Reddit’s stock experienced a remarkable surge of 42% on Wednesday, closing at an all-time high of $116.03 per share following a stellar earnings report that exceeded Wall Street expectations. The social media platform reported net income of $29.9 million, dramatically surpassing analyst predictions of an $8.8 million loss and marking only the third profitable quarter in the company’s history.
Revenue jumped an impressive 68% year-over-year to $348.4 million, with a significant portion of this growth attributed to Reddit’s strategic AI licensing agreements with tech giants OpenAI and Google. These deals, which allow AI companies to train their models on Reddit’s vast user-generated content, generated $33.2 million in “other revenue” during the third quarter—a staggering 547% increase year-over-year. This revenue category now represents over 9% of Reddit’s total revenue, up from less than 1% just a year ago.
CEO Steve Huffman has positioned Reddit as a key player in what he describes as an “arms race” for AI training data. The platform’s extensive collection of authentic human conversations and discussions makes it particularly valuable for training large language models. Beyond licensing deals, Reddit is actively innovating with AI technology itself, particularly through machine translation features currently being piloted in French.
According to Huffman, these AI-driven translation capabilities are already showing impressive results. “This quarter, machine translation drove four times more users than last quarter,” he revealed during the earnings call, announcing plans to expand the feature to over 30 countries throughout 2025.
The company’s user growth has been exceptional, adding over 24 million daily active users in just the first three quarters of 2024—already exceeding the 15.6 million users added during all of 2023. This surge in user engagement has provided a substantial boost to Reddit’s advertising business, with advertising revenue forecast to surpass $1 billion for the first time this year.
Deutsche Bank analysts praised the results, noting that “Revenue beat street expectations by 11%, dispelling fears around user growth sustainability, while displaying improved monetization via ad product innovation and AI-driven enhancements.” The firm raised its price target from $85 to $115, citing Reddit’s planned relaunch of its Search tool with generative AI capabilities as another potential growth driver. Analyst consensus for 2025 profits has jumped dramatically from $17.5 million to $113 million, reflecting newfound confidence in Reddit’s AI-powered business model.
Key Quotes
This quarter, machine translation drove four times more users than last quarter, and based on the success we’ve seen so far, we plan to expand machine translation to over 30 countries through 2025
CEO Steve Huffman shared this during the earnings call, highlighting how Reddit’s AI-powered translation features are successfully driving user growth and explaining the company’s ambitious international expansion plans.
Revenue beat street expectations by 11%, dispelling fears around user growth sustainability, while displaying improved monetization via ad product innovation and AI-driven enhancements
Deutsche Bank analysts provided this assessment in their Wednesday note, emphasizing how Reddit’s AI initiatives are addressing investor concerns and driving both user acquisition and revenue growth.
Looking forward, Reddit is expected to re-launch its Search tool in the coming quarters, which given the success of competing Gen AI-driven search tools, could drive another lever in monetization growth
Deutsche Bank analysts highlighted this upcoming feature as they raised their price target from $85 to $115, suggesting that AI-powered search capabilities could unlock additional revenue streams for the platform.
Our Take
Reddit’s earnings reveal a fascinating paradox in the AI economy: the company is simultaneously fueling the AI revolution while being transformed by it. The 547% growth in licensing revenue demonstrates that quality training data has become as valuable as the AI models themselves—perhaps even more so, given the scarcity of authentic, diverse human content.
What’s particularly noteworthy is Reddit’s dual strategy of monetizing its data externally while deploying AI internally to drive growth. The machine translation success story shows that AI isn’t just a revenue source but a powerful tool for international expansion and user acquisition. This positions Reddit uniquely in the AI ecosystem—not just as a data supplier, but as an AI innovator in its own right.
The market’s enthusiastic response suggests investors are beginning to recognize that platforms controlling valuable training data may have more sustainable competitive advantages than previously thought, especially as AI companies face increasing scrutiny over data sourcing and quality.
Why This Matters
Reddit’s earnings report represents a pivotal moment in the evolving AI data economy, demonstrating how platforms with valuable user-generated content can monetize their data through licensing agreements with AI companies. The 547% year-over-year growth in licensing revenue validates the business model of selling training data to AI developers, potentially encouraging other social media platforms to pursue similar strategies.
This development highlights the critical importance of high-quality training data in the competitive AI landscape. As AI companies race to develop more sophisticated models, access to authentic human conversations and diverse perspectives becomes increasingly valuable. Reddit’s success suggests that platforms hosting genuine user interactions may have a significant competitive advantage in the AI era.
Moreover, Reddit’s own implementation of AI features like machine translation demonstrates how companies can simultaneously supply data to AI developers while leveraging AI to enhance their own products. This dual approach—monetizing data externally while improving user experience internally—could become a template for other content platforms navigating the AI revolution. The stock market’s enthusiastic response signals strong investor confidence in AI-driven business models and the long-term value of quality training data.
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