Reddit shares rose greater than 12% on Friday after the corporate issued a stronger-than-expected quarterly revenue forecast, supported by growth in its promoting business and wider use of AI-driven ad tools.
If the gains hold, Reddit is about so as to add about US$3.4 billion in market value. The stock stays down around 36% for the yr, compared with declines of about 24% each for Snap and Pinterest.
AI ad tools support revenue forecast
The company forecast second-quarter revenue of US$715 million to US$725 million, above analysts’ estimates of US$711.6 million. It also expects adjusted earnings before interest, taxes, depreciation, and amortisation of US$285 million to US$295 million.
Reddit’s first-quarter revenue rose 69% from a yr earlier to US$663 million, beating estimates of US$610.9 million. Advertising revenue increased 74% to US$625 million. Daily lively unique visitors grew 17% to 126.8 million within the quarter. Global average revenue per user rose 44%.
Performance promoting accounted for greater than 60% of Reddit’s total ad revenue throughout the quarter, Chief Operating Officer Jen Wong told Reuters. Performance promoting is tied to measurable actions akin to purchases, app installs, or sign-ups.
The company’s lively advertiser count rose 75% year-on-year, based on Reuters. Wong said it was the third consecutive quarter by which Reddit recorded strong growth in lively advertisers.
Reddit leans on subreddit-based targeting
Reddit has been constructing its promoting platform around its interest-based communities, often called subreddits. Its ad system allows advertisers to position campaigns inside discussion threads linked to specific topics and user interests.
Reddit’s business materials say subreddits and interest groups provide intent signals because users discuss, compare, and review topics that advertisers can match to campaigns. The company says its targeting tools concentrate on communities and interest groups, fairly than only keywords.
Reddit’s ad products use discussion context, including the communities users visit, the topics they follow, and conversations around products, services, and categories.
Reddit says advertisers can use community and interest-based targeting to achieve users based on what they’re discussing or researching. The company presents those signals as a solution to align campaigns with subreddit-level activity, fairly than relying only on search terms or general audience segments.
The company has added AI tools to support campaign creation and management. These include an AI copywriter designed for Reddit-specific ads and an automatic creative asset cropper that adjusts images for various ad placements.
Reddit says its Max campaigns use Reddit Community Intelligence and AI to estimate impression value, automate targeting and budget allocation, and support bidding. The tool can even select mixtures of headlines, creative assets, and calls to motion for every impression.
The company says Max campaigns reduced cost per motion by 17% and increased results by 27% in split tests conducted between June and August 2025. The tests compared Max campaigns with standard campaigns over 21-day periods.
Max campaigns can be found for traffic and conversion campaigns. Reddit says some advertisers may not yet have access to the campaign type.
The tool includes automated targeting controls that allow advertisers to supply audience suggestions while the system identifies impressions with a better stated likelihood of conversion. It also distributes budget across the campaign and adjusts bids to minimise cost per result, based on Reddit.
Reddit says Max campaign reporting shows performance by audience persona, placement, device, location, creative asset, interest, and community.
The company’s AI creative tools are also geared toward adapting ads to Reddit’s format. Reddit says Max campaigns can generate headlines using Reddit-specific language, create thumbnails, and crop existing creative assets for various ad placements.
The results come as Reddit competes for promoting budgets with larger social media platforms, including Meta’s Instagram and Facebook. Wong told Reuters that Reddit is “still hiring and adding to our talent base.”
That hiring stance contrasts with recent workforce reductions at Meta, Snap, and Pinterest, which have cut 1000’s of jobs as they streamline operations and shift more spending toward artificial intelligence.
Analysts at B.Riley Securities said Reddit’s every day lively unique visitor growth and engagement should profit from efforts to enhance feed personalisation, narrow the gap between its iOS and Android app experiences, simplify onboarding, and strengthen marketing.
Morgan Stanley analysts said execution in areas akin to US user growth stays necessary for Reddit’s valuation, as it could display the platform’s relevance in a market increasingly shaped by generative AI and agentic technologies.
Reddit has also been expanding tools for advertisers to trace activity across communities. Reddit Pro Trends lets advertisers monitor keywords akin to brand names, products, competitors, and categories, and receive recommendations on communities where those terms are being discussed.
Reddit says Reddit Pro might be used to trace fast-moving topics, brand mentions, competitor discussions, and category-level conversations. The company says the tool may also help advertisers discover where products, services, or industry topics are being discussed across the platform.
Reddit says advertisers can use Reddit Pro to trace brand mentions, share of voice, search rating, referral traffic, comment engagement, and Reddit Ads performance data. The platform also combines organic and paid performance data through analytics and profile management features.
Reddit says advertisers can compare campaign activity with community engagement, referral traffic, and brand-related discussions outside paid placements.
Reddit’s archive of user discussions has also turn into a part of its broader business value. AI firms have been searching for large datasets to coach large language models, the technology utilized in chatbots akin to ChatGPT.
Following the outcomes, not less than seven brokerages raised their price targets on Reddit’s stock, based on LSEG data.
(Photo by Brett Jordan)
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