Reddit ended its first public year with strong financial results, posting a net income of $71 million in Q4 2024—more than 3.8 times higher than the previous year’s $18.5 million. Earnings per share (EPS) reached $0.36, surpassing analysts’ expectations. The company’s revenue also saw a significant boost, reaching $428 million, reinforcing the positive financial trajectory.
However, despite these solid numbers, the market’s reaction was mixed. A key disappointment was the lower-than-expected daily active users (DAU), which reached 101.7 million instead of the forecasted 103.3 million. This shortfall led to a sharp 15% drop in Reddit’s stock during after-hours trading. Although the stock partially rebounded the next day, it remains down 8.7% from its pre-report levels. The market’s response highlights how crucial user growth remains for investors, even in the face of strong revenue and profitability.
User Growth and Traffic Fluctuations
Reddit CEO Steve Huffman attributed the weaker-than-expected DAU growth to temporary fluctuations in search traffic caused by updates to Google’s search algorithm. He reassured investors that these issues primarily affected unregistered users and that search-driven traffic had already begun recovering in Q1 2025.
“We did see some changes in Google’s algorithm that caused short-term fluctuations in traffic volumes, but things have stabilized,” Huffman said. He emphasized that such fluctuations are common across digital platforms and are not unique to Reddit. Although investors and analysts pressed for more details on Google’s changes, Huffman declined to elaborate, saying only that the company had experienced similar situations before and had successfully adapted each time.
To counter the impact of search traffic instability, Reddit has focused on increasing the share of registered users. Previously, around 80% of new users abandoned registration at the name selection stage, which significantly hindered conversion rates. In 2024, Reddit simplified the process, allowing users to sign in via email, phone number, or third-party accounts like Google and Apple. This adjustment has led to a noticeable increase in the number of visitors completing registration and becoming active users.
Outlook and Future Challenges
Despite a strong Q4 performance, Reddit’s full-year results painted a more complex picture. The company reported a net loss of $484.3 million for 2024, a sharp increase from the $90.8 million loss in 2023. CFO Andrew Vollero explained that most of this—$595 million—stemmed from a one-time stock compensation expense following Reddit’s IPO. He clarified that excluding this accounting adjustment, the company had posted profitable results over the last three quarters, demonstrating the stability of its operational model.
“These are expenses that cannot be reflected while a company is private, but after going public, they must be recognized in financial statements,” Vollero said. He assured investors that Reddit’s core business remains strong, with consistent revenue growth and operational improvements.
Looking ahead, Reddit remains cautious in its projections, notes NIX Solutions. For Q1 2025, the company expects revenue between $360-$370 million and adjusted EBITDA in the range of $80-$90 million. These figures are notably lower than Q4 2024’s revenue of $427.7 million and EBITDA of $154 million, which could raise additional investor concerns. The decline in these key financial metrics, combined with the uncertainty surrounding user growth, underscores the challenges Reddit faces as it continues to navigate the public market.
While the company has demonstrated steady revenue and profit growth, investor sentiment remains closely tied to its ability to expand and retain its user base. The impact of search traffic fluctuations and shifting market dynamics will be critical factors in determining Reddit’s long-term success. We’ll keep you updated on any developments as the company works to strengthen its position in the market.