tapebrief
RDDT · Q2 2025
RDDT · Q4 2025

RDDT · Q3 2025 Earnings

Bullish

Reddit

Reported October 30, 2025

30-second summary

Revenue grew 68% YoY to $585M, blowing past the $535–545M guide by $40–50M, while adjusted EBITDA margin hit 40.3% — passing Reddit's pre-IPO profitability milestone and beating the implied 35% guide by ~500bps. Ad revenue accelerated to +74% YoY ($549M), other revenue decelerated to just +7%, and Q4 guidance of $655–665M implies 53–55% YoY growth with a 42% EBITDA margin at the midpoint. The setup: growth is decelerating modestly off Q2's 78% print as expected, but margins are inflecting faster than the Street modeled, and management is now openly pivoting capital toward user-acquisition marketing for the first time.

Headline numbers

EPS

Q3 FY2025

$0.80

Revenue

Q3 FY2025

$0.58B

+68.0% YoY

Gross margin

Q3 FY2025

91.0%

Free cash flow

Q3 FY2025

$0.18B

Operating margin

Q3 FY2025

23.7%

Key financials

Q3 FY2025
MetricQ3 FY2025YoYQ2 FY2025QoQ
Revenue$0.58B+68.0%$0.50B+17.0%
EPS$0.80—$0.45+77.8%
Gross margin91.0%—90.8%+20bps
Operating margin23.7%—13.6%+1010bps
Free cash flow$0.18B—$0.11B+64.9%

Guidance

Reddit significantly beat Q3 FY2025 guidance across revenue and Adjusted EBITDA, with Q4 guidance indicating sustained high-double-digit YoY growth and expanding margins.

Guidance is issued one quarter forward. The Prior-guide column references the guide issued last quarter for the period just reported; the New-guide column is for next quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ3 FY2025$535 million to $545 million$585 million+$40-50 million above guideBeat
Adjusted EBITDAQ3 FY2025$185 million to $195 million$235.6 million+$40-51 million above guideMet

New guidance

MetricPeriodGuideYoY
RevenueQ4 FY2025$655 million to $665 million53% to 55%
Adjusted EBITDAQ4 FY2025$275 million to $285 million78% to 85%
Adjusted EBITDA MarginQ4 FY202542% at midpoint—

Segment performance

Q3 FY2025
SegmentQ3 FY2025YoY
Ad Revenue$0.549B+74.0%
Other Revenue$0.036B+7.0%

Platform metrics

Q3 FY2025
SegmentQ3 FY2025
Daily Active Uniques (Global)116.0 million
Weekly Active Uniques (Global)443.8 million
Logged-in DAUq (Global)50.2 million
Logged-out DAUq (Global)65.8 million
ARPU (Global)$5.04
ARPU (U.S.)$9.04
ARPU (International)$1.84

Profitability

Q3 FY2025
SegmentQ3 FY2025
Adjusted EBITDA Margin40.3%

Other KPIs

Q3 FY2025
SegmentQ3 FY2025YoY
U.S. Revenue$0.48B+67.0%
International Revenue$0.105B+74.0%

Management tone

Q2 anchor → Q3 anchor: "Internet's reference corpus" → "Leader in both growth AND profitability"

Management's framing of profitability has shifted from aspirational to delivered. In Q2 the 33.4% EBITDA margin was framed as progress toward a long-stated goal; this quarter Huffman called the 40% print "passing that important profitability benchmark for the first time. That was a pre-IPO goal for Reddit and an important milepost to pass." The shift from forward-looking ambition to retrospective milestone language signals management now considers the margin question answered and is opening a new chapter focused on offense.

The consumer product narrative has tightened from "search unification" to direct app investment. Last quarter the user-acquisition story was about moving the search box front-and-center and unifying Reddit Search with Reddit Answers. This quarter Huffman explicitly said "our consumer product roadmap is focusing more intently on the Reddit app. This is where we can build direct, high-engagement relationships, which are most valuable to both our users and our business." The pivot is from SEO-traffic conversion to owned-relationship economics — a more durable but more capital-intensive path.

International expansion language has hardened from "foundational" to operating playbook. In Q2 the France brand campaign was a "positive proof point" for marketing efficiency; this quarter Reddit is naming three focus countries — France, Brazil, India — with strength "across a number of regions" and international growth (74%) overtaking U.S. growth (67%). The qualitative-to-quantitative shift indicates the international motion has moved from experimentation to repeatable execution.

DPA has graduated from emerging capability to measurable performance lever. Q2 commentary framed DPA at "2x higher ROAS than standard conversion campaigns" as a still-scaling product with adoption challenges. This quarter Wong cited "double-digit percentage improvements to performance outcomes" from model improvements and "over 20%" gains from ML-driven lower-funnel optimization. The product is no longer being sold to the Street as potential — it's being framed as operating leverage.

Marketing spend disclosure is also new. Management explicitly quantified consumer marketing at "low single-digit percent of revenue last quarter, low-mid single-digit percent this quarter" with willingness to scale further if returns hold. This is the first time Reddit has openly signaled it will spend to acquire users — a meaningful shift from the historically organic-growth-only posture.

Recurring themes management leaned on this quarter:

AI-driven ad stack optimization and automationProfitability milestone achievement with 40% EBITDA marginsInternational expansion momentum in focus countriesConsumer app engagement as strategic priorityLower funnel monetization improvements and model optimizationMargin expansion alongside 60%+ growth

Risks management surfaced:

DPA adoption requiring more time and resources for clients to implement complex ad productARPU remains low on absolute basis despite 41% YoY growthSeasonality in fourth quarter requiring management attentionUser onboarding friction from community rules enforcementMarketing spend scalability dependent on sustainable returns

Q&A highlights

Ron Josie · Citi

Asked about user growth trends into Q4, diversification of traffic sources, and engagement metrics for Reddit Answers users post-integration into search results (75M WOWs).

Management reported Q3 user growth balanced between organic and paid, with external search flat. Product initiatives including machine translation drove growth. Reddit Answers handling ~20% of search volume; expanding to non-English languages (Spanish, German, Italian, French, Portuguese). Focus on first-session user experience and retention as driver of sustainable growth.

190 million Americans visit Reddit weeklyReddit Answers handling ~20% of search volumeRecently expanded Answers to Spanish, German, Italian, French, PortugueseExited Q3 higher than average for user growth

Tom Champion · Piper Sandler

Asked about Publisher Pro revenue opportunity versus engagement drivers, and user marketing spend strategy domestically and internationally.

Publisher Pro primarily about platform value and vibrancy, with indirect revenue benefits through increased engagement. Spending on user marketing in test mode: low single-digit percent of revenue last quarter, low-mid single-digit percent this quarter. No pinpoint target; focused on quality users, ROI, and retention curves. Not afraid to increase spend if traction identified.

User marketing spend: low single-digit % of revenue last quarterUser marketing spend: low-mid single-digit % of revenue current quarterTesting both brand and conversion-focused marketingSpending in U.S. and international markets

John Colantoni · Jefferies

Asked about returns and learnings from new marketing campaigns, performance ad engagement compared to existing users, and conversion-to-login rates from performance channels.

Brand campaign in France showed positive app install lift, brand awareness and consideration gains. Performance marketing infrastructure newly built out; learnings ongoing. High opportunity identified: in U.S., only ~25% of parents on Reddit despite strong parenting content; ~50% don't consider Reddit for parenting. Testing tailored landing pages and content selection by audience vertical.

France brand campaign increased Reddit app installsOnly ~25% of U.S. parents currently on Reddit~50% of U.S. parents don't consider Reddit for parentingTesting audience-specific landing pages and content curation

Naved Khan · B Reilly Securities

Asked about early results from simplified onboarding flow and the significance of referral traffic from AI chatbots to overall traffic.

Simplified onboarding launching soon; intuitively compelling given friction-heavy current process. AI chatbots not currently a traffic driver; relationships with partners remain healthy and collaborative. Acknowledged mutual learning on data value and product opportunities but no major traffic impact today.

Simplified onboarding launching 'relatively soon'AI chatbot referral traffic not material todayMachine learning feed is top driver of new subreddit subscriptions

Jason Helfstein · Oppenheimer

Asked about progress on LLM licensing deals with existing and new partners, logic behind litigation against IP infringement, and potential deals to capture identity of logged-out users for ad targeting.

No news on LLM licensing; relationships described as healthy and collaborative with mutual product confidence. Declined to comment on lawsuits beyond noting complaints are publicly available. On logged-out user identity: Reddit model centers on interests, not demographics; differs from other platforms; better for privacy while enabling powerful interest-based targeting.

No new LLM licensing deals announcedRelationships with LLM partners described as 'healthy and collaborative'Reddit targeting model: interests-based, not demographics-basedCore business is ads, not licensing

Answers to last quarter's watch list

U.S. DAUq above 50M and international DAUq above 60M — Logged-in DAUq came in at 50.2M global (not split by region in this disclosure, a framework change from Q2). Total DAUq grew to 116.0M from 110.4M in Q2. The regional split is no longer disclosed at the DAUq level, so the original threshold isn't directly testable.
Not resolved
Ad revenue growth deceleration below 70% YoY — Ad revenue grew 74% YoY to $549M, holding above the 70% threshold and confirming Q2's 84% print wasn't a one-time spike. DPA performance improvements and ML-driven optimization are now quantified as double-digit and 20%+ contributors.
Resolved positively
Other revenue acceleration from renegotiated deal terms — Other revenue grew just 7% YoY to $36M, a sharp deceleration from Q2's +24%. Management was directly asked about LLM licensing in Q&A and declined to disclose any progress beyond "healthy and collaborative" relationships. The renegotiated-deal-terms thesis has not materialized as growth.
Resolved negatively
International ARPU response to marketing spend — International ARPU moved to $1.84 from $1.73 in Q2 (+6% sequentially) while international revenue growth accelerated to +74% YoY, outpacing U.S. (+67%). The France campaign was cited as driving app installs and brand metrics. Marketing is showing efficiency, not just spend.
Resolved positively
Reddit Answers WAU vs. the 6M figure — Management didn't restate a WAU figure but disclosed Reddit Answers now handles ~20% of Reddit's search volume and expanded to five non-English languages. The disclosure framework shifted from WAU count to search-share contribution, a meaningful upgrade in usage scale though not directly comparable.
Continue monitoring

What to watch into next quarter

Whether Q4 revenue lands above the $665M high end of guide — Q3 beat its high end by ~7.5%, so a repeat would put Q4 near $715M (~67% YoY) and signal Q3 wasn't a peak-growth print.

Whether other revenue growth re-accelerates above 15% or stays in single digits — two consecutive quarters of deceleration (24% → 7%) with no LLM licensing disclosure suggests the data-licensing lever management cited in Q2 may be structurally weaker than framed.

Consumer marketing spend as a percent of revenue: track whether it crosses mid-single-digits and whether logged-in DAUq accelerates in response — this is the new capital allocation story and management has committed to scaling spend if returns hold.

Q4 adjusted EBITDA margin vs. the 42% midpoint guide — a beat would mean margin expansion is outpacing the marketing reinvestment, a miss would mean the user-acquisition pivot is more expensive than management is signaling.

Whether Reddit re-discloses regional DAUq splits or whether the move to logged-in/logged-out global splits becomes the permanent framework — the disclosure change happened quietly and reduces visibility into the U.S. vs. international user base.

Sources

  1. Reddit Q3 2025 earnings press release (SEC EDGAR) — https://www.sec.gov/Archives/edgar/data/1713445/000171344525000225/earningspressreleaseq325.htm
  2. Reddit Q3 2025 earnings call transcript (prepared remarks and Q&A)

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