reddit stock

Reddit Stock Soars After Strong Earnings: What’s Driving the Surge?

When Reddit (NYSE: RDDT) went public earlier this year, many investors wondered if the social media giant—known more for memes and online communities than financial stability—could deliver the kind of consistent performance Wall Street demands. Fast forward to late October 2025, and the answer is a resounding yes.

Reddit’s Q3 2025 earnings report sent its stock soaring, beating analyst expectations on both revenue and profitability. The platform also reported strong growth in domestic daily active users (DAUs), a key metric for any digital platform. But beyond the numbers, what’s really driving this momentum? And more importantly, what does it mean for Canadian investors watching from north of the border?

Let’s break down the story behind Reddit’s recent stock surge—and why it matters.

Recent Updates: Earnings Beat, AI Deals, and a CEO Who’s Playing the Long Game

The latest chapter in Reddit’s financial journey unfolded on October 30, 2025, when the company released its third-quarter earnings results. According to reports from CNBC and The Globe and Mail, Reddit crushed expectations with 68% year-over-year revenue growth, reaching $420 million—well above the $385 million Wall Street had projected.

Even more impressive? The company reported adjusted earnings per share (EPS) of $1.12, surpassing the estimated $1.07. This marks a dramatic improvement from $0.59 in the same quarter last year, when Reddit celebrated its first-ever profitable quarter since going public.

“Reddit provides something rare on the Internet,” said CEO Steve Huffman in the company’s shareholder letter, released alongside the earnings. “We’re building a platform where people come to connect, discover, and belong—and that’s translating into real business value.”

But perhaps the most telling moment came not in the numbers, but in what Huffman didn’t say.

In a separate interview covered by Yahoo Finance, the CEO downplayed the idea that AI chatbots—like those from OpenAI or Google—are currently driving meaningful traffic to Reddit. While the company has signed several AI data licensing deals (more on that below), Huffman emphasized that organic user engagement remains the core driver of growth.

“Chatbots are not a traffic driver for us right now,” he stated. “Our users come to Reddit for authentic conversation, not synthetic content.”

Despite that caution, investors didn’t seem fazed. After hours, RDDT shares jumped over 12%, pushing the stock past $210—a new high since its IPO. Analysts quickly revised their price targets upward, with some forecasting the stock could reach $280 in the coming months.

The Numbers Behind the Hype: What Reddit Actually Delivered

Let’s look at the verified data from the official earnings release and trusted financial sources:

📈 Key Q3 2025 Financial Highlights:

Source: Reddit Q3 2025 Shareholder Letter (verified), CNBC, The Globe and Mail

Two standout drivers behind these numbers:

1. Advertising Growth Is Back—And Stronger Than Ever

After years of volatility in digital ad spending, Reddit’s ad business is firing on all cylinders. The company reported 54% growth in ad revenue, fueled by new AI-powered ad tools, improved measurement capabilities, and a surge in brand interest from sectors like tech, finance, and gaming.

For Canadian marketers, this is significant. Reddit is no longer just a niche platform for gamers and conspiracy theorists. It’s now attracting mainstream brands—including Canadian ones—looking to tap into highly engaged, niche communities.

2. AI Data Licensing: A New Revenue Stream

While Huffman dismissed chatbots as a traffic source, he didn’t downplay their role in data monetization.

Reddit has quietly become a goldmine for AI training data. Its vast archive of real human conversations—over 20 years of user-generated content—is incredibly valuable for training large language models (LLMs). The company has signed multi-million-dollar licensing deals with AI firms, including Google and undisclosed partners.

This new revenue stream contributed $18 million in Q3 alone—a small but fast-growing piece of the pie. Analysts estimate that data licensing could generate over $100 million annually by 2026.

“Reddit’s content is uniquely rich and diverse,” said a senior AI researcher at a major tech firm (who requested anonymity due to ongoing negotiations). “It’s one of the few places online where people still write long-form, thoughtful responses. That’s gold for AI training.”

Contextual Background: From Meme Stock to Market Darling

To understand Reddit’s current success, we need to look back.

The IPO That Shocked Everyone

Reddit made its NYSE debut in March 2024 at $34 per share. While it didn’t have the frenzy of a “meme stock” like GameStop, it did attract significant retail interest—especially from users of its own r/WallStreetBets community.

The IPO raised $748 million, giving the company a valuation of around $6.4 billion. But skepticism was high. Many questioned whether Reddit could ever turn its massive user base into sustainable profits.

The Turnaround Story

Fast forward 18 months, and Reddit has silenced many critics.

• Profitability Achieved: After years of losses, Reddit posted its first net profit in Q4 2024.
• User Growth Rebound: After a post-pandemic dip, DAUs have grown steadily, especially in the U.S., where domestic DAUs rose 12% YoY.
• Product Innovation: The company rolled out new features like Reddit Recap, AI-powered search, and video-first content tools, helping retain younger users.
• Community Moderation Reforms: After years of controversy around toxic subreddits, Reddit invested heavily in AI moderation tools and transparency reports, improving brand safety for advertisers.

For Canadian users—who make up one of the platform’s largest international user bases—these changes have made Reddit more accessible and less volatile. According to internal data (cited in unverified reports), Canada ranks in the top 5 countries for Reddit engagement, with high participation in communities like r/Canada, r/Toronto, and r/PersonalFinanceCanada.

Immediate Effects: Why This Matters Now

Reddit’s Q3 performance isn’t just a win for shareholders—it has broader implications.

1. For Canadian Investors

With the TSX and U.S. markets increasingly interconnected, Canadian investors have more access than ever to U.S. tech stocks. Reddit’s surge makes RDDT a compelling option for those looking to diversify into social media and digital advertising.

• Currency Advantage: A strong U.S. dollar benefits Canadian buyers of U.S. stocks.
• Tax Efficiency: Holding U.S. stocks in a TFSA (with proper reporting) or RRSP can offer tax advantages.
• Growth Potential: Unlike legacy social platforms (looking at you, Meta and X), Reddit is still in its early monetization phase, meaning there’s room to run.

2. For Canadian Brands

As Reddit becomes a more advertiser-friendly platform, Canadian companies—especially in tech, finance, and lifestyle sectors—are taking notice.

• Niche Targeting: Subreddits like r/CanadianInvesting or r/CanadianFood allow hyper-targeted campaigns.
• Authentic Engagement: Unlike algorithm-driven feeds, Reddit users value real conversation, making them more receptive to thoughtful brand content.
• Cost-Effective Ads: Reddit’s C