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Reddit, Inc. (RDDT)·Q1 2025 Earnings Summary

Executive Summary

  • Strong top-line and profitability in seasonally soft Q1: revenue rose 61% y/y to $392.4M, GAAP net income was $26.2M (6.7% margin), gross margin 90.5%, and Adjusted EBITDA $115.3M (29.4% margin) . User metrics remained robust with DAUq 108.1M (+31% y/y) and WAUq 401.3M (+31% y/y) .
  • Clear beat vs Street on revenue; EPS well above consensus: Q1 revenue of $392.4M exceeded S&P Global consensus of ~$369.7M*, and reported diluted EPS of $0.13 was far above Primary EPS consensus of ~$0.0134* . Values retrieved from S&P Global.
  • Guidance positive into Q2: management guided Q2 revenue to $410–$430M and Adjusted EBITDA to $110–$130M, implying sequential revenue growth and continued profitability .
  • Ad engine and monetization broadening: ad revenue grew 61% y/y to $358.6M, with performance ads ~60% of ad revenue and a new pricing tailwind; ads in comments reached ~6% of impressions, and Dynamic Product Ads beta is progressing .
  • Watch near‑term traffic variability from search: management flagged Google‑related volatility; April DAU growth was in the “high teens” y/y, but leadership views bumps as manageable and strategy‑consistent .

What Went Well and What Went Wrong

What Went Well

  • Monetization strength and breadth: ad revenue +61% y/y to $358.6M, driven by performance, scaled (mid‑market/SMB) channels, and pricing tailwind; 10 of top 15 verticals grew >50% .
  • Profitability and cash generation: GAAP net income $26.2M (7% margin), Adjusted EBITDA $115.3M (29%), and operating cash flow $127.6M, the best ever; hosting contract savings supported >90% gross margin .
  • Product/AI momentum: Reddit Answers reached ~1M WAU and is being integrated into core search; machine translation now in 13 languages, aiding international growth (+82% y/y revenue) .

Management quotes

  • “Reddit Answers… has reached 1 million weekly users… we are now working to integrate it into Reddit’s core search experience” — Steve Huffman, CEO .
  • “Mid‑ and lower funnel performance revenue… accounted for about 60% of total ad revenue… ads in comments… contributed about 6% of impressions” — Jen Wong, COO .
  • “Gross margins… benefited from… lower contract pricing from our hosting providers” — Drew Vollero, CFO .

What Went Wrong

  • Search traffic variability: management highlighted “bumps” from Google updates; April DAU growth slowed to “high teens” y/y versus +31% in Q1 .
  • Seasonal step‑down vs Q4: revenue fell sequentially to $392.4M from $427.7M and Adjusted EBITDA margin to 29.4% from 36.1% due to normal seasonality .
  • SBC still notable: stock‑based compensation was ~$107M (~27% of revenue), though down materially y/y post‑IPO catch‑ups; GAAP EBITDA (per standard definition) remains low vs Adjusted EBITDA .

Financial Results

MetricQ3 2024Q4 2024Q1 2025Q1 2025 Consensus
Revenue ($USD Millions)$348.4 $427.7 $392.4 $369.7*
GAAP Diluted EPS ($)$0.16 $0.36 $0.13 $0.0134*
Gross Margin %90.1% 92.6% 90.5% —
Adjusted EBITDA ($USD Millions)$94.1 $154.3 $115.3 —
Net Income ($USD Millions)$29.9 $71.0 $26.2 —
Net Income Margin %8.6% 16.6% 6.7% —

Values retrieved from S&P Global for consensus cells marked with *.

Segment and geography

MetricQ3 2024Q4 2024Q1 2025
Advertising Revenue ($M)$315.1 $394.5 $358.6
Other Revenue ($M)$33.2 $33.2 $33.7
U.S. Revenue ($M)$288.0 $347.7 $313.9
International Revenue ($M)$60.4 $80.0 $78.5

KPIs

KPIQ3 2024Q4 2024Q1 2025
DAUq (Millions)97.2 101.7 108.1
WAUq (Millions)365.4 379.4 401.3
ARPU – Global ($)$3.58 $4.21 $3.63
ARPU – U.S. ($)$5.88 $7.04 $6.27
ARPU – International ($)$1.32 $1.67 $1.34

Non‑GAAP context

  • Company Adjusted EBITDA adds back interest (income), taxes, D&A, SBC and other items, producing $115.3M vs standard EBITDA of ~$7.9M implied by GAAP reconciliation (NI + tax + interest + D&A) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / ActualChange
RevenueQ1 2025$360M–$370M (given Feb-12) Actual $392.4M Beat vs guidance
Adjusted EBITDAQ1 2025$80M–$90M Actual $115.3M Beat vs guidance
RevenueQ2 2025N/A$410M–$430M New guide
Adjusted EBITDAQ2 2025N/A$110M–$130M New guide

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
AI/Search (Reddit Answers)Answers beta launched; focus on on‑platform search 1M WAU; integrating into core search; 10x query growth vs Q4 Accelerating
Ads performance & pricingPricing “mostly consistent” in Q4; performance ads ~<60% Pricing tailwind emerged; performance ~60% of ad revenue; advertisers +50% y/y Improving
New ad surfacesConversation ads early; ~3% of impressions in Q4 Ads in comments ~6% of impressions; strong adoption/performance Expanding
International & MTMT scaling; strong France/EMEA traction MT in 13 languages; intl revenue +82% y/y; focus markets outgrow Accelerating
Search/Google volatilityQ4 algorithm swing, then recovery Expect near‑term “bumps”; April DAU growth “high‑teens” y/y Variable but manageable
Data licensingNew ICE partnership in Q4 Renewal appetite positive; partners “love Reddit data” Steady

Management Commentary

  • Strategic focus on seekers and scrollers: “We want one search box… integrate [Answers] into Reddit’s core search experience… streamline the path from question to answer on Reddit.” — Steve Huffman, CEO .
  • Ads engine progress: “Performance revenue… accounted for about 60% of total ad revenue… ads in comments contributed about 6% of impressions… pricing was up y/y.” — Jen Wong, COO .
  • Cost discipline and margins: “Gross margins exceeded 90%… lower contract pricing from hosting providers… investments in ML and search” — Drew Vollero, CFO .
  • Operating model: “North Star… revenue growth twice as fast as costs” — Drew Vollero, CFO .

Q&A Highlights

  • Macro and ad market: management sees “business as usual” despite uncertainty; product/measurement improvements delivering more profitable outcomes for advertisers .
  • Traffic/Google: leadership expects “bumps” from search algorithm changes; April DAU growth “high‑teens” y/y; long‑term opportunity intact given user intent and brand searches for Reddit .
  • Pricing tailwind: pricing up y/y as more valuable impressions and outcomes drive advertiser demand; aim for consistency rather than maximizing price .
  • Answers roadmap: moving to a unified search experience; Answers unlocks queries with subjective answers and links back to human comments/subreddits .
  • Data licensing renewals: too early to detail renewals; partners value ongoing, up‑to‑date Reddit content; Reddit building its own products on top of the corpus .

Estimates Context

MetricQ1 2025 ActualQ1 2025 S&P Global ConsensusDelta
Revenue ($M)$392.4 $369.7*Beat
Primary EPS ($)$0.13 (GAAP diluted) $0.0134*Beat (different basis)

Additional context

  • Q2 2025 revenue consensus pre‑guide was ~$426.0M*, and company guided $410–$430M, bracketing consensus . Values retrieved from S&P Global.

Note: Primary EPS Consensus Mean may differ from GAAP diluted EPS due to methodology; company does not guide non‑GAAP EPS but provides Adjusted EBITDA .

Values retrieved from S&P Global for consensus cells marked with *.

Key Takeaways for Investors

  • Monetization flywheel is working: performance ads, scaled channels, and pricing tailwinds drove a clear revenue beat and strong Adjusted EBITDA in a seasonally soft quarter .
  • Gross margin structurally high (>90%) with cloud contract savings; cash generation robust (OCF $127.6M), reinforcing operating leverage and reinvestment capacity .
  • Product/AI roadmap (Answers integration into search) and new surfaces (ads in comments) are expanding monetization and engagement, a medium‑term catalyst as they scale globally .
  • International is an emerging growth vector: MT in 13 languages and focus markets (e.g., UK/EMEA, Brazil) are accelerating users and revenue (+82% y/y International) .
  • Near‑term risk: external search volatility can affect logged‑out traffic, but management expects variability without changing long‑term opportunity; April DAU growth still in high‑teens y/y .
  • Non‑GAAP vs GAAP optics: strong Adjusted EBITDA reflects material SBC add‑backs; GAAP EBITDA remains modest; watch trajectory of SBC as percentage of revenue .
  • Trading setup: durable revenue growth + high incremental margins + positive guide should support estimate revisions upward for revenue and profitability; monitor search volatility and ad pricing sustainability into Q2 .
All consensus figures marked with * are Values retrieved from S&P Global.