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Reddit, Inc. (RDDT)·Q2 2025 Earnings Summary

Executive Summary

  • Reddit delivered a decisive beat in Q2 2025: revenue $500.0M (+78% y/y) and GAAP diluted EPS $0.45; gross margin expanded to 90.8%, and Adjusted EBITDA rose to $166.7M (33% margin) . Against S&P Global consensus, revenue beat by ~$74.0M and Primary EPS beat by ~$0.74, a significant surprise versus expectations*.
  • Both Brand and Performance ads grew >80% y/y, with pricing tailwinds and strong adoption of Dynamic Product Ads, CAPI, and the Smartly integration driving ROAS improvements .
  • Guidance was initiated for Q3 2025: revenue $535–$545M and Adjusted EBITDA $185–$195M (≈35% margin at midpoint), implying continued operating leverage into the back half .
  • User momentum remained strong: DAUq 110.4M (+21% y/y) and WAUq 416.4M (+22% y/y), with machine translation available in 23 languages fueling international growth; Reddit Answers reached 6M WAUq (up 5x q/q) .
  • Key stock reaction catalyst: outsized revenue/EPS beat vs consensus, margin expansion, and higher Q3 EBITDA guide support estimate revisions and confidence in ad-stack execution*.

What Went Well and What Went Wrong

What Went Well

  • Revenue acceleration and profitability: revenue +78% y/y to $500.0M, GAAP diluted EPS $0.45, Adjusted EBITDA $166.7M (33.4% margin), operating cash flow $111.3M and free cash flow $110.8M .
  • Ads execution: advertising revenue up 84% y/y to $465M, with broad-based strength and ROAS gains; DPA generally available, Smartly integration live, and CAPI coverage tripled y/y, improving lower-funnel performance .
  • Strategic product momentum: Reddit Answers WAUq reached 6M (5x q/q), core search now 70M weekly users, and machine translation extended to 23 languages, bolstering international DAUq growth (+32% y/y) .

Management quote: “Reddit is built for this moment… We’re focused on growing globally, scaling sustainably, and making Reddit the most trusted place on the internet.” — Steve Huffman, CEO .
Management quote: “Our combined revenue growth rate and adjusted EBITDA margin hit 111%, a new high for Reddit.” — Drew Vollero, CFO .

What Went Wrong

  • External traffic volatility: management cited Google search as a headwind in Q2, noting variability and slower start in April before traction improved later in the quarter .
  • Rising variable costs with growth: total adjusted costs rose 38% y/y, reflecting higher hosting, sales commissions/incentives, and strategic investments (sales, search ML, and marketing) .
  • Near-term dilution: fully diluted shares rose to 206.6M (+0.3% q/q, <0.5% YTD), reflecting annual grants; SBC and related taxes were $95.1M in Q2 (down sequentially) .

Financial Results

Headline Financials vs prior periods

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$281.2 $427.7 $392.4 $499.6
Gross Margin (%)89.5% 92.6% 90.5% 90.8%
Net Income ($USD Millions)$(10.1) $71.0 $26.2 $89.3
Net Income Margin (%)(3.6%) 16.6% 6.7% 17.9%
Diluted EPS ($USD)$(0.06) $0.36 $0.13 $0.45
Adjusted EBITDA ($USD Millions)$39.5 $154.3 $115.3 $166.7
Adjusted EBITDA Margin (%)14.0% 36.1% 29.4% 33.4%
Operating Cash Flow ($USD Millions)$28.4 $90.0 $127.6 $111.3
Free Cash Flow ($USD Millions)$27.2 $89.2 $126.6 $110.8

Revenue by Geography

MetricQ2 2024Q4 2024Q1 2025Q2 2025
U.S. Revenue ($USD Millions)$228.1 $347.7 $313.9 $408.8
International Revenue ($USD Millions)$53.1 $80.0 $78.5 $90.8

Revenue by Type

MetricQ4 2024Q1 2025Q2 2025
Advertising Revenue ($USD Millions)$394.5 $358.6 $465.0
Other Revenue ($USD Millions)$33.2 $33.7 $35.0

KPIs

KPIQ2 2024Q4 2024Q1 2025Q2 2025
DAUq (Global, Millions)91.2 101.7 108.1 110.4
WAUq (Global, Millions)342.3 379.4 401.3 416.4
ARPU (Global, $USD)$3.08 $4.21 $3.63 $4.53
ARPU (U.S., $USD)$4.94 $7.04 $6.27 $7.87
ARPU (International, $USD)$1.24 $1.67 $1.34 $1.73

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q2 2025$410–$430M Actual: $499.6M Raised/Beat guidance
Adjusted EBITDA ($USD Millions)Q2 2025$110–$130M Actual: $166.7M Raised/Beat guidance
Revenue ($USD Millions)Q3 2025n/a$535–$545M Initiated
Adjusted EBITDA ($USD Millions)Q3 2025n/a$185–$195M Initiated

Management noted midpoint Q3 Adjusted EBITDA margin of ~35% . No tax rate, OI&E, or OpEx range guidance was provided; non-GAAP reconciliations for forward-looking measures were not furnished due to variability .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/Technology initiatives (Reddit Answers)Launched beta; early versatility; improving search with ML; ~40M daily queries; Answers 1M WAUq; integration plans Answers reached 6M WAUq (5x q/q); plan to unify Answers with core search; 70M weekly users; global expansion Accelerating adoption and deeper integration
International growth & machine translationMT available in 8–13 languages; strong growth in focus markets (France, Spain, Brazil) MT now 23 languages; over half of int’l DAUq growth from focus markets; moderator expansion Scaling breadth and localization
Ads stack & performance (DPA/CAPI)Expanded Conversation ads, AMA ads; CAPI drove cost reductions; DPA beta progress DPA GA; Smartly integration; CAPI-covered conversion revenue tripled y/y; +10% CTR with Conversation Summary Add-ons Strengthening lower-funnel and automation
Macro/Google trafficQ4: algorithm volatility; recovered; search remains variable Q2: Google a headwind; slow April; improved later in quarter Variable external traffic; internal offsets improving
Data licensing/LLM relationshipsICE data licensing; growing importance of Reddit corpus Reddit corpus “#1 most cited” for AI; learning on partnership structure; strategic position Validating strategic data value
Marketing investmentEarly capability build; brand campaign in France Initiated broader marketing tests; low double-digit $M spend; modulating by returns Testing, scaling selectively

Management Commentary

  • “Our core search product now has 70 million weekly users, and Reddit Answers has grown to 6 million, up from 1 million last quarter.” — Steve Huffman .
  • “Adjusted EBITDA hit $167 million in Q2 and GAAP net income reached $89 million… combined revenue growth rate and adjusted EBITDA margin hit 111%, a new high.” — Drew Vollero .
  • “Advertisers are consistently achieving a ROAS that is on average two times higher than standard conversion campaigns [with DPA].” — Jen Wong .
  • “Machine translation is now live in 23 languages… our goal is for Reddit to be self-sustaining in these countries.” — Steve Huffman .
  • “Conversation Summary Add-Ons… delivering over 10% higher click-through rates than standard image ads.” — Jen Wong .

Q&A Highlights

  • U.S. user trends: Q2 started slow (April) but improved; Google traffic was a headwind; July saw DAUq additions in both U.S. and international, exiting above Q2 average .
  • Ads innovation roadmap: scaling DPA, automation (auto-bidding, creative AI), and Reddit Community Intelligence; expect broader adoption across objectives .
  • Search product direction: unify Answers with core search, bring search front-and-center in app for both seekers and scrollers; integrate Answers into multiple surfaces .
  • Marketing spend cadence: low-double-digit $M in Q2 (a few points of revenue); plan to modulate spend by market and returns; cost growth likely “high 30%” y/y in Q3 .
  • Data licensing exclusivity: too soon to commit; Reddit corpus increasingly essential; learning on structures while building best products on own corpus .

Estimates Context

Actuals vs S&P Global consensus (Primary EPS and Revenue):

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Primary EPS Consensus Mean ($)-0.297*0.2496*0.0134*0.1888*
Primary EPS Actual ($)0.3448*0.8456*0.6636*0.9242*
Revenue Consensus Mean ($USD)253,883,140*405,549,890*369,675,890*425,973,930*
Revenue Actual ($USD)281,184,000*427,707,000*392,361,000*499,627,000*

Values retrieved from S&P Global.*
Note: Company-reported GAAP diluted EPS was $(0.06) in Q2 2024, $0.36 in Q4 2024, $0.13 in Q1 2025, and $0.45 in Q2 2025; “Primary EPS” is S&P Global’s normalized definition and may differ from GAAP diluted EPS reporting .

Forward fiscal-year consensus (context):

  • FY 2025: Revenue $2.1435B*, Primary EPS $2.3258*, EBITDA $804.7M*.
  • FY 2026: Revenue $2.9606B*, Primary EPS $3.7827*, EBITDA $1.2421B*.
    Values retrieved from S&P Global.*

Implications: Substantial beats on both revenue and EPS in Q2 2025 suggest upward estimate revisions near term, with Q3 guidance implying continued EBITDA margin expansion* .

Key Takeaways for Investors

  • Q2 2025 was a step-change quarter: broad-based ads strength, pricing tailwinds, and performance tooling (DPA, CAPI) drove an outsized top-line and EPS beat vs consensus* .
  • Margin durability: gross margin >90% for the fourth straight quarter; Q3 guide implies ~35% Adjusted EBITDA margin at midpoint, reinforcing operating leverage .
  • Product catalysts: rapid scaling of Reddit Answers and unified search experience should deepen engagement for seekers and scrollers, with international MT scaling in 23 languages .
  • Marketing investments are targeted: low-double-digit $M spend in Q2 with a disciplined, returns-driven approach by market and funnel stage .
  • External traffic volatility (Google) remains a watch item, but internal product/marketing offsets and rising “intent to reach Reddit” mitigate risk over time .
  • Data licensing optionality: Reddit’s corpus is increasingly essential to LLMs; while exclusivity structures are premature, strategic value creates future monetization paths .
  • Near-term trading: the magnitude of the beat and higher Q3 EBITDA guide are the narrative drivers; watch for sell-side revisions and continued ROAS proof points in lower-funnel ads* .

Endnotes and Cross-References

  • Q2 2025 press release and financials (including guidance, margins, EPS, OCF/FCF): .
  • Q2 2025 shareholder letter detail on DAUq/WAUq/ARPU, internationalization and product: .
  • Q1 2025 press release and letter (prior guidance): .
  • Q4 2024 press release and letter (historical context): .
  • Q2 2025 earnings call transcript (themes, roadmap, Q&A): .