Reddit announces solid sales performance and provides positive outlook.

Reddit reported first-quarter revenue on Thursday that exceeded Wall Street expectations and provided better-than-anticipated guidance. The stock initially surged by as much as 19% in after-hours trading but settled around 5% after executives discussed the volatile economy and challenges related to Google search.

Here’s how the company performed in comparison to LSEG estimates:

• Earnings per share: 13 cents vs. 2 cents expected
• Revenue: $392 million vs. $370 million expected

Revenue increased by 61% from $243 million a year earlier. Net income was $26.2 million, or 13 cents a share, compared to a loss of $575.1 million, or $8.19 a share, a year ago due to costs associated with its IPO.

Reddit projected second-quarter sales to range between $410 million and $430 million, surpassing Wall Street’s expectations of $396 million. In a letter to investors regarding the ongoing trade dispute between the U.S. and China, Reddit stated it is “well-positioned to meet this moment.”

CEO Steve Huffman remarked, “Ever-shifting macro environments like these create both challenges and opportunities. We’ve grown through challenging times before — people need connection and information just as much in uncertain times.”

Operating Chief Jen Wong acknowledged the sluggish economy on the earnings call, noting that while “there’s a lot of uncertainty in the market,” it has been “mostly business as usual.” She mentioned, “We’re staying close to our customers to help them navigate the volatility by sharing insights on consumer trends that inform their strategy based on observations from Reddit.”

The company’s global daily active uniques, or DAUq, surged 31% year over year to 108.1 million in the first quarter, exceeding analysts’ expectations of 107.3 million. Reddit has benefited significantly from Google search changes and site improvements, leading to an increase in both new and returning users. The focus on updates has encouraged logged-out users to create accounts, making them more valuable to advertisers.

For the first quarter, the number of global logged-in DAUq rose 23% year over year to 48.7 million, while global logged-out DAUq increased by 38% to 59.4 million. In February, Reddit noted that a Google search algorithm change temporarily impacted user growth during the fourth quarter, but search-driven traffic rebounded in the first quarter.

Huffman stated on the earnings call that Reddit’s search-derived traffic might be “bumpier than usual” in the near term, as “the search ecosystem is under heavy construction.” He assured that short-term fluctuations do not affect the company’s long-term strategy or opportunities, emphasizing that Reddit is “in control of our own destiny.”

Huffman also pointed out that the online search market is being influenced by large language models, or LLMs, used by companies to summarize web data. Reddit’s own AI-powered service, Reddit Answers, currently has 1 million weekly active uniques, according to the company.

While some users may prefer LLM-powered tools for “annotated sterile answers from AI,” Huffman emphasized that Reddit’s unique user-created content, featuring “subjective, authentic, messy, multiple viewpoints,” will help the company stand out.

Across the online advertising landscape, companies are noting the potential impact of economic shifts. Meta shares rose on Thursday after the company posted first-quarter earnings that exceeded expectations. However, its advertising sales in the Asia-Pacific region fell short of estimates.

Susan Li, Meta’s finance chief, commented that “Asia-based e-commerce exporters” have reduced their digital ad spending likely due to a trade loophole ending. Snap also reported experiencing headwinds at the beginning of the current quarter and declined to provide guidance amid macroeconomic uncertainties.

Alphabet reported first-quarter earnings last week, indicating that Google advertising sales increased by 8.5% year over year to $66.89 billion, while YouTube ad sales rose by 10% to $8.93 billion. Pinterest is set to report earnings on May 8.

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