Reddit RDDT is a community-led platform built around real-time, interest-based discussions across 100,000+ active communities. With advertising as its main revenue driver, Reddit’s growth hinges on expanding and retaining a deeply engaged user base as marketers seek high-conversion platforms.
Reddit’s user engagement has been gaining strength, with Daily Active Uniques (DAUq) and Weekly Active Uniques (WAUq) rising 31% year over year in the first quarter to 108.1 million and 401 million, respectively. The Zacks Consensus estimates for DAUq and WAUq are pegged at 110.15 million and 407.56 million, respectively, for second-quarter 2025. Average revenue per user rose 23% year over year to $3.63 in the reported quarter. The Zacks Consensus estimate for the same being pegged at $3.85 for the second quarter.
A series of platform enhancements is expected to act as a key catalyst. Reddit’s AI-powered feed ranking delivers more personalized content, which could improve session duration and retention. Reddit Answers and guided contribution flows are designed to promote active participation, while Community Intelligence tools are expected to sharpen ad targeting. Simultaneously, integrations with Meta and an improved onboarding experience are aimed at drawing more first-time users.
The ongoing engagement gains are expected to drive Reddit’s core ad business, which rose 61% year over year to $358.6 million in the first quarter. The Zacks Consensus estimate for ad revenues is pegged at $394.2 million for the second quarter. Sustained traction in user activity should support ad scaling efforts and reinforce Reddit’s broader growth trajectory.
RDDT Faces Stiff Competition
Reddit faces intense competition from Meta Platforms META and Nextdoor KIND in scaling ad revenues through user engagement.
Meta Platforms continues to lead with its AI-powered ad delivery and vast user base, enabling it to drive high ARPU and retention across platforms like Facebook and Instagram. With a strong focus on performance marketing, Meta Platforms overlaps with Reddit’s efforts to grow its ad efficiency and cohort engagement.
Nextdoor is expanding its localized performance ad model, boosting ARPU with context-aware placements. By reinforcing its community-driven approach, Nextdoor increasingly mirrors Reddit’s strategy of converting engagement into monetizable intent through conversational tools.
Reddit’s Share Price Performance, Valuation and Estimates
Reddit shares have declined 10.9% year to date, while the broader Zacks Computer & Technology sector and the Internet Software industry increased 7.5% and 14.1%, respectively.
RDDT's YTD Price Performance
Image Source: Zacks Investment Research
Reddit stock is trading at a premium, with a forward 12-month Price/Sales of 12.62X compared with the industry’s 5.72X. RDDT has a Value Score of F.
RDDT's Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Reddit’s 2025 earnings is pegged at $1.21 per share, unchanged over the past 30 days. The figure marks an improvement over 2024’s loss of $3.33 per share.
Reddit Inc. Price and Consensus
Reddit Inc. price-consensus-chart | Reddit Inc. Quote
Reddit currently carries a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
