Should Reddit's (RDDT) Surging Q3 Profits and AI Deals Change Investor Expectations?

• Reddit reported third-quarter 2025 earnings, revealing US$584.91 million in sales and US$162.66 million in net income, both significantly higher than the prior year, along with guidance for fourth-quarter revenue between US$655 million and US$665 million.
• An important takeaway from the results is Reddit's growing revenue diversification, with notable momentum driven not only by advertising but also from emerging AI licensing partnerships.
• We'll assess how Reddit's strong profitability and upbeat revenue guidance influence its investment narrative, especially in terms of sustained earnings growth.

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Reddit Investment Narrative Recap

To be a Reddit shareholder right now, you need to believe that its expanding ecosystem of user-generated communities and new revenue streams, particularly in AI licensing and diversified advertising, will drive sustainable monetization and growth. The company’s standout Q3 earnings and strong fourth-quarter outlook reinforce the near-term narrative around profit momentum but do not fully resolve the biggest risk: heavy reliance on digital advertising, which remains exposed to shifts in privacy regulations and broader economic tides.

Among recent announcements, Reddit’s Q4 2025 revenue guidance of US$655 million to US$665 million is especially relevant as it sets performance expectations in the wake of rapid growth in Q3. This signal will be closely watched by investors gauging whether the company can maintain its pace of growth as data licensing matures and the ad market evolves.

On the other hand, investors should be aware that while performance is trending up, the risk of overdependence on advertising still looms if...

Read the full narrative on Reddit (it's free!)

Reddit's narrative projects $3.8 billion revenue and $1.0 billion earnings by 2028. This requires 31.8% yearly revenue growth and a $783.7 million increase in earnings from the current $216.3 million.

Uncover how Reddit's forecasts yield a $228.50 fair value, a 9% upside to its current price.

Exploring Other Perspectives

Twenty-six Simply Wall St Community members placed Reddit’s fair value estimates between US$97 and US$317 per share. Even with strong recent results, reliance on ads still defines Reddit's fortunes; explore these contrasting views to see how opinions shift as growth catalysts unfold.

Explore 26 other fair value estimates on Reddit - why the stock might be worth less than half the current price!

Build Your Own Reddit Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Reddit research is our analysis highlighting 3 key rewards that could impact your investment decision.
• Our free Reddit research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Reddit's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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