Reddit stock jumps as AI-powered ad tools draw cheers from Wall Street analysts

Reddit's stock price jumped 20% after the company announced much better-than-expected Quarter 2 results on Thursday. CNBC reported that the social media platform earned 45 cents per share, which was much higher than the 19 cents that experts predicted. The company made $500 million in revenue, beating the expected $426 million by a large margin. This was Reddit's biggest earnings surprise since it became a publicly traded company. The platform's revenue grew by 78% compared to the same time last year, showing strong business growth.

Reddit also made a profit of $89 million in the second quarter, a big change from losing $10 million during the same period last year. The company expects to make between $535 million and $545 million in the third quarter, which is much higher than Wall Street's prediction of $473 million. According to CNBC's coverage, Reddit now has 110.4 million daily active users worldwide, up 21% from last year and ahead of analyst estimates of 109 million users.

The strong results come as Reddit benefits from new artificial intelligence tools that help advertisers create better campaigns. Reuters highlighted how the company's AI-driven advertising strategy has won praise from Wall Street analysts and investors. Reddit's focus on understanding what users want through real community conversations puts the company in a good position to make more money from advertising. Financial expert Danni Hewson explained that being able to find exactly the right type of customer who might buy what advertisers are selling has made sites like Reddit very popular with companies looking to advertise their products.

The advertising industry is showing strength despite economic uncertainty from changing US trade policies. Reddit offers different types of ads, including ones that put brands directly into conversations on the platform's discussion boards called subreddits. Reuters noted that these diverse advertising options remain attractive to marketers who want to reach specific audiences through authentic community discussions.

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Reddit's success reflects a broader trend in the advertising industry, as Barron's observed in their coverage of the earnings announcement. The company's stock was soaring after earnings far exceeded what investors expected, with management providing better revenue estimates for the upcoming quarter. Reddit has been putting money into new products, search features, and expanding to other countries to make up for inconsistent user traffic from Google searches.

The company's CEO Steve Huffman mentioned that Reddit's AI-powered answer tool now has 6 million weekly users, up from 1 million in the previous quarter. This tool will expand globally and become more integrated into Reddit's main search experience. Barron's coverage emphasized how Reddit's results, along with similar strong performance from Google and Meta, show that the advertising sector is adapting well to new challenges. The company's ability to maintain steady user growth in the U.S. market, even with some challenges from Google traffic changes, demonstrates the value that both search engines and users place on Reddit's unique content and community discussions.