Reddit seen hitting 100M US users, boosted by ads and AI deals

Wedbush Securities released a bullish report on Reddit on Thursday, projecting that the platform will report strong second-quarter results when it announces on July 30. The analysis centers on three primary growth drivers: user expansion, advertising product innovation, and AI licensing revenue.

On the user side, Reddit has been investing in feed quality, app speed, new-user activation, and search capabilities. These investments are described as moving US daily users closer to management's target of 100 million—a significant milestone for a platform whose advertising value scales with audience size. In parallel, Reddit has launched or refined several advertising products designed to broaden its appeal beyond large brands. Reddit Max is a premium advertising offering; search ads monetize queries within Reddit's search function; Dynamic Product Ads allow retailers to showcase inventory dynamically; and the Shopify integration enables merchants to connect their stores directly to Reddit's ecosystem. Collectively, these tools are aimed at attracting small businesses and retailers who may not have previously advertised on the platform.

A third growth vector is AI content licensing. Reddit Answers, a feature expected to continue gaining users, represents a direct user-facing product. But more strategically, Wedbush identifies Alphabet's Google and OpenAI as partners in content licensing arrangements. The report notes that posts written by users add value to AI search results, creating an economic rationale for search engines and AI companies to pay Reddit for access to that content. Search ads, in turn, may generate incremental revenue as the search product matures. Wedbush believes Reddit and Google will likely maintain their relationship and may build deeper links, suggesting the two companies view this arrangement as mutually beneficial.

On the basis of these expectations, Wedbush added Reddit to its "Best Ideas List," maintained an outperform stock rating, and set a $250 price target. The second-quarter earnings announcement on July 30 will be the first major test of whether the analyst's thesis on user growth, advertising traction, and AI revenue is borne out in actual results.

Reddit's path to monetization is increasingly diversified beyond traditional advertising. The company's strategic focus on feed quality and user experience appears to be moving it toward its 100 million US daily user target, a threshold that would substantially increase its relevance as an advertising platform. This growth is being reinforced by purpose-built ad products that address specific business needs—Reddit Max and search ads target brand awareness, while Dynamic Product Ads and the Shopify integration cater directly to e-commerce retailers seeking performance-oriented campaigns.

The AI licensing component represents a newer but potentially significant revenue stream. User-generated posts on Reddit have inherent value to search engines and AI models, since they contain authentic discussion, recommendations, and answers to common questions. Wedbush's expectation that Reddit and Google will maintain and deepen their relationship reflects the recognition that Reddit's content enhances search quality. By monetizing this content through licensing deals with Google and OpenAI, Reddit converts what was previously a free value transfer into a contractual relationship. The emergence of Reddit Answers and the monetization potential of search ads suggest the company is layering revenue opportunities atop its core user base rather than relying on a single income stream.

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