Reddit Q2 Preview: Can AI Deals and Meme Momentum Fuel the Next Leg?
Warning! GuruFocus has detected 2 Warning Sign with MRK.
Ad revenue and average revenue per user (ARPU) will remain core metrics as Reddit tries to scale its unique mix of community-led content and real-time discussion into sustainable ad dollars. Investors are also watching the buildout of its data licensing business. After inking AI-related deals with Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and OpenAI earlier this year, Reddit has leaned into monetizing its archive of user-generated content, but will need to show those deals are recurring, not one-off windfalls.
Other watch-points include user engagement trends, API access strategy, and any update on international expansion. The recent resurgence of meme stock trading (largely after the Q2 period) has driven fresh traffic to Reddit's forums, especially r/wallstreetbets. While this won't impact Q2 results, investors will listen for management commentary on whether that spike is sustaining into Q3 and how it could translate into higher ad impressions or engagement-driven monetization. Bulls also want to see signs that Reddit's recent profitability can persist, especially as infrastructure, moderation, and AI investments continue to rise.
Valuation remains stretched, trading at over 14x sales on a forward basis. With a rich multiple already pricing in monetization upside, Reddit now has to prove its platform can scale without losing what makes it sticky.
This article first appeared on GuruFocus.
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