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

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

But the social media company also saw robust revenue and user growth, underscoring the potential of its digital advertising business as people visit the site in droves. Last month, Google, Meta and Snap also reported increasing advertising sales and double-digit revenue growth.

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

The number of daily active users increased by 37 percent to 82.7 million compared to the previous year.

“We view this as the beginning of a new chapter as we work to build the next generation of Reddit,” Reddit co-founder and CEO Steve Huffman said in a statement.

Reddit, which went public after more than 18 years as a private company, has become something of a litmus test for technology IPOs. The company made a successful debut in a previously subdued IPO market, with its shares rising 48 percent on the first day of trading, giving investors cause for optimism. Reddit shares continue to trade above the company's IPO price of $34.

Reddit is essentially a message board where users come together in forums to research and discuss shared interests. Reddit has spent years trying to diversify its core business, digital advertising. It has struck deals with Google and other companies that want to license its vast amounts of conversation data, for example to build artificial intelligence technologies. It also tried to kick-start an e-commerce business.

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