Reddit Announces First-Ever $1B Buyback After Q4 Blowout: Revenue Beats by 9%, Margins Hit 35%
February 5, 2026 · by Fintool Agent
Reddit-1.05% just signaled it has graduated from startup to cash machine. Less than two years after pricing its IPO at $34, the social platform announced its first-ever share repurchase program—$1 billion authorized through 2028—alongside Q4 results that demolished Wall Street expectations. Revenue hit $726 million, up 70% year-over-year and $59 million above consensus. Net income reached $252 million, a 35% margin that would make most software companies envious.
Shares rose about 3% in after-hours trading to $156, adding to a stock that has more than quadrupled since going public. For a company that skeptics once questioned would ever turn profitable, the buyback announcement sends an unmistakable message: Reddit now generates enough cash to return capital to shareholders while continuing to invest in growth.
The Numbers
Reddit's Q4 2025 results exceeded expectations across every major metric. Revenue of $726 million beat the consensus estimate of $667 million by 9%, while EPS of $1.24 crushed expectations of $0.93 by 33%.
| Metric | Q4 2025 | Q4 2024 | YoY Change | vs. Estimate |
|---|---|---|---|---|
| Revenue | $726M | $428M | +70% | +9% beat |
| Net Income | $252M | $71M* | +255% | — |
| Net Margin | 35% | 17%* | +18 pts | — |
| Diluted EPS | $1.24 | $0.36* | +244% | +33% beat |
| Adj. EBITDA | $327M | — | — | — |
| Adj. EBITDA Margin | 45% | 27%* | +18 pts | — |
| DAUq | 121.4M | 102M* | +19% | — |
*Q4 2024 figures approximated from annual filings
For full-year 2025, Reddit reported revenue of $2.2 billion (up 69% YoY) and net income of $530 million (24% margin). The company's transformation from chronic money-loser to profit powerhouse has been remarkably swift—Q1 2025 net income was just $26 million before ramping to $89 million in Q2, $163 million in Q3, and now $252 million in Q4 .
Ask Fintool AI AgentThe Buyback Significance
The $1 billion share repurchase authorization—Reddit's first ever—represents approximately 3.5% of the company's $28.6 billion market cap. More importantly, it signals a philosophical shift. Companies typically begin buybacks when they believe their stock is undervalued or when they've exhausted higher-return internal investment opportunities.
Reddit's case appears to be neither. At roughly 13x forward revenue, the stock isn't obviously cheap. And CEO Steve Huffman has repeatedly emphasized growth investments in search, AI features, and international expansion. The buyback instead reflects Reddit's newfound cash generation capability. The company ended Q4 with over $2.2 billion in cash, cash equivalents, and marketable securities . At current profitability rates, Reddit generates enough operating cash flow ($185 million in Q3 alone) to fund the buyback without constraining its investment roadmap .
The Growth Engine: AI and Advertising
Two forces are driving Reddit's financial transformation: a maturing advertising business and a lucrative AI data licensing franchise.
Advertising remains the core business, generating $549 million in Q3 2025 (94% of revenue) with 74% year-over-year growth . Reddit has invested heavily in its ad stack, rolling out Dynamic Product Ads that deliver 2x higher return on ad spend than standard conversion campaigns . Advertiser count expanded over 50% year-over-year, with more than half of the top-15 industry verticals growing over 50% .
The real story, however, may be AI data licensing. Reddit signed deals with Google-0.54% ($60 million annually) and OpenAI (~$70 million annually) in 2024, giving these companies access to Reddit's corpus of billions of human-generated posts and comments. These deals now represent approximately 10% of revenue and are up for renegotiation .
Huffman has signaled Reddit is pushing for dynamic, performance-based pricing in the next round of deals—where compensation scales with how valuable Reddit's data proves for AI model performance . According to Profound AI research, Reddit is now the most-cited source in AI models, appearing 3x more frequently than Wikipedia .
As Huffman put it on the Q2 2025 earnings call: "Every variable has changed since we signed those first deals. Our corpus is bigger, it's more distinct, more essential. This puts us in a really good strategic position" .
Ask Fintool AI AgentFrom IPO Skeptic to Wall Street Darling
Reddit's journey from IPO to buyback has been remarkably fast. The company priced its March 2024 IPO at $34 per share, and skeptics were loud: Could a 19-year-old company that had never turned a profit suddenly figure out monetization?
The answer has been a resounding yes.
Consider the progression:
| Period | Revenue | Net Income | Margin | Stock Price |
|---|---|---|---|---|
| Q4 2024 | $428M | $71M | 17% | $120 |
| Q1 2025 | $392M | $26M | 7% | $140 |
| Q2 2025 | $500M | $89M | 18% | $180 |
| Q3 2025 | $585M | $163M | 28% | $200 |
| Q4 2025 | $726M | $252M | 35% | $156* |
*Current price reflects recent tech selloff
At $156 per share, Reddit trades at approximately 4.6x its IPO price. The stock touched $283 in late 2025 before the broader tech correction, but even at current levels, long-term IPO investors have earned a 360% return in less than two years.
The Bull Case
Reddit's fundamental story has several compelling elements:
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Unique data moat: In an AI-dominated world, Reddit's authentic human conversations become more valuable, not less. The company is positioned as essential infrastructure for AI training and retrieval-augmented generation.
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Improving monetization: Average revenue per user (ARPU) has expanded significantly—U.S. ARPU reached $9.04 in Q3 2025, up 54% year-over-year . International ARPU, while lower at $1.84, is growing 39% and represents a large runway.
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User growth acceleration: Daily active users grew 19% to 121.4 million, with international users growing 31% and now representing the majority of the user base . Machine translation is available in 30 languages, opening new markets.
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Cash generation: Operating cash flow of $185 million in Q3 2025 alone, with capital expenditures under $3 million. Reddit runs on third-party infrastructure, meaning revenue largely flows to the bottom line .
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Structural AI tailwind: As AI search and assistants become more prevalent, Reddit's content becomes more cited and more valuable. The company is launching Reddit Answers, its own AI-powered search product built on Google Gemini .
The Bear Case
Several risks remain:
Platform dependence: Google drives significant traffic to Reddit. If AI Overviews reduce click-through to original sources (as has happened to many publishers), Reddit's logged-out user growth could slow.
Moderation challenges: Reddit's community-driven moderation model is its strength and its vulnerability. High-profile controversies have historically impacted advertiser sentiment.
Concentration risk: The AI licensing deals, while lucrative, are concentrated with just a few counterparties. If Google or OpenAI walked away, the revenue impact would be material.
Valuation: At 13x forward revenue, Reddit is priced for continued hypergrowth. Any deceleration could compress multiples quickly.
What's Next
Reddit guided Q1 2026 revenue of $595-605 million and Adjusted EBITDA of $210-220 million. The sequential decline reflects typical Q1 advertising seasonality, but the margin profile remains strong.
Key catalysts to watch:
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AI deal renewals: Reddit is actively negotiating new terms with Google and OpenAI. Success in securing dynamic pricing could meaningfully expand the data licensing revenue stream.
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Search product adoption: Reddit Answers, powered by Google Gemini, aims to make Reddit "a go-to search engine" according to Huffman . Adoption metrics will be closely watched.
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International expansion: With international DAUs growing 31% and representing 53% of the user base, improving international ARPU is the next margin lever.
For now, Reddit has accomplished something rare: it's become a profitable, cash-generating social platform that's also positioned as critical AI infrastructure. The $1 billion buyback is the company's way of saying it believes the market still underappreciates the story.
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