Reddit 2025-26: Q4 Revenue +70%, Ad +75%, ARPU $5.98 +42%
FY25 revenue $2.20B (+69%); op income $442M (vs -$561M FY24 — flip); NI $530M; EPS $2.62. Q4 revenue $726M (+70%); advertising $690M (+75%). DAU 121M (+19%); WAU 471M (+24%). ARPU $5.98 (+42% YoY). 11 of top 15 verticals +50%+. US +68%, Int'l +78%. FY26 guide: Q1 revenue $595-$605M (+52-54%); EBITDA $110-$220M; SBC high-teens % of revenue.
Key takeaways
- Profitability inflection from -$561M op loss → +$442M op income FY25. EPS $2.62 vs -$2.69 FY24. The company achieved durable GAAP profitability mid-year and continues compounding from there.
- Q4 ARPU $5.98 (+42% YoY). ARPU is the single best leading indicator — rising means ad stack improvements + lower-funnel objectives + verified profiles + Reddit Max are working. The unit economics keep getting better.
- DAU 121M (+19%) / WAU 471M (+24%). User growth healthy; international acceleration noted (Q3 international +74% vs US +67%). Reddit Answers + machine translation in 30 languages opening international scale.
- Performance ads outperforming, lower-funnel revenue doubled. Reddit Max (AI-powered campaign platform) launched. CAPI-covered conversion revenue tripled YoY Q3. The transition from brand-only to performance + brand is the structural moat.
- FY26 Q1 guide: revenue +52-54%, EBITDA $110-$220M (midpoint 36% margin), SBC dilution at lower end of 1-3% guide. Ongoing leverage to long-term 50% margin target.
Business
Reddit, Inc. operates the global community platform with 471M weekly active users + advertising business. Three revenue streams:
- Advertising (~95% of revenue). $690M Q4 (+75% YoY). Performance ads + brand ads + lower funnel doubling. 11 of top 15 verticals +50% Q4. Reddit Max + verified profiles + interactive ads + reminder ads.
- Data licensing (~5%). $36M Q3 (+7%); structured deals with AI labs for training data. Smaller stream but high-margin.
- Other (residual). User economy / subscriptions deprioritized FY25.
Strategic moves FY25:
- Reddit Max launched (AI-powered ad campaign platform)
- Reddit Answers (search) — 80M+ weekly searches Q4; integrated into core search
- Machine translation in 30 languages (international acceleration)
- Verified profiles for brands + individuals (bot defense)
- DPA (Dynamic Product Ads) launched
- Conversation Summary Add-Ons launched (higher CTR)
- 80/20 product simplification (deprioritized user economy + community points)
- 13-language → 30-language machine translation expansion through 2025
FY25 financial performance
| Metric (FY) | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue ($M) | 667 | 804 | 1,300 | 2,203 |
| Revenue YoY | n/a | +21% | +62% | +69% |
| Op income ($M) | -172 | -140 | -561 | 442 |
| Op margin | -25.8% | -17.4% | -43.1% | 20.1% |
| Net income ($M) | -159 | -91 | -484 | 530 |
| Diluted EPS ($) | -0.97 | -0.56 | -2.69 | 2.62 |
| FCF ($M) | -100 | -85 | 216 | 684 |
| Capex ($M) | -6 | -10 | -6 | -7 |
| Total debt ($M) | 19 | 26 | 27 | 23 |
The transformation: FY22 -$172M op loss → FY25 +$442M op income. Op margin -26% → +20% over 4 years. The IPO occurred March 2024 at $34/share; this is the post-IPO scaling story.
FCF $684M FY25 — exceptional given ~$0 capex business. The operating leverage is structural.
Capital allocation
- Capex: $-7M FY25 (~0.3% of revenue). Software business — minimal capex.
- Dividends: $0. Growth-stage.
- Buybacks: $0. Stock-based compensation dilution control instead.
- Debt: $23M (immaterial; cash-rich).
- SBC: High-teens % of revenue target FY26; aiming for low end of 1-3% net dilution.
FY26 outlook (per Q4 2025 call, 2026-02-05)
| FY26 framework | Detail |
|---|---|
| Q1 FY26 revenue | $595M to $605M (+52-54% YoY) |
| Q1 adj EBITDA | $110M to $220M |
| Q1 adj EBITDA margin | ~36% midpoint |
| SBC as % of revenue | High-teens FY26 target |
| Net dilution | Low end of 1-3% medium-term guide |
| Long-term margin target | 50% range |
Q1 adj EBITDA $110-$220M range reflects investment cadence flexibility. Lower end represents heavy reinvestment into growth; upper end represents discipline. Full-year FY26 not formally guided.
Key risks
- AI-related authenticity. Distinguishing real user content from AI-generated content. Erosion of trust risk if not managed. Verified profiles partial mitigation.
- Bot management. Bot verification + labeling key to community authenticity. Ongoing arms race.
- Hyperscaler / search competition. Google algorithm changes can affect organic traffic. AI-driven tools (Perplexity, ChatGPT) compete for "info" queries.
- Advertiser concentration. Performance ads + brand mix evolving; large customer concentration unclear.
- Stock-based compensation dilution. High-teens % of revenue — material dilution if not managed; long-term 1-3% net dilution target depends on revenue growth outpacing SBC.
- Data licensing volatility. Q3 data revenue +7% only; lumpy contract structure.
Bottom line
RDDT FY25 is the inflection year: revenue +69%, op income flipped from -$561M to +$442M, EPS $2.62 (vs -$2.69), Q4 advertising +75%, ARPU +42%. The unit economics + ad stack improvements + international scale make this a structural compounder. FY26 Q1 guide of +52-54% revenue / 36% EBITDA midpoint validates ongoing leverage. Risks are AI authenticity + bot management + dilution + competitive. High-quality post-IPO compounder mid-trajectory toward 50% LT EBITDA margin target.
Citations
- Reddit, Inc. FY25 Form 10-K (filed February 2026, SEC EDGAR).
- RDDT Q4 2025 earnings call, 2026-02-05 — FY revenue $2.2B (+69%); Q4 $726M (+70%); ad $690M (+75%); ARPU $5.98 (+42%); DAU 121M (+19%); FY26 Q1 guide (+52-54% rev; $110-$220M adj EBITDA; high-teens SBC target).
- RDDT Q3 2025 earnings call, 2025-10-30 — Q3 revenue $585M (+68%); ad +74%; ARPU $5.04 (+41%); EBITDA margin 40%; LT margin target 50%.
- RDDT Q2 2025 earnings call, 2025-07-31 — Q2 revenue $500M (+78%); ARPU $4.53 (+47%); fastest quarterly growth since 2022.
- RDDT Q1 2025 earnings call, 2025-05-01 — Q1 revenue $392M (+61%); WAU 401M (+31%); machine translation 13 languages.
- Internal financial_statements view (consolidated annual + cash flow + capital structure).