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    RDDT
    Earnings call· Dec 2025(Q4 FY25)

    Reddit Q4 FY25 earnings call RDDT

    Feb 5, 2026 Source

    Executive summary

    Reddit, Inc. Q4 FY25 — Strong Revenue Growth and Share Repurchase Program

    Reddit concluded FY25 with robust revenue growth and profitability, driven by strong ad platform performance and user engagement. The company is strategically investing in AI-powered product enhancements and automation to improve user experience and advertiser outcomes, while also initiating a significant share repurchase program to deliver shareholder value. Management remains focused on execution to capitalize on its unique position in an evolving internet landscape.

    Highlights

    5

    • Total revenue grew 70% year-over-year to $726 million in Q4 FY25, driven by broad-based strength in advertising.

    • Net income reached $252 million (35% of revenue) and Adjusted EBITDA hit $327 million (45% of revenue) in Q4 FY25, making Reddit a Rule of 115 company.

    • Free cash flow crossed $250 million in Q4 FY25, reaching $264 million, and $684 million for the full year, more than triple 2024.

    • Daily Active Users (DAU) grew 19% year-over-year to 121 million, and Weekly Active Users (WAU) grew 24% year-over-year to 471 million in Q4 FY25.

    • The Board authorized a $1 billion share repurchase program, reflecting confidence in growth and commitment to shareholder returns.

    Concerns

    3

    • Q1 FY26 revenue guidance of $595 million to $605 million implies a deceleration in year-over-year growth to 52%-54% from Q4 FY25's 70%.

    • Total adjusted costs grew 46% year-over-year to $399 million in Q4 FY25, slightly elevated from prior quarters, driven by hiring and marketing investments.

    • Marketing spend in Q4 FY25 was in the mid-single digits as a percentage of revenue, with price increases driven by seasonality and U.S. market focus.

    Guidance & targets

    7
    CategoryTargetConfidence
    Q1 2026 Revenue
    $595 million to $605 million
    high materiality
    High
    Q1 2026 Adjusted EBITDA
    $210 million to $220 million
    high materiality
    High
    Full-year 2026 Stock-Based Compensation (SBC)
    high teens as a percentage of revenue
    medium materiality
    High
    Full-year 2026 Dilution
    lower end of 1% to 3%
    medium materiality
    High
    Cash on Balance Sheet
    keep over $1 billion
    medium materiality
    High
    Share Repurchase Program
    up to $1 billion
    high materiality
    High
    User Reporting Disclosure Change
    phase out logged in and logged out metrics
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    United States
    U.S. revenues were up 68% year-over-year in Q4 FY25.
    		—68%——
    International
    International revenues were up 78% year-over-year in Q4 FY25.
    		—78%——

    Operational metrics

    23
    Adjusted EBITDA margin
    45%
    Q4 FY25

    Adjusted EBITDA hit $327 million, 45% of revenue, making Reddit a Rule of 115 company this quarter.

    Adjusted EBITDA margin
    38%
    FY25

    Full year adjusted EBITDA was $845 million, 38% margin.

    Net income margin
    35%
    Q4 FY25

    Net income reaching $252 million, 35% of revenue.

    Net income margin
    24%
    FY25

    Full year net income was $530 million, 24% of revenue.

    Free cash flow margin
    36%
    Q4 FY25

    Free cash flow was $264 million in Q4, 36% of revenue this quarter.

    Gross margins
    91.2%up 70 bps
    FY25

    Full year gross margins were 91.2%, up 70 basis points.

    Total adjusted costs
    $399 millionup 46% year-over-year
    Q4 FY25

    Q4 total adjusted costs were $399 million, up 46% year-over-year.

    Total adjusted costs growth
    35%
    FY25

    Total adjusted costs grew 35% for the year, about half the rate of revenue growth.

    Adjusted OpEx
    $340 millionup 41%
    Q4 FY25

    Adjusted OpEx costs grew 41%, driven by investments in hiring and marketing.

    Stock-based compensation as % of revenue
    13%
    Q4 FY25

    Stock-based compensation expense was below 20% of revenue for the third consecutive quarter, hitting 13% in Q4.

    Stock-based compensation as % of revenue
    18%
    FY25

    SBC was $387 million or about 18% of revenue in 2025.

    Total shares outstanding
    206.1 millionfell slightly
    FY25 end

    Total shares outstanding falling slightly to 206.1 million.

    Incremental adjusted EBITDA margins
    60%
    FY25

    Reddit's incremental adjusted EBITDA margins for the year were 60%.

    Rule of 115 company
    achieved
    Q4 FY25

    Adjusted EBITDA hit $327 million, 45% of revenue, making us a Rule of 115 company this quarter.

    Cash and cash equivalents
    nearly $2.5 billionup $250 million sequentially and over $630 million from last year
    Q4 FY25 end

    Cash and cash equivalents on the balance sheet ended at nearly $2.5 billion.

    Marketing spend as percentage of revenue
    mid-single digits
    Q4 FY25

    Marketing spend was in the mid-single digits as a percentage of Q4 revenues.

    Average revenue per user (ARPU)
    $5.98grew 42% year-over-year
    Q4 FY25

    Average revenue per user, or ARPU, grew 42% year-over-year to $5.98.

    Active advertiser count growth
    over 75%year-over-year
    Q4 FY25

    Total active advertiser count grew by over 75% year-over-year in Q4.

    Click volume (mid-funnel) growth
    over 60%
    Q4 FY25

    In Q4, click volume in the mid-funnel grew over 60%.

    Conversion volume (lower funnel) growth
    doubledyear-over-year
    Q4 FY25

    Lower funnel conversion volume doubled year-over-year.

    CAPI covered conversion revenue growth
    tripledyear-over-year
    Q4 FY25

    In Q4, CAPI covered conversion revenue tripled year-over-year, like it has done each quarter in 2025.

    Headcount
    2,555up 14% versus last year and up about 3% sequentially from Q3
    Q4 FY25 end

    The company ended with 2,555 total headcount.

    Verified users content creation
    post over 10% more
    first week

    Early results from Verified profile tests show that verification helps drive content creation and community trust. Verified users post over 10% more in their first week and generate more consumer engagement.

    Industry KPIs

    6
    MetricValueDetails
    Family dap dau121 million DAU, 471 million WAUusers
    CAPEX compute commitments$3 millionUSD
    Search query volume trend80 million WAU searching directly on Reddit, 15 million Reddit Answers queriesusers/queries
    Advertising revenue by segment$690 millionUSD
    Ai feature adoption monetization15 million Reddit Answers queries; 17% CPA reduction; 27% conversion volume lift; >75% ROAS improvementqueries/percent
    Ad impressions growth vs average price per adImpression growth was the main driver of revenue growth; pricing grew year-over-year

    Product announcements

    8
    ProductTypeDetails
    Verified profileslaunch
    Bot verification and labelingroadmap
    Reddit Answersexpansion
    Campaign budget optimizationlaunch
    Reddit Max campaignslaunch
    Interactive adslaunch
    Reminder adslaunch
    Chief Product Officer (CPO)update

    Deals & partnerships

    5
    Paramountpartnership

    Partnership to launch interactive ads in beta to promote their movie Running Man.

    SmartlyAPI partnership

    Existing API partnership, expanding partner ecosystem to scale audience reach, creative automation, and full funnel measurement.

    WooCommerceAPI partnership

    Existing API partnership, expanding partner ecosystem to scale audience reach, creative automation, and full funnel measurement.

    Googleproduct partnership

    Relationship evolving from a business deal to a product partnership, aiming to help build the best versions of each other's products and bring users into Reddit's communities. Reddit is the #1 cited source in AI answers.

    OpenAIproduct partnership

    Relationship evolving from a business deal to a product partnership, aiming to help build the best versions of each other's products and bring users into Reddit's communities. Reddit is the #1 cited source in AI answers.

    Risks & headwinds

    3
    Deceleration in revenue growth rateQ1 2026

    Q1 FY26 revenue guidance implies 52%-54% YoY growth, down from Q4 FY25's 70% YoY growth.

    Mitigation: Management expects momentum from Q4 to continue, but notes that Q1 business typically comes later in the quarter, with March being the biggest month for order writing.

    Elevated cost growthQ4 2025

    Total adjusted costs grew 46% YoY to $399 million in Q4 FY25, slightly higher than prior quarters' average of 38%.

    Mitigation: Investments are focused on revenue-generating functions (hiring) and user/brand marketing with strong ROI. Q1 FY26 guidance implies a sequential reduction in the total adjusted cost base to $385 million.

    Impact of AI-generated content and bots on platform authenticityOngoing

    Unquantified, but noted as a challenge to trust and conversation quality.

    Mitigation: Actively working on preserving authenticity through the launch of verified profiles for brands and individuals in Q4 FY25, with bot verification and labeling planned next. Emphasizing transparency and intentionality for automated content.

    Q&A highlights

    8

    What are the early benefits of revamped onboarding and integrating Reddit Answers into search, particularly for retention and user experience?

    Steve Huffman stated that onboarding experiments showed streamlining improves retention, with future ML investments for better cold-start feeds. Search integration led to increased search volume (80M WAU) and Reddit Answers queries (15M), with plans for more media-rich responses.

    “Reddit Answers queries, I believe, were up from 1 million to 8 million -- 15 million, excuse me. Thank you, Jesse. 1 million to 15 million queries over the last year and then 60 million to 80 million overall search queries. So we're seeing nice growth there.”

    asked by Ronald Josey · answered by Steven Huffman

    2 min read6 chapters

    Detailed Narrative

    01

    AI and Authenticity on Reddit

    Management highlighted Reddit's role as a 'human place on the Internet' amidst the rise of opaque algorithms and generative content. To preserve authenticity, the company launched verified profiles for brands and individuals in Q4 FY25, with plans for bot verification and labeling next. The goal is to ensure transparency and intentionality for any automated or AI-generated content, maintaining Reddit's core value of human-to-human interaction.

    02

    Product Development and User Engagement

    Key product priorities include improving new user onboarding and integrating search interfaces. Experiments in Q4 FY25 for onboarding showed that streamlining the process improves retention, with future investments in machine learning to enhance the 'cold start feed' for new users. Search volume increased significantly, with 80 million weekly users searching on Reddit, up from 60 million a year ago, and Reddit Answers queries growing from 1 million to 15 million.

    03

    Advertising Platform Momentum

    The advertising business grew 75% year-over-year to $690 million in Q4 FY25, driven by broad-based strength across various factors. Performance ads, particularly lower funnel objectives like purchase conversions and app installs, doubled year-over-year. The company saw strong growth across large customer and scaled segments, with SMB revenue doubling, and 11 out of its top 15 verticals growing 50% or more year-over-year.

    04

    Automation and Advertiser Value

    Reddit is scaling automation through its Ads Manager and Reddit Max, an AI-powered campaign platform that delivered an average 17% CPA reduction and a 27% conversion volume lift in testing. The strategy focuses on streamlining advertiser onboarding, expanding measurement capabilities (including first-party tools and third-party partnerships), and leveraging Reddit's community intelligence to provide actionable media strategies for brands.

    05

    Capital Allocation Strategy

    The company announced a $1 billion share repurchase program, emphasizing its ability to grow durably and generate significant cash flow. Capital allocation priorities remain investing in the core business, pursuing M&A (both tuck-ins and more scaled opportunities for capabilities and technologies), and opportunistic share repurchases. Reddit aims to maintain over $1 billion in cash on the balance sheet to support these priorities.

    06

    User Metric Reporting Evolution

    Reddit plans to phase out reporting on logged-in versus logged-out users starting with Q3 2026 disclosures. This change reflects the blurring distinction between these user states due to product work like instant personalization, which makes the login status less relevant to how the company manages and evaluates its operating performance as it scales. The focus will shift to growing all users and increasing engagement regardless of login status.

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