Reddit Stock Soars 28% as User Growth Reaches 400 Million

Reddit shares surged 28% in pre-market trading on May 30, 2026, following the release of first-quarter earnings that significantly exceeded analyst expectations. The social media platform reported average daily active users reached 400 million, a 15% increase year-over-year. Revenue for the quarter rose 31% to $1.8 billion, driven by a 40% expansion of its advertising technology stack, according to reporting from finance.yahoo.com.

Context — why this matters now

The rally marks a pivotal recovery attempt for a stock that has faced persistent skepticism since its 2025 IPO. The company's initial public offering priced at $34 per share, but the stock languished below that level for most of its first year as investors questioned its path to sustained profitability. The last comparable social media debut with a similar user-to-revenue growth arc was Snap in 2017, which took nearly four years to consistently trade above its IPO price after initial struggles.

The current macro backdrop features elevated but stable interest rates, with the 10-year Treasury yield at 4.25%. This environment has pressured high-multiple growth stocks but rewarded companies demonstrating clear operational use and margin expansion. What changed for Reddit this quarter was the successful scaling of its direct response advertising products and a notable increase in large-brand campaign spending, which together lifted ad revenue per user by 14%.

The catalyst chain began with the full integration of its 2025 acquisition of an ad-tech startup, which allowed for more granular user targeting. This technical upgrade coincided with a broader advertiser shift towards platforms with highly engaged, niche communities as broader social media reaches saturation.

Data — what the numbers show

Four distinct data points anchor Reddit's quarterly performance. Daily active users grew to 400 million, up from 348 million in Q1 2025. Revenue hit $1.8 billion, surpassing the consensus estimate of $1.65 billion. The company reported GAAP net income of $120 million, its second consecutive profitable quarter, compared to a $95 million loss in the year-ago period. Operating margin expanded to 14%, a 900 basis point improvement.

A comparison of key metrics before and after the earnings report illustrates the magnitude of the move. The stock closed at $29.75 on May 29. Following the pre-market surge to approximately $38.10, its market capitalization increased from $18.5 billion to nearly $23.7 billion. This performance starkly contrasts with the Nasdaq Composite Index, which is up 8% year-to-date, and the S&P 500 Communication Services sector, which is up 5%.

Reddit's price-to-sales ratio based on forward estimates now stands at 5.2x. This valuation remains below the sector median of 7.1x for social media peers but represents a significant expansion from its 4.0x multiple prior to the earnings announcement.

Analysis — what it means for markets / sectors / tickers

The report's second-order effects are most visible in the digital advertising ecosystem. Companies providing ad-tech infrastructure, like The Trade Desk (TTD) and PubMatic (PUBM), may see positive sentiment spillover as Reddit's success validates spending on next-generation platform inventory. Conversely, more established social media giants like Meta Platforms (META) and Snap (SNAP) could face intensified competition for brand advertising budgets, potentially pressuring their growth premiums.

A key risk to the bullish thesis is Reddit's reliance on a relatively small number of large advertisers for the recent revenue acceleration. Concentration risk remains if a few key accounts reduce spending. The company acknowledged that its top ten advertising partners represented 22% of total Q1 ad revenue.

Positioning data from major prime brokerage flows indicates hedge funds, which were net short the stock for most of 2025, have begun covering those positions. Retail investor inflows via major brokerages also spiked 300% in the 24 hours following the earnings release, according to platform activity summaries.

Outlook — what to watch next

Immediate catalysts include the upcoming FOMC meeting on June 18, 2026, which will set the tone for growth stock valuations. Reddit's next major test is its Q2 earnings report, scheduled for July 24, 2026, where user growth retention and margin trajectory will be scrutinized.

Key technical levels to monitor include the stock's 200-day moving average, currently at $31.50, which now serves as a major support level. Resistance is anticipated near the $41 zone, which aligns with the stock's post-IPO highs from March 2025. If the company maintains its current user growth rate, it is on pace to reach 450 million daily active users by the end of Q4 2026.

Frequently Asked Questions

What does Reddit's user growth mean for retail investors?

For retail investors, the surge to 400 million daily users demonstrates scalable engagement beyond its core base. This scale improves monetization potential and reduces platform risk. However, retail investors should note the stock's historical volatility and the fact that post-earnings moves of this magnitude often see partial retracements as liquidity normalizes.

How does Reddit's advertising growth compare to TikTok?

Reddit's 40% ad-tech expansion in Q1 2026 outpaces the most recent reported quarterly ad revenue growth from TikTok's parent company, ByteDance, which was approximately 28%. The divergence highlights Reddit's success in capturing brand budgets seeking community context, whereas TikTok's growth is now maturing after several years of explosive expansion.

What is the historical context for a social media stock gaining 28% in a day?

Single-day gains of 25% or more for large-cap social media stocks are rare post-IPO. Meta (formerly Facebook) saw a 19% gain after its Q3 2013 earnings when mobile revenue surprised. Snap's largest post-IPO single-day gain was 23% in February 2021 after it beat user estimates. Reddit's 28% move is among the largest for a company with a market cap over $15 billion in the sector's history.

Bottom Line

Reddit's earnings demonstrate a viable path to profitability through targeted advertising, shifting its narrative from a speculative platform to a scaled business.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.