Reddit forecast third-quarter revenue above Wall Street estimates on Thursday, betting on growing digital advertising driven by its artificial intelligence-powered marketing tools.
Shares of the company, which went public in March last year, soared 21% after earnings report.
The forecast follows bigger rival Meta's upbeat second-quarter results and strong revenue outlook on Wednesday, lifted by the Facebook and Instagram parent's core ad business.
Advertisers are increasingly turning to platforms such as Reddit, Meta, and TikTok, which offer advanced AI-powered tools for automated ad creation, precise audience targeting and access to fast-growing user bases.
Reddit offers marketers various ad formats, including conversation placement ads, which allow brands to advertise directly within discussion threads in its interest-based communities known as subreddits.
The company last month launched two new AI-powered ad features designed to help brands drive engagement by tapping into user conversations on the platform. It also has content licensing deals with Alphabet's Google and ChatGPT-maker OpenAI.
"Reddit just turned in a quarter that would make even its harshest subreddit proud," Emarketer analyst Jeremy Goldman said.
The company expects third-quarter revenue of $535 million to $545 million, well above analysts’ average estimate of $473 million, according to data compiled by LSEG.
It projected quarterly adjusted earnings before interest, taxes, depreciation, and amortization of $185 million to $195 million, compared with estimates of $160.4 million.
Second quarter revenue rose 78% to $500 million, beating estimates of $426 million. Its profit per share of 45 cents also exceeded estimates of 19 cents.
Reddit said its machine translation feature now supported 23 languages, helping fuel user growth across Asia Pacific, Europe and Latin America.
Daily active unique visitors increased 21% to 110.4 million in the quarter ended June 30, while global average revenue per user jumped 47% to $4.53, the company said.