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Reddit, Inc. (RDDT)·Q3 2025 Earnings Summary

Executive Summary

  • Reddit delivered a strong Q3 2025: revenue $584.9M (+68% YoY), GAAP gross margin 91.0%, net income $162.7M (27.8% margin), diluted EPS $0.80, and adjusted EBITDA $236.0M (40.3% margin) .
  • Results beat Wall Street consensus: revenue +6.4% vs $549.5M*, and EPS +53.8% vs $0.52*; advertising revenue rose 74% YoY to $549M and DAUq grew 19% YoY to 116.0M . Bold beats: revenue and EPS.*
  • Q4 2025 guidance: revenue $655–$665M and adjusted EBITDA $275–$285M; CFO indicated ~42% adjusted EBITDA margin at the midpoint and 53–55% YoY revenue growth .
  • Catalysts: first-time achievement of 40% adjusted EBITDA margin, diversified lower-/mid-/upper-funnel ad strength and pricing tailwind, international acceleration (machine translation and local content), and sustained >90% gross margins with low capex .

What Went Well and What Went Wrong

What Went Well

  • Advertising growth and platform performance: ad revenue +74% YoY to $549M; active advertiser count expanded >75% YoY; ML optimizations drove >20% lower-funnel performance improvement; Freeform and Conversation Summary formats delivered superior engagement (e.g., +100% CTR vs benchmark for Footjoy, +15% CTR uplift for Bethesda) .
  • Profitability and cash generation: adjusted EBITDA margin reached 40%; incremental adjusted EBITDA margin ~60%; free cash flow $183M (31% margin) and cash+marketable securities ~$2.226B .
  • Product and international progress: integrated Reddit Answers into core search, 75.75M weekly search users, machine translation expanded to 30 languages; international DAUq +31% YoY with strength in France, Brazil, and India .

What Went Wrong

  • Ad load lever used temporarily: impressions were helped by “ads in comments” and a temporary operating point to balance supply-demand; management emphasized ad load is lower than peers and not core to strategy .
  • Macro visibility: environment broadly stable but visibility low; tariffs on minds of customers; emphasis on efficiency across the funnel .
  • Data licensing and self-serve: no new LLM licensing updates; self-serve not yet a big part of the ad business—end-to-end automation is still being built to scale smaller advertisers .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$392.361 $499.627 $584.911
GAAP Gross Margin %90.5% 90.8% 91.0%
Net Income ($USD Millions)$26.158 $89.297 $162.663
Net Income Margin %6.7% 17.9% 27.8%
Diluted EPS ($USD)$0.13 $0.45 $0.80
Adjusted EBITDA ($USD Millions)$115.271 $166.749 $236.007
Adjusted EBITDA Margin %29.4% 33.4% 40.3%
Operating Cash Flow ($USD Millions)$127.578 $111.331 $185.159
Free Cash Flow ($USD Millions)$126.599 $110.826 $183.101
Cash + Marketable Securities ($USD Millions)$1,951.1 $2,060.0 $2,226.0
Revenue Consensus Mean* ($USD Millions)$369.676*$425.974*$549.529*
Primary EPS Consensus Mean* ($USD)$0.013*$0.189*$0.520*
EBITDA Consensus Mean* ($USD Millions)$88.788*$129.260*$196.512*

Values retrieved from S&P Global.*

Segment breakdown (Q3 2025):

Segment MetricQ3 2024Q3 2025YoY Change
Advertising Revenue ($USD Millions)$315 $549 +74%
Other Revenue ($USD Millions)$33.6 $36.0 +7%
U.S. Revenue ($USD Millions)$288.0 $479.7 +67%
International Revenue ($USD Millions)$60.4 $105.3 +74%

KPIs:

KPIQ3 2024Q2 2025Q3 2025
DAUq Global (Millions)97.2 110.4 116.0
WAUq Global (Millions)365.4 416.4 443.8
ARPU Global ($)$3.58 $4.53 $5.04
ARPU U.S. ($)$5.88 $7.87 $9.04
ARPU International ($)$1.32 $1.73 $1.84

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q3 2025$535–$545 Actual $584.9 Raised vs guide (beat)
Adjusted EBITDA ($USD Millions)Q3 2025$185–$195 Actual $236.0 Raised vs guide (beat)
Revenue ($USD Millions)Q4 2025N/A$655–$665 New
Adjusted EBITDA ($USD Millions)Q4 2025N/A$275–$285 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/search: Reddit Answers & core searchQ2: 70M weekly core search users; Answers 6M; plan to unify Answers into core search Integrated Answers into core search; ~75.75M weekly search users; expanding non-English rollout Strengthening
InternationalizationQ2: Machine translation live in 23 languages; building local ecosystems Machine translation in 30 languages; strong growth in France, Brazil, India Accelerating
Ad stack & formatsQ2: DPA GA; Smartly integration; Conversation Summary add-ons early results Broader testing of Conversation Summary; interactive ads via developer platform; Freeform success; auto-bidding/auto-targeting Broadening
Pricing & ad loadQ2: pricing tailwind; impression growth driver Temporary ad load operating point used; ads in comments; ad load lower than peers Managed tactically
Publisher toolsQ2: Reddit Insights for Agencies; Reddit Pro profile tools Reddit Pro tools tailored for publishers (e.g., Associated Press); syncing feeds and AI-powered discovery Expanding
LLM/data licensingQ2: corpus essential; learning from partnerships No new deal updates; focus on protecting data; ongoing healthy collaboration Stable
Macro/tariffsLimited earlier commentaryBroadly stable with low visibility; tariffs a consideration for some customers Watchful

Management Commentary

  • “Q3 was a strong quarter… Revenue came in at $585 million, up 68% year over year… net income of $163 million… adjusted EBITDA margin of 40%” — Steve Huffman .
  • “Advertising business grew 74% year over year in Q3 to $549 million… active advertiser count expanded by over 75% YoY… ML-driven optimizations improved lower-funnel conversion performance by over 20%” — Jen Wong .
  • “Adjusted EBITDA margin reached 40%… incremental adjusted EBITDA margin hit 60%… Free cash flow margin for the quarter was 31%… cash and cash equivalents at $2.2 billion” — Drew Vollero .
  • “North Star margin more than 40% near term; medium-term focus on >40%; longer-term North Star ~50%” — Drew Vollero .

Q&A Highlights

  • International growth drivers: France, Brazil, India benefited from machine translation, local content frameworks, marketing, and partnerships .
  • Onboarding simplification: removing multi-step flows, surfacing a high-quality personalized feed quickly; ML feed now top driver of new subreddit subscriptions .
  • LLM licensing and legal stance: collaborative relationships with partners; focus on protecting Reddit’s data and user privacy; no major traffic from chatbots today .
  • Monetization levers: temporary ad load to balance supply-demand; impressions driven by engagement and ads in comments; ad load structurally lower than peers .
  • Margin aspirations: medium-term >40% adjusted EBITDA margin with long-term North Star ~50%; willingness to invest when returns justify .

Estimates Context

  • Q3 2025 actuals vs consensus: revenue $584.9M vs $549.5M* (beat +6.4%); diluted EPS $0.80 vs Primary EPS consensus $0.52* (beat +53.8%). Bold beats. *
  • Adjusted EBITDA $236.0M vs S&P Global EBITDA consensus $196.5M*; note S&P’s EBITDA may be defined differently than company-reported adjusted EBITDA (non-GAAP), so not directly comparable *.
  • Q4 2025 guidance midpoint ($660M) is close to revenue consensus $664.9M*; adjusted EBITDA guide $275–$285M aligns with S&P EBITDA consensus $285.3M*, but definitions differ *.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue and EPS delivered significant beats vs consensus, driven by broad-based ad strength, pricing tailwinds, and continued funnel execution; margin scaling intact with 40% adjusted EBITDA achieved. Bold beat. *
  • Q4 guide implies sustained high growth and margin discipline (~42% adjusted EBITDA margin midpoint), supporting positive estimate revisions and thesis on profitability scaling *.
  • Product improvements (Answers-integrated search, simplified onboarding, personalization) and international expansion (30 languages, local content) are strengthening user growth and ARPU trajectory .
  • Monetization innovations (DPA, auto-bidding/targeting, Freeform, Conversation Summary, ads in comments) and publisher tools should widen advertiser adoption and ROAS, supporting revenue durability .
  • Cash generation and low capex provide flexibility to invest in growth while maintaining margin targets; dilution controlled with fully diluted shares down sequentially .
  • Watch macro and ad load dynamics; management uses ad load opportunistically, with strategy focused on increasing value per impression rather than raising ad density .
  • Medium-term margin aspiration >40% and long-term North Star ~50% suggest further operating leverage as product, search, and automation scale .