Reddit (RDDT) Stock Surges on Strong Q4 Results and Buyback News

TLDR

• Reddit posted Q4 earnings of $1.24 per share, crushing analyst estimates of 94 cents, with revenue hitting $726 million versus $666 million expected
• Ad revenue jumped 75% year-over-year to $690 million while daily active users grew 19% to 121.4 million
• The company announced a $1 billion share buyback program and ended 2025 with $2.48 billion in cash
• CFO Drew Vollero emphasized Reddit spent only $3 million on Q4 capex while competitors invest billions in AI infrastructure
• Shares climbed 5.3% in after-hours trading despite dropping 21% in the five sessions before earnings

Reddit delivered impressive fourth-quarter results Thursday that sent shares up 5.3% in after-hours trading. The social media platform reported adjusted earnings of $1.24 per share on revenue of $726 million.

Wall Street had expected just 94 cents per share on revenue of $666 million. The 32% earnings beat caught investors’ attention after a rough week for tech stocks.

Ad revenue drove the results, coming in at $690 million for the quarter. That crushed estimates of $626 million and represented a 75% increase from last year.

Reddit, Inc., RDDT

Daily active users reached 121.4 million in Q4, topping analyst forecasts of 120 million. The 19% year-over-year growth came primarily from international markets as Reddit expands language translations.

Big Buyback Announcement

Reddit unveiled a $1 billion share repurchase program for Class A common stock. The move demonstrates management’s confidence after a strong financial year.

Full-year 2025 revenue climbed 69% to $2.2 billion. Net income swung to $530 million from a loss in 2024.

The company ended the year with $2.48 billion in cash, cash equivalents and marketable securities. Gross margins stayed above 91% in Q4.

First-quarter revenue guidance came in between $595 million and $605 million. That range sits comfortably above Wall Street’s $577 million estimate.

Low AI Spending Stands Out

CFO Drew Vollero told Barron’s that Reddit is “getting the benefits of AI in our business, without the AI cost.” The comment highlighted a key difference from competitors.

Reddit’s Q4 capital expenditure totaled just $3 million. Other tech companies are spending hundreds of billions on AI infrastructure.

“You’re reading a lot about the other companies that are spending hundreds of billions of dollars in capex,” Vollero said. “Our capex in Q4 was $3 million.”

The timing proved perfect. Tech stocks had tumbled on concerns about AI replacing traditional information providers.

Reddit shares dropped 21% in the five trading days before earnings. Investors worried the company couldn’t compete with AI-powered alternatives.

Vollero pushed back on that narrative. He emphasized that human connection remains central to Reddit’s value proposition.

“The way that we think about AI here is that ultimately, human connection here is paramount,” he said. Reddit has its own AI chatbot called Reddit Answers but isn’t betting the farm on it.

IPO Success Story

Reddit went public on March 21, 2024 at $34 per share. Shares have surged 344% since the IPO despite recent volatility.

The stock has dropped 30% over the past 12 months. But Thursday’s results gave bulls fresh ammunition.

The most recent analyst rating on the stock is a Buy with a $197 price target. Reddit’s current market cap stands at $28.93 billion.

The post Reddit (RDDT) Stock Surges on Strong Q4 Results and Buyback News appeared first on Blockonomi.