"American Tieba" Reddit's Q2 revenue surged by 78%, and its stock price soared by 19% after hours | Earnings Report Insights

After advertising giants like Google and Meta successively released strong financial reports, the market had already indicated a recovery in the digital advertising industry. However, Reddit's second-quarter financial report still exceeded everyone's expectations, driving its stock price up more than 10% in after-hours trading.

On Thursday, the American version of "Zhihu + Tieba," Reddit announced its latest second-quarter revenue of $500 million, a year-on-year increase of 78%, surpassing expectations by 17%, marking the largest positive surprise since its IPO. Profitability also saw a significant leap, with net profit reaching $89 million, compared to a loss of $10 million in the same period last year.

Here are the key points from the financial report:

• Financial Performance: The second-quarter results overwhelmingly beat market expectations. Revenue grew 78% year-on-year to $500 million, far exceeding the expected $426 million. Earnings per share (EPS) reached $0.45, more than double the expectations. Net profit turned around from a loss of $10 million in the same period last year (affected by IPO costs) to a profit of $89 million.
• Core Business Progress: Global daily active users reached 110.4 million, a year-on-year increase of 21%; average revenue per user globally was $4.53, exceeding expectations by 16%. The AI search tool Reddit Answers had 6 million weekly active users, a sixfold increase from the previous quarter.
• Development Strategy: The revenue guidance for the third quarter is $535 million to $545 million, exceeding expectations by about 15%. The focus is on core needs, pausing the development of user economy-related projects. This means that the vision of a gaming and trading platform similar to Roblox or Facebook Marketplace, as depicted in its IPO prospectus, has been shelved.

From a regional perspective, of the $500 million in revenue, the U.S. market contributed $409 million, far exceeding the expected $335 million, and remains its absolute growth engine. International market revenue contributed $91 million. After the earnings announcement, Reddit's stock price surged over 19%.

"Growth + Monetization" Dual-Engine Drive, Performance Overwhelmingly Beats Expectations

Reddit's second-quarter financial data is astonishing. The growth momentum comes from two core aspects:

• Robust Expansion of User Base: Global daily active users (DAU) grew 21% year-on-year to 110.4 million, slightly above analysts' expectations of 109 million.
• Significant Improvement in Monetization Efficiency: Global average revenue per user (ARPU) reached $4.53, far exceeding the expected $3.90. The optimization of Reddit's advertising system and the recovery of advertiser demand are producing significant effects.

It is noteworthy that the daily active users in "logged-out" status (61.1 million) grew by 24% year-on-year, outpacing the growth of "logged-in" users (49.3 million, a year-on-year increase of 17%) Analysis believes that this massive "tourist" traffic represents a huge potential pool for future conversion, and is also an important asset for its data authorization business.

In addition, Reddit's guidance for the third quarter has ignited market optimism. Revenue is expected to be between $535 million and $545 million, with adjusted EBITDA expected to be between $185 million and $195 million, both significantly exceeding Wall Street expectations.

Strategic Shift: Embracing AI, Bidding Farewell to the Old Dream of "User Economy"

For investors, the clarity of the company's strategic direction is more important than the impressive numbers. Reddit has conveyed two clear signals this quarter:

First, fully embracing AI and data monetization.

CEO Steve Huffman announced in a letter to shareholders that the weekly active users of its AI-driven Q&A tool "Reddit Answers" have surged from 1 million last quarter to 6 million, and plans to integrate it more deeply into the core search experience.

This aligns with the trend of the company's "other revenue" business, which includes data authorization, growing 24% year-on-year to $35 million. Although this revenue currently accounts for a small proportion, it is undoubtedly the next attractive "story" Reddit is telling the market—capitalizing on its vast, high-quality conversational data in the AI era.

In stark contrast, the company has clearly stated that it is "lowering the priority of several initiatives," including the construction of its "user economy."

Previously, in its IPO prospectus, Reddit detailed plans to build games and online marketplaces similar to Roblox or Facebook Marketplace. Now, this grand but vague vision has been decisively shelved.

Analysis suggests that management has chosen a more pragmatic and focused path—abandoning uncertain visionary explorations and concentrating all resources on the proven advertising business and the clearly promising data authorization business