Nextdoor Holdings Inc., the social networking service focused on neighborhoods, returned to sales growth in the second quarter, suggesting that the digital advertising market is recovering from a post-pandemic slump.
The company posted a 4% increase to $56.9 million in the period, pulling out of a sales skid with better-than-projected results. Analysts had projected revenue of $53.4 million, which would have been down 2%.
Nextdoor is emerging from what chief executive officer Sarah Friar describes as “an ad winter.” The company’s report follows a similarly upbeat outlook from social media giant Meta Platforms Inc. in July, when the Facebook parent predicted its fastest sales growth since 2021.
“It feels like it’s starting to come up the other side,” Friar said in an interview after earnings were released. “There’s light at the end of the tunnel.”
Nextdoor shares gained 1.7% in extended trading following the report. They had been up 41% this year through the close, part of a broader rally for tech stocks.
In an effort to streamline its advertising business, Nextdoor began a rollout in June of Nextdoor Ads Manager, a self-service platform that helps marketers reach specific audiences.
Still, Nextdoor’s third-quarter outlook was a bit shy of estimates. The company predicted growth of approximately 4% year-over-year, which would be about $56 million. Analysts estimated $58.2 million.
Though total weekly active users grew 13% year-over-year to 41.6 million last quarter, that was down from 42.4 million in the first quarter of 2023. The company expects year-over-year growth to accelerate in the fourth quarter.
Google parent Alphabet Inc. also pointed to an improvement in the ad market when it reported results last month. Snap Inc., meanwhile, has invested heavily in its advertising business but the benefits have been slow to pay off.