Reddit (NYSE:RDDT) delivered better-than-expected fourth-quarter results and issued stronger guidance, helped by momentum in its advertising business as new AI tools attract more marketers to the platform. The company also unveiled its first-ever share buyback program, authorising repurchases of up to $1 billion.
The social media group reported adjusted earnings of $1.24 per share, comfortably ahead of analyst forecasts of $0.93. Revenue surged 70% year on year to $726 million, beating expectations of roughly $667 million, supported by solid advertiser demand and higher user engagement. Shares in Reddit rose more than 7% in premarket trading on Friday.
Looking ahead, Reddit projected first-quarter 2026 revenue of between $595 million and $605 million, topping Wall Street estimates of about $577 million. It also guided for adjusted EBITDA of $210 million to $220 million, exceeding consensus forecasts and signalling improving profitability alongside strong sales growth.
Reddit’s advertising model allows brands to place ads directly within subreddit discussion threads, giving marketers access to highly engaged and niche communities. To make campaign creation easier, the company has introduced tools such as an AI copywriter that generates Reddit-specific ad copy and automated image formatting.
The platform is also ramping up competition with larger rivals, including Meta Platforms, by testing AI-powered “Max” campaigns. These automatically optimise bids to hit target cost-per-result goals while dynamically selecting creatives and headlines.
Analysts at Morgan Stanley, led by Brian Nowak, lifted their 2026 and 2027 revenue estimates by 1%. He said Reddit’s “breadth and depth of advertiser engagement speaks to continued long growth runway with strong pipeline of initiatives into ’26 (Reddit Max, Ads Manager, ML Models), but user onboarding progress [remains] key to multiple/LT monetization debate.”
User metrics were broadly strong during the quarter. Daily active unique visitors climbed 19% to 121.4 million, beating market expectations, while global average revenue per user rose 42%, reflecting improved monetisation across regions. However, higher-value logged-in daily active users reached 50.7 million, coming in below Street forecasts, according to Bank of America.
“Another solid quarter, but logged-in user growth still slowing,” the bank’s analyst Justin Post wrote in a note. He added that Reddit’s initiatives to enhance ad performance and scale automation are expected “to continue improve advertiser ROI, supporting market share gains, with the key question being potential for improvement in U.S. user growth from onboarding initiatives.”