Reddit surges on $1B buyback after earnings beat
Social media platform beats revenue estimates by 9% as ad sales momentum continues despite 47% decline from 2025 highs
Reddit authorized a $1 billion share repurchase program after reporting fourth-quarter results that exceeded analyst expectations, demonstrating the social media platform's ability to monetize its vast user base despite trading 47% below its 52-week high.
The San Francisco-based company reported revenue of $726 million for the final quarter of 2025, marking a 70% increase from the same period a year earlier and beating the average analyst estimate of approximately $667.6 million. Diluted earnings per share reached $1.24, significantly outpacing Wall Street projections of $0.93.
The board's authorization to repurchase up to $1 billion of Class A common stock represents approximately 3.2% of Reddit's $31.3 billion market capitalization, signaling management's confidence in the company's valuation and future prospects. Shares were trading at $151.09 in afternoon trading on Thursday, down 1% on the day but well above the session lows following the earnings announcement.
Reddit's advertising business, which accounts for the vast majority of revenue, showed particular strength as marketers increasingly turn to the platform to reach younger, highly engaged audiences. The company's revenue growth of nearly 70% year-over-year represents a significant acceleration from earlier quarters and suggests Reddit is successfully capturing advertising dollars in a competitive digital ad market dominated by Meta Platforms and Alphabet.
Looking ahead, Reddit projected first-quarter 2026 revenue between $595 million and $605 million, above the consensus estimate of $577 million. The optimistic outlook contrasts with the stock's performance over the past year, as Reddit shares have fallen from a 52-week high of $282.95 amid broader concerns about valuations in the technology sector and increasing competition for user attention.
Analysts remain largely bullish on the stock despite the pullback, with 18 of 30 analysts surveyed rating Reddit a buy, including five at strong buy, according to market data. The average price target stands at $252.39, implying roughly 67% upside from current levels. The company's forward price-to-earnings ratio of 48.31 remains elevated compared to more mature social media companies, reflecting investor expectations for continued rapid growth.
Reddit's profitability metrics have shown substantial improvement, with quarterly earnings growth reaching 416.9% year-over-year and operating margins expanding to 23.7% on a trailing twelve-month basis. The company reported $1.9 billion in revenue over the past four quarters, with earnings per share of $2.17.
Institutional ownership of Reddit shares stands at approximately 100%, indicating strong demand from large investment managers despite the stock's volatility. The company's user base, known for its passionate communities and detailed discussions around specific interests, has proven attractive to advertisers seeking to reach niche audiences with targeted messaging.
The share repurchase authorization represents Reddit's first significant return of capital to shareholders since its public debut, a milestone that typically signals a company's transition from growth-focused investment to a more mature capital allocation strategy. Management indicated during the earnings call that the buybacks would be executed over time based on market conditions and the company's cash flow needs.
Reddit's strong fourth-quarter performance and confident guidance come as investors reassess technology sector valuations following a period of market turbulence. The company's ability to maintain triple-digit revenue growth while expanding margins suggests it may be better positioned than some peers to withstand potential macroeconomic headwinds.