Reddit's first year as a public company: Growth, losses, and a taste of Wall Street’s cold shoulder
Reddit’s inaugural year as a publicly traded company delivered robust financial results, but Wall Street remained unimpressed as a missed user growth target sent shares tumbling.
The social media platform reported its fourth-quarter and full-year 2024 results yesterday, showing a net income of $71 million for Q4, up from $18.5 million in the same period the previous year. Earnings per share came in at $0.36, exceeding analyst expectations.
Revenue for the quarter surged 71% to $428 million, while annual revenue reached $1.3 billion, reflecting a 62% increase. Advertising remained the dominant revenue driver, though content licensing deals with Google and OpenAI accounted for roughly 10% of total revenue.
Despite these strong numbers, Reddit’s global daily active unique users (DAU) grew by 39% to 101.7 million—falling short of Wall Street’s anticipated 103.3 million. This shortfall triggered a 15% decline in Reddit’s stock price during after-hours trading. While the stock has since rebounded slightly, it remains down approximately 8%.
CEO blames Google Algorithm change for user growth shortfall
On the earnings call, Reddit CEO Steve Huffman attributed the user growth miss to a Google search algorithm update, affecting search engine traffic.
“We did experience some volatility from Google Search triggered by a periodic algorithm change, but traffic from search has recovered so far in Q1 and we've regained momentum,” Huffman said. “These fluctuations are common and primarily affect logged-out users.”
Pressed for specifics on the algorithm change, Huffman declined to elaborate, stating he had “suspicions” but emphasized that such shifts are routine and did not impact revenue. He noted that the company has successfully converted many of these logged-out users into account holders, improving the onboarding experience to reduce friction in the sign-up process.
Annual losses explained
While Q4 painted a positive picture, Reddit’s full-year financials were less rosy at first glance, with a reported net loss of $484.3 million—up from $90.8 million in 2023. However, CFO Andrew Vollero attributed this primarily to a one-time $595 million stock-based compensation charge triggered by Reddit’s IPO. He clarified that $575 million of the losses occurred in Q1, describing it as an “isolated incident.”
“You can't expense that as a private company the way that we structured that stock, so we had all of those catch-up charges … that's really what drove the loss in 2024,” Vollero said. “The last three quarters, we were profitable on a cumulative basis.”
Uncertain guidance for 2025
Looking ahead, Reddit offered a conservative outlook. The company expects Q1 2025 revenue between $360 million and $370 million, with adjusted EBITDA of $80-$90 million. This is a noticeable drop from Q4 2024’s revenue of $427.7 million and EBITDA of $154 million.
Vollero noted that Reddit is only providing guidance for the next quarter, citing limited revenue visibility beyond that timeframe.
“We're still at a place where we're within the quarter trying to earn about half of our business … so it's hard for us to give a full-year guide,” he explained.
