A growing digital ad market is benefiting giants like Meta and smaller players like Reddit
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The digital advertising market is doing so well that even Reddit is getting a cut of the spoils.
Reddit on Wednesday reported fourth-quarter revenue of $428 million, which was up 71% from the previous year and represents the fastest growth rate for any quarter since 2022. Although Reddit’s shares tumbled on weaker-than-expected user numbers, the company’s growing sales indicate a particularly healthy digital ad market, said Jeremy Goldman, a senior director at Emarketer.
Investors typically look to the financial performance of tech giants like Meta, Alphabet and Amazon for a view of the ad market’s overall health, Goldman said. That Reddit’s sales grew significantly alongside the bigger players shows that advertisers feel optimistic enough to “diversify to a platform that’s more nascent, like Reddit, and say ‘We’re willing to throw some dollars at this thing that don’t really understand,'” Goldman said.
Media and advertising executives told CNBC in December that they were optimistic about the market and said that ad spending increased in the fourth quarter. That sentiment seemed to be reflected by online ad tech companies’ latest quarterly earnings reports, said Gil Luria, head of tech research at investment banking firm D.A. Davidson. He added that “animal spirits are high” following the U.S. presidential election.
For its fourth quarter results, Meta said sales were $48.39 billion, up 21% from the prior year. Microsoft said its fiscal second-quarter search and news advertising revenue soared 21% year over year, although it doesn’t provide specific sales numbers. Amazon said its online advertising business grew 18% year-over-year to $17.29 billion in the fourth-quarter earnings, and for its fourth-quarter results, Alphabet said its Google advertising sales grew 11% year over year to $72.46 billion while YouTube’s ad revenue rose 14% to $10.47 billion.
“Advertisers feel like consumers are susceptible to advertising and are investing in that,” Luria said.
Luria noted that while Google is the dominant online advertising business, it’s losing some market share as its core search engine is increasingly challenged by other companies investing in artificial intelligence and related services like ChatGPT.
“They are the biggest digital advertising platform by quite a bit of margin, but a lot of that is based on search, and their search franchise is continuously being eroded,” Luria said. “It’s being eroded by Amazon, being eroded by Meta, being eroded by the AI players.”
Fortunately for Alphabet, YouTube is still booming, Luria said.
YouTube is “becoming such an important media destination that the momentum there is greater than what you would just see from the advertising growth,” said Luria. He noted that some creators have migrated to YouTube amid the TikTok ban.
The uncertainty over TikTok’s future in the U.S. has yet to impact advertisers who are still running campaigns on the ByteDance-owned platform, said Kate Scott-Dawkins, the global president of business intelligence of media investment firm GroupM.
If TikTok eventually does get banned in the U.S., Scott-Dawkins said she expects Meta and Alphabet would inherit much of those ad dollars but noted Snap, Pinterest and others could also pick up scraps.
Snap and Pinterest also reported their fourth quarter results last week. Pinterest said its sales jumped 18% year over year to $1.15 billion while Snap reported $1.56 billion in revenue for the period, marking a 14% increase from the previous year.
But not every digital advertising player had good results for the quarter.
Despite ad tech company The Trade Desk on Wednesday reporting a 22% year over year increase in fourth-quarter sales to $741 million, that figure came in below Wall Street estimates, which sent shares tanking. CEO Jeff Green attributed the miss to “a series of small execution missteps” during an analyst call.
Although companies are pumping money into digital ad platforms, there’s a chance that high inflation, tariffs and weaker economies outside of the U.S. put pressure on the ad market, experts said.
High tariffs and new trade policies could result in Chinese-linked retailers like Temu and Shien slowing down their massive digital advertising campaigns with giants like Meta and Alphabet, Luria said. But even if those Chinese-linked retailers curb spending, it’s likely other advertisers take their place, Luria said.
It’s possible that AI startups like OpenAI, Anthropic and others could eventually become major ad spenders, Scott-Dawkins said. It’d be similar to how older tech companies like Airbnb and TikTok once grew their users via Facebook and Google. OpenAI debuted a Super Bowl commercial last week, which could be an indicator of more ad spending to come, she said.
Watch: I’d buy Amazon over Meta, says Hightower’s Stephanie Link
Alibaba showcase its AI technology application achievements from Alibaba Cloud at the World Artificial Intelligence Conference in Shanghai, China on July 26, 2025.
Cfoto | Future Publishing | Getty Images
Alibaba delivered better than expected revenue in its fiscal second quarter as sales in its key cloud computing division accelerated.
Alibaba’s New York-listed shares were around 4.3% higher in premarket trade as investors looked past a plunge in profitability.
Here’s how the company did in its fiscal second quarter ended Sept. 30 versus LSEG estimates:
- Revenue rose 5% to 247.8 billion Chinese yuan ($34.8 billion) versus 242.65 billion yuan the previous year.
Investors are focused on Alibaba’s cloud computing division which books its revenue related to artificial intelligence. Over the past few quarters, Alibaba’s cloud revenue growth has accelerated.
Alibaba reported a 34% year-on-year rise in cloud computing revenue to 39.8 billion yuan versus expectations of 37.9 billion yuan. That growth rate was faster than the 26% notched in the June quarter.
The Chinese tech giant said its investments in AI were helping its cloud unit.
“Robust AI demand further accelerated our Cloud Intelligence Group business, with revenue up 34% and AI-related product revenue achieving triple-digit year-over-year growth for the ninth consecutive quarter,” CEO Eddie Wu said in an earnings statement on Tuesday.
In September, the company said it plans to increase spending on AI models and infrastructure development, on top of the 380 billion yuan ($53 billion) over three years it announced in February. Alibaba said on Tuesday it has spent around 120 billion yuan in capital expenditure toward AI and cloud infrastructure over the past four quarters.
Earnings before interest, taxes, and amortization (EBITA), a measure of profitability, increased by 35% to 3.6 billion yuan for its cloud division.
Alibaba has emerged as one of China’s leading AI players. On Monday, Alibaba said its Qwen app, the Chinese giant’s rival to OpenAI’s ChatGPT, surpassed 10 million downloads within the first week of its public launch. The app is powered by Alibaba’s Qwen artificial intelligence models.
Investors look past profit drop
Meanwhile, the company has been investing heavily in the cut-throat instant commerce market. This a product offering from Alibaba and some of its Chinese e-commerce rivals that promises super-fast delivery on certain items.
Investment in this new segment has weighed on the profitability of Alibaba’s overall business even as cloud computing remains strong.
Overall adjusted EBITA, a profitability measure closely-watched by analysts, fell 78% year-on-year to 9.1 billion yuan, with Alibaba attributing this partly to its investments in quick commerce.
But investors appear to be looking past this because of the growth acceleration at the cloud computing business and Alibaba’s core China e-commerce division which houses revenue from its online shopping platforms Taobao and Tmall as well as the quick commerce initiative. China e-commerce revenue rose 16% year-on-year to 132.6 billion yuan, with growth coming in faster than the previous quarter.
Revenue from quick commerce surged 60% year-on-year in the quarter versus 12% in the quarter before.
“In our consumption business, quick commerce continued to scale with significant improvement in unit economics and drove rapid growth in monthly active consumers on the Taobao app,” Wu said.
Jensen Huang, NVIDIA founder and CEO, has a Q&A session at a press conference during the APEC CEO summit on October 31, 2025 in Gyeongju, South Korea.
Woohae Cho | Getty Images News | Getty Images
Nvidia shares fell on Tuesday after The Information reported that Meta is considering using chips designed by Google.
Shares of Nvidia were 3.6% lower in premarket trade. Google-parent Alphabet was trading 3% higher after a more than 6% rally on Monday.
On Monday, The Information reported that Meta is considering using Google’s tensor processing units (TPUs) in its data centers in 2027. Meta may also rent TPUs from Google’s cloud unit next year, the publication reported.
Google launched its first-generation TPU in 2018 and it was initially designed for its own internal use for its cloud computing business. Since then, Google has launched more advanced versions of its chip that are designed to handle artificial intelligence workloads.
TPUs are a customized chip and experts say this gives Google an advantage over rivals as it can offer customers a highly efficient product for AI.
If Meta uses the TPUs, it would be big win for Google and potential validation of the technology.
Shares of Broadcom, which helps Google design its TPUs, were up more than 2% in premarket trade on Tuesday after an 11% rise the day before.
Nvidia remains the market leader with its graphics processing units (GPUs) that have become the main piece of hardware underpinning the huge AI infrastructure buildout. While Nvidia’s dominance is unlikely to be dislodged in the near term, Google’s TPUs add further competition into the AI semiconductor market.
Companies building AI infrastructure have been searching for a more diversified supply of chips to reduce reliance on Nvidia.
Meta is among the biggest spenders on AI infrastructure, with the company projecting its capital expenditure to stand between $70 billion to $72 billion this year.
The share price moves come amid continued debate around whether there is an “AI bubble” and stretched tech company valuations.
Nvidia has been central to the debate and the company last week reported a stronger-than-expected sales forecast for the current quarter but technology stocks fell after.
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