What Happened?
Shares of online community and discussion platform Reddit (NYSE:RDDT) jumped 22.1% in the morning session after the company posted record-breaking second-quarter revenue and provided a strong forecast for the upcoming quarter. The social media platform's revenue jumped 78% year-over-year to $500 million, soundly beating Wall Street's expectations. Earnings per share landed at $0.45, more than doubling the forecasted amount. The company's user base also expanded, with daily active users growing 21% to 110.4 million. This performance was fueled by an 84% surge in advertising revenue and growth from data licensing deals. Looking ahead, Reddit projected third-quarter revenue well above consensus estimates, prompting analysts at Morgan Stanley to raise their price target on the stock.
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What Is The Market Telling Us
Reddit’s shares are extremely volatile and have had 60 moves greater than 5% over the last year. But moves this big are rare even for Reddit and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was about 21 hours ago when the stock gained 6.7% as investors reacted to a broader technology sector rally, which was fueled by strong earnings from artificial intelligence (AI) leaders Meta and Microsoft.
The broader technology sector received a boost after industry giants Meta and Microsoft announced impressive quarterly results. Their success signaled surging demand for artificial intelligence capabilities, creating a positive wave across the market. This optimism lifted Reddit's shares as investors looked ahead to the company's own second-quarter financial results, scheduled for release after the market closed. Analysts anticipated Reddit would report significant year-over-year revenue growth of around 50%, setting high expectations for the social media firm's performance.
Reddit is up 16.8% since the beginning of the year, but at $193.86 per share, it is still trading 13.9% below its 52-week high of $225.23 from February 2025. Investors who bought $1,000 worth of Reddit’s shares at the IPO in March 2024 would now be looking at an investment worth $3,843.
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