San Francisco-based social media platform Reddit has projected its first-quarter revenue to be higher than Wall Street analysts expected, driven largely by the growing use of artificial intelligence (AI) tools on its advertising platform. This upbeat forecast boosted investor confidence and lifted Reddit’s share price in extended trading.

AI Is Fueling Reddit’s Ad Boom

Reddit’s advertising system uses AI-powered features that help brands create and manage ad campaigns more effectively. These tools include an AI-based copywriter that writes ad text tailored for Reddit, and an image auto-crop feature that adjusts visuals to fit Reddit’s format, making it easier for advertisers to launch campaigns without extra effort.

Reddit’s Financial Outlook: Numbers That Matter

For the first quarter of 2026, Reddit expects its revenue to fall between $595 million and $605 million, topping the analysts’ forecast of around $577 million. The company also expects higher-than-expected adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), another key profitability measure.

Why Advertisers Are Flocking to Reddit

One reason for this strong outlook is Reddit’s unique advertising format. Brands can put ads directly inside subreddit discussions, allowing them to reach highly engaged niche communities, from health and tech to fashion and gaming. This targeted approach has attracted more advertisers and expanded Reddit’s advertiser base significantly.

The Impact: User Growth and Market Response

Reddit’s numbers for the previous quarter were also impressive. Revenue for the fourth quarter of 2025 jumped around 70% year-on-year to roughly $726 million. At the same time, daily active users climbed to about 121 million, and the average revenue per user increased by over 40%. These figures highlight that both advertiser demand and user engagement are growing together, strengthening Reddit’s business momentum.

What Comes Next for Reddit?

Reddit isn’t just stopping at stronger revenue forecasts. The company announced its first-ever $1 billion share repurchase program, a sign that it’s confident in its future growth and financial health. By investing in AI tools and expanding advertising options, Reddit hopes to continue challenging larger social platforms for ad dollars.