RDDT vs. META: Which Digital Advertising Stock Has an Edge Right Now?

Reddit RDDT and Meta Platforms META are leading social media platforms that monetize user engagement through digital advertising. While RDDT is an emerging social media platform, gaining traction with community-driven advertising, Meta leads the broader social networking space through platforms like Facebook and Instagram.RDDT or META — Which of these Digital Advertising stocks has the greater upside potential? Let’s find out.The Case for RDDT StockReddit is benefiting from strong demand in its advertising business, which has become a key growth driver of the company’s impressive financial performance and future growth prospects. In the first quarter of 2026, Reddit reported total revenues of $663 million, up 69% year over year, with advertising revenues growing even faster at 74% to $625 million. This marks Reddit’s seventh consecutive quarter of revenue growth above 60%, underscoring the sustained momentum in its ad business.Growth can be attributed to the company’s expanding portfolio, strong user engagement, including rising daily and weekly active users, gains in Average Revenue Per User and the expansion of advertiser tools such as Dynamic Product Ads (DPAs), Reddit Pixel and CAPI.  Reddit’s expanded partnership with Shopify remains noteworthy. In May 2026, Reddit expanded its Shopify integration globally, making it easier for merchants to launch DPAs and connect storefronts directly to Reddit’s advertising platform. The update includes streamlined account linking, automated product catalog syncing and a codeless Reddit Pixel for conversion tracking. Reddit also highlighted new retail research showing strong shopping intent among its users, with advertisers seeing higher returns on ad spend compared with other social platforms. The company highlighted that retail ad investment has grown significantly, reinforcing its position as a key destination for product discovery and purchase decisions.Reddit’s investments in artificial intelligence (AI)-powered tools remain noteworthy. The launch and adoption of Reddit Max, an automated, AI-powered campaign tool, enabled advertisers to achieve a 17% reduction in cost per action and a 25% increase in conversion rate in the first quarter of 2026. About 50% of Max campaign advertisers now use AI-powered creative features, and brands like Cozy have reported a 35% higher ROAS and a 28% lower cost per acquisition with these tools.The Case for META StockMeta Platforms’ focus on integrating AI into its platforms, which include Facebook, WhatsApp, Instagram, Messenger, and Threads, is driving user engagement to boost ad revenues. In the first quarter of 2026, Meta’s Advertising revenues were $55.02 billion, which increased 33% year over year.A key factor behind this momentum is Meta Platform’s ongoing investment in AI to enhance both user and advertising engagements. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.56 billion daily users. Meta Platforms continues to see strong engagement trends on Instagram Reels, with watch time up 10% and Facebook video time up 8% globally in the first quarter of 2026. AI-translated videos are now watched weekly by more than 500 million users on Facebook and Instagram. Threads continue to grow with more than 150 million daily active users.Meta Platforms’ generative AI advertising tools are gaining strong traction, with more than 8 million advertisers using at least one GenAI ad creative tool in the first quarter of 2026. Video generation tools improved conversion rates by more than 3%, while adoption among small and medium businesses has been particularly strong.Price Performance and Valuation of RDDT and METAIn the trailing 12-month period, shares of Reddit have gained 35.9%, whereas shares of Meta Platforms have plunged 14.9%. The outperformance in Reddit can be attributed to strong ad revenue growth, powered by automation and AI, the company’s expanding portfolio and strong user engagement.Despite a strong portfolio and client base, Meta Platforms is facing rising costs in AI infrastructure, which are increasing expenses. Reality Labs continues to operate at a loss. The benefits from Meta AI and its agents are still in progress, and overall scrutiny from regulations and lawsuits is high.RDDT and META Stock PerformanceImage Source: Zacks Investment ResearchValuation-wise, RDDT and META shares are currently overvalued, as suggested by a Value Score of F and C, respectively.In terms of the forward 12-month Price/Sales, RDDT shares are trading at 9.37X, which is higher than META’s 5.44X.RDDT and META ValuationImage Source: Zacks Investment ResearchHow Do Earnings Estimates Compare for RDDT & META?The Zacks Consensus Estimate for RDDT’s 2026 earnings is pegged at $4.83 per share, which has been unchanged over the past 30 days. This indicates an 84.35% year-over-year rise.Reddit Inc. Price and Consensus Reddit Inc. price-consensus-chart | Reddit Inc. QuoteThe Zacks Consensus Estimate for META’s 2026 earnings is pegged at $33.01 per share, which has increased 0.21% over the past 30 days. This indicates a 40.53% increase year over year.Meta Platforms, Inc. Price and Consensus Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. QuoteRDDT and META’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. However, RDDT’s average surprise of 67% is higher than META’s surprise of 12.31%.ConclusionWhile both Reddit and Meta Platforms stand to benefit from the booming digital advertising market, Reddit offers greater upside potential given its rapid revenue growth, surging advertiser base and expanding engagement tools.Despite its dominant position in the digital advertising market, Meta Platforms faces rising costs in AI infrastructure that are increasing expenses and growing regulatory pressures that could weigh on its advertising growth. Stiff competition further limits its upside potential.Both Reddit and Meta Platforms currently carry a Zacks Rank #3 (Hold) at present. 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