• Reddit stock jumped 42% on Wednesday to trade at a record high after reporting strong earnings.
• Reddit’s revenue jumped 68% from last year, thanks in part to licensing deals with OpenAI and Google.
• Analysts now expect profits of $113 million next year, up from $17.5 million previously estimated.

Reddit stock soared 42% to close at an all-time high of $116.03 per share Wednesday afternoon after the company reported strong earnings.

A few months ago, investors seemed wary of Reddit’s ability to compete in AI. Now, the platform’s AI licensing deals are helping fuel its strongest quarterly revenue growth in two years and propel its stock to new records.

On Tuesday, the company reported net income of $29.9 million, beating expectations for a loss of $8.8 million. This is only the third profitable quarter for the company.

Reddit’s revenue jumped 68% from last year, to $348.4 million. Part of this huge jump comes from its strong sequel licensing agreements with OpenAI and Google, which is reflected in the $33.2 million in “other revenue” for the third quarter.

This revenue category grew 547% year over year and now represents more than 9% of the company’s overall revenue, up from less than 1% last year.

The company’s licensing agreements allow AI giants to train their models on the platform, in an increasingly competitive environment. CEO Steve Huffman previously said Reddit was well positioned amid intense “arms race” for AI training.

The company is also innovating in AI through language translation, which it is testing in French, Huffman said during the earnings conference call. The move helped attract more users to the site, he said.

“This quarter, machine translation attracted four times more users than the previous quarter, and based on the success we’ve seen so far, we plan to expand machine translation to more than 30 countries worldwide. by 2025,” Huffman added.

The company added more than 24 million daily users in the first three quarters of the year, already surpassing the 15.6 million added in total last year, which also significantly boosted its advertising business. Advertising revenues are expected to exceed $1 billion for the year for the first time.

Analysts say the company’s publicity and AI innovation are reasons to still be bullish on the stock.

“Revenue beat expectations by 11%, allaying concerns about the sustainability of user growth, while showing better monetization thanks to ad product innovation and AI-driven enhancements,” the company said. Deutsche Bank analysts in a note published Wednesday.

“Looking ahead, Reddit is expected to relaunch its search tool in the coming quarters, which, given the success of competing AI-powered search tools, could generate another lever for monetization growth,” they said. -they added, increasing their price target in the market. shares from $85 to $115.

Analysts now expect $113 million in profits next year, up from $17.5 million, according to FactSet data.