Reddit's Ad Strategy Is Clicking, Say Analysts—Strong Q1 Sets Stage For Profitable Growth in 2025

Reddit, Inc. RDDT shares are trading higher on Friday.

On Thursday,  Reddit reported first quarter earnings of 13 cents per share, which beat the analyst consensus estimate of two cents. Quarterly revenue of $392.36 million beat the street consensus expectations for $370.01 million and is an increase of revenue of $242.96 million from the same period last year.

Here are the analysts’ takes on the stock:

• Needham analyst Laura Martin reiterated a Buy rating on Reddit, raising the price forecast from $135 to $145.
• JP Morgan‘s Doug Anmuth reiterated a Neutral rating on the stock, raising the target price from $110 to $145.
• Citizens‘s Andrew Boone maintained their Market Outperform rating, increasing the forecast from $155 to $180.
• Guggenheim analyst Michael Morris reiterated a Buy rating, trimming the prediction from $170 to $165.

Also Read: Reddit Stock Spikes Over 6% After-hours After Earning Beat, Platform Considers Putting Ads In Comments To Monetize High ‘Engagement’

Needham: Martin highlighted several positives from Reddit’s Q1 results, including strong revenue and margin growth, better ad performance with a shift toward full-funnel advertisers, rising daily active users, promising new features like Reddit Search and Answers boosting engagement, solid free cash flow, and AI-driven language tools expected to support international user growth in FY25.

The analyst raised the firm’s FY25 revenue estimate from $1.722 billion to $1.795 billion.

JP Morgan: The analyst projects Reddit to maintain strong revenue growth and improve profitability as it expands its ad offerings and targets a 40% long-term adjusted EBITDA margin.

While recent estimate upgrades reflect renewed confidence after earlier recession-related cuts, the analyst cautions that uncertainty around changes in Google’s search ecosystem remains a long-term risk. Projected average growth for 2025 and 2026 stands at 12% for revenue, 33% for adjusted EBITDA, and 34% for free cash flow, which the analyst believes justifies Reddit's premium valuation.

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Citizens: Boone writes that Reddit is largely insulated from tariff-related risks due to its limited reliance on retail ad spending and relatively modest ad revenue in 2023.

While a broader recession could affect the company, sector-specific macro headwinds are unlikely to cause major disruption, given Reddit’s lower exposure to the most impacted ad budgets.

Guggenheim: The analyst noted that while management recognized ongoing market uncertainty, they characterized current conditions as stable.

Advertising performance stood out, with pricing growth for the first time since Reddit's IPO, driven by progress in mid- and lower-funnel ad strategies, which now account for 60% of ad revenue.

Broad strength was seen across ad verticals, with 10 out of 15 growing over 50% year-over-year, alongside a 50% increase in active advertisers.

Price Action: RDDT shares are trading higher by 1.47% to $120.80 at last check Friday.

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