$RDDT Reddit, Inc. recently secured an important court ruling affirming that its User Agreement legally binds AI companies like Anthropic in how they use Reddit’s data for training. This victory strengthens Reddit’s position to control and monetize its vast user-generated content, potentially boosting its data licensing revenue alongside its core advertising business. However, the company still faces uncertainty around ongoing negotiations with major players like Google, which could impact future search traffic and licensing income.
On the growth front, Reddit reported strong second-quarter results with revenue up 61% year-over-year to $805 million and adjusted EBITDA more than doubling to $343 million. Daily active users rose 18% to 130.3 million, driven largely by international growth, though logged-in U.S. user growth remains modest. CEO Steve Huffman emphasized efforts to convert mobile-web users into app users and improve the platform’s home feed, which currently lags behind state-of-the-art technology. This is part of Reddit’s strategy to become a primary destination rather than relying on search referrals, which have become volatile and less reliable.
Despite solid financials and bullish endorsements like Jim Cramer’s recent “Buy Reddit” call, the stock has struggled, trading near $153 and down about 43% over the past year. The market appears to be pricing in risks related to slower user growth and the challenge of replacing search-driven traffic with direct engagement. Reddit’s forward P/E ratio of nearly 29 and a PEG ratio below 1 reflect expectations of continued earnings growth, but investors will be watching upcoming quarterly data closely to see if the company can sustain its momentum and expand its direct user base.
With the U.S. markets closed tonight, investors can look forward to more updates when trading resumes tomorrow morning at 9:30 AM ET.
Did you know?
The stock market has historically rewarded companies that grow their user base steadily, but the quality of users—such as active, engaged customers—often matters more than just raw numbers when it comes to long-term profitability.
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