Reddit just delivered a knockout quarter that's rewriting the narrative for social media profitability. The platform crushed fourth-quarter expectations with revenue surging 70% year-over-year to $726 million and net income exploding 255% to $252 million. But the real headline? A surprise $1 billion share buyback program that signals management's confidence in sustaining this momentum, even as a key growth metric raises questions about what happens when the Google traffic spigot slows down.
Reddit just proved that social media companies can actually make serious money without relying on the usual playbook. The company's fourth-quarter earnings demolished expectations Thursday, with revenue jumping 70% to $726 million and net income nearly tripling to $252 million compared to a year ago.
Shares initially spiked 6% in after-hours trading before pulling back to flat, a muted reaction that reveals Wall Street's lingering concerns about what's driving all this growth. The company's announcement of a $1 billion share buyback program - a bold move for a company that only went public in March 2024 - shows management thinks the market's missing the bigger picture.
The numbers tell a story of aggressive monetization. Reddit's earnings per share came in at $1.24, crushing the 94-cent consensus from LSEG. First-quarter guidance looks equally strong, with revenue expected between $595 million and $605 million versus Wall Street's $577 million estimate, according to CNBC's reporting. Adjusted earnings for Q1 are projected at $210 million to $220 million, ahead of StreetAccount's $203 million forecast.
But there's a tension beneath these stellar results. Reddit's U.S. logged-in daily active users - the metric investors care most about because these registered users are far more valuable to advertisers - grew just 5% year-over-year to 23 million. That's slower than the 7% growth the company posted in Q3, marking the sixth consecutive quarter of deceleration in this critical segment.
CEO Steve Huffman's response? Kill the metric entirely. In an investor letter, Huffman announced Reddit will "phase out reporting on logged-in and logged-out later this year," arguing the distinction no longer makes sense as the company blurs the line between user states. "As the industry evolves, how we think about our product and users must evolve too," Huffman wrote, citing features like instant personalization that engage users before they even create accounts.
