RDDT's AI Tools Gain Traction: Is Innovation Driving Top-Line Growth?

Reddit RDDT is benefiting from its investment in AI-powered tools, which are driving the company’s user engagement and contributing to top-line growth. In the third quarter of 2025, Reddit reported revenues of $584.91 million, which had increased 68% year over year.

In the third quarter of 2025, Average Revenue Per User (ARPU) grew 41% year over year to $5.04, indicating that portfolio expansions are driving higher monetization per user. In the reported quarter, RDDT reported 116 million daily active users and 444 million weekly active users, both increasing 20% year over year.

Reddit is expanding its search-led engagement through its AI-powered features. The introduction of Reddit Answers, a feature that uses community-driven insights to enhance search functionality, has been noteworthy.

In the third quarter of 2025, more than 75 million people searched on Reddit weekly, showcasing the growing popularity of this feature. The company also integrated Reddit Answers into its core search functionality, increasing visibility across conversations and expanding its reach to non-English languages, including Spanish, German, Italian, French, and Portuguese. 

Reddit’s investment in AI-powered tools has further strengthened its portfolio by improving user experience and community moderation. In September 2025, Reddit launched Reddit Pro tools for publishers. This new set of features aims to help media outlets share, track, and engage with their content easily. It targets Reddit’s 110 million daily active users. The update includes article insights, automatic RSS imports and AI-powered community recommendations. It also offers a better in-app link viewing experience and discussion tools.

RDDT Faces Stiff Competition

RDDT is facing stiff competition from competitors like Pinterest PINS and Snap SNAP, which are also expanding into advertising to compete in the rapidly growing digital ad market.

Snap is benefiting from increased engagement with its content and augmented reality (AR) features. In the third quarter of 2025, Snap’s AR engagement remained strong, with more than 8 billion daily uses of AR lenses and 350 million daily active users engaging with AR experiences.  New AI-powered lenses, such as the Imagine Lens, have further enhanced Snap’s user creativity and interaction.

Pinterest’s AI investments are playing an important role in enhancing user experiences and driving top-line growth. In the third quarter of 2025, Pinterest’s AI-powered visual search capabilities saw 44% year-over-year growth in queries, with 80 billion monthly queries overall. The company’s AI tools, such as Pinterest Performance+ and ROAS bidding, are gaining traction among advertisers.

RDDT’s Share Price Performance, Valuation, and Estimates

RDDT’s shares have gained 13.6% year to date, underperforming the broader Zacks Computer & Technology sector’s return of 23%. The company has outperformed the Internet - Software industry’s rise of 3%.

RDDT Stock's Performance

RDDT shares are overvalued, with a forward 12-month Price/Sales of 12.29X compared with the Computer & Technology sector’s 6.63X. RDDT has a Value Score of F.

Price/Sales (F12M)

The consensus mark for 2025 earnings is pegged at $2.35 per share, which has increased 26% over the past 30 days. This suggests 170.57% year-over-year growth.

Reddit Inc. Price and Consensus

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

RDDT currently sports a Zacks Rank #1 (Strong Buy). 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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