GoKawiilReddit CEO Steve Huffman stands on the floor of the New York Stock Exchange (NYSE) after ringing a bell on the floor setting the share price at $47 in its initial public offering (IPO) on March 21, 2024 in New York City.
Reddit reported second-quarter earnings on Thursday that beat on the top and the bottom lines, and the company issued guidance that sailed past expectations. But the company's shares sank after it revealed in an investor letter that "Search referrals were choppy," underscoring investor concerns about Reddit's reliance on Google to land new users.
Reddit shares sink 11% on 'choppy' search referrals
Here's how the company did compared with LSEG estimates:
Earnings per share: $1.25 vs. 95 cents expected
$1.25 vs. 95 cents expected Revenue: $805 million vs. $730 million expected
Sales for the second quarter rose 61% year-over-year from $500 million a year earlier, the company said in a statement. Net income climbed to $253 million, or $1.25 a share, from $89 million, or 45 cents per share, the previous year.
Third-quarter revenue should come in between $860 million to $870 million, the company said, while analysts were expecting $828 million. Reddit said adjusted earnings this quarter will be between $385 million and $395 million, topping Wall Street projections of $368 million.
Reddit's revenue rose more than 60% for an eighth straight quarter as the company's ad business continues to benefit from overseas expansion, a rush of new users and continued improvements to its online ad engine.
The results come a day after digital ad giant Meta reported a 28% increase in year-over-year revenue. That topped estimates, but the stock sank due to a weaker-than-expected forecast and dwindling cash flow tied to artificial intelligence investments.