Reddit approaches its Q2 earnings report on July 30 with Wall Street eyeing revenue to hit $731 million, up 46.3% from last year, and GAAP earnings per share forecasted at 97 cents, more than doubling the 45 cents recorded in Q2 2023. Despite a 20% decline in its stock price this year following a sharp selloff in January, Reddit remains up over 400% since its IPO earlier in 2024.
Q1 set a high bar, with revenue jumping 69% to $663.4 million and net income reaching $204 million. Advertising revenue was the driving force, surging 74% to $625 million as ad impressions and pricing each climbed by about a third. Daily active users also grew, surpassing 126 million, with international audiences expanding faster than those in the US, raising hopes for future monetization abroad where revenue per user remains significantly lower compared to domestic figures.
The main cloud hanging over the earnings is an unresolved licensing conflict with Google. Negotiations over a $60 million annual deal have stalled, with Reddit pushing for a usage-based fee model due to concerns that Google’s AI summaries divert traffic away from Reddit’s platform. The issue became public last week after a report indicated Reddit considered cutting off Google’s content access, triggering a 9% stock drop in a single day.
Investors will be watching the earnings call closely for any update on this high-stakes dispute. A favorable resolution could unlock a meaningful boost in licensing revenue, while a breakdown might impact both direct revenue from licensing and organic search traffic to Reddit.
Meanwhile, advertising remains a bright spot, with Alphabet’s recent 14% ad revenue growth in Q2 signaling strength in the broader market. Ads made up 94% of Reddit’s Q1 revenue, underscoring its reliance on this segment but also reaffirming the current positive momentum. Reddit’s conservative guidance approach suggests it could again surpass expectations.
Shares traded near $179 ahead of the report, reflecting cautious optimism tempered by ongoing risks.
This material is for informational purposes only and does not constitute financial advice.
