Reddit (RDDT) stock soared 5.01% in pre-market trading on Thursday, as investors show optimism ahead of the company's first-quarter 2025 earnings report, scheduled for release later in the day. The social media platform's shares are seeing increased interest despite recent underperformance and valuation concerns.

Analysts are expecting strong results from Reddit, with the Zacks Consensus Estimate projecting Q1 revenues of $372.09 million, representing a substantial 53.15% year-over-year increase. The company itself has guided for revenues between $360 million and $370 million, indicating 48% to 52% growth. Additionally, the consensus earnings per share estimate stands at 3 cents, having been revised upward by a penny over the past month.

Investors appear to be betting on Reddit's continued expansion of its advertising business, increased user engagement, and growing artificial intelligence (AI) initiatives. The company has been investing heavily in automation and AI to improve both ad performance and user experience, including the introduction of new features like the AI-powered Reddit Answers tool. However, it's worth noting that Reddit faces challenges, including intense competition from other social media platforms and potential impacts from evolving privacy regulations in the European Union.