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    RDDT
    Earnings call· Sep 2025(Q3 FY25)

    Reddit, Inc. RDDT

    Oct 30, 2025 Source

    Executive summary

    Reddit Q3 FY25 — Strong Revenue Growth and Profitability Milestone Achieved

    Reddit delivered a strong Q3 FY25, marked by significant revenue growth and the achievement of its 40% adjusted EBITDA margin goal ahead of schedule. The company is focused on enhancing the user experience, particularly within its app, and expanding internationally through product-led improvements and targeted marketing. Monetization efforts are scaling effectively, driven by ad platform optimizations and new ad formats, while the company continues to manage dilution and generate positive cash flow.

    Highlights

    6

    • Revenue reached $585 million, up 68% year-over-year.

    • Advertising business grew 74% year-over-year to $549 million.

    • GAAP Net Income was $163 million, a $133 million improvement from last year, with a 28% net margin.

    • Achieved a targeted adjusted EBITDA margin of 40%, a key IPO profitability goal.

    • Daily Active Unique users (DAUq) reached 116 million and Weekly Active Unique users (WAUq) reached 444 million, both growing around 20% year-over-year.

    • Total active advertiser count expanded by over 75% year-over-year.

    Concerns

    2

    • Macro market feels largely stable but with low visibility.

    • Tariffs are on the minds of some customers.

    Guidance & targets

    3
    CategoryTargetConfidence
    Q4 2025 Revenue
    $655M to $665M
    high materiality
    High
    Q4 2025 Adjusted EBITDA
    $275M to $285M
    high materiality
    High
    Long-term Adjusted EBITDA Margin
    50% range
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    U.S.
    Revenue growth in the U.S. region.
    		—67%——
    International
    Revenue growth in international markets, driven by the international playbook including machine translation and local content frameworks.
    		—74%——

    Operational metrics

    21
    Total revenue
    $585Mup 68% YoY
    Q3 FY25

    Differentiated growth and positive outcomes for advertisers.

    Other revenue (data licensing)
    $36Mup 7% YoY
    Q3 FY25

    Includes revenue from our data licensing business.

    GAAP Net Income
    $163Mup 4-5x YoY
    Q3 FY25

    An improvement of $133 million from last year.

    Net Income Margin
    28%expanded 1,900 bps YoY
    Q3 FY25

    Improvement from last year.

    Adjusted EBITDA
    $236M
    Q3 FY25

    A new high for Reddit.

    Incremental Adjusted EBITDA Margin
    60%
    Q3 FY25

    Reflects the scaling of the financial model.

    Gross Margin
    91%expanded 90 bps YoY
    Q3 FY25

    Fifth consecutive quarter of over 90%.

    Cash Flow
    $183M
    Q3 FY25

    Generating positive cash flow.

    Free Cash Flow Margin
    31%
    Q3 FY25

    Strong cash generation.

    Cash and cash equivalents
    $2.2B
    Q3 FY25 end

    Continued to build on the balance sheet.

    Total fully diluted shares outstanding
    206.1Mdown from 206.6M last quarter and 206.2M last year
    Q3 FY25 end

    Reflects efforts to minimize dilution.

    Stock-based compensation costs
    16%fell sequentially from 19%
    Q3 FY25

    Fell both in dollars and a percent of revenue basis.

    Average Revenue Per User (ARPU)
    $5.04grew 41% YoY
    Q3 FY25

    Still low on an absolute basis and remains an opportunity.

    Total adjusted cost
    $349Mup 37% YoY
    Q3 FY25

    Growth rate very similar to Q2.

    Adjusted Operating Expenses
    $297Mup 35% YoY
    Q3 FY25

    Close to half the growth rate of revenue (68%).

    Adjusted Sales and Marketing expenses
    $115M
    Q3 FY25

    In line with peers, driven by investments in sales team and brand/user marketing.

    Headcount net adds
    80grew ~3% sequentially
    Q3 FY25

    Investment track record continues to be very strong with fast paybacks.

    Marketing spend
    low to mid-single digits
    Q3 FY25

    Maintained a balanced approach to investing in brand awareness and performance marketing.

    Active advertiser count
    >75%expanded YoY
    Q3 FY25

    Added new accounts across all channels, including large mid-market and SMB businesses.

    Reddit Answers search volume
    20%
    current

    Currently handling about 20% of our search volume in Answers or in that kind of core search box.

    Reddit Pro tools adoption
    >3,000
    current

    Tools help mods grow and strengthen their communities.

    Industry KPIs

    4
    MetricValueDetails
    Family dap dau116M DAUq, 444M WAUqusers
    CAPEX compute commitments$2MUSD
    Advertising revenue by segment$549MUSD
    Ai feature adoption monetizationMultiple improvements

    Product announcements

    6
    ProductTypeDetails
    Reddit Pro tools for publisherslaunch
    Reddit Answers integration into core searchupdate
    Onboarding experience revamproadmap
    Conversation summary add-onsexpansion
    Interactive adsroadmap
    Video AMA with NASAmilestone

    Risks & headwinds

    3
    Macroeconomic uncertaintyNear-term (Q4 FY25)

    Broadly stable but low visibility

    Mitigation: Counseling customers on navigating dynamic environment, offering full-funnel ad solutions.

    Tariffs impacting advertisersNear-term

    On the minds of some customers

    Mitigation: Delivering efficiency and value for advertisers.

    Legal challenges regarding IPOngoing

    Lawsuits mentioned

    Mitigation: Protecting data for the business, users, and paying partners.

    What to watch in Q4 FY25

    5

    Onboarding revamp results

    Next quarter
    CurrentRevamp launching soon
    TargetEarly results on user experience and retention improvements

    Why it matters

    Improving the first-open experience and content relevance is a major lever for user retention and app growth.

    So on simplified onboarding, we're launching kind of a revamp of that relatively soon to get early results.

    Q&A highlights

    7

    Can you elaborate on user growth trends, particularly diversifying traffic sources, and the engagement trends for users utilizing Reddit Answers, now embedded in search results?

    User growth is balanced between organic and paid, with product initiatives and machine translation being major contributors. Reddit Answers, handling 20% of search volume and expanding to non-English languages, is expected to improve retention by providing differentiated search results, especially for new users.

    “We're currently handling about 20% of our search volume in Answers or in that kind of core search box, and that full integration is coming in the coming quarters.”

    asked by Ronald Josey · answered by Steven Huffman

    2 min read6 chapters

    Detailed Narrative

    01

    Product & User Experience Enhancements

    Reddit's consumer product strategy is increasingly focused on the Reddit app to build high-engagement relationships. Key initiatives include redesigning the experience with a modern, search-forward interface, streamlining onboarding for new users, and personalizing the home feed. AI is being leveraged to interpret subreddit rules for moderation and provide post guidance, aiming to make Reddit easier to use and more rewarding from day one, converting casual users into daily users.

    02

    Search as a Core Destination

    Recognizing the unique authenticity and context of Reddit conversations, the company is investing in making Reddit a true search destination. Over 75 million people searched on Reddit weekly in Q3. Reddit Answers, which provides curated community-powered insights, is being integrated into core search and expanded to non-English languages, with the goal of a single, great search experience that improves user retention.

    03

    International Growth Acceleration

    International growth continues to accelerate, driven by machine translation available in 30 languages. Reddit is applying a local content framework, successfully implemented in India, to guide partnerships, content, and marketing in focus countries like Australia, Brazil, Germany, and France. This strategy aims to broaden the types of users and communities globally.

    04

    Monetization & Ad Platform Progress

    The advertising business grew 74% year-over-year, reaching $549 million, fueled by expanding existing relationships, acquiring new customers, and diversifying the advertiser base. Investments in ad models and formats are driving greater performance, with ML-driven optimizations improving lower-funnel conversion performance by over 20%. New ad formats like conversation summary add-ons and interactive ads are being tested, showing promising results in click-through rates and time spent.

    05

    Financial Strategies & Capital Allocation

    Reddit's financial success is attributed to five strategies: differentiated revenue growth, expanding margins (gross margin 91%, adjusted EBITDA margin 40%), scaling profitably (GAAP net income $163M, adjusted EBITDA $236M), generating positive cash flow ($183M in Q3, >$0.5B LTM FCF), and minimizing dilution (fully diluted shares outstanding decreased sequentially and YoY). The company maintains modest CapEx at $2 million, less than 0.5% of revenue.

    06

    Marketing & Advertiser Acquisition

    The company strategically invested in brand campaigns and user marketing, aligning spend with creative campaigns and targeting specific growth segments in both U.S. and international markets. Marketing expenses were in the low to mid-single digits as a percentage of revenue. The total active advertiser count expanded by over 75% year-over-year, with automation across the ad stack making it easier for businesses of all sizes to adopt Reddit's ad tools.

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