TLDR
- Reddit shares surged more than 11% in after-hours trading.
- RDDT will join the S&P 500 before the market opens on August 18.
- Reddit will replace AvalonBay Communities in the benchmark.
- Q2 revenue rose 61% year over year to $805 million.
- Reddit reported $253 million in net income while search traffic volatility remains a concern.
Reddit stock surged more than 11% in after-hours trading Thursday after S&P Dow Jones Indices confirmed the social media company will join the S&P 500. RDDT shares rose as high as about $176 after closing the regular session at $158.12, up 3.04%.
Source: KnockOutStocks
Reddit will enter the benchmark before trading opens on August 18, replacing AvalonBay Communities. Equity Residential is acquiring AvalonBay, while the combined real estate company will remain in the S&P 500 under the new name Vivmark Residential.
Reddit S&P 500 Inclusion Drives RDDT Stock Higher
The S&P 500 addition creates new demand for Reddit shares from investment funds designed to track the benchmark. Index funds and exchange-traded funds that mirror the S&P 500 will need to adjust their portfolios to include RDDT when the change takes effect.
The announcement sent Reddit shares sharply higher even without a new earnings release or business deal. RDDT gained about 3% during regular trading before extending the rally after the S&P decision became public. Shares reached roughly $176 during extended trading, an increase of more than 11% from Thursday’s close.
Reddit will also become one of the few publicly traded social media companies represented in the benchmark. Meta Platforms is already an S&P 500 constituent, while Pinterest and Snap remain outside the index.
Reddit Q2 Revenue Jumps 61% to $805 Million
The index addition follows Reddit’s second-quarter results, which showed continued revenue and user growth. Revenue increased 61% year over year to $805 million, marking the company’s eighth straight quarter with sales growth above 60%.
Advertising revenue rose 64% to $762 million, while other revenue increased 24% to $43 million. Reddit reported net income of $253 million and diluted earnings of $1.25 per share. Adjusted EBITDA reached $343 million, more than doubling from a year earlier.
Daily active unique users increased 18% to 130.3 million, while weekly active unique users rose 24% to 514.6 million. Reddit also repurchased 1.5 million Class A shares during the quarter for $235 million at an average price of $157.57.
Those figures provide a financial backdrop for Reddit’s admission into the S&P 500, which requires companies to meet criteria covering market capitalization, liquidity and profitability.
Google Search Traffic Remains a Risk for Reddit Stock
Reddit still faces questions about traffic coming from internet search engines as artificial intelligence changes how users find online information. The company’s shares faced selling pressure after its Q2 report as investors focused on fluctuations in search referrals and the growing presence of AI-generated search answers.
Google has expanded AI-generated summaries within search results, creating concerns that fewer users may click through to external websites. Reddit has relied on search engines as one channel for attracting new visitors, leaving changes in search behavior closely watched by investors.
The S&P 500 inclusion does not change Reddit’s operating exposure to search traffic, but it introduces a new category of institutional shareholders required to hold RDDT through benchmark-tracking portfolios.
Reddit stock will officially join the S&P 500 before the opening bell on August 18. The next market test comes as index funds rebalance their holdings while investors weigh Reddit’s 61% revenue growth against continued uncertainty around search-generated traffic.
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