Reddit (RDDT) stock jumps 10% as AI-powered ad enhancements drive massive revenue beat. The company’s ‘AI-first’ pivot is officially paying!

Reddit (RDDT) just delivered a "high watermark" quarterly report that has silenced many skeptics. The company blew past expectations with $726 million in Q4 revenue (up 70% YoY), fueled by a massive pivot toward AI-powered advertising and search optimization.

Key "Alpha" from the Feb 5, 2026 Earnings Report:

• The AI Engine: Reddit credits the revenue beat to its new "Max Campaigns" (currently in beta). These AI-driven tools automate campaign management, delivering a 17% reduction in Cost Per Acquisition (CPA) and a 27% increase in conversion volume for early testers.
• Monetization Surge: Global Average Revenue Per User (ARPU) jumped 42% to $5.98, proving that Reddit is finally narrowing the monetization gap with rivals like Meta and Snap.
• The "Reddit Answers" Adoption: The platform’s AI-enhanced search feature, Reddit Answers, now has over 75 million weekly users, making the platform a primary "information engine" for the generative AI era.
• Shareholder Return: Management announced a maiden $1 billion share repurchase program, signaling extreme confidence in their $2.5 billion cash position.

The "Catch-22" for 2026: While the numbers are stellar, CEO Steve Huffman noted that Reddit is now restricting certain AI projects from accessing its API without explicit approval. This creates a fascinating strategic tension: Does Reddit win more by being an "open source" for AI chatbots, or by "gating" its data to maximize licensing revenue?