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For the third quarter of 2026, management expects revenues between $860 million and $870 million. The midpoint implies about 48% year-over-year growth. For the third quarter of 2026, the Zacks Consensus Estimate for revenues is pegged at $886.35 million, indicating year-over-year growth of 51.54%.
The consensus mark for earnings is pegged at $1.30 per share, which has been unchanged over the past 30 days. This indicates year-over-year growth of 62.50%.
RDDT’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 42.32%.
Let’s see how things have shaped up for this announcement.
Factors Likely to Have Influenced Q3 Performance
Reddit’s third-quarter 2026 performance is expected to have benefited from robust advertising demand, expanding advertiser adoption and continued investments in artificial intelligence (AI)-powered advertising solutions. In the second quarter, advertising revenues surged 64% year over year to $762 million, supported by higher impressions and pricing. Active advertisers increased more than 70%, while revenues from the scaled channel, comprising mid-market businesses and small and mid-sized businesses, doubled year over year. These trends are expected to have continued into the third quarter as well.
The company is expected to have benefited from increasing adoption of Reddit Max, its AI-powered advertising automation platform, in the to-be-reported quarter. In the second quarter of 2026, the number of advertisers using Reddit Max rose more than 60% sequentially, while revenues generated from Max campaigns surged more than 150%. The introduction of tailored creatives and app-install optimization capabilities is likely to have improved advertising efficiency, enhanced campaign performance and encouraged higher advertiser spending.
Improving user engagement and international monetization are also expected to have supported growth. In the second quarter of 2026, the platform reached more than 500 million weekly users and exceeded 130 million daily users. New app user retention improved 50% year over year on a relative basis. Enhanced feed recommendation models, improved onboarding experiences and higher conversion of web visitors into app users are expected to have supported engagement and advertising monetization. International revenues surged 84% year over year in the second quarter, indicating significant growth potential.
However, Reddit’s third-quarter 2026 results are expected to have been hurt by volatility in search referral traffic, particularly amid the growing adoption of AI-powered search summaries, which could have weighed on user growth and engagement. Higher investments in AI, machine learning, product development and marketing are likely to have increased operating expenses.
RDDT Shares Underperform Sector
RDDT shares have plunged 39.8% in the year-to-date period, underperforming the Zacks Computer & Technology sector’s return of 14%.
The company’s shares have also underperformed peers including Meta Platforms (META - Free Report) , Pinterest (PINS - Free Report) , and Alphabet (GOOGL - Free Report) , all of which are expanding their footprints in digital advertising. While Meta Platforms and Pinterest shares have lost 4.5% and 18%, respectively, Alphabet’s shares have gained 1.2% in the year-to-date period.
RDDT Stock Performance
Image Source: Zacks Investment Research
RDDT stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment, which makes it a risky bet for risk-averse investors.
On a forward 12-month Price/Sales basis, Reddit is trading at 6.18X, higher than the Internet - Software industry’s 4.12X, Meta Platforms 5.33X and Pinterest’s 2.19X. However, it is lower than Alphabet’s 7.19X.
RDDT Valuation
Image Source: Zacks Investment Research
RDDT Benefits From Expanding Portfolio
Reddit is well-positioned for long-term growth, driven by expanding user engagement, AI-powered advertising innovations and increasing monetization opportunities. The company aims to reach 1 billion daily active users globally and 100 million in the United States. Investments in improved feed recommendations, personalized onboarding, and enhanced app experiences are expected to accelerate user retention and engagement.
Further expanding its portfolio, Reddit recently introduced enhanced lead-generation capabilities to help advertisers convert high-intent engagement into qualified business opportunities. The enhancements include Max campaigns for automated optimization, in-market audiences to target potential buyers and expanded audience and measurement integrations with Bombora, Demandbase, Clay, G2, Octane11, and Dreamdata. Reddit is also testing HubSpot integration to improve CRM workflows, attribution and reporting. These enhancements are expected to have strengthened Reddit’s advertising platform, improved campaign performance and driven advertiser engagement in the quarter to be reported.
Reddit’s investments in search capabilities, including Reddit Answers, present additional monetization opportunities. The company is exploring shopping-focused advertisements within search experiences, while its extensive repository of authentic human conversations supports opportunities in AI data licensing.
Conclusion
Reddit’s strong advertising momentum, expanding AI-powered solutions and improving user engagement bode well for its long-term prospects. However, a stretched valuation, volatile search traffic and rising expenses warrant caution ahead of third-quarter earnings.
View the Zacks #1 Rank List
Image: Bigstock
Should You Buy, Sell, or Hold Reddit Stock Before Q3 Earnings Release?
Key Takeaways
Reddit (RDDT - Free Report) is set to release its third-quarter 2026 results on Oct. 29, 2026.
For the third quarter of 2026, management expects revenues between $860 million and $870 million. The midpoint implies about 48% year-over-year growth. For the third quarter of 2026, the Zacks Consensus Estimate for revenues is pegged at $886.35 million, indicating year-over-year growth of 51.54%.
The consensus mark for earnings is pegged at $1.30 per share, which has been unchanged over the past 30 days. This indicates year-over-year growth of 62.50%.
RDDT’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 42.32%.
Reddit Inc. Price and EPS Surprise
Reddit Inc. price-eps-surprise | Reddit Inc. Quote
Let’s see how things have shaped up for this announcement.
Factors Likely to Have Influenced Q3 Performance
Reddit’s third-quarter 2026 performance is expected to have benefited from robust advertising demand, expanding advertiser adoption and continued investments in artificial intelligence (AI)-powered advertising solutions. In the second quarter, advertising revenues surged 64% year over year to $762 million, supported by higher impressions and pricing. Active advertisers increased more than 70%, while revenues from the scaled channel, comprising mid-market businesses and small and mid-sized businesses, doubled year over year. These trends are expected to have continued into the third quarter as well.
The company is expected to have benefited from increasing adoption of Reddit Max, its AI-powered advertising automation platform, in the to-be-reported quarter. In the second quarter of 2026, the number of advertisers using Reddit Max rose more than 60% sequentially, while revenues generated from Max campaigns surged more than 150%. The introduction of tailored creatives and app-install optimization capabilities is likely to have improved advertising efficiency, enhanced campaign performance and encouraged higher advertiser spending.
Improving user engagement and international monetization are also expected to have supported growth. In the second quarter of 2026, the platform reached more than 500 million weekly users and exceeded 130 million daily users. New app user retention improved 50% year over year on a relative basis. Enhanced feed recommendation models, improved onboarding experiences and higher conversion of web visitors into app users are expected to have supported engagement and advertising monetization. International revenues surged 84% year over year in the second quarter, indicating significant growth potential.
However, Reddit’s third-quarter 2026 results are expected to have been hurt by volatility in search referral traffic, particularly amid the growing adoption of AI-powered search summaries, which could have weighed on user growth and engagement. Higher investments in AI, machine learning, product development and marketing are likely to have increased operating expenses.
RDDT Shares Underperform Sector
RDDT shares have plunged 39.8% in the year-to-date period, underperforming the Zacks Computer & Technology sector’s return of 14%.
The company’s shares have also underperformed peers including Meta Platforms (META - Free Report) , Pinterest (PINS - Free Report) , and Alphabet (GOOGL - Free Report) , all of which are expanding their footprints in digital advertising. While Meta Platforms and Pinterest shares have lost 4.5% and 18%, respectively, Alphabet’s shares have gained 1.2% in the year-to-date period.
RDDT Stock Performance
Image Source: Zacks Investment Research
RDDT stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment, which makes it a risky bet for risk-averse investors.
On a forward 12-month Price/Sales basis, Reddit is trading at 6.18X, higher than the Internet - Software industry’s 4.12X, Meta Platforms 5.33X and Pinterest’s 2.19X. However, it is lower than Alphabet’s 7.19X.
RDDT Valuation
Image Source: Zacks Investment Research
RDDT Benefits From Expanding Portfolio
Reddit is well-positioned for long-term growth, driven by expanding user engagement, AI-powered advertising innovations and increasing monetization opportunities. The company aims to reach 1 billion daily active users globally and 100 million in the United States. Investments in improved feed recommendations, personalized onboarding, and enhanced app experiences are expected to accelerate user retention and engagement.
Further expanding its portfolio, Reddit recently introduced enhanced lead-generation capabilities to help advertisers convert high-intent engagement into qualified business opportunities. The enhancements include Max campaigns for automated optimization, in-market audiences to target potential buyers and expanded audience and measurement integrations with Bombora, Demandbase, Clay, G2, Octane11, and Dreamdata. Reddit is also testing HubSpot integration to improve CRM workflows, attribution and reporting. These enhancements are expected to have strengthened Reddit’s advertising platform, improved campaign performance and driven advertiser engagement in the quarter to be reported.
Reddit’s investments in search capabilities, including Reddit Answers, present additional monetization opportunities. The company is exploring shopping-focused advertisements within search experiences, while its extensive repository of authentic human conversations supports opportunities in AI data licensing.
Conclusion
Reddit’s strong advertising momentum, expanding AI-powered solutions and improving user engagement bode well for its long-term prospects. However, a stretched valuation, volatile search traffic and rising expenses warrant caution ahead of third-quarter earnings.
Reddit currently has a Zacks Rank #3 (Hold), suggesting it may be wise to wait for a more favorable entry point before accumulating the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.