Reddit Stock Jumps More Than 11% as S&P 500 Entry Sets Up Heavy Index-Fund Buying

Reddit shares jumped more than 11% Friday morning after investors began pricing in the stock’s coming addition to the S&P 500, a change that could generate unusually heavy demand from funds that track the benchmark. The move followed Thursday’s announcement that Reddit will replace AvalonBay Communities in the index before the market opens on Tuesday, August 18.

The size of the expected passive buying is a central reason the announcement matters for the stock. According to Reuters’ August 14 market report, JPMorgan analysts estimate S&P 500 index funds will need to purchase about 16.7 million Reddit shares. That is nearly three times the stock’s average daily trading volume of roughly 5.98 million shares since Reddit went public in March 2024, based on LSEG data cited by Reuters.

At 9:32 a.m. ET, Reddit was trading at $175.69 and more than $201 million worth of shares had changed hands, Reuters reported. The early surge stood out even after a strong run in the broader market because the expected demand is tied to the mechanics of index tracking rather than to a new earnings release, product announcement or change in Reddit’s operating outlook.

A large passive-buying estimate is driving the repricing

When a company is added to a major benchmark, funds designed to track that benchmark generally have to adjust their portfolios so their holdings continue to reflect the index. That can create concentrated buying around the effective date, particularly when the incoming stock has a relatively limited amount of normal daily trading compared with the number of shares index funds may need.

JPMorgan’s 16.7 million-share estimate puts that imbalance into concrete terms. If the estimate is close to the eventual buying requirement, the quantity is large relative to Reddit’s recent trading liquidity. It does not mean all of those shares must be purchased at the same moment or that the stock is guaranteed to keep rising. Different index products use different implementation techniques, and other investors can sell into the demand. Even so, the estimate helps explain why traders reacted so strongly before Reddit has formally entered the benchmark.

The official change is not scheduled until next week. S&P Dow Jones Indices said Reddit, which trades under the ticker RDDT, will replace AvalonBay in the S&P 500 prior to the opening bell on August 18. Reddit will be classified in the Communication Services sector. AvalonBay is leaving the benchmark because S&P 500 member Equity Residential is acquiring the apartment owner, with the combined company expected to remain in the index under the name Vivmark Residential.

That makes Reddit’s addition an off-cycle index change rather than part of a regular quarterly reshuffle. Reddit described the same timing in its own announcement and said the inclusion takes effect Tuesday. The company did not provide an estimate of passive fund demand, so the 16.7 million-share figure remains a JPMorgan estimate reported by Reuters rather than an amount confirmed by Reddit or S&P Dow Jones Indices.

S&P 500 additions can create a short-term technical effect

The market reaction also fits a well-known feature of index changes: the announcement itself can move a stock before the effective date because investors anticipate the rebalancing trades. Reuters cited Stephens analyst Melissa Roberts as saying new S&P 500 additions have historically outperformed the benchmark between announcement and inclusion, with the largest gains often occurring the day after the announcement.

That history is not a forecast that Reddit will follow the same path. Roberts also said newly added companies have typically surrendered some of those gains after inclusion and underperformed the S&P 500 by about 2% over the following three months. The pattern highlights the difference between temporary demand created by index mechanics and the longer-term valuation of the underlying business.

For Reddit shareholders, that distinction is especially relevant because Friday’s jump follows a difficult year for the stock. Reuters reported that Reddit was still down more than 31% for 2026 through Thursday’s close and more than 42% below the record high it reached in September 2025. The index announcement therefore produced a sharp one-day repricing without erasing the stock’s earlier decline.

The S&P 500 inclusion can broaden the shareholder base because index mutual funds and exchange-traded funds tied to the benchmark will gain exposure to Reddit through their normal portfolio construction. It can also raise trading activity around the rebalance. Neither effect changes Reddit’s revenue, margins or user growth by itself, so investors still have to separate the technical demand surrounding August 18 from the company’s operating results and valuation.

Reddit enters the index after rapid revenue and profit growth

Reddit’s latest financial results provide context for why the company has become large enough and profitable enough to attract this level of market attention. In its second-quarter report on July 30, the company said revenue rose 61% from a year earlier to $805 million. Net income reached $253 million, up from $89 million a year earlier, while daily active uniques increased 18% to 130.3 million.

The results also showed how quickly Reddit’s advertising business has expanded. Advertising revenue increased 64% year over year to $762 million, and the company reported an adjusted EBITDA margin of 42.6%. Reddit said the quarter marked its eighth consecutive period with total revenue growth above 60%. Those figures are separate from the S&P 500 catalyst, but they help explain the company’s larger market footprint since its 2024 initial public offering.

Growth has not removed every concern around the shares. Reuters noted that uneven search-engine traffic affected U.S. user growth in the second quarter, even as Reddit issued an upbeat revenue forecast. That tension between strong monetization and variability in traffic has been part of the stock’s volatility, making Friday’s index-driven buying catalyst particularly noticeable against the broader fundamental debate.

The next concrete event is now the August 18 effective date. Index funds that track the S&P 500 will need to have their portfolios aligned with the new composition around that change, while other investors can position ahead of the rebalance or provide shares into the expected demand. Friday’s jump shows that much of that adjustment begins before Reddit officially becomes an S&P 500 constituent.