Reddit posted a quarterly loss of more than $500 million on Tuesday in its first earnings report as a publicly traded company, largely due to stock-based compensation costs incurred during its initial public offering in March.
But the social media company has also seen solid revenue and user growth, highlighting the potential of its digital advertising business as people flock to the site. Last month, Google, Meta, and Snap also reported increased ad sales and double-digit revenue growth.
Reddit's revenue for the first quarter was $243 million, up 48% from $163.7 million in the year-ago period and beating Wall Street's expectations of $214 million, according to data compiled by FactSet. exceeded. Net loss was $575.1 million, compared with a loss of $60.9 million in the prior-year period. Stock-based compensation expense totaled $595.5 million (compared to $13.2 million in the prior year period). The number of daily active users skyrocketed to 82.7 million, an increase of 37% year-over-year.
The result sent Reddit shares soaring 17% to $58 in after-hours trading.
Steve Huffman, co-founder and CEO of Reddit, said the growth was due to the company's product updates and improved content recommendations to users.
“We've been saying for a long time that everyone on Reddit has a home, but we've gotten much better at helping people find homes,” he said. said in an interview. “We’ve reached a tipping point where things are going well for us.”
Reddit, which went public after more than 18 years as a private company, has become a kind of litmus test for tech initial public offerings. The company made a successful debut in a lukewarm IPO market, with its stock soaring 48% on its first day of trading, giving investors optimism. Reddit stock continues to trade above the company's IPO price of $34.
Reddit, which is basically a bulletin board where users come together to research and discuss topics of common interest, has spent years diversifying its core business of digital advertising. The company has agreements with Google and public relations services company Cision, and is in talks with other companies that want to license its vast conversational data for things such as building artificial intelligence technology. It is also working to promote e-commerce business.
Huffman said in a letter to shareholders on Tuesday that he expects to continue investing in AI technology to improve Reddit's content recommendations so people spend more time on the site. . He also plans to invest in search technology that allows people to find information from conversations across the site.
Reddit expects revenue for the quarter to be between $240 million and $255 million, which is above Wall Street expectations.
Users known as Redditors were wary of the company going public, worried that management would put profits first, and took to message boards and social media to vent their frustrations. But some of that fear seems to have subsided in recent weeks, Huffman said, calling the past month “relatively quiet.”
“We have a good foundation and are in a good position,” he said.
