Reddit (NASDAQ:RDDT) reports third-quarter earnings, with revenue up 68% to $585 million. Advertising revenue surged 74% to $549 million, daily active users hit 116 million, and average revenue per user climbed 41% to $5.04. Content licensing deals with AI firms like Google and OpenAI grew 7% to $36 million.

Reddit’s success in Q3 showcases its strong performance in a competitive social media landscape. Despite initial doubts about its ad business as a growth driver, recent results prove otherwise. Improved user engagement and content licensing deals have contributed to Reddit’s revenue growth and positive stock performance.

Reddit’s focus on personalized feeds and subreddit recommendations has increased user engagement, debunking earlier skepticism about its ad value. Content licensing deals, especially with AI giants like Google and Meta Platforms, have contributed significantly to revenue growth. Reddit’s authentic discussions are highly sought after for training language models.

Reddit’s profitability is exceeding expectations, with positive free cash flow in recent quarters. Despite initial concerns about high multiples and regulatory risks, consistent earnings beats have helped compress multiples. Reddit’s niche communities and strong user growth in international markets provide a competitive advantage in the digital ad space.

While still cautious about Reddit’s valuation, recent performance has proven its resilience and potential for long-term investment. With a steep valuation at 20 times sales, waiting for a pullback may be wise, but Reddit’s growth drivers and diversification strategies make it a strong contender for a long-term investor’s portfolio.

Read more at Yahoo Finance: Here’s What I Got Epically Wrong About Reddit