06:34 AM EST, 02/13/2025 (MT Newswires) -- Reddit ( RDDT ) reported better-than-expected fourth-quarter results amid a sharp jump in advertising revenue, but the social media platform's daily user growth fell short of market estimates, sending its stock lower early Thursday.

The company posted global daily active unique visitors of 101.7 million in the quarter ended Dec. 31, up from 73.1 million a year ago, it said late Wednesday, while the average analyst estimate on FactSet was for 103.1 million. The metric's annual growth of 39% declined from the 47% gain logged in the previous three-month period.

"Later in (the fourth quarter), we experienced some volatility with Google Search triggered by a periodic algorithm change, but traffic from search has recovered so far in (the first quarter), and we've regained momentum," Chief Executive Steve Huffman said in a letter to shareholders. "What happened wasn't unusual-referrals from search fluctuate from time to time, and they primarily affect logged-out users."

Shares of Reddit ( RDDT ), which went public in March 2024, fell 14% in premarket activity.

Daily active unique users advanced 32% year over year to 48 million in the US, while international users rose 46% to 53.7 million. Worldwide average revenue per unique visitor inclined 23% to $4.21.

Revenue came in at $427.7 million for the December quarter, up from $249.8 million in the prior-year period, surpassing the Street's view for $405.8 million. Ad revenue soared 60% to $394.5 million mainly driven by impressions with consistent pricing on a yearly basis. Revenue jumped 70% and 76% in the US and international segments, respectively.

"Impression gains remain our primary objective and these increases were driven by user growth, improved ad click-through rates and new ad surfaces like comments," Chief Financial Officer Drew Vollero said during an earnings call, according to a FactSet transcript. "We saw strength across the ad funnel led by high-double-digit growth rates from performance advertisements."

Reddit ( RDDT ) reported net income of $0.36 a share for the quarter, ahead of the consensus for $0.25. Gross margin improved to 92.6% from 88.4% the year before. "We signed revised agreements with our key hosting providers which positively benefited gross margins over 150 basis points this quarter," according to Vollero.

For the ongoing quarter, the firm anticipates revenue to be in a range of $360 million to $370 million, while the Street is looking for $367.8 million. The company could see "slightly elevated" sequential stock-based compensation costs in the current period due to higher employer taxes depending on share price volatility, Vollero told analysts.