Reddit Rises 21% Year to Date: Buy, Sell, or Hold the Stock?

Reddit RDDT shares have rallied 21.5% in the year-to-date period, outperforming the broader Zacks Computer & Technology sector’s rise of 19.6%. The Zacks Internet - Software industry increased 16.7% in the same time frame.

The company has also outperformed its peers like Pinterest PINS and Snap SNAP, which are also expanding their footprints into advertising to compete in the rapidly growing digital ad market. While Pinterest shares have gained 4.9%, Snap shares have lost 27.7% in the year-to-date 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 a major growth driver. 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.

Key drivers include the adoption of Dynamic Product Ads, which consistently achieve a return on ad spend that is, on average, 2 times higher than standard conversion campaigns. Reddit’s focus on automation, including the introduction of auto-bidding and integration with third-party tools like Smartly, has made it easier for advertisers to scale and optimize their campaigns. These advancements are likely to attract more advertisers, further boosting ARPU.

Further expanding its footprint, in June 2025, Reddit launched its Community Intelligence engine at Cannes Lions, introducing the alpha versions of Reddit Insights and Conversation Summary Add-Ons to help brands extract real-time conversational insights and boost campaign performance.

Reddit’s international expansion also plays a critical role in ARPU growth. With machine translation available in 23 languages, the platform is reaching new markets in Asia, Europe, and Latin America. In the second quarter of 2025, International ARPU rose 40% year over year to $1.73.

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.

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 $549.69 million, indicating year-over-year growth of 57.80%. 

The consensus mark for earnings is pegged at 52 cents per share, which has increased by a penny over the past 30 days, indicating year-over-year growth of 225%.

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 14.23, higher than its median of 14.63 and the broader Zacks Computer & Technology sector’s 6.73, Pinterest’s 4.40X, and SNAP’s 2.06X.

Price/Sales (F12M)

Conclusion

Reddit’s prospects benefit from an expanding advertising business, an expanding clientele, and an improved 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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