Reddit Shares Rally 5.34% on Earnings Outperformance but Rank 175th in $660M Trading Volume

Market Snapshot

On February 25, 2026, RedditRDDT+5.34% (RDDT) closed with a 5.34% gain, marking a positive day for the stock amid mixed market conditions. The company’s shares saw a trading volume of $0.66 billion, ranking it 175th in terms of trading activity for the day. Despite the rally, the volume suggests moderate institutional or retail participation compared to broader market leaders. The price increase occurred against a backdrop of strong earnings momentum, as Reddit’s Q4 2025 results had exceeded forecasts, with revenue growing 70% year-over-year to $726 million and net income reaching $252 million. However, the stock’s after-hours dip of 1.65% following the earnings report indicates lingering caution among investors ahead of the company’s 2026 guidance.

Key Drivers

Reddit’s Q4 2025 earnings report, released in February 2026, served as a primary catalyst for the stock’s performance. The company reported an EPS of $1.24, surpassing the forecast of $0.93 by 33.33%, while revenue hit $726 million, a 70% increase from the same period in 2024. This outperformance highlighted Reddit’s ability to monetize its user base effectively, with daily active users rising 19% year-over-year. The results also underscored the platform’s cost management, as operating income for the quarter reached $231.8 million, reflecting a 31.9% EBIT margin. However, the stock’s after-hours decline to $150.17, a 1.65% drop, hinted at investor skepticism about the sustainability of these gains, particularly given the company’s ambitious 2026 guidance.

The announcement of a $1 billion share repurchase program further bolstered short-term sentiment. This move signaled Reddit’s confidence in its cash flow generation, with Q4 Adjusted EBITDA hitting $327 million (45% of revenue) and free cash flow reaching $264 million. For the full-year 2025, the company generated $684 million in free cash flow, demonstrating its ability to convert revenue into profitability. Share repurchases typically boost earnings per share and reinforce management’s commitment to returning value to shareholders, which likely attracted investors seeking capital appreciation.

Strategic initiatives outlined in the Q1 2026 guidance also played a role in the stock’s movement. Reddit projected revenue of $595–605 million for the first quarter, implying 52–54% year-over-year growth, alongside Adjusted EBITDA of $210–220 million. The company emphasized investments in user onboarding and AI-driven features, aiming to enhance engagement and monetization. These initiatives align with Reddit’s broader goal of transitioning from a community-driven platform to a diversified digital media and advertising hub. The focus on AI, in particular, resonated with investors, as it positions Reddit to compete with other tech firms leveraging generative AI for content creation and user interaction.

Despite these positives, the stock’s post-earnings decline suggests caution over valuation concerns. Reddit’s P/E ratio, based on the $1.24 Q4 EPS and a closing price of $150.17, implied a forward P/E of approximately 121x, reflecting high expectations for future growth. While the company’s revenue and EBITDA growth rates (69% and 65%, respectively, for full-year 2025) justify some premium, investors may be factoring in potential headwinds, such as macroeconomic conditions affecting advertising budgets or competition from established social media platforms. The share repurchase program, while positive, may also raise questions about the company’s balance sheet flexibility if growth slows.

In summary, Reddit’s 5.34% gain on February 25, 2026, was driven by robust Q4 earnings, a significant share repurchase announcement, and forward-looking guidance emphasizing AI and user growth. However, the post-earnings decline underscores the market’s balancing act between optimism about Reddit’s execution and concerns about valuation and long-term scalability. As the company moves into 2026, the success of its strategic initiatives and ability to maintain its EBITDA margins will be critical in determining whether the stock sustains its upward trajectory.