Reddit Surges 120% in Three Months: Should You Buy the Stock Now?

Reddit RDDT shares have surged 120.5% in the past three-month period, outperforming the broader Zacks Computer & Technology sector’s rise of 17.1%. The Zacks Internet - Software industry increased 10.3% in the same time frame.

The company’s shares have also outperformed its peers, including Meta Platform META and Snap SNAP, which are also expanding into advertising to compete in the rapidly growing digital ad market. While Meta Platforms’ shares have gained 9.9%, Snap shares have lost 8.2% in the past three-month period.

The outperformance can be attributed to strong growth in user engagement, including rising daily and weekly active users, gains in Average Revenue Per User (ARPU), and the expansion of advertiser tools such as DPA, Reddit Pixel, and CAPI.

In the second quarter of 2025, Reddit’s advertising revenue grew 84% year over year to $465 million, driven by both existing advertisers deepening their investments and a 50% increase in active advertiser count. This growth highlights Reddit’s ability to attract advertisers across large, mid-market and small-to-medium-sized businesses.

RDDT Stock's Performance

Reddit Benefits From Expanding Portfolio

Reddit’s expanding portfolio has been noteworthy. In the second quarter of 2025, ARPU grew 47% year over year to $4.53, indicating that portfolio expansions are driving higher monetization per user.

The company’s focus on automation and usability is a major driver of its advertising success. The platform has integrated tools like Smartly, which combines Reddit’s audience and performance data with AI-powered advertising capabilities, making it easier for advertisers to launch, scale, and optimize campaigns.

Further expanding its portfolio, the company recently announced the launch of new Reddit Pro tools for publishers. These tools include article insights, RSS auto-import and AI-powered community recommendations, all of which are currently in beta testing. The platform also introduced a better in-app link viewing experience. This change makes it easier for users to read articles and join conversations directly on Reddit.

RDDT is also expanding search-led engagement through Reddit Answers. In the second quarter of 2025, Reddit Answers experienced significant growth, with the number of weekly users increasing from 1 million to 6 million. Moreover, improving impressions and a rise in pricing are driven by Reddit’s investments in performance and targeting in the middle and lower funnel, which is expected to drive ad revenues.

Reddit’s international momentum is emerging as a key growth catalyst.  The company is actively expanding its presence in global markets, leveraging machine translation in 23 languages to unlock Reddit for millions of users across Asia, Europe, and Latin America. In the second quarter of 2025, International revenues soared 71.7% year over year to $91 million. International Daily Active Uniques (DAUq) jumped 32% year over year to 60.1 million, outpacing 11% growth in the United States.

RDDT’s Benefits From Expanding Partnership

Reddit’s expanding partner base also strengthens its competitive prowess. RDDT’s expanded collaboration with Integral Ad Science IAS to offer advertisers enhanced measurement capabilities has been noteworthy.

Integral Ad Science’s Total Media Quality for Reddit now delivers greater transparency, comprehensive reporting and advanced AI-driven technology. With Integral Ad Science supporting global coverage across Reddit’s platforms, advertisers can confidently engage with real users and optimize campaign performance.

Reddit Earnings Estimates Show Upward Trend

RDDT’s expanding portfolio and partnerships are expected to drive the company’s top-line growth.

For the third quarter of 2025, RDDT expects revenues between $535 million and $545 million.

For the third quarter of 2025, the Zacks Consensus Estimate for revenues is pegged at $549.59 million, indicating year-over-year growth of 57.77%. 

The consensus mark for earnings is pegged at 49 cents per share, which has remained unchanged over the past 30 days, indicating year-over-year growth of 206.25%.

Reddit Inc. Price and Consensus

Reddit Inc. price-consensus-chart | Reddit Inc. Quote

RDDT Stock Overvalued

Reddit’s stock is currently trading at a premium, as suggested by the Value Score of F.

In terms of the forward 12-month Price/Sales ratio, RDDT is trading at 19.37, higher than its median of 13.89 and the broader Zacks Computer & Technology sector’s 6.87, Meta Platform’s 8.68X, and SNAP’s 1.95X.

Price/Sales (F12M)

Conclusion

Reddit’s prospects benefit from an expanding advertising business, expanding clientele, and improving the user experience with upgraded search and discovery features. These factors justify the company’s premium valuation.

RRDT stock currently sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of B, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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