Reddit (RDDT) shares slipped roughly 5% in late trading on Wednesday, falling below the $150 mark as the company unveiled a suite of new in-app advertising tools aimed at accelerating revenue growth. The stock closed at $146.84, down 5.19%, after touching an intraday low of $143.91 on elevated trading volume. The decline stood in stark contrast to the broader market, with the SPDR S&P 500 ETF gaining about 1% and the Invesco QQQ Trust, which tracks major tech and growth stocks, climbing roughly 1.6%.
Despite the price weakness, Reddit continues to trade like a high-growth technology stock rather than a mature media company. The company reported first-quarter revenue of $663 million, a 69% increase year-over-year, with advertising revenue jumping 74% to $625 million. Daily active uniques (DAUq) rose 17% to 126.8 million, and the company posted net income of $204 million. CEO Steve Huffman described Reddit as a “one-of-one business” with a “unique advantage in the age of AI.”
New Ad Products Aim to Drive Performance
Reddit announced on Wednesday that it has seen a 129% surge in app install volume from advertisers over the past year. The company is pushing forward with automation of ad buying and measurement, making several tools widely available. “Max campaigns” for app ads are now in beta, while App Event Optimization is rolling out generally. A new first-party measurement product called Dual Attribution, which uses Reddit data to track user response to ads, is also in beta. “Max campaigns drive stronger performance with less manual work,” said Jyoti Vaidee, Reddit’s vice president of ads product.
Cost per action (CPA) is a key metric in Reddit’s advertising pitch. The company said initial split tests with Max app campaigns lowered CPA by 15% on average and lifted results volume by 28%. In beta testing, App Event Optimization improved CPA by 22%, according to Reddit. These figures are based on controlled tests, and investors are watching closely to see if they hold up once campaigns scale beyond experimental settings.
Insider Selling Adds Pressure
Reddit faced additional headwinds from insider selling. A Form 4 filing with the U.S. Securities and Exchange Commission on May 19 revealed that a trust linked to CEO Steve Huffman sold 18,000 Class A shares on May 15, following option exercises. Weighted average sale prices ranged from $154.19 to $158.96. The filing indicated that the sales were conducted under a Rule 10b5-1 trading plan established in May 2025.
Outlook and Analyst Views
Reddit reiterated its second-quarter revenue guidance of $715 million to $725 million, with projected adjusted EBITDA between $285 million and $295 million. Adjusted EBITDA excludes interest, taxes, depreciation, amortization, and other costs, and is used by the company to track core operating results.
Goldman Sachs analyst Eric Sheridan raised his price target on Reddit to $200 from $180, maintaining a Neutral rating. Sheridan cited steady user growth, AI and search trends, advertising strength, solid EBITDA, and a cautious approach to data licensing, as reported by The Fly via TipRanks.
Social media stocks were mixed in late trading. Meta Platforms (META) ticked up, Snap (SNAP) added about 1%, and Pinterest (PINS) edged lower. Reddit’s decline stood out, underperforming its digital advertising peers.
Risks and Competitive Landscape
Reddit is positioning itself as a smaller ad platform capable of capturing dollars from larger competitors. After its first-quarter earnings, Reuters reported that Reddit’s AI-driven ad technology places advertisements into relevant subreddit conversations. COO Jen Wong noted that Reddit is “still hiring and adding” personnel, even as Meta, Snap, and Pinterest have implemented layoffs.
However, risks remain significant. If Reddit’s new ad products fail to consistently lower costs for advertisers, or if insider selling continues to attract attention, the stock’s valuation could remain under pressure. There are also concerns about traffic: Reuters reported last year that Reddit fell short on user growth after Google modified its search algorithm. Susannah Streeter at Hargreaves Lansdown warned that AI-powered overviews might push “more prominence to less well-known sources,” potentially impacting Reddit’s visibility.
Reddit’s message on Wednesday was clear: investors see growth, but they want assurance that it can be sustained as comparisons become tougher, regulatory scrutiny intensifies, and digital advertising giants continue to dominate the landscape.
