Reddit on Tuesday reported a quarterly profit for the first time in its 20-year history. Shares of the company, popular for its user-run communities known as subreddits, rose more than 35% when markets opened the next day.
The company reported almost 100 million monthly users, a 47% increase from the previous year, and a profit of $29.9 million. Its revenue reached $348.4 million, a year-over-year increase of 68%, comfortably exceeding analyst expectations.
CEO Steve Huffman said the site’s new feature that translates English posts into French, Spanish, Portuguese, Italian and German using artificial intelligence drove the increase in users. Reddit plans to expand the feature to more languages in the coming months, according to Huffman’s letter to shareholders.
The company forecast revenue for the current quarter above Wall Street estimates, helped by its AI content licensing deals and strong digital advertising spending.
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The company’s content licensing deals with Alphabet’s Google and Microsoft-backed OpenAI to train its AI models have also boosted its revenue, analysts said. The social media platform also has deals with sports leagues like the National Basketball Association (NBA), which are helping the company bring more sports content to the platform and attract advertising dollars.
“Reddit’s AI partnerships with Google and OpenAI are a big plus right now, and while they were a big contributor to this quarter’s revenue, they’re like training wheels on a bicycle: They’re good for stability, but they will not drive long-term growth. growth,” said Jeremy Goldman, senior director of insights at Emarketer.