Reddit Reports Strong Q1 Earnings and User Growth, but Warns of Potential User Growth Slowdown

Reddit (RDDT) stock surged by as much as 18% after the company reported first-quarter 2025 earnings that significantly exceeded analyst expectations. The social media platform earned 13 cents per share on $392.4 million in sales, beating forecasts of 2 cents per share and $370 million in revenue. This marks a turnaround from a loss of $8.19 per share in Q1 2024, which was impacted by IPO-related costs. Year-over-year sales grew 61%, with total daily users reaching 108.1 million, a 31% increase. Reddit also provided optimistic guidance for Q2 2025, expecting $420 million in sales, above analyst estimates. Despite these strong results, Reddit’s leadership cautioned that user growth may experience some ‘bumps’ in the coming months, partly due to disruptions from Google’s AI search tests affecting referral traffic. CEO Steve Huffman emphasized the company’s resilience in challenging macroeconomic conditions and its efforts to improve product consistency and direct user engagement, including AI-powered features like ‘Reddit Answers.’ While the stock initially rallied strongly, gains moderated after concerns about decelerating daily active user growth were highlighted. Reddit’s shares have declined 27% year-to-date, following a massive post-IPO surge. Analysts remain cautiously optimistic, noting the company’s impressive quarter but acknowledging growth challenges ahead.