RDDT's User-Friendly Features Boost Ad Revenue: More Upside Ahead?

Reddit RDDT is benefiting from its strong focus on enhancing user-friendly features, which is driving significant growth in user engagement and ad revenue. In the third quarter of 2025, Advertising revenues surged 74% year-over-year to $549 million.

The company is also benefiting from its investment in AI-powered tools, which are driving the company’s user engagement. In the third quarter of 2025, RDDT reported 116 million daily active users and 444 million weekly active users, both increasing 20% year over year.

Automation tools, including auto bidding and auto targeting, simplify campaign management and improve efficiency, attracting advertisers across various business sizes. These advancements have led to a 75% year-over-year increase in active advertiser count in the third quarter of 2025.

Reddit is well placed to benefit from the growing demand for interest and context-based digital ads. To support campaign performance and advertiser outcomes, the company has introduced tools like Reddit Pixel, Conversion API, and Dynamic Product Ads. 

Reddit has also introduced innovative tools like Reddit Pro for publishers, enabling them to sync feeds, import articles, and use AI-powered tools to identify relevant communities.  These tools enhance user engagement and create opportunities for advertisers to connect with their target audiences in a more meaningful way.

RDDT Faces Stiff Competition

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

Snap is benefiting from strong revenue growth driven by improved advertising demand and the expansion of direct revenue streams. In the third quarter of 2025, Snap’s advertising revenues rose 5% year over year to $1.32 billion, driven primarily by growth in Direct Response (DR) advertising revenue, which increased 8% year over year. Growth in DR advertising revenue was primarily driven by strong demand for Pixel Purchase and App Purchase optimizations.

Meta Platforms’ focus on integrating AI into its platforms, which include Facebook, WhatsApp, Instagram, Messenger, and Threads, is driving user engagement to boost ad revenues. In the third quarter of 2025, Meta Platform’s advertising revenues increased 25.6% year over year to $50.08 billion and accounted for 97.7% of third-quarter revenues. At cc, revenues increased 25% year over year.

RDDT’s Share Price Performance, Valuation, and Estimates

RDDT’s shares have gained 58.5% in the trailing six-month period, outperforming the broader Zacks Computer & Technology sector’s return of 22.1% and the Internet - Software industry’s decline of 5.1%.

RDDT Stock's Performance

RDDT shares are overvalued, with a forward 12-month Price/Sales of 14.48X compared with the Computer & Technology sector’s 6.51X. RDDT has a Value Score of F.

RDDT Valuation

The consensus mark for 2025 earnings is pegged at $2.35 per share, unchanged 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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