Reddit Reports Record User Traffic in First Earnings Report After Going Public

San Francisco, US-based social media Reddit has reported record user traffic in its first earning report after it went public. The shares of Reddit have surged more than 15% following the announcement. 

As per the report, Reddit's user traffic has reached a record high as daily active unique users on the platform increased by 37% to 82.7 million.

Let's talk numbers:
 

• Revenue grew 48% year-over-year (YoY) to $243.0 million.
   
• Ad Revenue increased 39% YoY to $222.7 million.
   
• Net loss was $575.1 million or $8.19 per share compared to $60.9 million or 1.05 per share in Q1 2023. 
   
• Operating cash flow was $32.1 million, an improvement of $28.0 million from the prior year. 
   
• Free Cash Flow was $29.2 million.
   
• Capital expenditures were $2.9 million.

“It was a strong start to the year and a milestone quarter for Reddit and our communities as we debuted as a public company,” said Reddit co-founder and CEO Steve Huffman. 

Did you know? Reddit was founded in 2005 by Steve Huffman, Alexis Ohanian, and Aaron Swartz. Swartz is no more.

The company generates its revenue through advertisements and premium memberships to its users, also known as Redditors.

Reddit Shares Soar 15%

Reddit had confidentially filed for an initial public offering (IPO) in December 2021 and had expected to get listed within the next few months.

However, the company refrained from proceeding with it due to a volatile equity market throughout 2022-23.

When the company finally launched its IPO in March 2024, it was priced at $34 per share. The company was valued at around $6.5 billion at that point of time.

Key Highlight: Reddit's shares surged more than 15% following the announcement and even crossed past $58 yesterday.

Source: Yahoo Finance/Reddit

Reddit was trading at $49.4 at press time.
 

What Next?

Reddit hosted an earnings conference call following the results.

Let's have a quick look at the main updates from the call:

• Huffman indicated that this year, Reddit will focus on becoming "faster, easier to use, and safer" as "speed equals retention" and "retention equals growth."

   

• The company will rely on its investments in machine learning (ML) and artificial intelligence (AI) to improve "relevance, engagement, and moderation" on the platform. 

   

• The company had earlier indicated licensing the platform's data for AI training, though Hoffman underlined during the call that the project is "still early in its monetisation journey."
   
• For now, data licensing got listed under "other revenue" in the latest report, accounting for $20 million during Q1.
  
   
• As far as AI is concerned, Reddit is seeking not only to leverage the inherent market potential of the technology, but also the market requirement for human-generated content on its platform in the face of automated content.
  
   
• International revenue accounted for only 18% of Reddit's total revenue this quarter. The company is seeking to utilise machine translation for translating the content on its platform from English to other languages.
  
   
• Hoffman informed that Reddit is making use of large language models (LLMs) for translation at human level quality. The platform is currently testing its French translations, with Spanish being next in line. 

The report mentioned that Reddit expects a revenue in the range of $240 million - $255 million during the second quarter of 2024.

We will be keeping a close eye on the company's earnings report during July, and see if it will be meeting the set target.