Reddit forecasts revenue above estimates as AI fuels ad sales

Feb 5 (Reuters) - Reddit RDDT.N forecast first-quarter revenue above Wall Street estimates on Thursday, as artificial intelligence-powered enhancements to its advertising platform help the social media platform draw more marketers.

The company announced its first share repurchase program of up to $1 billion, citing strong profitability and cash generation that give it the flexibility to return capital to shareholders while continuing product investments.

Reddit allows ad placement directly within subreddit discussion threads, driving advertiser spending on the platform as brands aim to reach highly engaged and niche communities that discuss topics relevant to their products and services.

Its ad platform uses AI to enhance campaign creation and management, with features including an AI copywriter that generates Reddit-specific ad copy and an image auto-crop tool for required aspect ratios on the platform.

The first-quarter revenue is expected to be between $595 million and $605 million, above analysts' average estimate of $577.2 million, according to data compiled by LSEG.

Its forecast of adjusted earnings before interest, taxes, depreciation and amortization of $210 million to $220 million was above estimates of $202.9 million.

Reddit is ratcheting up competition with Meta META.O by rolling out AI-powered Max campaigns in beta, which automate ad campaigns by adjusting bids to hit target cost-per-result as well as dynamically selecting headlines and creatives.

Facebook-owner Meta and Snapchat-parent Snap also reported upbeat fourth-quarter revenue.

Reddit's fourth-quarter revenue rose 70% to $726 million, beating estimates of $665.4 million.

The company's daily active unique visitors rose 19%, to 121.4 million in the quarter ended December 31, while its global average revenue per user increased by 42%.