Reddit Inc. (RDDT) shares plummeted 14.39% in the after-hours session on Wednesday, despite reporting robust financial results for the fourth quarter of 2024. The social media platform's stock closed at $185.58, erasing a significant portion of its year-to-date gains.

For the quarter ended December 31, 2024, Reddit reported revenue of $427.7 million, representing a 71% year-over-year increase and surpassing Wall Street's expectations. The company's net income stood at $71 million, compared to $18.5 million in the year-ago period. Adjusted EBITDA came in at $154.3 million, with an Adjusted EBITDA margin of 36.1%.

Reddit's user metrics also demonstrated impressive growth, with daily active uniques (DAUq) increasing 39% year-over-year to 101.7 million. The company's average revenue per user (ARPU) rose 23% globally to $4.21, driven by a 28% increase in the U.S. market.

However, the company's guidance for the first quarter of 2025 appears to have disappointed investors. Reddit expects revenue in the range of $360 million to $370 million and Adjusted EBITDA between $80 million and $90 million. This relatively conservative outlook likely contributed to the stock's sharp decline in after-hours trading.

Nonetheless, analysts remain optimistic about Reddit's long-term prospects. The company's partnership with Intercontinental Exchange, announced earlier in the day, marks its entry into the financial sector. This collaboration aims to create data and analytics products by leveraging Reddit's vast trove of user-generated content, potentially opening new revenue streams.

Seaport Research Partners initiated coverage on Reddit with a Neutral rating, highlighting the company's significant monetization opportunity in advertising, both in the U.S. and internationally. Raymond James reiterated its Strong Buy rating, citing promising early results from Reddit's international expansion and language model translation initiatives.