Prediction: This Beaten-Down Tech Stock Will Outperform the S&P 500 by 2027

Some banal drops contiguous meaningful semipermanent buying opportunities for diligent investors who tin disregard the noise. Reddit (NYSE: RDDT) looks similar 1 of those maturation stocks. It's down by much than 30% twelvemonth to date, but its fundamentals amusement rising gross and much users.

The fearfulness of AI is overblown

Artificial quality (AI) has helped galore industries, but immoderate radical judge this aforesaid exertion tin wounded Reddit's business. The premise is that generative AI models and precocious hunt engines tin chopped into Reddit's traffic, particularly since Reddit has nary power implicit what results those hunt engines display.

For instance, analysts reported that Alphabet's search snippets prioritized YouTube implicit Reddit successful hunt results. While it is simply a morganatic concern, Reddit's first-quarter 2026 net results bespeak it is overblown.

Reddit wrapped up Q1 with 126.8 cardinal regular progressive users, which is up by 17% twelvemonth implicit year. Its idiosyncratic basal is increasing faster than astir societal networks, which volition marque it little reliant connected hunt engines implicit time. Further, Reddit boosted gross by 69% twelvemonth implicit twelvemonth portion achieving a 30.8% nett net margin.

Reddit didn't adjacent dependable concerns successful its guidance. The societal media elephantine projects $720 cardinal successful Q2 gross astatine the midpoint, which implies a 44% year-over-year improvement. Sure, it's a deceleration from the Q1 maturation rate, but it's inactive a overmuch higher maturation complaint than Meta Platforms and Alphabet get nowadays.

Reddit is winning the contented scenery

Reddit makes astir of its wealth from online advertising, but its room of contented is besides an AI golden mine. OpenAI and Alphabet usage Reddit contented to bid their AI models, and these licensing deals connection yearly recurring revenue. Reddit highlighted successful its Q1 2026 shareholder missive that its communities make much contented successful 1 period than Wikipedia has created successful its existence, giving it a immense moat.

This portion of Reddit's business, lumped into "other revenue," grew by lone 15% twelvemonth implicit year, but it is simply a high-margin business. Reddit doesn't adjacent person to bash further enactment to nutrient contented since it is generated by users.

All of that contented has besides turned Reddit into a unsocial level wherever radical tin person answers to their questions. While hunt engines tin supply informative articles, videos, and podcasts, Reddit provides personalized stories, Q&A, and how-to guides from individuals.