TLDR
- Reddit will join the S&P 500 on August 18, replacing AvalonBay Communities
- RDDT stock jumped over 11% in after-hours trading following the announcement
- Reddit becomes only the second pure-play social media company in the S&P 500, after Meta
- The company has posted eight straight quarters of revenue growth above 60%
- RDDT was down 31% year-to-date before Thursday’s announcement
Reddit (RDDT) stock surged more than 11% in after-hours trading on Thursday after S&P Dow Jones Indices confirmed the company will join the S&P 500 on August 18.
Reddit replaces AvalonBay Communities, which is being removed from the index following its acquisition by fellow S&P 500 member Equity Residential.
The move makes Reddit only the second pure-play social media company in the S&P 500. Meta is the other. Pinterest and Snap are both smaller by market cap and remain outside the index.
Twitter held a spot in the S&P 500 until Elon Musk acquired the company in 2022. It’s now called X and is privately held under SpaceX.
To qualify for the S&P 500, companies must have a market cap of at least $22.7 billion and meet profitability, liquidity, and share-float requirements. Reddit cleared those bars.
The stock’s pop is a fairly standard reaction to index inclusion news. Fund managers who track the S&P 500 are required to buy the stock to match the benchmark, which drives demand.
Eight Straight Quarters of 60%+ Revenue Growth
Reddit reported its second-quarter results in late July, posting its eighth consecutive quarter of revenue growth above 60%. That’s a streak worth paying attention to.
Despite the strong revenue run, the stock had been under pressure. RDDT was down 31% year-to-date heading into Thursday’s close.
The Q2 report came with a warning. Reddit flagged that its “search referrals were choppy,” raising concerns about its dependence on Google for user acquisition.
CEO Steve Huffman pointed to Google’s AI Overviews, powered by Gemini, as a factor behind that volatility. As Google surfaces more answers directly in search results, fewer users are clicking through to Reddit.
AI Deals in Place, But Investors Want More
Reddit has signed data licensing deals worth hundreds of millions of dollars with OpenAI and Google, allowing both companies to train AI models on Reddit’s forum data.
Those deals have added revenue, but investors had been hoping for more agreements of that kind. The AI opportunity has not yet translated into the kind of momentum the market was looking for.
Since its IPO in March 2024, Reddit has focused on growing its share of the digital advertising market, competing against Meta and Google, which dominate that space.
San Francisco-based Reddit hosts forums across thousands of topics and has been investing in ad technology to attract more advertiser spend.
As part of the same index reshuffle announced Thursday, Sun Communities will move to the S&P MidCap 400, replacing Webster Financial.
Reddit’s addition to the S&P 500 takes effect before the market open on August 18.
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