Reddit shares experienced a remarkable surge, jumping 12.6% Friday after S&P Dow Jones Indices confirmed the platform will join the S&P 500 next week. According to Business Standard, the inclusion is part of an off-cycle change that will see Reddit replace AvalonBay Communities in the benchmark index, with Reddit set to be added as of Tuesday. J.P. Morgan estimates that index funds tracking the S&P 500 would need to buy 16.7 million Reddit shares, which is nearly three times the stock's average daily trading volume of about 5.98 million shares since the company went public in March 2024. The inclusion acknowledges Reddit's significant market capitalization of around $30 billion and aligns with the company's strong performance, making Reddit only the second pure-play social media company in the index after Meta.
The S&P 500 inclusion comes just weeks after Reddit reported robust second-quarter results, including a 61% year-over-year revenue jump to $804.9 million—marking its eighth consecutive quarter of growth above 60%. As reported by Live Mint, net income jumped 183% to $252.85 million, while daily active users increased 18% to 130.3 million and weekly active users climbed 24% to 514.6 million. Adjusted EBITDA more than doubled to $343 million. The company ended the quarter with $2.8 billion in cash and marketable securities and repurchased 1.5 million shares for $235 million. For the third quarter, Reddit guided to revenue of $860–$870 million and adjusted core profit of $385–$395 million. The San Francisco-based company, which went public in March 2024, has been continuously investing in advertising technology with the aim to grow its share of the digital ads business dominated by industry giants Meta Platforms and Alphabet's Google.
Thursday's pop arrives less than three weeks after Reddit's second quarter results split investors, according to reports from S&P Dow Jones Indices. The company posted its eighth straight quarter of revenue growth above 60%, yet shares initially sold off after CEO Steve Huffman flagged uncertainty around Reddit's dependence on Google for new users. Huffman noted that "search referrals were choppy in the quarter, and traffic was more volatile later in the quarter," tying the volatility to Google's growing use of Gemini-powered AI Overviews which answer search queries directly on the results page instead of routing users to sites like Reddit. Despite striking deals worth hundreds of millions of dollars with OpenAI and Google, which have trained their AI models on Reddit's proprietary data, investors had hoped for more agreements amid the AI boom. The platform has finalised deals worth hundreds of millions of dollars with OpenAI and Google, which have trained their AI models on the web forum's proprietary data, however investors wish for more agreements.
With the inclusion, Reddit will be recognised as one of the approximately 500 largest and most influential publicly traded companies in the US and become one of the fastest-growing companies in the S&P 500. As reported by Business Standard, the index inclusion means more investments as the S&P 500 tracks 500 of the biggest US stocks, with trillions of dollars in investments benchmarking themselves against it. Those investments include mutual funds and exchange-traded funds that will now have to buy Reddit stock once it becomes part of the index they track. The growth of passive investing has elevated the importance of S&P 500 inclusion, with companies requiring a market capitalization of at least $22.7 billion and meeting profitability, liquidity and share-float requirements. AvalonBay is being removed after agreeing in May to an all-stock merger with Equity Residential to form a rental housing company with an enterprise value of $69 billion. The companies have said the deal is expected to close in the second half of 2026.
Despite recent gains, RDDT stock had fallen 31% year-to-date through Thursday's close and remained more than 42% below its record high reached in September 2025. However, the stock's 12.6% surge Friday following the S&P 500 confirmation suggests renewed investor confidence. According to The Economic Times, analysts at J.P. Morgan estimate index funds tracking the S&P 500 would need to buy 16.7 million Reddit shares, which is nearly three times the stock's average daily trading volume. Stephens analyst Melissa Roberts noted that new S&P 500 additions have historically outperformed the benchmark from announcement to inclusion, with the biggest gains coming the day after the announcement. After inclusion, however, they have typically given back some gains and lagged the benchmark over the next three months by about 2%. Wall Street expects profits to more than double overall in 2026 on a surge in revenue, with the company having posted profits almost every quarter since going public in 2024.
