Reddit, Inc. Q3 FY2025 earnings call

• Core product: Redesigning the experience with a modern search-forward interface, streamlining onboarding, using AI to help users contribute and moderators manage communities (tools live in over 3,000 communities with 30% more active moderators). - Search: Over 75 million people search on Reddit weekly; Reddit Answers integrated into core search, increasing visibility and rolling out to non-English languages. - Internationalization: International growth accelerating with machine translation in 30 languages, local content framework identifying top interests in each country. - Monetization: Advertising business grew 74% YOY; ad stack investments focusing on driving performance, improving usability, and building unique ad formats; CAPI-covered conversion revenue tripled YOY. - Financials: Adjusted EBITDA margin reached 40%, GAAP net income $163 million with a 28% net margin; cash flow $183 million in Q3, free cash flow margin 31%.

Revenue for Q3 was $585 million, up 68% year-over-year. Advertising revenue grew 74% year-over-year to $549 million, while other revenue (including data licensing) reached $36 million, up 7% year-over-year. Average revenue per user (ARPU) grew 41% year-over-year to $5.04. Regionally, US revenue grew 67% and international revenue grew 74% year-over-year. Key revenue drivers included strong performance in performance ads and brand ads, impression growth, strength across the funnel, and diversified vertical growth with 9 of top 15 verticals growing revenues by 50% or more.

• Q4 revenue guidance: $655 million to $665 million, representing 53%-55% year-over-year growth. - Q4 adjusted EBITDA guidance: $275 million to $285 million, representing approximately 78%-85% year-over-year growth and an adjusted EBITDA margin of 42% at the midpoint. - Long-term margin target: Looking towards a margin target in the 50% range.

Q: Impressed by international DAUq growth, which countries stood out?

A: Strength in France, Brazil, and India, with growth driven by machine translation, local content framework, marketing efforts, and local partnerships.

Q: What's being done to improve user experience and help new users understand subreddit rules?

A: Using AI to make subreddit rules easier to enforce, supporting the contribution journey with AI-powered tools to help users avoid violating community rules early in their journey.

Q: Talk about user growth trends and Answers engagement.

A: User growth balance between organic and paid, product initiatives (machine translation) as largest contributor; Answers integrated into core search, handling 20% of search volume, expanded to non-English languages.

Q: Publisher Pro revenue opportunity and user marketing approach.

A: Reddit Pro brings value to the platform, potentially leading to more engagement and advertising opportunities; user marketing focuses on ROI, brand and performance spend, targeting specific audiences with testing in different markets.

Q: Simplified onboarding flow results and referral traffic from AI chatbots.

A: Simplified onboarding in testing phase; referral traffic from AI chatbots not a major driver today but with opportunity for future collaboration.

Q: LLM licensing, lawsuits, and logged-out user identity capture.

A: No new LLM licensing news; lawsuits details not provided; Reddit targets user interests rather than personal identity for ad targeting.

Q: Logged-out users from search and lower-funnel products for 2026.

A: Focus on converting logged-out search users to logged-in, with efforts to improve their experience; lower-funnel products include engine automation, shopping (Dynamic Product Ads), and ongoing work on app install measurement.

Q: Onboarding flow experimentation and rollout.

A: Simplifying onboarding with machine learning feed as top driver of subreddit subscriptions; testing new flows to get users into relevant feeds sooner.

Q: Reddit's role in search and LLM deals, and margin targets.

A: Relationships with search and LLM companies are collaborative to grow core product; margin target moving towards 50% in the medium term.

Q: Advertiser count expansion and AI optimization use case.

A: Self-serve not a major part of advertiser count yet, focusing on managed segments; Reddit's conversation platform is key for marketers, leveraging authentic human conversations for engagement and business outcomes.

Q: User mix evolution and ARPU drivers.

A: User mix includes contributors, lurkers; efforts to improve contributor mix by reducing friction; ARPU growth driven by impression growth, eCPM, and strategic ad load management (not focused on increasing ad load).

Q: Reddit's strategy in AI content and video consumption.

A: Reddit is for human conversation, supporting various content types (text, video, etc.) with a focus on the Reddit version of content formats; video comment replies and AI integrations are explored while text remains important as a conversation prompt.