Should You Buy, Sell, or Hold Reddit Stock Before Q4 Earnings Release?

Reddit RDDT is set to release its fourth-quarter 2025 results on Feb. 5, 2026.

For the fourth quarter of 2025, RDDT expects revenues between $655 million and $665 million, representing 53% to 55% year-over-year revenue growth with a midpoint of about 54%.

For the fourth quarter of 2025, the Zacks Consensus Estimate for revenues is pegged at $667.58 million, indicating year-over-year growth of 56.06%. 

The consensus mark for earnings is pegged at 96 cents per share, which declined by a penny over the past 30 days, indicating year-over-year growth of 166.67%.

Reddit Inc. Price and EPS Surprise

Reddit Inc. price-eps-surprise | Reddit Inc. Quote

RDDT’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 192.49%.

Let’s see how things have shaped up for this announcement.

Factors Likely to Have Influenced Q4 Performance

Reddit’s fourth-quarter performance is expected to have benefited from increased ad sales and the company’s growing AI initiatives.

Reddit’s advertising business is expected to have benefited from continued innovation in ad products and solutions in the to-be-reported quarter. Its focus on automation, dynamic product ads and tools like Reddit Insights and Community Add-Ons is set to improve advertiser performance and attract more advertisers.

RDDT is also expanding search-led engagement through Reddit Answers. 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. This is expected to have further contributed to ad revenues in the fourth quarter of 2025.

International expansion remains a key growth driver for Reddit. In the third quarter of 2025, the company implemented machine translation in 30 languages and developed localized content frameworks to cater to specific interests in countries like India, Brazil, Germany, and France. This is expected to have driven further user engagement and revenues in the to-be-reported quarter.

However, a challenging macroeconomic environment, including elevated tariffs, may reduce discretionary ad spending. Intense competition, along with advertiser concentration risks, poses challenges to RDDT’s near-term prospects.

RDDT Shares Underperform Sector

RDDT shares have plunged 12.2% in the trailing six-month period, underperforming the Zacks Computer & Technology sector’s return of 14.6%.

RDDT Stock's Performance

RDDT stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment, which makes it a risky bet for risk-averse investors.

In terms of the forward 12-month Price/Sales, Reddit is trading at 10.81X, higher than the Internet - Software industry’s 4.32X.

RDDT's Valuation

RDDT Faces Stiff Competition

Despite an expanding portfolio and rising user engagements, RDDT is facing stiff competition from competitors like Snap SNAP, Meta Platforms META, and Pinterest PINS, 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 fourth quarter of 2025, Meta Platform’s advertising revenues increased 24.3% year over year to $58.14 billion and accounted for 97.1% of fourth-quarter revenues. At cc, revenues increased 23% year over year.

Pinterest is expanding its portfolio through acquisition. In December 2025, Pinterest announced that it had inked a definitive agreement to acquire tvScientific, a firm specializing in a connected TV advertising platform. The buyout will enable Pinterest to bring its advertising business to TV screens, allowing advertisers to compare the impact of TV ads on their marketing campaigns.

Conclusion

Reddit’s prospects benefit from an expanding advertising business, an expanding clientele, and an improved user experience with upgraded search and discovery features. However, a challenging macroeconomic environment, including elevated tariffs, may reduce discretionary ad spending. Stretched valuation and stiff competition also remain a concern.

Reddit currently has a Zacks Rank #4 (Sell), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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