RDDT vs. GOOGL: Which Digital Advertising Stock Is a Better Buy?
RedditRDDT and AlphabetGOOGL are major players in the digital advertising space. While RDDT is an emerging social media platform gaining traction with community-driven advertising, GOOGL remains the dominant force in global search and digital ad markets.
Per the Fortune Business Insights report, the global digital advertising market size was valued at $573.06 million in 2025. The market is expected to grow from $662.52 million in 2026 to $2,114.41 million by 2034, expanding at a CAGR of 15.61% during the forecast period between 2026 and 2034. Both Reddit and Alphabet are expected to benefit from this rapid growth pace.
RDDT or GOOGL — Which of these Digital Advertising stocks has the greater upside potential? Let’s find out.
The Case for RDDT Stock
Reddit is benefiting from its strong focus on enhancing user-friendly features, which is driving significant growth in user engagement and ad revenue. Its strong focus on enhancing user-friendly features and expanding advertiser tools such as DPA, Reddit Pixel and CAPI is driving significant growth in user engagement and ad revenues. In the fourth quarter of 2025, Advertising revenues surged 75% year over year to $690 million.
The company is also seeing significant growth in its advertiser base, with total active advertiser count increasing more than 75% year over year in the fourth quarter of 2025. This includes large brands, mid-market companies and small-to-medium businesses (SMBs), with SMB revenues doubling year over year.
The introduction of new ad formats, like DPA and Reddit Max campaigns, has further bolstered advertiser adoption and improved return on ad spend (ROAS). The introduction of DPA has been particularly impactful, with strong performance during key shopping periods like Black Friday and Cyber Monday. Improvements to DPA’s machine learning models have led to a 75% increase in advertiser ROAS in the fourth quarter of 2025. This development makes Reddit a strong competitor in the shopping ads market.
RDDT’s expanding portfolio of advertising tools and rising user engagements are expected to drive the company’s top-line growth. For the first quarter of 2026, RDDT expects revenues between $595 million and $605 million.
The Case for GOOGL Stock
Alphabet is benefiting from rising advertising revenue, driven by strong growth in its Google Services segment, particularly in Search and YouTube. In the fourth quarter of 2025, Search and other revenues increased 16.7% year over year to $63.07 billion. Search and other revenues accounted for 55.4% of total revenues and 76.7% of Google Advertising revenues. In the fourth quarter of 2025, Alphabet’s advertising revenues increased 13.6% year over year to $82.28 billion and accounted for 72.3% of total revenues.
The introduction of AI Overviews and AI Mode has driven growth in overall queries, including commercial queries. It is creating opportunities for people to connect with businesses and shop on search. AI Max and Search are already used by hundreds of thousands of advertisers, making it the fastest-growing AI-powered search ads product.
Alphabet’s introduction of innovative tools like AI Max and PMax allows advertisers to create millions of customized creative assets. In the fourth quarter of 2025, L’Oreal leveraged AI Max across 800 campaigns in 23 countries, achieving a 23% revenue increase for its direct-to-consumer brands. Aritzia also used AI Max to identify high-value customers, resulting in an 80% uplift in conversion value during the reported quarter.
Alphabet generates a significant portion of its revenues from advertising. In 2025, ad revenues accounted for 73.2% of total revenues. However, the company always faces the risk of reduced spending by advertisers. It has already been suffering from a sluggish Network ad business for the past few quarters. In 2025, Network ad revenues declined 2% from 2024’s level. Strict regulations tend to affect Google’s ability to customize ads, which, in turn, might hurt its relationships with advertisers. This, along with huge spending on AI-related initiatives, is creating concern for investors.
Price Performance and Valuation of RDDT and GOOGL
In the trailing 12-month period, shares of Reddit and Alphabet have surged 102.7% and 36.8%, respectively. Alphabet’s outperformance can be attributed to its continued AI push across its search, YouTube and cloud computing platforms. An expanding focus on improving the enterprise footprint is expected to boost prospects.
Despite a robust portfolio, Reddit faces a challenging macroeconomic environment, including elevated tariffs, which may reduce discretionary ad spending. Stiff Competition also remains a concern.
RDDT and GOOGL Stock Performance
Image Source: Zacks Investment Research
Valuation-wise, RDDT and GOOGL shares are currently overvalued, as indicated by Value Scores of F and D, respectively.
In terms of the forward 12-month Price/Sales, RDDT shares are trading at 7.68X, which is lower than GOOGL’s 9.06X.
RDDT and GOOGL Valuation
Image Source: Zacks Investment Research
How Do Earnings Estimates Compare for RDDT & GOOGL?
The Zacks Consensus Estimate for RDDT’s 2026 earnings is pegged at $4.02 per share, unchanged over the past 30 days. This indicates a 53.44% rise year over year.
The Zacks Consensus Estimate for GOOGL’s 2025 earnings is pegged at $11.49 per share, unchanged over the past 30 days. This indicates a 6.29% increase year over year.
RDDT earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an average surprise of 188.78%. Alphabet’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 20.82%. However, Reddit’s average surprise is higher than that of Alphabet.
Conclusion
While both Reddit and Alphabet stand to benefit from the booming digital advertising market, Reddit offers stronger upside potential driven by rapid ad revenue growth, rising advertiser adoption, improving ROAS and higher earnings growth momentum.
Despite Alphabet’s broader advertising expansion, the company’s heavy reliance on advertising, declining network ad revenues, regulatory pressures and rising AI investment costs remain a concern.
Currently, Reddit has a Zacks Rank #2 (Buy), making the stock a stronger pick than Alphabet, which has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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