Reddit (NYSE:RDDT) Beats Expectations in Strong Q4 CY2025
Online community and discussion platform Reddit (NYSE:RDDT) reported revenue ahead of Wall Street’s expectations in Q4 CY2025, with sales up 69.7% year on year to $725.6 million. On top of that, next quarter’s revenue guidance ($600 million at the midpoint) was surprisingly good and 4.3% above what analysts were expecting. Its GAAP profit of $1.24 per share was 33.1% above analysts’ consensus estimates. Is now the time to buy Reddit? Find out in our full research report. Revenue: $725.6 million vs analyst estimates of $667.5 million (69.7% year-on-year growth, 8.7% beat) EPS (GAAP): $1.24 vs analyst estimates of $0.93 (33.1% beat) Adjusted EBITDA: $327 million vs analyst estimates of $286.5 million (45.1% margin, 14.1% beat) Revenue Guidance for Q1 CY2026 is $600 million at the midpoint, above analyst estimates of $575.2 million EBITDA guidance for Q1 CY2026 is $215 million at the midpoint, above analyst estimates of $204.9 million Operating Margin: 31.9%, up from 12.4% in the same quarter last year Free Cash Flow Margin: 36.3%, up from 31.3% in the previous quarter Domestic Daily Active Visitors: 52.5 million, up 4.5 million year on year Market Capitalization: $28.93 billion “We’re entering the next era of Reddit—defined by sharper execution, global expansion, and product innovation that puts real people and conversations at the center,” said Steve Huffman, Reddit Co-Founder and CEO. Founded in 2005 by two University of Virginia roommates, Reddit (NYSE:RDDT) facilitates user-generated content across niche communities (called subreddits) that discuss anything from stocks to dating and memes. A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Reddit’s sales grew at an incredible 48.9% compounded annual growth rate over the last three years. Its growth surpassed the average consumer internet company and shows its offerings resonate with customers, a great starting point for our analysis. Reddit Quarterly Revenue This quarter, Reddit reported magnificent year-on-year revenue growth of 69.7%, and its $725.6 million of revenue beat Wall Street’s estimates by 8.7%. Company management is currently guiding for a 52.9% year-on-year increase in sales next quarter. Looking further ahead, sell-side analysts expect revenue to grow 34.7% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and implies the market is forecasting success for its products and services. Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. Click here to access a free report on our 3 favorite stocks to play this generational megatrend. As a social network, Reddit generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown. Over the last two years, Reddit’s domestic daily active visitors, a key performance metric for the company, increased by 29.2% annually to 52.5 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction. Reddit Domestic Daily Active Visitors In Q4, Reddit added 4.5 million domestic daily active visitors, leading to 9.4% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating user growth just yet. Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Reddit’s audience and its ad-targeting capabilities. Reddit’s ARPU growth has been exceptional over the last two years, averaging 22.1%. Its ability to increase monetization while growing its domestic daily active visitors at an impressive rate reflects the strength of its platform, as its users are spending significantly more than last year. Reddit ARPU This quarter, Reddit’s ARPU clocked in at $10.79. It grew by 53.3% year on year, faster than its domestic daily active visitors. We were impressed by how significantly Reddit blew past analysts’ EBITDA expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Looking ahead, next quarter's guidance for revenue and EBITDA both beat expectations. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $154.47 immediately following the results. Reddit put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
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