Over the course of 2024, the S&P 500 index generated a return of 17.7%. That represented an above-average year for the benchmark index. By contrast, however, shares of Reddit (RDDT 7.70%), which debuted on the stock market in March 2024, advanced 262%, and are up another 18% so far in 2025.

I predict that in 2025, Reddit will once again beat the market. Here's why.

Image source: Getty Images.

Understanding Reddit's business model

First, let's get a grip on what Reddit does and why its shares rose over the last 10 months.

Reddit is a social media network -- a collection of message boards -- each based around a particular topic, attraction, or pursuit. Whether it's movies, cooking, gardening, car repair, or just about any other pursuit, there's likely a Reddit board dedicated to the topic.

That makes Reddit a valuable source of information on the web -- and that's why Reddit is one of the most-visited websites on the planet. Indeed, according to Similarweb, a platform that analyzes website traffic, Reddit ranks No. 8 overall in web traffic, right between Wikipedia and ChatGPT, and ahead of giants like Amazon and TikTok.

So, clearly, Reddit is a major player on the internet, but that alone is not why its stock is rocketing into the stratosphere. Instead, it comes down to that old driver of stock market success: growth.

Reddit generates revenue through ad sales. And since the company's platform is already based on interests, it's easy for the company (and its advertisers) to get the right ads in front of the right users.

What's ahead for Reddit and why its stock can beat the market again

Clearly, the company's business model is already paying off.

In its most recent quarter (for the three months ending on Sept. 30, 2024), Reddit reported revenue of $348 million, up an eye-popping 68% from a year earlier. Moreover, daily average users (DAUs) increased by 47% to 97 million.

Looking ahead, the company plans to keep that blistering growth going in two ways, both of which involve artificial intelligence (AI):

First, Reddit is hard at work translating all of its existing content -- decades worth of posts -- from English into other languages. The company started with French, Spanish, German, Italian, and Portuguese, with plans to roll out automatic, real-time translation for another 25 languages this year. In doing so, the company hopes to grow its international audience.

Second, Reddit's Corpus -- its enormous cache of data -- is itself an enormously valuable asset. That's because AI models need to be trained on tremendously large datasets. Therefore, it's likely that AI developers may look to license Reddit's Corpus to help train the next generation of AI models -- providing Reddit with another lucrative revenue stream in addition to advertising. Indeed, Alphabet, the parent company of Google, already inked a similar deal with Reddit last year.

Reddit has several paths to success. It is growing its user base, expanding into foreign markets, and ramping up its ad business. That alone will support its stock price over the next year. What's more, given the potential for lucrative partnerships with AI developers, Reddit stock appears positioned to beat the market.