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    RDDT
    Earnings call· Jun 2026(Q2 FY26)

    Reddit Q2 FY26 earnings call RDDT

    Jul 30, 2026 Source

    Executive summary

    Reddit Q2 FY26 — Strong Revenue Growth and Improved App User Retention

    Reddit delivered robust financial results driven by strong advertising momentum and increasing monetization efficiency, achieving significant revenue growth and profitability. Despite headwinds in search referral traffic, the company is focused on improving direct user engagement and retention through product enhancements, particularly for its mobile app, to achieve its long-term user growth targets. Management also highlighted the value of authentic human conversation in an increasingly automated online environment.

    Highlights

    5

    • Total revenue grew 61% year-over-year to $805 million.

    • Advertising revenue grew 64% year-over-year to $762 million.

    • Adjusted EBITDA margin reached 43%.

    • New app user retention was up 50% year-over-year on a relative basis.

    • Operating cash flow doubled from $111 million to $262 million year-over-year.

    Concerns

    3

    • Search referrals were choppy and traffic was more volatile later in the quarter.

    • User acquisition spending needs stronger attention to improve returns.

    • U.S. daily active users (DAU) were sequentially down by 300,000.

    Guidance & targets

    5
    CategoryTargetConfidence
    Q3 2026 Revenue
    $860 million to $870 million
    high materiality
    High
    Q3 2026 Adjusted EBITDA
    $385 million to $395 million
    high materiality
    High
    Full-year SBC expense
    low to mid-teens as a percentage of revenue
    medium materiality
    High
    Q3 2026 SBC and related taxes
    $140 million to $155 million
    medium materiality
    High
    Full-year dilution
    lower end of 1% to 3% targeted range
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    U.S.
    U.S. revenues were up 56% year-over-year.
    		—56%——
    International
    International revenues were up 84% year-over-year.
    		—84%——
    Advertising
    Advertising revenue grew 64% year-over-year to $762 million, reflecting broad-based strength across the business.
    		$762 million64%——
    Other Revenue
    Other revenue reached $43 million, up 24% year-over-year.
    		$43 million24%——
    Scaled Channel (Mid-market and SMBs)
    Our scaled channel revenue, which includes mid-market and SMBs, doubled year-over-year.
    		—doubled——

    Operational metrics

    33
    Adjusted EBITDA margin
    43%
    Q2 FY26

    Achieved in Q2 FY26.

    Revenue per employee
    $1 million
    LTM

    Crossed this milestone on a last 12-month basis for the first time.

    Average revenue per unique user
    $6.1836% year-over-year
    Q2 FY26

    Grew 36% year-over-year.

    Gross margin
    91.3%up 50 basis points versus last year
    Q2 FY26

    Up 50 basis points versus last year, driven by incremental revenues and hosting efficiency programs.

    Cost of revenue
    $70 million53% year-over-year
    Q2 FY26

    Includes investments in machine learning, site performance, safety, and ad targeting.

    Adjusted OpEx as percentage of revenue
    49%compared to 57% last year
    Q2 FY26

    Demonstrates cost leverage.

    Headcount added
    100
    Q2 FY26

    Added in Q2, focusing on consumer product, ad stack, and advertiser accounts.

    Stock-based compensation-related taxes
    $107 million
    Q2 FY26

    Well in line with benchmarks.

    Total fully diluted shares outstanding
    207 millionup 0.3% sequentially and up 0.2% year-over-year on a net basis
    Q2 FY26

    Net basis, considering share repurchases.

    Sequential dilution (net basis)
    0.3%
    Q2 FY26

    Excluding the impact of share repurchases.

    Sequential dilution (gross basis)
    1%
    Q2 FY26

    Excluding the impact of share repurchases.

    Net income
    $253 millionmultiples more than $0.48 from a year ago
    Q2 FY26

    Multiples more than the $0.48 from a year ago.

    Diluted EPS
    $1.25multiples more than $0.45 from a year ago
    Q2 FY26

    Multiples more than the $0.45 from a year ago.

    Basic EPS
    $1.31multiples more than $0.48 from a year ago
    Q2 FY26

    Multiples more than the $0.48 from a year ago.

    Capital expenditure
    $1 million
    Q2 FY26

    Very light, less than 0.2% of revenue.

    Cash, cash equivalents and marketable securities
    $2.8 billionup over $700 million from a year ago
    Q2 FY26

    Up over $700 million from a year ago and slightly higher sequentially.

    Conversion volume
    over 100%YoY
    Q2 FY26

    Growing over 100% year-over-year.

    Click volume
    over 30%YoY
    Q2 FY26

    Growing over 30% year-over-year.

    Active advertisers
    over 70%YoY
    Q2 FY26

    Grew over 70% year-over-year.

    Reddit Max advertisers
    over 60%from Q1
    Q2 FY26

    Grew over 60% from Q1.

    Reddit Max revenue
    over 150%from Q1
    Q2 FY26

    Grew over 150% during the same period.

    Video views revenue (upper funnel)
    more than doublingYoY
    Q2 FY26

    Fastest-growing upper funnel objective, more than doubling revenue year-over-year.

    6-second view-through rate
    over 130%lift
    Q2 FY26

    Delivered over 130% lift in testing for 6-second engaged video views goal.

    Video completion rate
    over 70%increase
    Q2 FY26

    Over 70% increase in testing for 6-second engaged video views goal.

    Cost per 6-second video view
    80%reduction
    Q2 FY26

    80% reduction with auto bidding in testing for 6-second engaged video views goal.

    App install cost per action (Max campaigns)
    average 15%reduction
    Q2 FY26

    Average 15% reduction in beta tests.

    App install results volume (Max campaigns)
    28%increase
    Q2 FY26

    28% increase in beta tests.

    High-intent shopping conversations
    40%YoY
    Q2 FY26

    Growing 40% year-over-year on Reddit.

    Ads API revenue
    over 40%from Q1
    Q2 FY26

    Grew over 40% from Q1.

    Revenue from credit line relationships
    more than half
    Q2 FY26

    More than half of revenue comes from credit line relationships.

    Shopify integrated accounts
    over 500
    Q2 FY26

    More than 500 accounts are now integrated with strong activation rates.

    Total adjusted costs and expenses
    $462 million39% year-over-year
    Q2 FY26

    Up 39% year-over-year, consistent with the 41% rate over the last 4 quarters.

    Posts and comments
    26 billion1 billion added since Q1
    Q2 FY26

    26 billion posts and comments on Reddit with 1 billion added since Q1.

    Industry KPIs

    6
    MetricValueDetails
    Family dap dauover 130 millionusers
    CAPEX compute commitments$1 millionUSD
    Advertising revenue by segment$762 millionUSD
    Share buyback capital returned$235 millionUSD
    Ai feature adoption monetizationover 150%%
    Custom silicon ai infrastructure—

    Product announcements

    6
    ProductTypeDetails
    Reddit Max - App Install Objectiveupdate
    Reddit Max - Tailored Creativeslaunch
    Video in Commentslaunch
    Shopping Listing Adslaunch
    Dual Attributionlaunch
    Shopify Integrationlaunch

    Deals & partnerships

    1
    ShopifyIntegration to enable Shopify merchants to easily advertise on Reddit.

    The Shopify integration became generally available in May, allowing merchants to sync catalogs and integrate CAPI automatically. Reddit plans to focus on improving the product experience, acquiring merchants, and increasing dynamic product ads adoption among these clients.

    Risks & headwinds

    4
    Search referrals choppy/volatileQ2 FY26, ongoing

    Traffic was more volatile later in the quarter; decline in machine translated content observed.

    Mitigation: Focusing on building Reddit as a direct destination and driving more direct traffic to the app; converting web users to app users.

    User acquisition spending needs stronger attentionOngoing

    Returns on user acquisition spending need improvement.

    Mitigation: Evaluating the mix of spend, improving user retention, balancing with brand marketing (e.g., 'People Are The Best' campaign).

    AI overviews impact on trafficOngoing

    AI overviews has yet to make a similar level of positive impact for publishers and businesses.

    Mitigation: Focusing on direct user engagement and building Reddit as a destination, rather than relying on external search traffic.

    New users having posts removedOngoing

    New users are likely to have their post removed due to long-standing strategies (e.g., account age).

    Mitigation: Using LLM-assisted moderation to help bring in prospective great users and improve post success rates, while keeping spammers out.

    What to watch in Q3 FY26

    5

    New app user retention

    Next quarter
    CurrentUp 50% YoY on a relative basis
    TargetContinued improvement

    Why it matters

    This is a key product quality metric and a primary driver for converting weekly users to daily users, essential for long-term user growth targets.

    new app user retention, an area we've discussed frequently, was up 50% year-over-year on a relative basis this quarter.

    Q&A highlights

    5

    Asked about the trend in user growth, particularly in Q2 and early Q3, and management's ability to drive high-quality users to Reddit, given the stated goal of 1 billion global DAUs and 100 million U.S. DAUs.

    Steve Huffman reiterated the focus on product work to drive daily direct users, citing a 50% YoY relative improvement in new app user retention. He acknowledged headwinds from search referrals but emphasized building Reddit as a direct destination, noting that U.S. and international weekly users both grew sequentially.

    “We grew our reach. We crossed 0.5 billion weeklies. U.S. and international weeklies both grew sequentially.”

    asked by Thomas Champion · answered by Steven Huffman

    2 min read6 chapters

    Detailed Narrative

    01

    AI and the Value of Human Connection

    Steve Huffman emphasized Reddit's role as an "antidote to an automated web," providing authentic human perspectives and context amidst synthetic content. He highlighted that people crave real opinions and lived experiences, making Reddit a unique destination for decision-making across various aspects of life, from purchases to health and careers. This focus on human connection is central to Reddit's mission and strategy, differentiating it from platforms increasingly flooded with AI-generated content.

    02

    Advertising Momentum and Diversification

    Jen Wong detailed the broad-based strength in advertising, with total revenue growing 61% and ad revenue 64% year-over-year, driven by both pricing and impressions. The company saw significant growth in mid- and lower-funnel performance objectives, with conversion volume up over 100% and click volume over 30% year-over-year. This strength was observed across industry verticals, particularly retail and travel, and in the scaled channel (mid-market and SMBs), which doubled year-over-year, demonstrating increasing resilience and flexibility.

    03

    Product Enhancements and User Engagement

    Management discussed efforts to improve user experience, focusing on converting weekly users to daily users to achieve the goal of 1 billion global DAUs and 100 million U.S. DAUs. Key initiatives include updated feed models, driving web users to the app for higher engagement, and making posting easier within communities. New app user retention improved 50% year-over-year on a relative basis, indicating positive momentum in product-led growth.

    04

    SMB and Ad Stack Development

    Reddit Max, the AI-driven optimization tool, saw strong adoption with advertiser usage up 60% and revenue up 150% from Q1, demonstrating improved performance for advertisers like Lenovo. The company is expanding Max capabilities, including app install objectives and tailored creatives, and integrated with Shopify to streamline catalog syncing and CAPI for merchants. These efforts aim to simplify onboarding, enhance efficiency, and scale SMB engagement.

    05

    Search Referrals and User Growth Strategy

    Steve Huffman acknowledged headwinds in search referrals, particularly later in the quarter, and noted the low visibility into search ecosystem changes, including a decline in machine-translated content and the impact of AI overviews. Despite this volatility, the company remains focused on building Reddit as a direct destination and driving user growth through product-led initiatives, emphasizing that its business thrives on direct, repeat users rather than drive-by traffic.

    06

    Capital Allocation and Financial Strength

    Drew Vollero highlighted the doubling of operating cash flow, adjusted EBITDA, net income, and GAAP EPS year-over-year, with LTM operating cash flow crossing $1 billion for the first time. The company repurchased $235 million in stock and maintains a strong cash position of $2.8 billion. Reddit's capital priorities include investing in the business, opportunistic M&A, and share repurchases, while maintaining a high level of profitability and managing dilution.

    AI-generated summary of the company’s earnings call. Not investment advice.