Reddit, Inc. (RDDT)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue grew 71% YoY to $427.7M with diluted EPS of $0.36 and Adjusted EBITDA of $154.3M (36.1% margin), delivering a strong finish and second consecutive GAAP-profitable quarter .
• Mix and execution drove outperformance vs the company’s own prior Q4 guidance (Q3 guide: revenue $385–$400M; Adj. EBITDA $110–$125M), with Q4 actuals of $427.7M revenue and $154.3M Adj. EBITDA; gross margin expanded to 92.6% aided by improved hosting terms .
• Q1 2025 guidance calls for revenue of $360–$370M and Adj. EBITDA of $80–$90M, implying ~48–52% YoY growth and continued profitable scaling; management cited healthy ad market, ongoing product/ML investments, and international momentum .
• Strategic drivers included performance-ad strength (now ~60% of ad revenue), AI-enabled search (“Reddit Answers”) launch, and data licensing expansion (new ICE partnership), while Google Search algorithm volatility late in Q4 was characterized as primarily logged-out and “no revenue impact,” with recovery in Q1 .

What Went Well and What Went Wrong

• What Went Well

  • Delivered broad-based top-line strength: total revenue +71% YoY to $427.7M; ad revenue +60% YoY to $394.5M; other revenue $33.2M; gross margin 92.6% (+420 bps YoY) .
  • Profitability scaling: Q4 net income $71.0M (16.6% margin), Adj. EBITDA $154.3M (36.1% margin), operating cash flow $90.0M; diluted shares fell sequentially to 206.2M .
  • Management execution and narrative: “our advertising customers are diversifying… as more brands tap into Reddit's unique ability to grow their business,” and “we’re focused on making on-platform search a truly first-class product” (Reddit Answers beta) .

• What Went Wrong

  • Search algorithm volatility: late-Q4 Google update affected logged-out traffic; management emphasized recovery in Q1 and “no revenue impact,” but it underscores dependence on third-party search variability .
  • Stock-based compensation remains elevated (Q4 SBC ~$97M, ~23% of revenue), a headwind to GAAP expense optics even as Adjusted EBITDA scales .
  • EU privacy and macro monitoring: management flagged evolving EU privacy landscape and event-driven caution as areas to watch as they scale globally .

Financial Results

P&L highlights vs prior quarters (USD millions unless noted)

Segment and mix

Key KPIs

Estimate comparisons

• S&P Global Wall Street consensus could not be retrieved at time of analysis due to a data access limit. As a result, we are not showing vs-consensus comparisons for Q4 2024 and Q1 2025. We note Q4 actuals materially exceeded Reddit’s prior internal guidance (see Guidance Changes below) .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO on 2024 milestones and strategy: “In 2024, we've surpassed $1 billion in revenue, crossed 100 million DAUqs… and we're using AI to make this content accessible to everyone… we launched the beta for Reddit Answers… an AI-powered search tool that provides curated summaries of community discussions.”
• COO on ad performance drivers: “Mid- and lower funnel revenue accounted for about 60% of total ad revenue and drove more than half of the year-over-year growth… international ad revenue grew 77% year-over-year.”
• CFO on gross margin tailwinds: “In Q4, we signed revised agreements with our key hosting providers, which positively benefited gross margins over 150 basis points… gross margins to 92.6%.”
• CFO on FY24 GAAP loss context: “We lost $575 million in the first quarter… a $595 million accounting charge related to stock-based compensation… the last 3 quarters, we were profitable on a cumulative basis.”

Q&A Highlights

• Search and monetization: Management sees Reddit Answers unlocking high-intent recommendation use cases and plans to integrate into core search; monetization to follow once product stabilizes (foundation includes keyword targeting and product-level creative shopping tests) .
• Google algorithm update: CEO reiterated the change was mostly logged-out, “no revenue impact,” and Q1 traffic recovered; relationship remains “symbiotic” .
• Cost outlook and hiring: Total adjusted costs have been growing ~20% YoY; 2025 hiring to be “slightly accelerated” with investments in adtech and search .
• International runway: Reddit expects user and monetization playbooks to extend globally; MT and in-country community efforts are core levers .
• Data licensing and open-source AI: Open-source models do not change the licensing opportunity; value is in ongoing, up-to-date human perspectives; Reddit uses commercial, open-source, and in-house models across the stack .

Estimates Context

• We attempted to pull S&P Global Wall Street consensus for Q4 2024 and Q1 2025 (EPS, revenue, EBITDA, target price), but data was unavailable at time of retrieval due to access limits. Therefore, we cannot present vs-consensus comparisons in this recap. We note Reddit’s Q4 actuals materially exceeded its own prior guidance ranges, which typically implies upward estimate revisions for forward revenue and margin trajectories absent macro shocks .

Key Takeaways for Investors

• Outperformance vs prior guide: Q4 revenue ($427.7M) and Adj. EBITDA ($154.3M, 36.1% margin) exceeded the Q3-communicated ranges, underpinned by performance ads, impression growth, and ad-stack upgrades .
• Margin trajectory improving: GM expanded to 92.6% with hosting contract benefits; incremental Adj. EBITDA margins ~74% signal strong operating leverage .
• Product catalysts: Reddit Answers (AI search) broadens on-platform high-intent activity; shopping and end-to-end automation are 2025 roadmap priorities to deepen lower-funnel monetization .
• International leverage: DAUq +39% YoY to 101.7M with int’l DAUq +46% and int’l ad revenue +77% YoY, aided by machine translation across eight languages—sustained user and monetization runway abroad .
• Data monetization optionality: ICE partnership expands licensing into financial analytics; while not core to the thesis vs ads, it diversifies “Other” revenue and validates data value .
• Risk checks: External search volatility appears transitory and logged-out; EU privacy and SBC (23% of Q4 revenue) warrant monitoring; share count disciplined (206.2M FD shares, down seq.) .
• Setup: Q1 2025 guide implies ~50% YoY revenue growth with positive Adj. EBITDA—supports estimate momentum and narrative of profitable scale into 2025 if execution and macro hold .

Supporting Detail

Other relevant press releases in Q4 window:

• Intercontinental Exchange and Reddit collaborate to create and distribute data products for capital markets, leveraging Reddit’s Data API and ICE data science to deliver datasets/analytics for sentiment, trend identification, and risk management .

Prior quarters for trend analysis:

• Q3 2024: Revenue $348.4M; ad revenue $315.1M; GM ~90%; Adj. EBITDA margin 27%; net income ~$29.9M .
• Q2 2024: Revenue $281.2M; ad revenue $253.1M; GM nearly 90%; Adj. EBITDA margin 14%; net loss $(10.1)M .