Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Reddit Inc (NYSE:RDDT) achieved a 71% year-over-year revenue growth in Q4, marking a strong financial performance.
• The company reported GAAP profitability for the second consecutive quarter, with total revenue growing 3.5 times faster than total costs.
• International growth was robust, with a 46% increase in daily active users, highlighting Reddit's expanding global presence.
• Reddit's advertising business grew 60% year-over-year, driven by diverse industry participation and strong international ad revenue growth.
• The introduction of AI-powered tools like Reddit Answers and machine translation in multiple languages is enhancing user engagement and accessibility.

Negative Points

• Reddit Inc (NYSE:RDDT) experienced volatility due to a Google Search algorithm change, affecting traffic from search, particularly for logged-out users.
• Despite Q4 profitability, the company ended 2024 with a significant loss of $484 million, primarily due to a $595 million accounting charge related to stock-based compensation.
• The company faces challenges in maintaining and expanding profitability amidst fluctuating search engine referrals and evolving privacy regulations.
• There is a need for continued investment in infrastructure and hiring, which could impact cost management and profitability.
• Reddit's international user base is still underdeveloped compared to peers, with significant room for growth in non-US markets.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with OPRT.

Q: How focused is Reddit on developing new types of ads, and how could these potentially differentiate Reddit from other platforms? A: Jen, Reddit's COO, emphasized leveraging Reddit's unique community intelligence and engagement. They are enhancing formats like AMAs (Ask Me Anything) and exploring shopping and product optimization. Reddit aims to incorporate community signals into ads to provide more context, which can augment both brand and conversion performance.

Q: How confident is Reddit in maintaining or expanding profitability in 2025, given the major loss in 2024? A: Drew, Reddit's CFO, explained that the $484 million loss in 2024 was primarily due to a $595 million accounting charge related to stock-based compensation. Reddit has been GAAP profitable for the last three quarters, with strong revenue growth and expanding margins. The company is confident in its profitability trajectory for 2025.

Q: What are the early results and insights from the rollout of Reddit Answers, and how did the Google search algorithm change impact Reddit? A: Steve, Reddit's CEO, noted that Reddit Answers, launched in December, is promising, providing deep and compelling answers to a broad set of questions. The Google algorithm change primarily affected logged-out users, with no significant impact on revenue. Reddit has seen a recovery in search traffic and continues to grow in key areas.

Q: Can Reddit's search tools do more than Google, and how do you view the commercial relevance of these searches? A: Steve highlighted that Reddit's search focuses exclusively on Reddit content, offering annotated answers linked to specific comments. Jen added that about 40% of Reddit posts are inherently commercial, and Reddit Answers reveals recommendations, creating opportunities for monetization through high-intent searches.

Q: What initiatives are in place to convert logged-out users to logged-in users, and what are the advertising priorities for 2025? A: Steve mentioned improvements in the login process and onboarding, focusing on user interests to enhance retention. Jen outlined advertising priorities, including applying machine learning to brand optimization, improving measurement and creative optimization, and enhancing ease of use and performance for advertisers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.