The Reddit app icon on a smartphone in this illustration taken October 27, 2025. REUTERS/Dado Ruvic/Illustration
(Reuters) -Reddit forecast fourth-quarter revenue above Wall Street estimates on Thursday, thanks to its artificial intelligence-powered advertising tools that are boosting marketing spending on the social media platform.
The company's AI-optimized ad platform helps advertisers to place targeted ads directly within relevant discussion threads across its interest-based communities, known as subreddits.
Reddit's vast content library is one of its valuable assets at a time when AI companies are looking for data to train their large language modes, a technology behind chatbots such as ChatGPT, Gemini and Grok.
The company already licenses its data to Alphabet's Google and Microsoft-backed OpenAI. It sued Perplexity AI and other three data scraping companies last week, alleging them of illegally collecting Reddit's data.
"To continue its upward trajectory, the company must continue to protect its intellectual property - consumer conversations - from data scrapers," said Jeremy Goldman, senior director of briefings at Emarketer.
Shares of the company rose around 3% in volatile after-hours trading.
Reddit operates in a crowded social media market, where dominant platforms such as TikTok and Meta are aggressively vying for new advertisers with their massive user-bases and AI-powered ad tools. Facebook-parent Meta reported upbeat third-quarter revenue on Wednesday.
Reddit expects fourth-quarter revenue to be between $655 million and $665 million, compared with analysts' average estimate of $637.9 million, according to data compiled by LSEG.
The company forecast fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization to be between $275 million and $285 million, compared with estimates of $258.8 million.
Daily active unique visitors rose 19% to 116 million in the third quarter ended September 30, while its average revenue per user increased by 41%. The company said its machine translation feature now supported 30 languages, helping fuel user growth across markets outside the United States.
Third-quarter revenue rose 68% to $585 million, beating estimates of $545.7 million.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel)