Social media company Reddit (RDDT 2.18%) knocked it out of the park with its fourth-quarter earnings report. Revenue soared 70% year over year to $726 million, daily active unique users jumped 19% to 121.4 million, net income exploded to $252 million, and the company announced a $1 billion share buyback program.
What's Reddit's secret? Authenticity, which is rare in the age of AI.
Image source: Getty Images.
People don't trust AI
The internet is being overloaded with AI-generated content, and traditional search engines are making things worse. Alphabet's Google AI summaries now show up at the top of many search results, but they can be riddled with errors and misleading statements. This issue is compounded when the content on websites cited by AI summaries is generated by AI and potentially incorrect.
A recent Gartner survey found that 53% of consumers distrust or lack confidence in the reliability of AI search and summaries, and more than 60% want to be able to toggle off AI summaries. A different survey from December, which polled 3,000 Americans across all age groups, found that 88% said it's harder to tell what's real online than a year ago. Additionally, 60% said they had backed out of a purchase, booking, or date because something felt suspicious.
With the internet economy revolving around advertising and selling stuff to consumers, this distrust could be a major problem for brands. Widespread distrust in AI search results and AI-generated content could diminish the effectiveness of digital ads and creator endorsements.
Reddit has positioned itself as the answer to AI overload
"One of the main reasons Reddit, Inc. is the go-to place for community is the candor of our conversations. This authenticity is rare. And it's what makes conversations on Reddit, Inc. uniquely helpful and influential," said Reddit CEO Steven Huffman during the fourth-quarter earnings call.
While bots and AI content certainly exist on Reddit, the platform has emerged as a trusted source of information for consumers. AI chatbots and platforms like OpenAI also turn to Reddit to source information. According to an analysis by Profound, Reddit is the top-cited source across all major AI platforms.
The company is leaning into its reputation for trustworthiness with new tools and features. Reddit started testing verified profiles in December, allowing brands and users to opt in to a verification process that can lend more credibility to their posts. The company is also working to improve the onboarding process for new users, which could help with retention and engagement and ultimately drive ad revenue higher.
Reddit Answers, the company's AI-powered search features, is also being improved. Reddit Answers draws from Reddit posts and likely helps keep users on Reddit rather than turning to Google search for AI chatbots. More than 80 million users now search using Reddit Answers each week.
A multi-billion-dollar opportunity for Reddit
Digital advertising spending in 2025 was around $750 billion, spread across search, social media, display, video, and other formats. Reddit has only begun to tap into this enormous market.
NYSE: RDDT
Key Data Points
Reddit generated $2.2 billion in revenue during 2025, up 69% from 2024. Growing its user base will help drive revenue higher, but so will generating more ad revenue per user. Reddit has added shopping ads, a new format that highlights products and replicates the types of ads often seen on other social media networks. The company is still in the early innings of fleshing out its ad platform and maximizing its revenue potential.
While Meta Platforms is the king of social media advertising and Alphabet reigns supreme in search ads, Reddit may be the best growth story in the digital advertising industry. As trust in search results and AI summaries erodes, and as social networks like Facebook turn into AI slop factories, Reddit can stand out and offer advertisers a truly unique and authentic platform.
Reddit stock was slumping on Friday despite the solid results, but long-term investors should seriously consider the emerging social media giant.
