Reddit (RDDT) Q4 earnings reports 2024

Reddit shares fell greater than 15% on Wednesday after the corporate reported weaker-than-expected user numbers in its fourth-quarter earnings.

Here’s how the corporate did compared with LSEG estimates:

• Earnings per share: 36 cents vs. 25 cents expected
• Revenue: $428 million vs. $405 million expected

Global day by day lively uniques, or DAUq, rose 39% from a 12 months earlier to a mean of 101.7 million for the fourth quarter. That trailed Wall Street estimates of 103.1 million.

A Google search algorithm change caused some “volatility” with user growth within the fourth quarter, but the corporate’s search-related traffic has since recovered in the primary quarter, Reddit CEO Steve Huffman said in a letter to shareholders.

“What happened wasn’t unusual — referrals from search fluctuate every so often, they usually primarily affect logged-out users,” Huffman wrote. “Our teams have navigated quite a few algorithm updates and did a wonderful job adapting to those latest changes effectively.”

Reddit has benefited from Google search updates and internal site improvements which have helped it gain a big amount of latest and returning users, which the social company refers to as logged-out users, over the past 12 months and a half. Reddit has said it’s working to persuade logged-out users to create accounts as logged-in users, that are more lucrative for its business.

Global logged-in DAUq grew 27% 12 months over 12 months to 46.1 million within the quarter, while global logged-out DAUq rose 51% to 55.6 million, the corporate said.

On the earnings call, Huffman said that Google’s algorithm changes happen about twice a 12 months, adding “not the primary, not the last.”

“It primarily affects logged-out users within the U.S.,” he said. “This one was particularly interesting because there really was a swing down, but then a recovery shortly thereafter happened right at the tip of the quarter.”

Despite missing on user number, the corporate otherwise reported a powerful quarter and provided optimistic guidance.

Reddit’s sales jumped 71% within the quarter from $250 million a 12 months earlier, the fastest growth rate for any quarter since 2022.

The corporate said first-quarter sales will likely be between $360 million and $370 million, ahead of the typical analyst estimate of $358 million.

Net income almost quadrupled to $71 million, or 36 cents a share, from $18.5 million, or breakeven on a per-share basis, a 12 months earlier. Reddit reported adjusted earnings of $154 million within the fourth quarter, topping analysts’ expectations of $128 million.

Reddit went public in march at $34 a share and has since seen its stock jump greater than sixfold to $216.47 as of Wednesday’s close. The shares were up 32% this 12 months prior to the after-hours selloff.

Reddit’s fourth-quarter earnings followed several other internet advertising tech corporations that recently reported their latest quarterly earnings.

Last week, Amazon reported fourth-quarter earnings, saying its internet advertising business recorded $17.29 billion, up 18% from a 12 months ago. In its fourth-quarter earnings, Pinterest said its sales within the period rose 18% 12 months over 12 months to $1.15 billion. 

Also last week, Alphabet said its Google promoting sales grew 11% from a 12 months prior to $72.46 billion, while YouTube ad revenue jumped 14% to $10.47 billion within the fourth quarter. Snap, meanwhile, reported fourth-quarter revenue growth of 14% 12 months over 12 months to $1.56 billion.

In late January, Meta said its revenue for the fourth quarter got here in at $48.39 billion, up 21% from the previous 12 months. Microsoft also reported that its news promoting sales increased 21% 12 months over 12 months in its latest quarterly earnings. Microsoft doesn’t disclose that unit’s quarterly sales figures.

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