What You Need To Know Ahead of Reddit’s First Earnings Report Since Its IPO

Key Takeaways

• Reddit will announce its first-quarter results on Tuesday after the bell, in its first quarterly earnings report since the social media company started trading publicly in March.
• The company’s financials could offer more insight into the platform’s monetization efforts.
• Analysts expect Reddit to report strong average daily unique user numbers, showcasing the platform’s engaged user base.
• Reddit could also provide investors details about its growth strategy, specifically for advertising and data licensing for artificial intelligence training.

Reddit (RDDT) is set to announce on Tuesday its first quarterly earnings since the social media company made its trading debut on the New York Stock Exchange (NYSE) in March.

Securities and Exchange Commission (SEC) filings show Reddit’s 2023 revenue was $804 million, representing 21% growth from 2022’s $666.7 million. Reddit’s net loss was $90.8 million in 2023, narrowing from $158.6 million the previous year.

For the fourth quarter of 2023, Reddit said its revenue came in at $249.8 million, up from $207.5 million in the third quarter and $200.4 million in the fourth quarter of 2022, suggesting Reddit’s recent revenue trajectory has been one characterized by growth. However, Reddit also saw its revenue decline in first quarter of 2023 from the fourth quarter of 2024 as well as the first quarter of 2022 from the fourth quarter of 2021, in what could point to seasonal weakness in the first quarter.

Key Metric: Average Daily Unique User Count

Reddit offers investors a look into its user engagement by providing quarterly averages for daily unique user (DAUq) counts. Reddit records quarterly DAUq numbers for logged-in users and those accessing the platform’s content while logged out.

Raymond James analysts indicated they expect DAUq to be a “positive standout” for Reddit. They projected the company will report 38.5 million logged-in DAUq in the first quarter, up from 36.4 million in the final quarter of 2023 and the 31.1 million recorded in the year-ago period.

JPMorgan analysts, who wrote that they “remain on the sidelines” in part waiting for “greater confidence in DAUq trajectory over time,” said that they expect “strong 20%+ Y/Y DAUq growth, in line with recent levels, but we recognize growth will likely decelerate through 2H on tougher comps and as the user base grows larger.”

Business Spotlight: Advertising and Data Licensing Opportunities

When filing for its initial public offering (IPO), Reddit disclosed that it was advertising and licensing its data for artificial intelligence (AI) training.

Bank of America analysts called Reddit a “senior” social company that is “still early in advertising and data license monetization.”

JPMorgan analysts said that “Reddit captures a hard-to-reach audience that’s highly engaged,” noting “the company’s corpus of historical information could represent a compelling source for LLM (large language model) training.”

The analysts estimated “ad revenue growth of +21% Y/Y & expectations may be even higher” for the first quarter. Reddit’s first-quarter earnings report could help strengthen investor sentiment about its growth prospects.

Reddit’s stock price at $46.64 as of Friday’s close was up about 37% from its IPO price of $34.

Read the original article on Investopedia.