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Court Win Over AI Data Use Might Change The Case For Investing In Reddit Stock (RDDT)

Simply Wall St · 1d ago
  • Reddit recently won a key court ruling in its contract dispute with Anthropic, with the judge agreeing Reddit supplied adequate evidence that Anthropic is bound by Reddit’s user agreement on how platform content can be used.
  • This outcome strengthens Reddit’s ability to control AI training on its data and supports the company’s efforts to develop paid licensing as a distinct revenue line.
  • The focus now is on how Reddit’s stronger contractual control over AI data use could reshape the broader investment narrative around the platform.

Scan how Reddit’s data-licensing push fits into the wider AI-content race by reviewing the hand-picked 36 AI small caps that are also vying to monetise their platforms and data pipes.

Reddit Investment Narrative Recap

For Reddit, the core belief as a shareholder is that a large, engaged community can support both a strong ad engine and a growing data licensing stream. Recent choppiness in search traffic and user growth has put more weight on execution around product, discovery, and international expansion in the near term.

The court ruling against Anthropic strengthens Reddit’s control over how its conversations are used in AI models. That matters for the short term because data licensing is still a relatively small revenue contributor, and there is uncertainty around deal durability, so operational focus still sits on ad performance, user relevance, and moderation risks.

Recent Q2 2026 results, where Reddit shares fell sharply after earnings, highlighted how sensitive the story is to user trends and revenue guidance. Management flagged slower Q3 revenue growth despite an outlook of US$860 million to US$870 million, and that combination has put more scrutiny on near term engagement and advertiser demand.

Set against that backdrop, the Anthropic ruling interacts with earlier messaging around data licensing as an earnings diversifier. The legal win helps Reddit better defend the value of its corpus, but the key catalysts still revolve around whether ad tools like Dynamic Product Ads, product improvements such as Reddit Answers, and international localisation efforts translate into more consistent, monetisable activity.

Reddit Earnings and Valuation Setup

Reddit now has a clearer legal footing on data licensing, but analyst expectations still lean heavily on how the income statement evolves over the next few years. The current consensus framework sketches out a business that is growing fast, expanding margins, and leaning into higher value uses of its corpus such as AI training, yet still trading at a premium multiple to the broader interactive media peer set.

On the top line, analysts are working with an annual revenue growth rate of 28.9% over the next three years. That pace assumes the ad engine, international rollout, and licensing deals together support much faster expansion than many mature internet platforms. It also implies that any slowdown in user additions or advertising budgets would matter quickly for how realistic these revenue curves feel.

Earnings expectations show an even bigger reset in scale. Forecast consensus points to US$2.1b in profit by 2029 compared with US$871.1m today. That is roughly a 2.4x increase in the earnings base, helped by a projected improvement in profit margins from 31.3% to 35.5% over the same period. The spread between the most bullish and most cautious forecasts, US$2.6b versus US$1.4b, indicates that sentiment is far from settled on what Reddit can sustainably earn once the current investment phase matures.

Valuation assumptions tie directly into those profit targets. On the Simply Wall St numbers, Reddit would be trading on a P/E of 27.4x 2029 earnings, down from 35.3x today but still above the US Interactive Media and Services industry marker at 15.1x. To line up with that framework, you would need to be comfortable that by 2029, revenue reaches US$6.0b, earnings come in at US$2.1b, and the market continues to pay a premium for this growth profile, even with a discount rate of 8.6% included in the models.

Share count also subtly factors into the story. Analysts are building in 2.8% annual growth in shares outstanding over the next three years, which would slightly dilute per share outcomes relative to headline earnings growth. For anyone focused on earnings per share instead of absolute profit, that extra issuance means Reddit needs to keep margins and revenue scaling efficiently just to hold the current valuation line.

Price targets bring these moving parts into a single number. The consensus sits at US$216.35 per share, with a wide range from US$120.00 to US$300.00. Compared with the current share price of US$159.97, that central target is 26.1% higher, which reflects the belief that Reddit can grow into its projected revenue base, expand margins, and keep monetising its user conversations without major disruption from moderation, competition, or changes in AI data demand.

Reddit's narrative projects US$6.0b revenue and US$2.1b earnings by 2029. This setup assumes 28.9% yearly revenue growth and an earnings increase of about US$1.2b from US$871.1m today.

Uncover how Reddit's fair value indicates a 42% potential upside to its current price that could narrow quickly if Reddit continues on its current earnings path.

NYSE:RDDT 1-Year Stock Price Chart
NYSE:RDDT 1-Year Stock Price Chart

Exploring Other Perspectives

One alternate view leans hard into Reddit’s AI insights catalyst. Before this court ruling, the most optimistic analysts were already pencilling in US$6.3b revenue and US$2.4b earnings by 2029, assuming richer AI driven products and higher margins. You are seeing a legal decision that could nudge those optimistic forecasts even higher or prompt a rethink.

Explore 14 other Reddit fair value estimates, including one that suggests as much as 179% upside from the current price.

Decide For Yourself

Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts.

Looking for more Reddit investment ideas beyond the stock itself

If Reddit is already on your radar, it can help to scan a wider field of potential opportunities that match different risk and return preferences. The Simply Wall St Screener lets you line up companies side by side, filter by fundamentals that matter to you, and spot patterns that are harder to see when you only watch a single ticker.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.