Reddit posted a quarterly loss of more than $500 million in its first earnings report as a public company on Tuesday, largely due to stock-based compensation expenses incurred during its March IPO .
But the social media company also reported robust growth in revenue and user numbers, underscoring the potential of its digital advertising business as people flock to the site. Last month, Google, Meta and Instant also reported increased ad sales and double-digit revenue growth.
Reddit’s revenue was $243 million in the first quarter, up 48% from $163.7 million a year earlier and above Wall Street estimates of $214 million. dollars, according to data compiled by FactSet. The net loss was $575.1 million, compared to a loss of $60.9 million a year earlier. Stock-based compensation expense totaled $595.5 million, compared to $13.2 million a year earlier. The number of daily active users jumped to 82.7 million, an increase of 37% from the previous year.
The result sent Reddit shares up 17% to $58 in after-hours trading.
Steve Huffman, co-founder and chief executive of Reddit, attributed the growth to the company’s improvements to product updates and content recommendations to users.
“We’ve said for a long time that everyone has a home on Reddit, but we’ve done a much better job of helping them find it,” he said in an interview. “We have reached an inflection point where our work is working.”
Reddit, which went public after more than 18 years as a private company, has become something of a litmus test for tech IPOs. The company made a successful debut in what had been a tepid IPO market, with its shares up 48 percent on the first day of trading, giving investors reason to be optimistic. Reddit shares continue to trade above the company’s IPO price of $34.
Essentially a discussion board where users gather on forums to find and discuss interests they have in common, Reddit has spent years trying to diversify from its core digital advertising business. It has deals with Google and Cision, a public relations services company, and is in talks with other companies that want to license its large amounts of conversation data, for example to develop artificial intelligence technology . It also tried to boost e-commerce.
In a letter to shareholders Tuesday, Mr. Huffman said he plans to continue investing in AI technology to improve Reddit’s content recommendations so people spend more time on the site. It also plans to invest in search technology, which could help people find information from conversations that took place on the site.
Reddit expects revenue of between $240 million and $255 million for the current quarter, above Wall Street’s expectations.
Users, known as Redditors, were nervous about the company’s IPO, fearing that executives would prioritize profits, and had expressed their frustration on message boards and on Twitter. social networks. But some of that anxiety appears to have eased in recent weeks, said Mr. Huffman, who described the last month as “relatively calm.”
“We are in a good situation with good foundations to build on,” he said.
