Reddit reports a loss of $575 million related to the IPO but also strong growth

Reddit on Tuesday reported a quarterly loss of more than $500 million in its first earnings report as a public company, largely due to stock compensation expenses incurred during its initial public offering in March.

But the social media company has also reported robust revenue and user growth, underscoring the potential of its digital advertising business as people flock to the site. Last month, Google, Meta and Snap also reported increased ad sales and double-digit revenue growth.

Reddit's revenue was $243 million in the first quarter, up 48% from $163.7 million a year earlier and higher than Wall Street estimates of $214 million, according to data compiled by FactSet. Net loss was $575.1 million, compared to a loss of $60.9 million a year earlier. Stock-based compensation expense totaled $595.5 million, up from $13.2 million a year earlier.

Daily active users jumped to 82.7 million, up 37% from a year earlier.

“We see this as the beginning of a new chapter as we work toward building the next generation of Reddit,” said Steve Huffman, co-founder and CEO of Reddit.

Reddit, which went public after more than 18 years as a private company, has turned into something of a litmus test for technology initial public offerings. The company made a successful debut in what had been a tepid IPO market, with its shares rising 48% on its first day of trading and giving investors reason for optimism. Reddit shares continue to trade above the company's IPO price of $34.

Essentially a message board where users gather in forums to research and discuss interests they have in common, Reddit has spent years trying to diversify its core digital advertising business. It has struck deals with Google and other companies that want to license its vast amounts of conversational data, for example to build artificial intelligence technologies. It also sought to spur an e-commerce business.

Reddit expects revenue of $240 million to $255 million in the current quarter, above Wall Street expectations.

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