Motley Fool cites Reddit earnings strength despite share price slump
The Motley Fool argues the social media platform is undervalued following a 69 per cent revenue jump in the first quarter of 2026.
An analysis published by The Motley Fool on Yahoo Finance argues that Reddit (NYSE: RDDT) remains undervalued despite a year-to-date share price decline exceeding 30 per cent. The report, published on May 20, 2026, contends that the market has overreacted to short-term volatility, pointing to robust first-quarter 2026 financial results as evidence of underlying strength.
The analysis highlights that Reddit reported 126.8 million daily active users in the first quarter, representing a 17 per cent increase year-on-year. Weekly active users also rose by 23 per cent to 493.1 million. The report notes that growth among logged-out users accelerated by 26 per cent year-on-year, compared to a 7 per cent rise for logged-in users, suggesting a broadening reach beyond registered accounts.
Financial metrics further support the bullish case, with revenue surging 69 per cent year-on-year to achieve a 30.8 per cent net profit margin. Management guidance for the second quarter of 2026 projects a midpoint revenue of $720 million, implying a 44 per cent year-over-year improvement. While this represents a deceleration from the first quarter, the report notes it remains significantly higher than growth rates seen by peers such as Meta Platforms and Alphabet.
Addressing concerns that artificial intelligence could cannibalise traffic, the article argues these fears are overstated. It points out that Reddit’s content library is licensed to major AI firms including OpenAI and Alphabet, generating annual recurring revenue. This segment, categorised as "other revenue," grew by 15 per cent year-on-year. The report emphasises that the volume of user-generated content provides a competitive moat, with communities producing more material in a single month than Wikipedia has created in its entire history.
Despite the positive outlook, the article clarifies that Reddit is not currently included in The Motley Fool’s list of top ten stock picks. The publication’s Stock Advisor service, which boasts a total average return of 993 per cent as of May 18, 2026, identified ten other opportunities it believes will outperform the S&P 500 by 2027. The Motley Fool disclosed that it holds positions in Reddit, Alphabet, and Meta Platforms.
