock) fell more than 15% on Wednesday after the company reported weaker-than-expected user numbers in its fourth-quarter earnings report.
Here’s how Reddit stock performed compared with LSEG estimates:
- Earnings per share: 36 cents vs. 25 cents expected
- Revenue: $428 million vs. $405 million expected
- Global daily active uniques (DAUq) rose 39% year over year to an average of 101.7 million for the fourth quarter, missing Wall Street estimates of 103.1 million.
A Google search algorithm change caused some "volatility" with user growth in the fourth quarter, but the company’s search-related traffic has since recovered in the first quarter, Reddit CEO Steve Huffman said in a letter to shareholders.
“What happened wasn’t unusual — referrals from search fluctuate from time to time, and they primarily affect logged-out users,” Huffman wrote. “Our teams have navigated numerous algorithm updates and did an excellent job adapting to these latest changes effectively.”
Reddit earnings have been impacted by fluctuations in Google search algorithms, but internal site improvements have helped the platform attract a significant number of new and returning users. The company is working on converting logged-out users into logged-in users, which are more valuable for its business.
Key Insights from Reddit Earnings Report
- Global logged-in DAUq grew 27% year over year to 46.1 million in Q4.
- Global logged-out DAUq increased 51% to 55.6 million.
- Reddit stock earnings report revealed that first-quarter sales are expected to be between $360 million and $370 million, exceeding analyst estimates of $358 million.
- Net income surged to $71 million, or 36 cents per share, from $18.5 million, or breakeven, a year earlier.
- Adjusted earnings were $154 million, surpassing analyst expectations of $128 million.
Despite missing user growth estimates, Reddit reported strong financial performance and provided optimistic guidance for the next quarter. The company’s sales grew 71% in Q4, the fastest rate since 2022.
RDDT Stock Performance
Reddit went public in March at $34 per share, and its stock has since soared more than sixfold to $216.47 as of Wednesday’s close. Before the after-hours selloff, RDDT was up 32% in 2024.
Industry Comparisons
Reddit's fourth-quarter earnings report follows similar reports from other major advertising tech companies:
- Amazon’s online advertising business recorded $17.29 billion in Q4, up 18% year over year.
- Pinterest reported Q4 sales of $1.15 billion, up 18% from a year ago.
- Alphabet’s Google ad revenue increased 11% to $72.46 billion, while YouTube ad revenue rose 14% to $10.47 billion.
- Snap's revenue grew 14% year over year to $1.56 billion in Q4.
- Meta reported Q4 revenue of $48.39 billion, a 21% increase from the previous year.
- Microsoft’s advertising sales also grew 21% year over year, though the company does not disclose specific figures.
Despite some fluctuations in user numbers, Reddit earnings show strong financial growth and increased ad revenue, making RDDT stock a key player in the online advertising market.
