Reddit raises revenue outlook as AI ad tools gain traction

Reddit lifted its third-quarter revenue forecast to $860 million to $870 million, topping Wall Street’s $829.1 million estimate and signaling that its push into AI-powered advertising is starting to pay off.

The San Francisco company has been using machine-learning and generative-AI features to help marketers build campaigns, target audiences and measure performance. That pitch matters because Reddit’s value to advertisers comes from something rivals do not have at the same scale: millions of conversations organized around hobbies, purchases, product debates and niche communities that can reveal buying intent in real time.

Reddit’s second-quarter results showed why investors are paying attention. Revenue rose 78% from a year earlier to $500 million, daily active uniques increased 21% to 110.4 million, gross margin widened to 90.8%, net income reached $89 million and adjusted EBITDA was $167 million, equal to 33% of revenue. The company also said its advertiser count rose 70% in the quarter, a sharp sign that the ad pitch is drawing more marketers onto the platform.

The question for investors is whether that growth can hold up as a business model, not just as a one-quarter boost. Reddit’s ad appeal rests on contextual targeting, which can be more precise than broad social-feed buying and more brand-safe than chasing traffic across the open web. At the same time, Reddit has to keep monetizing without breaking the community culture that makes those conversations valuable in the first place.

Reddit has already started changing the product to make ad buying easier. In January, the company introduced Max Campaigns, a beta AI-powered tool designed for ad performance and audience insights. The product is meant to help advertisers use Reddit’s community data more effectively, a sign that the company wants to sell not just inventory but a better workflow for planning, targeting and measurement.

There are still some uneven spots beneath the headline growth. U.S. user growth in the second quarter was affected by choppy search-engine traffic, showing that Reddit’s audience expansion is not immune to changes in how people find content online. Even so, the latest outlook suggests management believes ad demand, margins and AI-driven tools can keep revenue climbing.

For investors, the key checks are straightforward: whether advertiser growth keeps rising, whether revenue gains continue beyond the launch of new tools, and whether Reddit can turn its community graph into durable ad pricing power against larger social and search competitors.