Why Reddit’s latest results matter for investors

Reddit (RDDT) is back in focus after a strong quarterly report highlighted 69% year over year revenue growth to US$663.4 million and a 31% net income margin, which has renewed attention on its stock performance.

The quarter also showcased Reddit’s growing role in AI data licensing, with Google reportedly paying for access to its content. Commentators have pointed to these fundamentals as a key driver of recent bullish sentiment.

Reddit’s share price has been volatile, with a 24.23% 7 day share price return and a 20.80% 90 day share price return, while total shareholder return over the past year sits at 56.99%, hinting at momentum rebuilding after earlier year to date weakness.

If the AI story around Reddit has caught your attention, it could be worth seeing what else is moving in the space by scanning 31 AI small caps

With Reddit now valued at around US$33.9b and trading at US$176 per share, some analysts see upside based on their targets and intrinsic estimates. The key question is whether there is still a buying opportunity or if the market is already pricing in much of Reddit’s potential growth.

Most Popular Narrative: 43.2% Undervalued

Reddit’s narrative fair value of $309.77 sits well above the last close at $176, and the gap is all about how usage, ads, and AI data intersect.

Successful ad networks are driven fundamentally by usage. The best type of usage is on returning daily users usually measured by Daily Active Users. The higher the number of unique daily active users the higher the ad revenue generated on a per day basis. While ad networks and profitability and growth are generally optimised through delivery i.e. FB size scale and optimisations, in the early stage of a company sheer user number and therefore impressions drive a huge part of the narrative for ad spenders to use the platform. RDDT currently represents a large undervalued segment because its DAU user growth is still being undervalued. In the most recent quarterly reports, the company reported total Daily Active Uniques (DAUq) of 126.8 million for Q1 2026, representing a 17% year-over-year increase, highlighting continued strength in user engagement and platform relevance. Importantly, that engagement is increasingly being monetized. Reddit delivered revenue of $663 million in the quarter, up 69% year-over-year and ahead of analyst expectations, signaling strong demand across its advertising and data licensing initiatives.

This narrative, according to kinnth, leans heavily on fast growing usage, richer ad monetization and a premium profit multiple to justify that higher fair value. It blends assumptions on revenue growth, margins and future P/E into one cohesive story that is very different from the current share price.

Result: Fair Value of $309.77 (UNDERVALUED)

However, this hinges on Reddit sustaining user engagement and ad demand, and on AI data deals remaining attractive. Any slowdown or weaker terms could quickly challenge that story.

Another view: earnings multiple sends a different signal

That user narrative leans on growth and cash flows to argue Reddit is undervalued, but the current P/E of 47.9x tells a tighter story. It sits well above the US Interactive Media and Services average of 12.1x, the peer average of 26.8x, and the fair ratio of 33.4x. This points to a rich earnings price tag that could cut both ways for future returns.

Next Steps

With sentiment running high around Reddit, it helps to stress test the story against the numbers yourself and move quickly if your view differs. To see which potential bright spots are driving optimism, review the 3 key rewards

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.